Greek Kolotumbas Increasing at Disconcerting Rate

I’m at risk of getting whiplash from watching the speed at which Greece is changing its position on key issues. And while I’d be delighted to be proven wrong, there are reasons to think this pattern does not bode well for the government’s ongoing negotiations.

The negotiations between Greece and its creditors are not garden-variety bargaining between two parties. These are complex multi-party dealings that are part of ongoing relationships. Thus they also involve a substantial amount of diplomacy. One of the things we flagged at the outset as a large obstacle for Syriza was the degree to which its messaging was public, and what it felt necessary to say to its domestic supporters might be at odds with what it might convey to its creditors, and vice versa.

Consider the advice of the father of diplomacy, Talleyrand, at the funeral of Charles-Frédéric Reinhard, who succeeded Talleyrand as Minister of Foreign Affairs in the Directory. Talleyrand was well into his 80s, and this address was correctly recognized as almost certainly the last time Talleyrand would make a public appearance. Tout Paris turned out to see him. Talleyrand discussed the requirements of the office, which were the skills needed by a top diplomat:

A sort of instinct, always prompting him, should prevent him from compromising himself in any discussion. He must have the facility of appearing open, while remaining impenetrable; of masking reserve with the manner of careless abandon; of showing talent even in the choice of his amusements…

Yet all these qualities, as rare as they are, might not suffice, if good faith did not give them the guarantee they almost always require. Here there is one thing I must say, in order to destroy a widely spread prejudice: no, diplomacy is not a science of deceit and duplicity. If good faith is necessary it is above all in political transactions, for it is that which makes them firm and lasting. People have made the mistake of confusing reserve with deceit. Good faith never authorized deceit but it admits reserve, and reserve has this peculiarity that it increases confidence.

Translation: a diplomat needs to be very sparing in his communications, since every remark will be seen as a potential commitment, and a sign of his trustworthiness.

Now one might think that Yanis Varoufakis understands this lesson, since he stressed in a New York Times op-ed that he was not engaging in game-theory type stratagems:

If anything, my game-theory background convinced me that it would be pure folly to think of the current deliberations between Greece and our partners as a bargaining game to be won or lost via bluffs and tactical subterfuge.

So far, so good. But remember that various members of the Eurogroup talked about the need to establish trust with the new government. Now mind you, some of that needs to be taken with a big measure of salt, since some parties’ idea of “trust” is “knuckle under and implement the structural reforms the previous government agreed to.” But as Varoufakis acknowledged, he and the incoming government are the new kids on the block, and they need to establish at least a viable working relationship with the major parties: the ECB, the IMF, the EC, and at least a fair number of members of the Eurogroup.

There are signs that the diplomacy/relationship establishment part of this project is not going swimmingly. A recent Der Spiegel article, which was admittedly a bit of a puff piece for German finance minister Wolfgang Schauble, nevertheless had a revealing section. There’s a disputed account of a meeting in which Varoufakis allegedly yelled at the Eurogroup head, Jeroen Dijsselbloem repeatedly, calling him a liar. Varoufakis and Dijsselbloem both deny that this took place. But regardless of what happened, look at what transpired next:

The result was that last Friday’s Euro Group meeting was atomized, with small groups of two to four people meeting individually with Schäuble, with International Monetary Fund head Christine Lagarde, with European Central Bank head Mario Draghi and with Dijsselbloem.

Varoufakis quickly realized that he was alone, that the other 18 finance ministers were against him. But he took it as validation for his approach….

Prior to the beginning of last Friday’s meeting, Dijsselbloem had telephoned with European leaders to consolidate support behind his compromise proposal. German Chancellor Angela Merkel made it clear to Tsipras that there were no other alternatives. “It’s either that, or it’s over,” she said. And Tsipras relayed his decision to his finance minister: He had decided to give in. Thereafter, Varoufakis was largely uninvolved in the talks, sources say.

Understand what this means: last week’s memo was not negotiated. It was a diktat. The deliberate ambiguity was more a result of a recognition of the need for Syriza to be able to preserve its standing with voters than representing an intent to compromise with Greece. This story is confirmed almost in its entirety by a new account in the Financial Times, save that Tsipras did get one word in the memo changed.

Even the Greek press has come to the understanding that the agreement has more limited implications than some parties have attributed to it. From ekathimerini this morning:

The agreement between the Greek government and its lenders, which was sanctioned by the Eurogroup last Tuesday, appears to be more of a respite and less of a sea change in the relationship between the two sides. The apparent confidence gap is bound to aggravate economic conditions and undermine talks on debt relief unless it is bridged fast. Refraining from adversarial statements is the least they can do at this point, especially some ministers.

With that understanding of how fraught relations between Greece and its creditor are, let’s consider some of the news stories in the last few days. Greece astonishingly suggested it might not make the payment due to the IMF in March. Recall an earlier Greek kolotumba, that of claiming confidently that it had enough funds to get at least through March, only to have ekathimerini report a week or so later that the government would hit a cash crunch as of February 24. From the Wall Street Journal:

Greece’s cash-strapped government suggested in the past week that it might default on some of the debt it owes the International Monetary Fund in March, which would make it the first advanced economy in the institution’s seven-decade history to fall into protracted arrears with the fund.

It would also put the new Athens government on a par with a small group of mostly conflict-ravaged debtors that have stiffed the IMF—a list that includes Afghanistan’s Taliban, Zimbabwe strongman Robert Mugabe and coup-stricken Haiti.

Few expect Greece to shirk its debts to the IMF, but the suggestion alone highlights the deepening standoff between the fund and Athens over the country’s finances.

And the Journal had this tidbit:

A senior adviser to Prime Minister Alexis Tsipras on Thursday said Greece was prepared to ask for an extension on its IMF debt. “If we haven’t collected the 1.4 [billion euros] and, say, have collected 0.8 [billion euros] we will ask for an extension of two months,” said Greek Minister of State Alekos Flabouraris. “I don’t understand, what is the difficulty?”

This sort of flippant remark is not helpful. For those of you old enough to have been around in the stone ages of banking, when character assessment was a big part of deciding whether or not to make a loan, this “Why is paying on time a big deal?” earns you demerits. Remember that any renegotiation involves assessing whether the new government is committed. While Greece needs to be firm in negotiations, remarks like these are red flags. A few at this stage can be attributed to inexperience, but if it continues, the government will be seen as unreliable. One solidly left-leaning correspondent has already called the Greek government The Gang That Can’t Shoot Straight.

And the experts were right. Greece quickly retreated, with Varoufakis stating over the weekend on BBC that:

Of course, Greece would not be the first country not to meet our obligations to the IMF. We will squeeze blood out of stone if we need to do this on our own and we shall do this.

Varoufakis made other remarks to the media last week that caused more consternation. From Ambrose Evans-Pritchard in the Telegraph:

Greece is counting on quiet support from France and the European Commission. “There is a schism in the Troika,” Mr Varoufakis told a local radio station. “We will be talking with the Commission. The EC can coordinate with the ECB if it wants.”

This radio interview has caused outrage in Berlin precisely because it reveals what Syriza’s leaders are telling their audience at home, and how they interpret events. Once again he repeated that there will indeed be debt relief, and “very swiftly”, whatever the pro forma denials by the creditors.

It is hard to fathom the upside of disclosing one’s negotiating strategy, particularly when it is also insulting to your counterparties. Moreover, it is hard to see how Greece could pull it off. All the key European officials have established histories with each other. They know the various governments and official bodies priorities and pet peeves, as well as the personal quirks of the major players. The Greek government is at a massive information disadvantage, and on top of that, is not trusted. How can this be a foundation for driving wedges between parties that are also largely on common ground in their negotiating position?

Another own goal over the weekend was accusing Spain and Portugal of being part of an anti Greek axis,trying to topple the government before elections. That led to a response from Rajoy, per Reuters:

Rajoy said Spain had shown solidarity with Greece as part of the euro zone by helping with its bailout and urged Greece to fulfil its obligations and keep its promises.

“We are not responsible for the frustration generated by the radical Greek left that promised the Greeks something it couldn’t deliver on,” he said.

