Varoufakis Charges Eurogroup with Bad Faith Dealing in Negotiations

You must watch the press conference with Yanis Varoufakis. In the nicest possible manner considering the circumstances, he describes how he was presented with a memorandum prior to the Eurogroup meeting that he found acceptable and was presented with a different and unacceptable memo, at Eurogroup head Jeroen Dijsselbloem’s instigation, at the top of the session. I don’t see Varoufakis as having insinuated what Mason attributes to him, but it is certainly a logical inference that the Germans were behind this stunt.

Varoufakis reiterated he’d be happy to sign the older memo or a reasonable variant of it any time. He also does an impressive job of staying upbeat and on message under what have to be trying circumstances.

Update: Not surprisingly, the EU side disagrees with Varoufakis’ account:

Or not quite:

I suspect we’ll get some sort of rebuttal. But the fact that Varoufakis said repeatedly that he’d sign the older version of the memo would seem to undercut a Eurogroup defense. And now we have this:

Ed Harrison’s take via e-mail:

The bias is: “What a minute, this is just optics.” That’s a pro-German bias because that’s what Schaeuble was saying about Greece’s desire not to deal with the Troika: just names. Spiegel is too inside baseball and has been co-opted. He believes Greece is being unreasonable and that it is plausible that the two are the same when it is clear they are not substantively the same – or Greece wouldn’t be apoplectic. That is unless you think Yanis cares about superficial differences.

Update 6:15 PM: It looks like Peter Spiegel’s credibility is mud:

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  1. Petey

    “No #eurozone official I talked to can figure out why @pierremoscovici draft ok to #Greece but not other one. They say no diff on substance”

    Then why was the first draft withdrawn?

    And if that’s true, why not re-offer the Moscovici draft?

  2. Oregoncharles

    He IS a game theorist.

    Once again, I think the real action is behind the scenes. No way can they deal with this in public.

    Anybody care to offer odds on the Eurozone going smash?

    Note: the precious metals markets aren’t especially alarmed.

  3. Petey

    “We think it is still early days in these negotiations.”

    “there is a point of view that says this is similar to wrestling – appearance of violence, largely faked, delights the fans on both sides.”

    — Citi’s Steven Englander on the Greece talks.


    Worth analogizing to WWI. There were endless brinksmanship showdowns between 1905 and 1914. But the reason they never started a full European war prior to 1914 was that 1914 was the very first time the German General Staff was determined to force a war.

    Same basic principle here. This brinksmanship can get solved, unless Merkel is determined to force Greece out.

      1. Tsigantes

        They may “want” it but there is no mechanism to kick Greece 1) out of the Eurozone or 2) out of the EU without violating the Treaty, ie break their famous rules. Only Greece can decide that.

  4. Gee

    Ever read a FOMC statement? A single word alteration can change the meaning of ten paragraphs of pabulum.

  5. Swedish Lex

    I hope the Moscovici paper contains the goods.
    Varoufakis refuses to roll over & play Cyprus.
    Dieselboom confused by now (assuming he indeed had fooled the Greeks with one draft text for several days until at the actual meeting when he produced a new text with an offer the Greeks could not refuse, only they did).

  6. Petey

    “Dieselboom confused by now (assuming he indeed had fooled the Greeks with one draft text for several days until at the actual meeting when he produced a new text with an offer the Greeks could not refuse, only they did).”


    Also possible, (if this is really 1914), that Dieselboom substituted the first draft with the second because he knew the Greeks couldn’t/wouldn’t accept the second draft…

    1. Gee

      Well, it’s not the stupidest move to try a switcheroo. They are pretty much pissed at each other already, and if they got YV to sort of agree to something, they know one potential outcome that Greece would be willing to accept. So at that point, why would they not try to get into position to make a counteroffer? They dont know that what he said he would agree to was a minimum, and they most certainly want to minimize any concessions. Also, the further they push Greece to the brink, the better chance they wring out some more terms in their favor.

    2. Swedish Lex

      To be clear; Dieselboom is as independent from Berlin as I am from my wife; not at all.

      Cyprus must have taught Greece a lesson; never trust a man whose name begins with “Diesel” and ends with “Boom”.

  7. plantman

    It looks like the eurocrats thought they could pull a fast on Varoufakis by pulling the old switcheroo…
    Only it backfired.

    They’ve not only shown that they can’t be trusted, but also, that they’re a little sleazy in their business dealings.

  8. mpr

    What a great presser by Varoufakis – he is a constant embarrassment to all previous Greek (and other Euro) governments, as in this is what you can do if you have a little bit of spine and are not totally intellectually captured.
    If the Eurocrats think there is no difference between the two documents, then they should have no objection to going back to the previous one, so that position is completely disingenuous.

    BTW, the video link here didn’t work for me.

        1. Tsigantes

          Excuse me, NOT Talleyrand who ended up with egg on his face / early retirement. It is Capodistrias who would be proud. The great unsung diplomat strategist of Europe. A Greek too.