The Greek government tried to de-escalate, saying Tsipras’ remarks had been misinterpreted. However, Reuters, which broke the story, repeated the quote in the story about Rajoy’s response, meaning it stands by its original account.

So why are Greek officials too often making statements domestically that they have to walk back when the international press picks up on them? Syriza recent approval ratings are as high as 87% and polls on the bailout specifically show 56% approval ratings versus 24% against.

The problem may be a rift within the party:

But concerns are also beginning to surface about the need of the government to start showing progress on reforms if it is to make headway with its creditors. Admittedly, as we have discussed, the government has been so busy with the Eurogroup negotiations that it was impossible for it to have taken control of the bureaucracy. Nevertheless, consider this section at the end of a new article in ekathimerini:

Nevertheless, getting over the state funding issue in March will not get the country far unless the Greek authorities start delivering on their commitments and some government officials, such as Finance Minister Yanis Varoufakis, who seems to like to talk to the press a lot, do less talking and more work.

Abstaining from statements which strain the relationship with the creditors is a must and should be a priority. Some of these statements may aim at the domestic audience and may serve internal SYRIZA party purposes, but they do more damage than good. This is more so in view of the negotiations that will take place in the weeks and months ahead for serious matters such as the sustainability of the debt in tandem with the proper magnitude of the primary budget surpluses and structural reforms to make the economy more competitive. The government should stop shooting itself in the foot by allowing some of its cabinet members to engage in verbal warfare with the creditors and undermine much needed trust.

This is in keeping with the latest statement of Eurogroup head Dijsselbloem, who is prepared to accommodate Greece by being willing to entertain releasing some of the bailout funds early, provided Greece agrees to and starts to implement some reforms pronto:

Greece must immediately start adopting some of the economic reforms demanded by its creditors if it is to receive much-needed access to emergency funds in the face of a mounting March cash crunch, the eurozone’s chief negotiator has warned.

Jeroen Dijsselbloem, the Dutch finance minister who leads the Greek talks as chairman of the eurozone finance ministers’ group, told the Financial Times that he was prepared to make a “first disbursement” of the €7.2bn remaining in Athens’ €172bn bailout as early as this month.

But the funds would only be transferred if the new Greek government, which for weeks has resisted implementing measures contained in the existing bailout after campaigning to kill the programme, adopted reforms the two sides could quickly agree on.

As you can see, this “tough love” is pretty heavy on the tough, particularly given that the reforms in question must not only be agreed to (as in the terms hashed out in sufficiently specific detail) but the Greek government must also have moved to implement them. Perhaps “start adopting” means only getting them passed by Parliament; otherwise, this seems like an impossible order to achieve this month.

I am by private sources that Greece is staring to make contingency plans, but the only external sighting is an Ambrose Evans-Pritchard on new drachmas designed by amateurs [Update: to clarify, Greece would want to keep any Grexit plans under wraps, but launching quasi currencies like tax anticipation notes is another matter]. But he argues that neither side holds the upper hand, since the prospect of a powerful Grexit is a powerful weapon.

That view may be part of what is informing the sometimes self-sabotaging aggressive Greek posture. And it may not be accurate. The US and UK press have expressed more concern about the risk of a Greek departure from the Eurozone. And recall that it took a lot of external pressure on Germany, not just from the US and UK governments, but from NATO too, to get Merkel to rein in Schauble.

However, the concern that led Eurogroup to relent may not have been about a Greek departure, but a disorderly Grexit. If enough of the hardliners (the ECB, the IMF, and the more bloody-minded members of the Eurogroup) share that view, Greece’s likely assumptions about its negotiating leverage, and what degree of concessions its “partners” are prepared to make would prove to be off base.

We have the possibility of a fatal misunderstanding of negotiating positions, as we did in the runup to the Lehman failure. Even though Hank Paulson was clear in telling Dick Fuld of Lehman that he could expect no rescue, Fuld never believed him. Yet any reader of the media could see the Bush administration saw another bailout as politically toxic after the backlash after the Bear Stearns salvage operation. By contrast, Fuld appeared to regard the Bear bailout as proof that Lehman would get one too if it exhausted its other options. As a result, he repeatedly overplayed his hand, including undoing a serious good bank/bad bank deal with the Korean Development Bank, which had a longstanding relationship with Lehman, that KBD reaffirmed after the collapse that it really wanted to consummate the transaction.

It would be better if I were wrong. Perhaps the Greek government will change gears when it gets into intensive negotiations with the Troika, which will presumably be less visible to the public and hence less politicized. If so, it will prove to be a better venue for understanding and hashing out differences. But even with improved communications, the Greeks still have an uphill road before them.

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  1. docg

    The perceived capitulation to the Eumenides (aka “The Institutions,” the Troika, the Furies), created a serious problem for Syriza’s credibility in Greece, so, as it seems to me, passive acceptance of the draconian terms of the agreement would have been politically fatal, even if economically (and diplomatically) prudent. It looks to me like Varoufakis at some point (perhaps all along) woke up to the reality noted by Evans-Pritchard: “neither side holds the upper hand, since the prospect of a Grexit is a powerful weapon.”

    Your comparison with the Lehman situation is well chosen, Yves, and Tzipras/Varoufakis may well be overplaying their hand. But if the Eurozone allows Schauble to cease all payments to Greece, Syriza will have no choice but to default — and the not so kindly Eumenides will be blamed. This would be the largest default in history, and might well constitute the falling domino so many have feared for so long.

    Which could be a good thing:

    1. Cugel

      What exactly is Syriza supposed to do in the face of total intransigence and Troika determination to make Greece suffer to the maximum extent as an “example” to others? More clever negotiations? They have no allies, and have at all costs to maintain popular support. Telling truth to power is usually futile, as it seems to be in this case. But, is there really some imaginative way in which a brilliant negotiating strategy would permit Greece to obtain real relief from the crushing bonds of Austerity?

      I’ve yet to see Yves point to anything the Greeks could possibly do, no matter how clever they were, that would have any possibility of long term success given German attitudes and their fatal belief that any instability resulting from Grexit could be “contained.” In short, utter blindness and complete imbecility reigns in Berlin. What can Greece do in the face of that?

      This is not a negotiation. This is a war for the survival of Greece as an independent country. Have Varoufakis and Syriza made unforced errors? Yes. Just the sort of errors Belgium made in September 1939. It’s true they believed the Nazi promises not to invade them (idiocy) but then nothing they could have done in the face of the Nazi blitz would have been any use and at best could have delayed their collapse by a few weeks. The Troika, and Germany in particular have made the fixed determination to loot Greece of every Euro before kicking them out and blaming them for everything. So Varoufakis’ game theory postulates that he tell everybody everything without reservation (i.e. disclosing his negotiating position quite openly) and then trying (hopelessly) to get the Germans to take 1 coin rather than 2, because that’s in everybody’s long term interest. But, you can’t get a thief to realize that it might be in his long-term interest to leave the victim with a few coins. He doesn’t think in terms of mutual advantage. He thinks in terms of loot and run.

      Well the Troika is going to take 2 coins, believing that can simply write off Greece and just move on with their Euro project. End of story. And if the markets don’t collapse immediately (probably not) and if the German government can survive (in the short term) they will chortle in victory – rather like Dick Cheney when it appeared for a short time in 2003 that the Iraq war might prove to be a “success.”

      The only question is whether Syriza can maintain enough popular support at home to stay in power after they are forced out. Or if they capitulate completely, then what happens next to Greece? Is it some splinter group of the left or (more probably) Golden Dawn or a military coup which will seize control. And what happens to the rest of the Europe?

      1. Praedor

        I’m with you on this. It almost seems that the argument is, “Forget what you campaigned and WON elections upon, the voter’s will doesn’t matter”. The voters will is the ONLY thing that matters. The Germans, the ECB, the IMF are purely secondary in importance if Greece is, in fact, a sovereign democracy…or are we to pretend voting matters only as veneer and that left, right, the shape of the government doesn’t matter so long as it changes nothing and serves the wishes of the financial dictators in Brussels? Granted, Syriza needs to be circumspect in what it says but it sure as hell doesn’t need (SHOULDN’T) toss out its supposed platform and principles now that it has been elected. That is something for the US government to do, not proper democracies.

        Personally, I’m a “burn them all to the ground” kind of guy. If the opponent seeks to burn me down, burn them to ashes as well. In this vein, Greece should be (secretly) speaking to the BRICs about “alternative arrangements” and then, if the Germans and unelected financial technocrats of the ECB and IMF remain stubbornly wed to their corrupt and failed austerity system then not only exit the EU but exit NATO, expel the NATO troops, join the BRICs lock, stock, and barrel. Go nuclear. It’s that or its Golden Dawn (or military coup…something NATO would likely prefer as it gives them absolute control of Greece). Pussyfooting around the edges will only lead to the continued evisceration of Greece, the looting of all its natural resources, and the permanent impovershment of its people. That’s the neoliberal program, afterall.

      2. Yves Smith Post author

        I said from the very outset that there were no good options for Greece. I’m not about to paint lipstick on this pig.

        It was the Greek government that nevertheless made its bad situation worse by throwing away its only negotiating card of a Grexit. If you aren’t willing to use that, you are a supplicant of the Troika.

        Greece is again making matters worse by taking a negotiating posture that forces it to make nice to the Troika, or at least try to reason with them, and instead keeps poking important parties in the eye, as well as making disconcerting changes in its position.

        Your ire is really misdirected. I am telling you where things are. I am not responsible for Greece’s or the Troika;s conduct.

        1. Carlos Fandango

          Syriza can mitigate some of the effects of a Grexit by developing tax collection, financial regulation and building some level of support from other key Greek institutions. I always thought this was a prerequisite for Grexit. They were totally unprepared after only a few weeks in office, in that sense they had no bargaining power at the time.

          The longer Syriza stay in power and the longer they have to prepare contingency plans, the greater their bargaining power. The Euro group had all the contingency plans for Grexit in place at the get go, so their bargaining position will erode somewhat relative to Greece (assuming Syriza make contiguency plans).

          Greek public opinion poll support for the Euro is also a big bargaining chip for the Euro group. I suspect public support for European integration may be stretched quite thin at this point and may snap at any moment.

          Counterintuitively, If Syriza thoroughly prepare for Grexit and build support from the public, it increases their chances of staying in the Euro, they can bargain more from a position of what will you offer for us to stay. I’m quite sure the Eurobrats have thought through this scenario and have an array of dirty tricks up their sleeves to hamper any preparations.

          If Syriza strategists think in any way similar to myself (doubtful), they have to toe a line somewhere between external compromise and internal demonization of the Eurobrats, they need to placate them and poke them at the same time to get a nasty reaction. Luckily Dr Schauble is around to play the Bond villain.

        2. Cugel

          I have no “ire.” You have posited that the Greeks have done a poor job of negotiating because they have irritated the Germans without winning any concessions and “thrown away” the possibility of Grexit.

          I’d say that voluntary Grexit was never a possibility because the Greeks don’t want and didn’t vote for it. It has to appear to the forced on them from outside despite every possible attempt of the Government to be reasonable. And Varoufakis clearly is trying his best to get some kind of concessions. But, should they do so at the cost of keeping silent, even when that probably would undermine support within Greece, which seems far more important than what the attitude of the opposition is.

          I’ve been in high level commercial negotiations, and I admit it’s usually a lot better to have a really good mediator who can keep the parties from talking to each other and present deal points back and forth. Clearly, confronting the Troika directly about their abuse of power has been rather like confronting a battering spouse. It only leads to more violence and abuse.

          Still, there’s no room for real negotiations. Now, given this, should Syriza be sounding the alarm in Greece and calling for a referendum on Grexit? There’s a profound feeling in Greece that they want to be a part of Europe. There doesn’t seem to be anything like sufficient popular support for Grexit, and the prospects for successfully surmounting all the economic dislocations in the face of vicious Euro retaliation seem remote too.

          So, in order to maintain popular support, they have to essentially lie to the Greek people and keep up the facade of negotiations. And clearly Varoufakis is committed to making the attempt at negotiations. They can’t simply walk away for many reasons.

          But, I can’t understand what the real downside is from antagonizing the Germans and publicly disclosing their negotiating positions. What difference is that going to make in negotiations that are hopeless from the beginning, as these clearly have been? If they gain some measure of popular support from the exercise, and don’t push things so far the Germans and Finns can push publicly for withdrawing support for the banks – at least prior to June, then they gain something. It doesn’t look like much, and it may ultimately be futile, but that is a lot more on the Germans than the Greeks.

          1. Yves Smith Post author

            What good does it do to get people who have power over you angry with you? Greece is basically hoping its counterparties have enough mature cool headed grownups on the others side of the table so that they won’t take their anger and annoyance out on Greece in the negotiations.

            And as I indicated repeatedly, there is all the difference in the world between repeatedly saying, as Varoufakis has, “There is no Plan B” versus saying that Syriza was voted in to get meaningful relief from punishing and unproductive austerity, and that while Greece very much wants to stay in the Eurozone and is prepared to continue to make concerted efforts toward that end, getting that relief is paramount. You make an implicit, not an explicit threat.

            1. Michael

              Greece has always needed Germany to appear irrational and cruel; that’s its hope when playing for time. A victory for Greece happens in Spain and Ireland. That’s what makes all of this such a mess.

              And yes, Varioufakis is plainly not negotiating in good faith, just as none of us here negotiate with a rabid dog in good faith. We try to keep it from harming us as long as possible while we reach for some kind of leverage. Varoufakis cannot serve two masters, and he seems to have no interest in doing so anyway.

              Germany has made its position clear: Greece is a German colony and is to return to Third World status without any possibility of improvement. That’s something Varoufakis needs to shop around to the voters of Spain and Ireland — and even France, really.

            2. vlade

              and you don’t negotiate via media unless you are in a clear position of power. in which case you are nt negotiating on the first place anyways.

              1. Yves Smith Post author

                There are no elections in Portugal in the time frame that the Greeks have, and in Spain, only municipal and regional elections. Podemos is not talking up Syriza at all. Strong results might lead the ruling parties to moderate their position, or they might decide to double down. The international left so far is largely sitting on its hands.

                1. Chris in Paris

                  As you say there are no important elections coming up that could influence the situation but to be clear, here the FN, Greens and the left (including some in PS) parties have been publicly supporting Greece. France could turn against German wishes quickly if there’s a spark. The street still has power here.

        3. Sibiriak

          Yves Smith : ” It was the Greek government that nevertheless made its bad situation worse by throwing away its only negotiating card of a Grexit. If you aren’t willing to use that, you are a supplicant of the Troika. Greece is again making matters worse by taking a negotiating posture that forces it to make nice to the Troika, or at least try to reason with them, and instead keeps poking important parties in the eye, as well as making disconcerting changes in its position.

          And if Greece had not supposedly “thrown away” the Grexit card; if it had not unnecessarily angered those that had power over it; if it had negotiated more skillfully, had avoided embarrassing flip flops and had played a better media game– if Greece had done all that, then what? What better terms specifically could Greece have possibly gotten from a completely intransigent Troika et al?

          I don’t see that any of that would made much of a difference. The only way Greece might have gotten a better result would have been by actually playing the Grexit card— but Greece 1) was ideologically and electorally committed NOT to do that and 2) was not READY to do that.

    2. Yves Smith Post author

      The focus has been unduly on Schauble, which I may have unwittingly reinforced by using the Der Spiegel piece as the source for the quote about how the memo last week was presented to Greece as a fait accompli, but Der Spiegel did report that before the Financial Times.

      What is critical to appreciate now is that the negotiations have moved to the Troika, with the Eurogroup then having to review and approve what they did before any funds are released. This will likely lead to some coordination with Eurogroup during negotiations. However, a potentially bigger issue is that the IMF and the ECB are not on the same page as Greece as far as many of the structural reforms that Greece has proposed. The IMF in particular wants Greece to implement the existing structural reforms, and some of those are at odds with campaign promises Greece made that it reasserted in the initial reform list it submitted. So there are multiple fronts on which Greece faces opposition. It’s not just Eurogroup hardliners like Germany, Spain, Finland, and Portugal.