          1. Gerldam

            How can you say that? Talleyrand was arguably one of the very greatest statesmen of the last thousand years. Period. Far cleverer than either you and me, by a huge margin.

  9. dbk

    Is there any way to obtain a copy of the agreement Varoufakis was presented with by Muscovici and was prepared to sign, so that we could compare the two?

    The video link didn’t work for me, either, btw.

  10. Petey

    Back to WWI again, the casus belli was the AH ultimatum to Serbia, (prepared with full German participation and assent), that was carefully designed to be something Serbia couldn’t agree to.

    (My favorite part of the whole machinations was when Serbia agreed to all kinds of horrifically unreasonable conditions, dissenting only from the two clauses most specifically designed to be unacceptable, the Kaiser’s response to the German General Staff was ‘Fantastic! War is averted’, and Falkenhayn replied, ‘Sorry, “it’s out of your hands” now, my supposed superior in the chain of military command’.)

    So, I still think this is all brinksmanship that eventually gets solved, but who knows the mind of Merkel? The Moscovici switcheroo is certainly the kind of thing that would be done if Merkel is genuinely determined to let loose the dogs of war.

    1. Yves Smith Post author

      No, I disagree. The Eurogroup made a clearly worse offer to Varoufakis this week than last week. Compare the rejected memo of this week to last week’s rejected memo. The two sides are moving further apart in their positions. The Troika position is basically: “We know you have no stamina, so go to hell.”

      As we point out later in this thread: Frances Coppola and others read it the same way, see this conversation on Twitter:

      Her conclusion: “It was basically ‘give up your silly ideas’. No wonder it was rejected.”

  11. alex morfesis

    the video does not yet seem to be fully released by the EBs system

    but where is the report described from the earlier mid day briefing (at 2:45 minutes in) there was a statement that the report on where there are agreements from the friday and saturday…that might allow a closing of the gap and a better feel about what the real issues are on the 30%

    also are they saying at 5:45 that the Troika is officially dead ?

    1. Yves Smith Post author

      I replaced the Europa site version with one on YouTube. The YouTube one seems to be missing a small bit of Varoufakis’ opening remarks but is a lot better visually. Europa seem to keep only what they regard as major up (as in Varoufakis’ session was on the site only as long as it was the latests live feed item) and this presser was apparently not that.

      Oh, I see that you found it on the Europa site when I failed. I’ve used that link, thanks!

  12. Petey

    Wait. It gets better.

    2 hours ago, Peter Spiegel is told:

    “No #eurozone official I talked to can figure out why @pierremoscovici draft ok to #Greece but not other one. They say no diff on substance”

    An hour and a half later, Peter Spiegel is told:

    “For everyone looking for a @pierremoscovici draft, I’m told it doesn’t exist. It was more a statement of principles agreed by the two sides.”

    So that official narrative got dramatically re-written by someone over an hour and a half. Seems as if they can’t outflank Yanis without flat-out lying.

  13. WanderingMind

    Given the previous pattern of resolutions of Eurozone issues only when the boat is about to go over the falls, I thought that there would be a “kick the can down the road” resolution this time as well, in the sense that the Eurozone ministers would agree to the six month breathing space that Varoufakis was asking for.

    However, last night I was watching this series of videos in which Warren Mosler explains, in typical, understated and logical Mosler fashion, how the problem in Italy (and Greece and Spain and Ireland, etc.) is an employment problem. He then explains, using MMT principals, how easy it is to resolve that problem, either within the eurozone or by using a new currency issued by the country if the eurozone refuses to implement a deficit program large enough to resolve the unemployment problem.

    In either case, though, he emphasizes that the government involved (eurozone or national) must be willing to engage in deficit spending, something that, beyond the 3% of GDP hard-wired into the Stability and Growth Pact of the eurozone, cannot be legally done unless there is some kind of emergency.

    At about 6:00 of the video I linked to Mosler says that he asked a senior EU offical, in 2013 whether the official understood things to be as Mosler stated in this video. The EU official, according to Mosler, agreed with him that deficit spending is the only way to resolve the problem, but that politically, the EU has “come too far now to reverse course.” After which Mosler says he asked the EU official whether it would take “blood in the streets” before the EU changed course. The EU official says, yes.

    Mosler’s analysis is important because he focuses on unemployment as the problem and, based upon a very simple demand side analysis, shows how to resolve it. The Greek government, too, is focused on unemployment and has, as Varoufakis states in his editorial, made further damage to employment in Greece one of the “red lines” they will not cross. On the other hand, it is clear if you listen to Dieselboom, Schauble and other EU leaders, that they expect Greece, Spain, Ireland, etc. to allow the unemployment problem to last as long as it takes to lower the debt-to-GDP ratio.