      1. Dan Allen

        The IMF tried to blindside Schauble a few years ago when Stournaras was the Greek FinMin by demanding a haircut for Greece. They tried to spring it on him, but Stournaras didn’t grab the olive branch, and because of that, the IMF is now unwilling to cross Schauble by coming to Greece’s aid. But the same pressure exits within the IMF to right the wrongs if the past. The political will is simply not there however.

        1. Praedor

          Indeed. The IMF is psychotic. I’ve read with interests many a paper from the IMF indicating that it actually finally understands that austerity policies, the destruction of wages, etc, is actually economically counterproductive, let alone destructive on the human level, yet it still persists on shoveling the same pig crap in practice. It repeatedly shows signs of enlightenment and sentience only to robotically behave as if it never published the papers. It is hopelessly broken and corrupt.

          1. Yves Smith Post author

            Those papers come out of the research side. The research side has no impact on the program side, which is responsible for the various lending programs. The program side still believes in structural reforms and austerity, although for Greece it is willing not to make austerity worse, as in it sees the idea of increasing the primary surplus from the current level as unproductive.

            And I am told that the European program team is particularly bloody-minded, so I don’t expect them to concede much on the structural reforms front.

            1. Dan Allen

              It was actually LaGarde who tried to spring a trap on Schauble. The Greek FinMin Stournaras was too timid.

      2. JTMcPhee

        The cynically sage advice of that bloody old survivor Talleyrand includes the phrase “good faith.” I guess that has some special diplomacy-lexicon meaning that ordinary people like myself are not subtle and experienced enough in the black arts of dissimulation and Great Gamery to appreciate.

        Where in all of this, where rapacious looting (in lieu of military conquest) is the apparent fundamental element of all the games in play, is the “good faith?” Liars and thieves and strong-armed robbers using their monopoly on the clubs and spears of “rule of law” and “right of contract” and “irrevocable debt” are “in good faith” if they act their parts with debonair suavité? Meanwhile, whole populations of ordinary people of all ages and situations are starved of food, water and hope by a bunch of smiling predators? While too many other ordinary people are led by image and manufactured consensus to think that strangulation and depopulation are just and fitting and fair, without regard to the wolves sneaking up on their own cattle and children?

        1. Yves Smith Post author

          His advice is much simpler when you parse it: say as little as you can in a negotiation, since everything you say can be regarded as a commitment. This isn’t deception. It’s keeping your cards as close to your chest as possible.

          As to the rest of your comments, we are in the midst of a finance-led counerrevolution. Read Polynyi. He stresses that the propensity of a market system is to destroy society. The first fifty or so years of the Industrial Revolution pauperized many workers in England. Real incomes fell. This phase unfortunately is more typical of the operation of a market system than the sunny depictions of capitalism would have you believe.

          1. Cugel

            I doubt that Varoufakis is really unable to keep his mouth shut. It’s rather like a cold-war scenario: both sides in the cold war tried to eliminate as much of the other side’s sources of insight into what they were really thinking as possible, especially eliminating spies. However, this is utterly counter-productive because it leads inevitably to misunderstanding your opponent and miscalculations because you have no idea what he will or will not do. That kind of intelligence failure led to the Cuban Missile Crisis, with its “1/3 to 1/2 chance of nuclear war” in the words of JFK.

            Varoufakis in essence is not negotiating. He is making his positions known in advance so that the other side can get used to them. Unfortunately, the “religious” commitment to Austerity is so great and the short-term profits to be made are so large that the Euro Group has been unable and unwilling to adjust its thinking to reality. The result is “outrage” because the negotiating points are so far from the “norm” of proper subservience. Yet, Syriza simply cannot successfully get the Greek people to continue to accept the Austerity program. As he said after the short-term deal, “we will see” whether the government could gain support for even the short-term concessions they have made.

            I can’t see how it would be possible for Syriza to ultimately surrender and then continue to govern. They can’t get the Greek people to accept the change in program. It will cause an explosion.

            1. Yves Smith Post author

              I beg to differ. Varoufakis is talking to the media more than he needs to, particularly now that the negotiation of the memo is past, and saying more in the interviews that he needs to. He has a fondness for definitive statements in a situation that is fluid. He does not need to take every media invite.

              1. D. Galanis

                I agree with Yves. He is talking more than he should and he is confusing not only the Europeans but the Greeks as well, even many supporters of SYRIZA. Not a day passes without Yanis giving interviews to local and international media. Lots of people are starting to wonder where he finds the time for this PR blitz given the sorry state of the Greek economy and the miracles he has to perform in order to fix it. I m afraid that Yanis is so full of himself that he does not realize the gravity of the situation. Here in Athens there is already a meme going around: Shut the Varoufuckis up!

                1. Dan Allen

                  What stuns me most is the idea that Greece can do anything to fix its economy. It can’t.

                  There is nothing Varoufakis can do but prepare for an exit.

                  And, he has people on hi staff, people who actually worked with Robert Parenteau, who have written about setting up alternate credit devices once they are cut off. There are people with international expertise right underneath him.

                  The Greek economy can’t be fixed as long as there is no investment and no stimulus. After a bankruptcy, the games are political. I think all the players realize his.

                  What more, the gov’t is operating in typical Greek fashion, as factions do their thing. Take the power company, which gave a raise to certain workers. You cannot expect Varoufakis to have any negotiating ground when the power company, which you refuse to privatize, is giving people raises, and then you also want to address the humanitarian crisis by giving people free electric. One way to make electric more affordable is to keep labor costs down. That’s a huge knot for Varoufakis, in that now his claims for humanitarian crisis are undercut, or else the privatization rationale.

                  1. D. Galanis

                    Well he can at least try. He promised to be hard on the oligarchs and last Sunday one of his books was given as a present to readers of a newspaper that belongs to one of the biggest oligarchs. Very confusing. At the same time he talks about dignity but this is just words to people going hungry.

                  2. Calgacus

                    Well, he can start using alternative credit devices like TANs and impose capital controls before the probable (& hopeful) separation from the Euro. Can try to use the Austerian occupation to modernize the tax system (as the Danegeld did for England a little while ago.)

                    He could also think about the economics more and not exaggerate the problems of leaving the Euro, or propose non-solutions like defaulting within the Euro.

    1. susan the other

      Thanks, I was going to look it up too. “Kolotumbas” sounds like tumbling. A good description. And this was a good summary of the chaos. When a Greek pol says “what difference does it make?” it sounds to me like there are overriding realities here. I don’t think this was as flippant as it was truthful. If there is an unspoken dedication to save Greece (which I bet there is), but the politix of public statements is nutty and getting nuttier, it would be my guess that the political parties being shielded from the truth are Merkel’s own. Then maybe Syriza’s far left. Spain is interesting, but I do think all the GIPSIs are competing for eventual investment funds and this might be prelude. Makes me wonder why negotiations must be so delicate if everyone already knows politix is just a series of small cuts and betrayals. The nature of the beast. Just think if the betrayals were all discounted up front.

  2. papicek

    You’re blaming Greeks when the fact is that the reporting on Greeks has been uniformly awful. There are all sorts of stories concocted about Tsipras & company are saying and doing, and that’s mostly what they are: pure concoctions.

    Do as I did, and get some sources on the ground in Greece and fact check everything you come across, and take everything you see with a grain of salt.

    1. Yves Smith Post author

      The kolotumbas are all based on statements that Greece made in public and then reversed in public. I suggest you read the post again. These are not reports on the negotiations, where the rumors generally sorted themselves out in a few days.

      1. lyman alpha blob

        The Times is being polite. I am definitely not fluent but I did pick up a fair bit of slang in my travels and working with Greeks and your ‘kolos’ is your ass. I would translate ‘kolotumba’ more like ‘a falling on your ass’ but maybe there are some native Greek speakers with a better translation.

        Kolo- is the root in quite a few interesting Greek compound words, both profane and non-profane. One of my favorites is kolokitha, which translates as pumpkin, but the roots mean ‘sitting ass’.