    If you look at this situation from the point of view of what is fair and beneficial to Greece and to Europe as a whole, it is obvious that 25% unemployment has to be addressed the way Mosler describes. However, if you look at the Eurozone system as a project to empower and enrich the ownership class at the expense of labor, then the new Greek government’s red lines over unemployment and privatization are obviously non-negotiable from the ownership class’ perspective.

    From this class struggle perspective, then, Yves’ more pessimistic appraisal of the current situation is the more accurate one and the Greek government will be forced into some kind of Plan B, such as Mosler has laid out or as laid out in the the post yesterday. The only question is whether they will roll out Plan B in March, May or some later time.

    1. Doug Terpstra

      Very insightful comment. “…simple demand side analysis, shows how to resolve it.” Yes let’s try demand-side priming again for the first time. There’s the real engine of wealth creation, the empowerment of billions of people.

      Impoverishing the majority of a population and relegating a large minority to underemployed serfdom is unsustainable evil. Cult devotion to supply-side monetary policy over demand-side fiscal policy is a recipe for “blood in the streets” as Mosler’s unnamed Eurocrat put it.

      And there’s the rub. Anti-democratic disempowerment is the intent of neoliberalism, not a mistake or a design flaw. This latest revelation of calculated deceit is proof. Naked powerlust and greed have no self-regulating capacity. Neoliberal greed is a cancer that cannot bridle itself.

  14. EmilianoZ

    What? It was all about some preliminary communique? They had not even started negotiating? But it could well be that the Eurocrats wanna give YV a duck that’s called a hen. YV must take whatever behaves like a duck and privately explain to his constituents that it really is a duck. The Eurocrats must be allowed to save their faces or else it aint gonna work.

    Look at Dieselbloom! He looks like the kinda nerd that were mercilessly bullied in middle school by guys that looked like Varoufakis. Throw the man a bone!

  15. Glenn

    From Paul Mason (UK Channel 4) facebook page:

    The draft Varoufakis nearly signed, which is claimed to have been offered by Moscovici.

    Draft Eurogroup Statement on Greece
    The Eurogroup reiterates its appreciation for the remarkable adjustment efforts undertaken by Greece and the Greek people over the last years. Over the last week the Eurogroup and the institutions have engaged in an intensive dialogue with the new Greek authorities.
    The Greek authorities have expressed their strong commitment to a broader and deeper reform process aimed at durably improving growth and employment prospects, enhancing social fairness and ensuring stability and resilience of the financial sector. In particular the Greek authorities commit to implementing long overdue reforms to tackle corruption and tax evasion, and improving the efficiency of the public administration. At the same time the Greek authorities reiterated their unequivocal commitment to honour their financial obligations towards all their creditors. The Greek authorities will make the most efficient use of the continued provision of the technical assistance.
    We discussed the policy priorities of the new government on the basis of work undertaken by the institutions and the Greek authorities. We welcomed that in a number of areas the Greek policy priorities can contribute to a strengthening and better implementation of the financial assistance programme and can serve as the basis for a new arrangement. The Greek authorities intend to make the best use of existing built-in flexibility in the current programme as work commences on the new arrangement. They will work closely with their European and international partners to secure agreed parameters for structural reforms.
    The Greek authorities agree to ensure appropriate primary fiscal surpluses and financing in order to ensure debt-sustainability. Any new measures will be funded and will not endanger debt sustainability or financial stability.(1)
    The above forms the basis for a request to extend the current loan agreement, taking the form of an intermediate step to a new arrangement, that will be discussed and decided during this period of six-months. We also agreed that the IMF would continue to play its role in this agreement. The Eurogroup is favorably disposed to such a request by the Greek authorities.
    Moreover, we were informed by the EC, the ECB and the IMF that it would be prudent to extend the availability period of the EFSF bonds in the HFSF buffer for six months, in parallel to the extension of the EFSF programme. The Eurogroup looks favorably at such an extension. Following a request by Greece, the EFSF can make the necessary arrangements. The Eurogroup emphasizes that these funds can be used for bank recapitalization and resolution costs and will only be released on the basis of an assessment by the institutions and a decision of the Eurogroup.
    We remain committed to provide adequate support to Greece until it has regained full market access as long as it honors its commitments within the newly-agreed framework.
    Possible points to give:
    1) Refrain from uni-lateral actions with net fiscal implications

    1. Yves Smith Post author

      Yes, the key bit seems to be that nowhere is it affirmed that this is an extension of the current bailout. This part can be construed both ways:

      The Greek authorities intend to make the best use of existing built-in flexibility in the current programme as work commences on the new arrangement. They will work closely with their European and international partners to secure agreed parameters for structural reforms.

      So are the current structural reforms all on or not? You can read that either way.

      But the key bit seems to be this:

      The above forms the basis for a request to extend the current loan agreement, taking the form of an intermediate step to a new arrangement, that will be discussed and decided during this period of six-months.

      The idea that the Greeks are extending the loan agreement, by implication only, and had wriggle language around the structural reforms, seems to have been the finesse.

      By contrast, see the text of the newer memo in this post and notice Varoufakis’ notes:

      He added language that narrowed where he’d get technical assistance from, and struck this sentence:

      The Greek authorities have indicated that they intend to successfully conclude the programme, taking into account the new government’s plans.

      1. wbgonne

        To me the problem appears to be the tension between these two statements. First, from the draft:

        The above forms the basis for a request to extend the current loan agreement, taking the form of an intermediate step to a new arrangement, that will be discussed and decided during this period of six-months.

        Then the revised language, which Varoufakis struck:

        The Greek authorities have indicated that they intend to successfully conclude the programme, taking into account the new government’s plans.

        While the content is similar, one might see how the different language makes a huge political difference. In the former, the existing arrangement is aimed for sunset, and to be replaced with a new arrangement. This seems at least linguistically compatible with Syriza’s platform. The revised language, however, clearly suggests that the existing arrangement will be maintained until completion. That does not seem to be consistent with Syriza’s core mission and is therefore politically unpalatable.

      2. Santi

        There is an even stronger difference, about the primary balances. Krugman highlights that the draft Varoufakis didn’t sign was implying that Greece would keep the 4.5% primary balance that is in the current programme for next year, obviously a deal breaker.

        1. Yves Smith Post author

          Yes, that is huge, and another sign the two sides are moving further apart. There were rumors all over the place, even in the German press, that the two sides had found or could find a compromise on that. But it is now clear the Eurogroup, as in Germany, does not intend to give ground. Either they never did or they are pissed and have decided to beat the Greeks into submission.


    paul mason has tweeted photo of what he says is (what appears to be only page 1of) pierre moscovici earlier draft communique.
    siegel, as to his tweet quoted above–“No #eurozone official I talked to can figure out why @pierremoscovici draft ok to #Greece but not other one. They say no diff on substance”–
    has now tweeted “i stand corrected.”

  17. steviefinn

    However this turns out it feels like a breath of fresh air from Yannis – I heard him explain the truth to some pot noodle journo on the reality of the much trumpeted rise in Greek GDP – it was like pure clean water to a parched man. There seems to be a lot of interest in Ireland on large sites in regard to this, accompanied by photos of the apparent rotten carcass of Finmin Michael Noonan, who has declared that he will put an end to all of this kind of thing. A response that has led to mainly universal derision. The likes of him, Enda Kenny & many others must be very worried about this for many reasons, God forbid that any of the other 18 finmins should tell the truth in regard to the official EU BS line & even if they crush Greece, surely at least one of these tosspots might consider that the can now has a ticking timebomb in it, & as for blood on the streets, they are very sure it will not be theirs.

    1. hemeantwell

      steviefinn, what large [web]sites are you referring to? I’d like to get a better idea how this is playing into Irish politics.

      1. steviefinn

        I probably should have described them as large mainstream outlet facebook pages such as the Irish times, the & the Irish Independent. It does seem to me that since the water protests, people who I know & many others who were previously apathetic are gradually seeing behind the mainstream smoke & mirrors. Many here are following the Greek developments, as are probably many others in the rest of the periphery,

  18. Petey

    “Update 6:15 PM: It looks like Peter Spiegel’s credibility is mud”

    I’m not a fan of Peter Spiegel, but that’s most definitely not how I read the situation here.

    Spiegel, (at least in his twit feed), was clear and upfront that he was purely being a stenographer for EZ officials in the two crucial tweets. “For everyone looking for a @pierremoscovici draft, I’m told it doesn’t exist.” Someone’s credibility is indeed mud, without the slightest doubt, and that someone is high up enough to be able to re-write the narrative on short order. But don’t shoot the stenographer instead of laying blame where it belongs. Spiegel was actually quite useful here in revealing the lie machine…

    1. Yves Smith Post author

      I stand by my statement. Spiegel stated there was never a Pierre Moscovi draft. Paul Mason of the BBC published both that draft and later ones.

      1. JustAnObserver


        Channel 4 not BBC, exBBC Newsnight. It’s nice to see his presence and basic humanity noted in the midst of this insanity. As well as his skill as a journalist.


  19. Sanctuary

    So is there a real point of contention between the 2 texts or is it just Greece blowing up because the face saving language was stricken? I’m not really sure.

    Actually, I just read an update where Paul Mason says the correct version of the text that Varoufakis read begins with “close of business”

    It seems to have much more emphasis on the humanitarian crisis in Greece.

    1. Yves Smith Post author

      Huh? There are substantial difference, almost entirely against Greece, including clearly depicting the agreement as an extension of the current bailout, which implies adherence to all the current “conditionalities” meaning structural reforms that Greece has rejected, such as privatizations and more measures to drive wages lower. It also has much stronger language regarding Greece meeting its current obligations, which is basically a belt and suspenders reference to sticking to the terms of the current bailout. And it requires them to maintain a substantial primary surplus!