  3. mpr

    “A bit of a puff piece “ Ye think ? But after that you actually take what follows in that article seriously.

    his radio interview has caused outrage in Berlin precisely because it reveals what Syriza’s leaders are telling their audience at home, and how they interpret events

    Those paying attention know that they were saying this openly for some time (weeks before the agreement). In particular, if you understand this, its pretty clear why at least the Greeks don’t regard the new agreement as a capitulation. What you are seeing now is the Germans realizing that the agreement was fig leaf for *them*, not for the Greek government, as Schaeuble had claimed.

    Ambrose Evans-Pritchard reports that the government has designed new drachmas.
    Link ? If its the piece I’m thinking of, that isn’t what he reported. I understood from the piece that those were some kind of joke designs which were circulating.

    As to your broader point, I would agree that the Greek government is at times needlessly careless about communications. As just one example, bring up Nazi reparations was an unnecessary own goal. But, most of it serves the useful purpose of managing expectations. Part of the problem in the current round of negotiations was that the Euro side assumed the Greek side would cave, and it took them a while to adjust. Put another way, when you’re playing a game of chicken, it actually helps to unbolt the steering wheel, and flamboyantly throw it out of the window.

    1. Yves Smith Post author

      I suggest you read the article carefully. I clearly pointed out that this piece was pro-Schauble. I also pointed out that the section I cited was confirmed separately by the Financial Times.

      You and many of the other readers on this thread, appear to be suffering from a case of halo effect, which is the tendency to see people (or in this case, causes) as all good or all bad. You should be able to see that these constant changes in what Syriza says and does is not helping them in getting to a deal, which is what they say they want to do.

      I’m sorry my attempt at irony fell flat. I should have either played it up more or just written it straight. A mere design, even a serious design, is not a serious move, and Greece does need to take the idea that it might have to Grexit seriously.

      1. John Jones

        No Greek government has ever explained to the Greek people that staying in the E.U and Eurozone means more capitulation and austerity. And the challenges if they leave. I think it would take a responsible government to do so. To inform the people so they understand.

      2. brazza

        Impossible as it may be to find perfection on any side of any political issue, once sympathies have drawn empathies to one side of a divide, we will tend to unconsciously parse out information that does not strengthen our preferred outcomes. And lets face it … as much as Syriza’s lack of preparation to govern borders on recklessness, we’ll still root for a bit of Zorba blue and white in the midst of Euro-countless-shades-of-gray. But thanks for hanging tough on your journalistic integrity, and giving it like you see it.

  4. dr frank

    And so, at some point, Syriza should bring out some crafty old walrus in a wheelchair to deal with the powers that be, Tallyrand style?
    In defence of Varoufakis and Tsipras, they are dealing with an implacable foe that has shown itself willing to do no more than agree to minimal cosmetic changes in language, just sufficient, perhaps, to prevent complete breakdown of social order in Greece, or prevent an adverse strategic alliance. Meanwhile, the creditors have taken the opportunity presented by the newly elected “leftist” government to tighten the screws on further advances of funds, and they have made any such advances contingent on their evaluation of Greece’s conformance with the conditions. The way I read it, new advances are completely discretionary. The negotiations so far have concluded with Syriza’s head in a noose.
    Of course, it would be better if Varoufakis and Tsipras and the others were more careful in their utterances, and even better still if Varoufakis were talking numbers instead of concepts.
    The thesis has been advanced that Greece is to be made an example of the horrific things than can happen in order to prevent anti-austerity and debt forgiveness revolts in Spain and Italy and Ireland and France. That doesn’t seem much like honest diplomacy either.

    1. Sibiriak

      dr frank:And so, at some point, Syriza should bring out some crafty old walrus in a wheelchair to deal with the powers that be, Tallyrand style?

      Lol! Incisive.

    2. susan the other

      We all know the history of Greece. It suffered enormous losses and political confusion in WW2. It was victimized by the Russians, the Germans and the Allies – all three. Greece survived even tho’ it was always a dollar short by virtue of getting ripped-off everytime it turned around. And because it started out in such bad shape. And because of its power-alliances, Greece spent too much money on its military – much like we did. Whereas Spain was neutral during the war. Nobody screwed much with Spain. And Portugal leads a life of comparative bliss as well. Iceland is intrepid and has no particular obligations to the EU. Italy isn’t as bad off as it will be if Greece is ground into the dirt – another reason Greece will be saved. Ireland just got totally screwed because it was overextended when the crash hit and was forced to pay off the unsecured debts of its idiot banks. And etc. Of all the most troubled EU countries, Greece has been the great survivor. It would be a shame to let it fail now for no good reason except EU politix and a financial system that is so dysfunctional that nobody understands it anymore.

    3. Yves Smith Post author

      I hate to tell you, but the Germans have been clear about their position, which is Greece can stay or leave, it’s their choice. So I am not clear on why you are suggesting that they have been duplicitous.

      And I’m not talking about crafty. I am talking about the appearance of basic competence. Saying you might stiff the IMF and having to walk it back, saying confidently after you have won the election that you won’t need bailout money till after March (indicating a time frame implies you’ve done an analysis of some sort), telling the world about your negotiating tactics and reversing yourself on that, attacking the governments whose approval you need to get bailout funds you desperately need released, how pray tell is that productive? This is not a matter of crafty, this is common sense.

      As I said early on, the Greek government threw away its only negotiating card, which was the threat of a Grexit. They could have kept that on the table and still presented that as their least preferred option. The Greeks are basically being told by the Troika and the Eurogroup not to expect much of what they want. Yet they refuse to hear that and act as if being in denial will somehow make things better for them.

      Your annoyance with me is shooting the messenger. I’d like to see Greece prevail too but I said early on they had only terrible options. Going to the Troika means being a supplicant and working to get some variances here and there. The government tried to get more but the memo of last week was a diktat. But what is disconcerting is that the government seems to believe the PR it is feeding to the Greek public. They don’t seem to be coping well with the fact that they have far less freedom in dealing with the Troika than they had hoped.

  5. Dan Allen

    After several bad translations from the Greek, Varoufakis was quoted in one press conference as saying he doesn’t trust translators. He gave an interview with Bloomberg in which he went through pains to differentiate what he said in the Greek from what was reported in public. He said that of course Greece will deal with the troika institutions of the ECB, IMF and Eurogroup. He said that in the Greek he referred to the troika technocrats in Athens, who regularly nix legislation.

    People should also remember that prior Greek gov’ts have been at this negotiation for 5 years now. The previous FinMin Stournaras is an associate of Varoufakis’s. We need to compare what the new gov’t achieves (or doesn’t) to what Stournaras managed. Why is Varoufakis taking the Greek case public in such open terms? Because previous negotiations begging for mercy have utterly failed. Varoufakis is heightening the fact that Greek is being squeezed and forced out in a dishonest way.

    Roll back the negotiations to 2012 when Greece converted Athens denominated debt into London-based debt AND Eurozone debt. That was in exchange for solidarity and keeping Greece in the eurozone without killing it, but it seems the Eurogroup is much more inclined toward punishing Greece (as Geithner revealed). Viewed from the context of who will be to blame for Greece’s forceful exit through banking failure, then the public case that Varoufakis is making is a PR necessary move. There is no good will at the Eurogroup. That much has been proven over 5 years. It brought down the prior gov’t. Varoufakis’s public words are a reaction to the Eurgroup’s stance. They have never been a negotiating position.

    I too believe Greece is making preparations, unfortunately, but it will not leave willingly.

    Lastly, in order to understand the depth of the misportrayal of the Greek position, I read over the weekend that the Germans and Schauble were livid that Varoufakis mentioned a debt writedown to Charlie Hebdo in Paris, as though this were proof that Greece was reneging. Almost all western news sources are apparently not aware that the 2012 agreement promised Greece a future debt writedown WHEN it achieved a primary surplus.

    1. guest

      Almost all western news sources are apparently not aware that the 2012 agreement promised Greece a future debt writedown WHEN it achieved a primary surplus.

      So why has this point not be given more prominence by the Greek negotiators?