      Frances Coppola and others read it the same way, see this conversation on Twitter:

      Her conclusion: “It was basically ‘give up your silly ideas’. No wonder it was rejected.”

      1. Sanctuary

        Lol. I was writing the 1st sentence of that post when i saw the update from Paul Mason (6:45 version) and read that version and then i could see the difference more clearly. The 1st version (posted at 6:15) seemed like a more muted text that gave a bit of wiggle room to Greece to try and spin it as a win to the Greek public when it was a partial cave to ECB priorities, as least as it is written in my opinion. That’s why I didn’t understand at first why Varoufakis was saying the 1st draft was one he could sign when even that one seemed more ECB-like. The updated version seems much more like something Varoufakis and Greece would have signed because it forcefully acknowledges the humanitarian crisis Greece is going through and acknowledges the change in priorities to focus on elite corruption, tax evasion, and fostering growth.

  20. Petey

    According to Paul Mason, Moscovici himself gave him the Second (Final) First Draft.

    So to sum up:

    – France tried to offer an acceptable draft.
    – Someone (cough, Germany) substituted an draft designed to be unacceptable.
    – After the Yanis presser, someone (cough, Germany) first tried to pretend the Moscovici draft was the same as theirs, then tried to pretend there never was a Moscovici draft.
    – France publicly called “shenanigans” on someone (cough, Germany).

  21. Cugel

    Whenever something like this “substitution” happens, it reflects an inability among the partners on one side to agree on some fundamental issue. One guy acting for the coalition offers what is presumed to be a compromise solution, and then some hardliner argues that this is “going too far” and tries to walk back any concessions.

    In short, it always is a bad sign for a coalition because it means serious disagreements on the EU side over strategy. Greece is simply not bluffing. Their “red lines” are simply red lines. If they are forced out, it’s going to be absolutely a death knell for the EU, because they clearly are going to be talking moderately and reasonably the whole time, while the Troika utter incomprehensible gibberish. Can you imagine several more months of this kind of thing, with Varoufakis looking like the only adult in the room and reiterating simple principles, and making the case that they cannot agree to policies that have utterly failed – all while the EU simply reiterates it’s mantra that “a deal is a deal”? They have zero argument to deal with the question, “why should we keep to the deal if it’s been tested for years and is clearly a disaster?”

    The public relations optics of this will be a political disaster for the EU, and especially Germany. You can’t keep saying “we will crush you!” and then not be able to force tiny Greece to capitulate. It just makes you look like an ineffective bully. The worst kind.

    1. BillC

      Cugel, after carefully listening to the entire video above, I would agree with you 100% … if all European citizens in the 99% could listen to and understand the video, in English. Unfortunately, most of them will be reading or hearing a version in another language that has been “interpreted” on their behalf. My guess is, those interpretations will utterly reverse the impression about who’s the adult in the room.

      1. Paper Mac

        English is a European language, it’s well understood amongst professional classes throughout Europe, and you can bet that independent translations will be produced, so I wouldn’t worry about this too much.

        1. guest

          BillC is right. Most people will not delve into youtube or the official EU site to look at the full video — they will get heavily redacted snippets of it, bracketed by biased comments, from the TV or their favourite mainstream site (BBC, Le Monde, etc).

  22. Petey

    “Whenever something like this “substitution” happens, it reflects an inability among the partners on one side to agree on some fundamental issue. One guy acting for the coalition offers what is presumed to be a compromise solution, and then some hardliner argues that this is “going too far” and tries to walk back any concessions.”

    Fully agreed. (And FWIW, the close ECB vote on Greece last week proved the same point about lack of consensus.)

    But the thing that really strikes me here isn’t the initial “substitution” split. Instead, it’s the way the Germany and its Quislings spent literally hours flat-out lying about the split afterwards, only to have France publicly call them on their lies. That’s remarkable on multiple levels.

    1. Yves Smith Post author

      I don’t think so. The draft was apparently out there for over a day and there is no way Germany would not have been in the loop. This looks like a deliberate effort to corner Varoufakis in a meeting with supposedly no time beyond the session to agree a deal, to catch him off guard and coerce him.

      1. MartyH

        As if he wasn’t expecting it … or wasn’t prepared in case …

        The Euros aren’t used to backbone. They’re not terribly well equipped to deal with this other than by stonewalling … and that will continue to work against them on Main Street (in Greece, Spain, Ireland, …)

  23. rheno

    Could this “substitution” be pay back for Greek FM cancelling last weeks’ common statement after German FM has left the meeting?

    1. Clonal Antibody

      There was a “substitution” done after the German FM had left – see The (almost) agreed statement on Greece

      However, Greek officials insist the text they agreed to Wednesday night was actually an earlier version than the final statement we published. These officials say the agreed draft was changed before it was to be issued at a late-night press conference by Jeroen Dijsselbloem, the eurogroup chairman, prompting their veto.</blockquote"

  24. Rosario

    That video was fantastic, I think his acclaim is much deserved. His continuous reference to the EU being (in theory) a democracy is very important. As he said, its manifestation in Greece reflecting “the facts on the ground”. This goes beyond the language of articles and contracts on to the people that have to live with these decisions made by a select few who are often unelected. Greece’s democratic challenge is much needed.

    1. OpenThePodBayDoorsHAL

      LOL Eurozone democracy LOL. When Berlusconi got uppity the EU knifed him and installed their Goldman guy as PM (Monti) and said “now is not the time for elections, now is the time for actions”. Doesn’t sound much like democracy to me.
      But Yanis is the Man. As Churchill said after Crete in 1941: we used to say “those Greeks fought like heroes”. Now we will say “those heroes fought like Greeks”.

  25. Petey

    “I don’t think so. The draft was apparently out there for over a day and there is no way Germany would not have been in the loop. This looks like a deliberate effort to corner Varoufakis in a meeting with supposedly no time beyond the session to agree a deal, to catch him off guard and coerce him.”

    Fully agree with you!

    But don’t you agree that France did publicly call shenanigans (in insider language) afterwards on the scheming?

    I’m by no means opposed to a pessimistic reading of the eventual outcome, but the combination of France tonight, and the very close ECB vote against Greece last week, seems to me a clear indication of a lack of consensus that provides room for an optimistic reading of the eventual outcome. There is case to be made that Germany is winning battles and losing the war.

  26. Petey

    Frances Coppola is on board with the optimistic reading.

    “And neither side wants Grexit. So there will be a deal. Imho Greece will get much of what it wants.”


    “I keep saying that the Eurogroup’s hand is not as strong as ppl think. Forcing #Grexit is not an option.”


    In some of the 1905-1914 brinksmanship crises, things got so over the top that armies were actually mobilized before deals got calmly agreed to. But whether you go to war, or whether you don’t do to war, either way, this is what brinksmanship looks like…

    1. Yves Smith Post author

      Germany is convinced that there is no contagion risk. German officials have said that and media messaging is consistent with that. With all due respect, Coppola is in the UK, where the financial press has quite a few news stories of a different view. And the markets are reinforcing the German position. Periphery bond spreads have not reacted to the brinksmanship. By contrast, with the past Eurozone extend and pretend cliffhangers, they did.

      Greece is not doing a Grexit. Her basic premise is incorrect. Varoufakis has repeatedly said no, he has a strong personal history of being opposed to the idea, and the public is not on board either. Plus reader Wandering Mind has provided links to legal studies on the matter, one by the British government, another by the ECB. Greece cannot exit unilaterally. It has to ask for permission AND it takes two years. And it gets kicked out of the EU, which has nasty implication (loss of EU subsidies, big disadvantage in terms of trade with Europe. .

      Moreover, the negotiators would not have tried a stunt like this if they did not believe they had the upper hand and could get Greece to capitulate. Their view is that if Greece does not get a deal, its economy will go into further collapse. They might get lucky from their perspective and have Syriza turfed out in six months. But even if not, the further devastation that will be visited on Greece will scare any periphery country into not bucking the Troika (or exit, for the ones that have enough financial heft to do a dirty exit, as in print their own currencies, meaning France and Italy).

      So pray tell me exactly where Greece’s leverage lies? The only hope I see is if they can last long enough so that the March-April elections in France and Spain deliver a strong enough showing to anti-austerity and anti-Eurozone parties so as to make the incumbents plenty worried.

      1. Gerldam

        Concerning France, austerity has not even started. Government spending has never ceased to increase. Not one civil servant has been fired. Social handouts are larger than ever. All debt financed, of course. So talking of austerity concerning France is gibberish.
        Concerning Spain or Portugal, the story is very different and the people do feel the pinch of real austerity, but not France.

  27. Sanctuary

    Ok Yves. Given what just transpired today, and that at every turn the Troika keeps trying to humiliate the Greeks, do you still think Grexit is a low probability event?

    1. alex morfesis

      the sad truth is Hellas does not have the financial capacity in terms of depth of human capital to fall back into its own currency, the draxma, since they really were not doing so great before the euro and I am not sure where this fairy tale of wonderful life under the draxma has come from. BUT, the reality is Deutschland can not afford a stable euro as it (the euro) would become a magnet for capital, destroying the currency war games being played with Greece and her “problems” as the excuse…but Mutti/Lucy has not figured out that charlie brown went off to college and lost the baby fat…and now plays cricket…