      Similarly, there are those 1.7 or 1.9 b€ accrued interests in favour of Greece that the ECB is refusing to take into account.

      What is exactly the deal with those elements? And why hasn’t Tsipras or Varoufakis used the card “the EU must abide by its obligations” with them?

      1. Dan Allen

        They have said it is part of the previous agreement, but they also want a totally new agreement.

      2. Yves Smith Post author


        You have the events out of sequence. Varoufakis DID say Greece was no longer dealing with the Troika. He then clarified that (and he made it clear it was a clarification) in a BBC interview shortly thereafter that he meant the Troika monitors, not the Troika as lenders. Most but not all media outlets reported the distinction after the BBC interview.

        I’ve done hundreds of hours of interviews through translation (Japanese). The translators Varoufakis is getting when he is speaking in Greek at Eurogroup sessions are diplomatic translators. They are as good as it gets. But simultaneous translation is very hard and mistakes are not unheard of.

        guest, to your point, and I didn’t want to overegg the post, but your point is important.

        Do you see Varoufakis state, “In our 2012 deal, we were promised that we’d get debt relief”? Here is a summary from the blog Macropolis:

        On November 27 2012, the Eurogroup agreed to provide further debt relief to Greece once it achieved a primary surplus…

        Despite this commitment and even though Greece achieved a primary surplus in 2013, a year ahead of schedule, no measures on further debt relief were offered. The previous government was told at the end of 2013 to wait until the primary surplus was rubber stamped by Eurostat in March. Then, it was told to wait until after the European Parliament elections in May. Then, it was told to wait until after the completion of the troika review that began last September. Greece’s lenders attempted to cover their reluctance with the fig leaf of claims that Greek debt was on a sustainable path.

        Varoufakis has tried raising other cases where Greece got the short end of the stick, such as this one:

        But this is a more ambiguous issue. Even though Varoufakis is right in theory, reality is path dependent, and the ECB did the SMP before the 2012 restructuring. The bigger issue is that private investors took haircuts, while official investors have taken economic reductions in the value of their Greek debt (by lowering interest rates and extending maturities).

        The big issue for Greece is not so much getting more debt relief (the economic value of its debt is more like 70% of GDP), although they do need a break near term just to make their payments coming due. The issue is that under a depression and deflation, whatever debt it has only keeps rising in value in real terms, necessitating more stealth haircuts. The Troika really needs to make a break with the past and adopt pro-growth policies. But all they seem willing and able to do is go from austerity to austerity lite.

        1. guest

          All right, but then if the Troika (whatever the ECB, Eurogroup, FMI take as a name) only propose leonine contracts to Greece and adamantly refuse, for political, ideological and financial reasons to change paths in their policies, what is the point of trying to “build trust”?

          I get it that the new Greek government, being composed of outsiders, did not know the ins and outs and who is who in the EU, has little experience in high-stakes negotiations, did not have time to gather and digest all the information, and was not cautious in negotiation tactics, but given the circumstances it looks the best that can be achieved is being dictated a leonine contract by a smiling Draghi or Lagarde instead of being dictated the same leonine contract by a grumpy Schäuble or Dijsselbloem.

          Somehow the current situation looks like a total dead-end that can only be escaped by blowing one of the walls (default, grexit, parallel currency, whatever).

          1. Yves Smith Post author

            Greece was the one that said it wanted to stay in the Eurozone no matter what. Like it or not, that puts them in a position of needing to rely on Eurozone institutions and having good working relations with them.

            I am simply telling you the implications of the course the Greek government has chosen.

        2. Dan Allen

          In the original Greek, Varoufakis apparently referred to the Athens- technical team. Jeroen D. was given the translation you have, which is why he said, “You killed the troika.”

        3. Dan Allen

          I do agree that it is a tilt at a windmill to get the troika to hold to this debt relief commitment, but I don’t understand why people are apoplectic when Varoufakis mentions it.

          As for Greece, I think there’s pent-up demand there, but no one is going to jump in feet-first when the 180% debt to GDP means it’s heading out of the euro and that any investment you make will be lost forever.

          That’s the country’s biggest problem, the debt and all that comes with it.

          1. Yves Smith Post author

            I wasn’t but I assume it was because the official debt has always been restructured to not write down principal. The European governments don’t want to book losses, and a writedown would require that, while reducing the value in economic terms does not. I assume they regarded this as a obvious boundary condition on their side and were ripshit when Varoufakis acted as if it didn’t matter.

            1. Dan Allen

              There’s a reason why Varoufakis acted this way. It’ because LaGarde and France led the charge to actually give Greece a haircut. Unfortunately, because of Stournaras’s timidity (and he’s a friend of Varofuakis’s), LaGarde will never try to cross Schauble again. The Greeks didn’t seize the opportunity when it was presented.

              Nonetheless, the fact that it was presented at all means that a haircut is not expressly forbidden.

  6. mi

    Your recommendations for the current Greek government certainly played out well for its predecessors.

    1. Yves Smith Post author

      I suggest you read the piece more carefully. There is all the difference in the world between pissing people off for no productive purpose and taking tough positions in negotiations. Nor do you help your credibility by making claims in public about what you are doing to do and then reversing them within days, repeatedly. And please explain how it is helpful to broadcast your negotiating tactics in advance. Syriza is hurting its case, not helping it. You are attempting to shoot the messenger with your remark.

      1. Santi

        I don’t think it is Syriza, I do think there is a lot of infowar and propaganda around the Greek government right now. Almost as much as in the flank North.

        1. Yves Smith Post author

          The conflicts are all in remarks that the government made in public, in speeches or on Greek TV. There has not been a single report in ekathimerini on mistranslations in the foreign media, citing those reports versus the statements made in Greek. Nor have I had my Greek readers who watch Greek TV and sometimes send me rush translations of what they’ve seen, tell me that the foreign media is misreporting on government presentations to the Greek public.

          1. Dan Allen

            I’ll give you one absolute example of a mistranslation. When Tsipras gave his first address and referenced the sacrifices of people like Glezos, he talked about the German war loans as “debt owed to history” and that phrase in the Greek was translated as reparations. Inasmuch as any war loan may be considered a reparation, that translation may be proper. However, it seems there is differentiation between the war loan and the destruction in Greece, as a practical difference. Soonafter Tsipras made the speech a gov’t minister quoted the figure of 11 billion euros, which relates to the war loan, and not reparations.

      2. Dan Allen

        If the negotiation was never with the Eurogroups but with other entities in Europe, then public utterance is the only way to heap pressure on them. The tactful method didn’t work for Stournaras and the others. The Eurogroups took advantage of them.

        1. Yves Smith Post author

          No it isn’t. These are not elected officials but members of organizations that are not democratically accountable. Does the Fed care if the governor of Georgia says bad things about them? Would the World Bank care? Now admittedly, Greece has direct dealing with the ECB and the IMF, while the governor of Georgia does not have direct dealings with the Fed and World Bank, but the premise that public criticism makes a difference to these organizations is spurious. Financial investors, top media commentators, and highly respected economist, have been loudly criticizing the Eurozone’s “kick the can down the road” approach to the financial crisis for years. That hasn’t led to any changes in conduct.

          1. Dan Allen

            It’s the main weapon Greece has in front of the unemployed populations of the south and Ireland. It causes political upheaval, as do Tsipras words about Spain and Portugal squeezing Greece (which they did, they insisted that no Friday agreement be allowed).

            Syriza is trying to move the Greek population toward an acceptance of being moved out while simultaneously forcing the EU to debilitate its banking system. These are the two bets.

            What Syriza won’t do is voluntarily leave (because then it would be on the hook still for the debt) and it won’t choose to drop the euro while the population wants it.

            Syriza is going to come back harder at the EU than it did in February. At that point, it will be forced out.

            1. Yves Smith Post author

              Podemos is pointedly not talking up Syriza, so that gambit is not working. It is over my pay grade, but readers have said Podemos is unlikely to dominate a ruling coalition given how the two round voting system works in Spain, despite its leading the polls.