      If the Traikia had wanted to get anything done, the first matter they would have insisted on four years ago would have been to have the hundreds of missing millions of euros that had been sent to organize a proper set of property records be properly deployed (prop x 3 ?)…the people at MERS, Inc learned from PASOK and NEW Democracy how to fumble property records…it is the largest impediment to development in Hellas…Germany has no interest in a resolution as it would make its exports more expensive…a stable Euro is a higher Euro…if they called it a currency reduction play, they would get called on it…there is also that little list of people from Hellas (and other countries) who have hidden funds overseas…if they allow Athens to catch a breath they might be able to connect the money list with Siemens and that might lead to Cornelius Gurlitt and whatever happened to all that “art” money…Minister Varoufakis has no interest in being handed the keys to the Bockscar and flying over Franfurt with it…one can always find something to fight about…the fact that Germany outright rejected reparations for WW2 shows they are only interested in a currency war. There are 5 euro nations that are weak (six if you include France)…

      Spain, Italy and Portugal were allies of the german ww2 regime, and except for a few sorties for “show”, Ireland was not effected by the war…So, If Germany were to write a check to Hellas and insist it WAS in fact for reparations, the other nations could not really ask for “relief” from the terms they agreed to…(France had Vichy)…

      the value to Hellas of the Euro far outweighs any opportunities to go it alone with the Draxma…If the property records were not such a mess and they actually had a stable tax code, one could possibly imagine a possibility of capitalizing on the draxma conversion, but since that is not the case, and Hellas has limited industrial export capacity, then it is just a useless waste of energy to imagine the rebirth of a Draxma, other than it becoming an Hellenic version of the WIR that Switzerland has…

      If Volkswagen, Audi and Mercedes can sell cars in Israel, it is time to find a way to let go of the past…as long as Mutti wants to play nice…her grandfather has a past no one talks about…perhaps we should…her father “chose” to go INTO east germany…

      1. Rosario

        You know more history than most on this subject, and that seems to be a large part of the problem for the perception of the issue for those in the Americas and something that is likely willfully overlooked in Europe (though I’m sure Varoufakis would have some choice words if left to informality). The web of historical politics are wrapped all about these negotiations. Problem is, the historical truth is often revealed by the commoners in the streets rather than the well dressed, professional occupants of negotiating rooms.

      2. John Jones

        they really were not doing so great before the euro

        What was not so great before the euro in Greece with the Drachma been the cause?

      3. guest

        Spain, Italy and Portugal were allies of the german ww2 regime

        As were Hungary, Romania, Bulgaria and Slovakia (and Finland, somewhat).

    2. Yves Smith Post author

      Independent of alex’s informative detail, what happened today does not change the odds. Greece will not print drachmas. Varoufakis is firmly opposed and has sound reasons. Greece may default if it runs out of dough. The Troika may try to declare a Grexit if Greece were to use tax anticipation notes or some other quasi-currency, but as Rob Parenteau points out, the matter would be subject to legal challenge and would be tied up in the courts for years.

      1. Sanctuary

        “Greece may default if it runs out of dough. ”

        But that’s been my point. Greece stumbling into something that will be called a Grexit, not necessarily something they march into wide-eyed. Wouldn’t financial markets call a default a de facto Grexit, regardless of how the parties tried to characterize it? They wouldn’t have the funds to pay bills or Euros to capitalize their banks and no more funds would be forthcoming from the ECB. Wouldn’t they be in a limbo that would soon be recognized as a Grexit in all but name? I’m not arguing that Greece is planning to print drachmas. I take Varoufakis at his word that he doesn’t want Grexit. But how do you not get that de facto result if both sides cannot move from their negotiating positions?

        And in the aftermath of such a result, wouldn’t it be in the Greek government’s interest to loudly point out some of the other peripheral countries that are just as bad off as Greece (Portugal, Spain, Italy)? If they don’t employ that nuclear option and increase peripheral bond pressures they will allow Greece to be used as a cautionary tale of what not to do instead of a cautionary tale of why countries should not belong to the Eurozone or trust the ECB.

        1. Yves Smith Post author

          No, a default and a Grexit are two completely different thing, and the difference is important.

          Grexit means leaving the Eurozone and starting to use a different currency, which we will call the drachma since that is what their pre-Eurozone currency was called. That also according to a legal analysis prepared by the ECB implies a departure from the European Union. There are members of the EU, like England, which still have their own currency.

          Defaulting is just defaulting. Anyone can default. You can stop paying your credit card or mortgage. Detroit went into bankruptcy. One reader produced a link that he purported showed that pretty much every county has defaulted, although England may have an arguable out because its last default was so long ago (but it was early to leave the gold standard in the Great Depression, so it did default in gold terms).

          1. Ysaac

            So what could be the consequences of Greece defaulting? Is it better than those of a Grexit?

            Can you also please link to the youtube version of the above video for those with slower connections?

  28. JMarco

    Clearly, Greece has a good man in their corner. I believe that Yani thinks that ECB and Euro ministers would like to come to some mutual agreement. I don’t think that he will get one in next 48hrs unless this is being played out over a Wednesday deadline of sorts. I think that they would like to pressure Greece for another 2 months and hope for surrender by Syriza party.

    1. I.G.I.

      I don’t think EMU and IMF are relying on mere hopes for the Syriza surrender… these people have been running a well proven monies and assets extraction scheme for decades, and are not going to permit to be challenged – it’s akin to the Mafia voluntarily ceasing operations… I think the current negotiations are more or less a farce on the part of the EC-IMF, they are just bidding their time to take the Syriza government down. I think this is be the only logical progression

    2. Yves Smith Post author

      Syriza is only become more popular, but the officialdom is presumably hoping that will change as economic conditions worsen. But that has not happened in Russia with Putin either.

      1. Gerldam

        The difference is that the Russian people have a long history of suffering and their capacity to endure suffering for a long time certainly exceeds that of the Greek people by a fair amount.

  29. sumguy

    Hope I’m wrong.

    But it feels alot more like a cheap attempt to recreate an Ems dispatch kind of situation. Provoke the other side to justify hostilities.

    The CDU/SPD German governing coalition, can’t tolerate the success of a leftist party. A new Left emerging puts the established order into question. The two parties profit to much from the current status quo. Politicians that put the needs of the people above the needs of the political cadres is terrifying for the German establishment. Far more terrifying than the possibility of losing hundreds billions of Euros.

    Syriza needs to fail so the looting can continue. But the German government needs a pretext to destroy Greece, for domestic political reasons, as most Germans actually want to help Greece but finance is hard and they are confused by big numbers and even more confused by the bond market and since things aren’t bad in Germany no one cares.

    But maybe the more important reason for this charade is that Greece is a vital Nato member and destroying the Greek economy without a pretext would almost certainly alienate the US.

    German media is saying that the Greek government is playing games and acting irrationally. What they really mean is that they will take out the bundle of sticks and beat Greece till Greece is broken.

    Once Greece is broken they’ll tell this story as a cautionary tale to the children(or leaders of other EU countries), Schäuble sees himself as an educator and Greece has the audacity to question Schäuble’s logic, this is unacceptable, the other kids could get wrong ideas.

    Schäuble thinks destroying Greece will have a pedagogic effect on Spain and Italy and will compel those electorates to abandon parties that aren’t acceptable to the German establishment.

    Once the other countries have learned their lesson(Schäuble decides when they have) greater integration might be possible.

    It won’t work a collapse of the Greek economy is not containable. But they have guys in suits who tell them that it is, so Germany will force this conflict.

  30. dannyc

    Every time Varoufakis gets near a microphone is a win Greece –and by extension for the hopes of Spain, Ireland, Portugal, and Italy. His arguments are so clear, thorough, and truthful, you almost don’t have to be in the negotiations; you know what’s going on. You always know what the other side is doing — their only come back is the ever cruel There-Is-No-Alternative rap. In a just and democratic Europe, today’s press conference would be aired in full across the Continent in translation. Instead, here is Reuter’s English translation.

  31. kimsarah

    The Germans want Tsipras to replace Yaroufakis at the negotiating table with someone who is easier to deal with.
    From Zero Hedge:

    Zee Germans are not happy and, as KeepTalkingGreece reports, are now suggesting Tsipras replace varoufakis at the negotiating table…
    An SPD politician from Merkels’ social-democrat coalition suggested that Prime Minister Alexis Tsipras should replace Finance Minister Yanis Varoufakis as he apparently creates lots of confusion, German politicians cannot understand.
    SPD executive board member, Joachim Poß, wrote in an e-mail for his party colleagues:
    “Greek Finance Minister Varoufakis has best demonstrated with his performance until now, that he is not up to the demands of such an office. In the interest of the Greek people and in view of the difficult situation, Prime Minister Tsipras should consider to replace Mr Varoufakis with a political experienced, realistic-efficient person.” (Handelsblatt)
    I suppose Varoufakis is an overwhelming challenge for some petty-minded politicians. He is much more than they can take. Or they just want a Yes-Man.
    * * *

    1. hunkerdown

      In the interest of the German people and in view of the difficult situation, the CDU and SPD should be immediately deemed terrorists and rendered incommunicado to Siberia.

  32. Petey


    “So pray tell me exactly where Greece’s leverage lies?”

    That, unlike in situations like Cyprus and others, Germany and its Quislings may well not have the institutional strength to pull of its normal power play here.

    There has been unprecedented lack of institutional consensus so far from various EU institutions in carrying out the agenda of Germany and its Quislings.

    I thought the signaling from Paris yesterday was unprecedented and important. I think the fact that Moscovici draft had to have had to be co-signed by Junker, at a very minimum, is important. I think the fact that the ECB vote against Greece last week was unprecedentedly so close to not having a bare majority means the 2/3 vote necessary to cut off ELA is not viable. And so on, and so on.

    Up to this point, the EU institutions have been inseparable from Germany’s will. But as long as Varoufakis is able to keep being the Most Reasonable Man In The Room, Coppola’s analysis that the EU institutions have a weak hand here has a case to be to made for it.

    Again, I’m not opposed to a pessimistic reading of the eventual outcome, but I don’t think it’s a cut and dried case.

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