              The pro Syriza rallies in other countries have had small crowds, mere thousands. By contrast, protests in Spain and Portugal in 2012 got huge turnout, in the millions in both countries. And deposits and bond yields in periphery countries haven’t budged.

  7. bdy

    Is it shaping up like a Lehman replay, where the first large default puts proof in the pudding that widespread relief is required to prevent systemic collapse?
    In that scenario a Grexit sends the Eurozone all FUBAR before the Spanish, Italian, Irish and French dominoes get some kind of structured relief. Works for racist Germany and sucks for the Comintern, so why not if you’re the PTB? Wonder what a state-directed Euro-TARP would look like . . .

  8. Gary Orton

    A little bit different take by James Bone in the Australian Financial Review: “Yanis Varoufakis, finance minister with Europe in his hands.” Bone explains a paper YV wrote: Rational Rules of Thumb in Finite Dynamic Games: N-Person Backward Induction With Inconsistently Aligned Beliefs and Full Rationality.

    Two players take turns picking coins from a table of 1000 gold sovereigns. If one person takes a coin, then the other can take a coin. But if one person takes two coins (the maximum), the game is over. Traditional game theory finds that the first person will immediately take two coins, so ending the game with just two in her pocket. However, Varoufakis’ paper argued that the two will co-operate taking one each until both end up with 500. . . . In the game theory of Greece’s negotiations with the rest of the eurozone, the question is whether Germany will pocket the first two gold sovereigns, thus ending the game for Greece. Or whether Berlin will collaborate in order to share the money on the table [e.g., by using solutions set forth YV’s Modest Proposal]. It is not at all clear that Varoufakis will win this game – or that Syriza necessarily expects him to. Already, there is speculation in Greece that [Syriza economist Costas] Lapavitsas, who has in past called for the euro to be replaced by a system of managed exchange rates, is being kept on the substitutes’ bench to replace Varoufakis as finance minister if he fails to strike a debt deal with Europe and “Grexit” actually occurs.

    As stated in the article, we are at the stage of waiting to see how many gold coins Berlin will pocket.

    1. Santi

      Exactly, and in the game you outline it is fundamental that the other side is continuously reminded of the RATIONAL actions and expectactions that will maximize THEIR OUTCOME, and try to avoid adversarial views. This is what Greek government tries to do. Using the truth is the best way to achieve this outcome.

      1. Yves Smith Post author

        But the Greeks cannot take the high ground of presenting themselves as truth tellers if they keep reversing themselves! Don’t you see how they are undermining their own strategy?

        1. Gary Orton

          The Greeks cannot take the high ground of presenting themselves as truth tellers if they keep reversing themselves.

          The elephant in the negotiating room is the humanitarian crisis in Greece. It speaks for itself. Its truth gives Syriza the high ground, regardless of how ineptly or recklessly Syriza attempts to modify debt terms.

          As Varoufakis’s ex-wife, Margarite Poulos, a lecturer of modern European history at University of Western Sydney who speaks to him every day on the phone, pointed out, it’s the humanitarian crisis that provides far more common ground for successful negotiation than any of the journalists acknowledge—more than negotiating debt terms.

          “Let’s face it: Greek society and the economy are in a state of paralysis, and Syriza was correct to reframe the economic crisis in the eurozone as a humanitarian one—which is what won them the election,” she says. “Now, it’s an understatement to say that Syriza simply doesn’t want to disappoint its voters—it’s more important to underscore that the country is in tatters, and that any government would need to address that.” Greece’s Varoufakis, according to his ex-wife

          1. Yves Smith Post author

            None of the Greek officials are talking up the humanitarian crisis. At most, all they do is refer to it in passing. That’s not a way to galvanize support around that issue.

  9. fosforos

    What seems missing from the analyses is the fact that Varoufakis, and Syriza, are “eccentric” (ie., anti-Stalinist, anti-Sectarian) Marxists who have been elected with a term in office of four years. Which is a longer term than any of its negotiating counterparts (ie. enemies). To the extent that they think as Marxists they think in terms of the European political perspective–what strategy has the best chance of leading to a series of far-left electoral successes over those years? As far as ‘Grexit” is concerned they have to make it clear, and have long made it clear, that they are totally against it. Their strategy would not be that of Roosevelt and Stimson (“make damn sure that it’s the Japs who hit first”) but that of Lenin and Trotsky at Brest-Litovsk: if Hoffman and Ludendorff are determined to take the Ukraine we can’t stop them, but we can buy time while making it clear to the European working classes who it is that wants peace and who wants to continue the war. On that (Kaiser vs. Soviets) level the strategy certainly worked–the Kaiser was gone within the year (the subsequent decline and fall of the Soviets is another matter).

    1. Calgacus

      Fosforus: If I understand you correctly, Varoufakis has made it clear that his strategy is closer to Roosevelt- Stimson than Lenin-Trotsky. And I think it is a very reasonable strategy: The main thing is to put ending austerity above everything. If the EZ insists on eternal austerity – YV is not saying “we can’t stop them” – which is just not true. He is saying that Greece will separate from the Eurozone, one way or another. I just hope they will maintain this strategy, and put enough of their program into practice soon- which will likely cause the “institutions” to throw a tantrum.

  10. juliania

    I don’t know if there’s any proof in this overview, Yves, but it rather delighted me I have to say:

    I of course am missing many technicalities of finance, but it did seem to me that your observations dealt with the protocols. Perhaps this is after watching this season’s final episode of “Downton Abbey” (which is mostly about protocol) but also I am reading Edith Wharton’s “The Age of Innocence.” So, mea culpa on having that forcibly hit home – what the Greek government is now doing isn’t proper.

    Well, the Gordian knot does come to mind as well. Not to mention student loan debt whereby my (brilliant) jobless son has seen his double thanks to the accruing interest. If that’s not usury, I don’t know what is.

    Vive la difference, Greece! I’m mad enough to say keep on keeping on.

  11. BadBentham

    Well, citing flip-flopper Talleyrand, the high artist of diplomatic and political kolotumbas, as pointed out by Napoleon: ” shit in tights” , to make a claim against Syriza`s behaviour: for what it is worth ;) After all, half of your article sounds somewhat like opposition to any meaningful political change. That is clearly, by definition, always chaotic, and the new actors are per se defined as having neither allies , nor a real clue what is “really” going on behind the curtains of power. (For sure a reason why revolutions are rarely tried, and even less often successful) In a way, the typical, highly cynical, “wisdom” of policy makers accompanied by bloody compromises that cost human lives, for what the Restaurationist Talleyrand is the archetype, is the last that Greece, and as a matter of fact: Europe, currently needs. It is rather a gun-to-the-head situation, where Greece as the weakest part of the EZ shall be brought into total submission by the systemic violence and its economic warfare, as you continuously point out yourself. And so, Tsipras` talk is from my side highly understandable, as well as close to the truth- although it makes things certainly even more difficult in the close future. However, as much as I love to listen to Yanis, Kathimerini certainly has a point, – as in “The Good,the Bad and the Ugly” : If you want to shoot, shoot. Don`t talk! ;)

    1. Yves Smith Post author

      I suggest you read up on Talleyrand. He had a consistent policy position his entire career and never deviated from that. And he claimed he never abandoned a government or political leader before they abandoned themselves, as in engaged in a course of conduct that was destructive to France.

      And it was Napoleon, not Talleyrand, who flip flopped. After the famed “shit in a silk stocking” remark, which came late in a half-hour diatribe that discredited Napoleon before his court far more than it hurt Talleyrand, Talleyrand was back to status quo ante, serving Napoleon as before, in less than a month.

  12. fosforos

    Citing Talleyrand on diplomacy is really awful. Talleyrand was a scoundrel dealing always with scoundrels (Metternich! Castelreagh!) as slimy as himself. Of course they got along “comme des larrons au foire.” Syriza (an “eccentric” Marxist party) faces avowed enemies intent on its defeat or neutering. If it wants a French model (without going so far as the great Danton–“l’audace, toujours l’audace, et nous vaincrons!”)–it can find a good enough negotiating model in de Gaulle (though without wishing for Schauble the exact fate of Darlan–Giroud would be enough).

    1. Yves Smith Post author

      See my remark above. Talleyrand managed to preserve France’s borders after the Napoleonic wars, a remarkable accomplishment, and he also is almost single-handely responsible for the independence of Belgium. In his day, his status as a successful stock market speculator was more scandalous than his numerous affairs. He also had the bad taste to require really big bribes under Napoleon when more tasteful sized bribes were standard. But he’d return the money if he failed to deliver.

      He also proposed numerous reforms, many of which would be regarded as progressive even today. And despite having personal reservations about him, everyone turned to him as clearly the most skilled interlocutor they could find.

      By contrast, Danton wound up dead and failed at moderating the moderating the progress of the French Revolution, and the escalating violence paved the way for the Empire and thus the Restoration.

    2. gordon

      I don’t recall that Talleyrand was ever elected by anybody. His position was therefore fundamentally different from elected representatives like Tsipras and Varoufakis. Loyalty to a party platform or keeping campaign promises were never issues for Talleyrand.

      I know his regular betrayals of those who had appointed him to various positions (Bishop of Autun, Foreign Minister) are usually excused by claiming his overriding “loyalty to France”, and perhaps it is easier to excuse betrayal of a patron than betrayal of a people. The elected Tsipras’ and Varoufakis’ only honourable option, in the event they are unable to put their policy in operation, however, is confession of failure and resignation, not abandonment of the policy. A backflip and surrender to the “troika” isn’t an option for them, because the position they are in, in relation to the Greek people, is not like Talleyrand’s in relation to the French people of his day.

      One can get a bit too carried away with insider dealing and the mechanics of negotiation, and forget the fundamentals of who you are and why you are there.

      1. Yves Smith Post author

        Talleyrand made it abundantly clear he never took his status as a Bishop seriously. He gave all of one Mass, and that not well. As the eldest son, he should have inherited the modest family wealth, but he was a cripple, so his family arranged for the second son to get the family money and packed Talleyrand off to the clergy.

        Talleyrand tried hard to curb Napoleon’s conquests, seeing them as unsustainable and also despairing of Napoleon treating acquired countries as French vassal states rather than giving them more of an appearance of independence. It was when that failed that he began operating against Napoleon, openly. Napoleon figured he was smarter than Talleyrand and kept him on regardless. So how deceptive was Talleyrand, pray tell?

        1. gordon

          The point is the difference between Talleyrand’s position and the position of Tsipras and Varoufakis, not the evaluation of Talleyrand’s career and his place in history.

          For the record, however, he successively betrayed the Catholic Church, the Directory, and Napoleon. I know people defend him by saying “but he never betrayed France”; that argument can go on forever.

          1. Lambert Strether

            If I had to pick institutions to betray, at least two of those would be candidates for the top item on my list.

            And doesn’t saving France’s borders after Napoleon flamed or got stamped out count for something.

            1. gordon

              Look, if you want to have a discussion about the career, moral character, historical significance and personal hygiene of Talleyrand, go right ahead. I’m not interested.

              In the OP, Talleyrand was quoted on diplomacy. My objection to this, and the interpretation of his remarks, is that the position of Talleyrand as a non-elected appointee was quite different from the position of Syriza people who are elected popular representatives. Talleyrand went to Vienna as an appointed representative of an undemocratic French government put in place and held in place by foreign bayonets. Of course he was an insider, doing insider deals with other insiders. That was his idea of diplomacy, maybe appropriate for his position at that time. It’s not appropriate now, especially not for people who are elected on the basis of a specific programme.

              1. Yves Smith Post author

                I pointed out that these negotiations have a diplomatic as well as a political character. And the Greek government has chosen to make them far more public than they need to be, not just by the frequency with which government officials discuss the negotiations with the press, but also in doing things that were unheard of, like leaking text that was being negotiated while the negotiations were on! This has nada to do with the requirements of democracy. Those do not stand in the way of observing the principles I cited, of discretion and of making sure the other side believes you are acting in good faith.

                1. gordon

                  “…far more public than they need to be…”

                  I think the more publicity the better, so everybody can see what is being done to Greece and why, and how the Greek representatives are coping (or trying to cope) with it. I don’t like this “insider” orientation; I love leaks and whistleblowers; I want to know what’s going on.

                  So do you, I think.

                  1. gordon

                    In fact, I’ll go further; I think it would be an excellent idea for the Syriza government to draw together in one public document a statement of all that has happened in regard to Greek debt, the EU response, the Syriza position and the resulting discussions. Such a document would provide a basis for everybody in Europe, including those who haven’t followed the matter before now, to form a view. No doubt it would provoke a counter-document from the “troika”. All the better; Europeans would have both sides of the story.

                    1. Yves Smith Post author

                      “Europeans” do not have a seat at the table. The IMF and the ECB are not accountable to votes, and none of the governments is up for election in the negotiating time frame that the Greek government faces. The only powerful figure in waiting that has supported Syriza is Marine Le Pen, but the French government is somewhat sympathetic to the Greek position, so the pressure of her rising star does little to change the dynamics.

                      You need to look at the actual state of play, and tell me exactly how getting voters to hear Syriza’s case, charitably assuming foreign media would take it up (US/UK reporting has allegedly been more extensive than on the Continent) will change things. Mass demonstrations against austerity in Spain and Portugal in 2012 were barely reported and did not lead to more favorable terms.

                    2. gordon

                      “Europeans” don’t have a seat at the table.”

                      That’s a big part of the problem.

                      You ask what Syriza can possibly gain by dealing publicly. In reply, I see no reason to believe that Syriza would get a better deal by dealing in secret.

                      Off to bed now.

                  2. dannyc

                    I agree, the more publicity the better. Is this a financial crisis or a humanitarian crisis? A humanitarian crisis should never be negotiated in secret. Too much of the terminology itself is false. All these euphemisms — bailout for extortion, privatization for theft of the commons (the heritage of all the Greek people) etc — how can negotiations private or otherwise be considered in good faith when the terms themselves are so deceptive. The World should know exactly what’s going on here. The Neo-liberal austerity scam should be exposed and shamed out of existence. Full employment through effective aggregate demand should be proven to work once and for all. The Greek people (democracy) should never be swindled out of reality behind closed doors. If your gonna crush the well-being a whole society, do it out in the open and call it what it is. (I’m not debating you Yves. I’m out of my depth. I’m just voicing my opinion for full disclosure public debate . This is a dress rehearsal for the coming TPP world. I think Varoufakis has been playing the only card he has: public opinion; the Germans got everything else in writing We need a new global financial Magna Carta)

              2. Lambert Strether

                Actually, I think gordon’s off-point response was to me. He wrote:

                For the record, however, he successively betrayed the Catholic Church, the Directory, and Napoleon.

                Presumably, Gordon views that as a fault. So I responded — in short form, this would have been “so what?” — but in longer form was:

                If I had to pick institutions to betray, at least two of those would be candidates for the top item on my list.

                In response we get nonsense about hygiene.

                I also wrote:

                doesn’t saving France’s borders after Napoleon flamed or got stamped out count for something

                To which gordon responds in part:

                the position of Talleyrand as a non-elected appointee was quite different from the position of Syriza people who are elected popular representatives.

                This amounts to a restatement of the truism that there were no European democracies in the time of Talleyrand. In fact, Yanis’s position in the Eurogroup is remarkably in parallel with Talleyrand’s position at the Council of Vienna, from which a prostrate France emerged with her borders intact:

                It was due in part to [Talleyrand’s] skills that the terms of the treaty were remarkably lenient towards France. As the Congress opened, the right to make decisions was restricted to four countries: Austria, the United Kingdom, Prussia, and Russia. France and other European countries were invited to attend, but were not allowed to influence the process. Talleyrand promptly became the champion of the small countries and demanded admission into the ranks of the decision-making process.

                So, one person (Talleyrand/Yanis) is surrounded by enemies (the Allies/Eurogroup), and (Talleyrand/Yanis) attempts to become the champion of small countries (other European Countries/Spain, Portugal, Italy). The comparison seems on point to me, and one can only hope Yanis is as successful defending Greece as Talleyrand was France.

                History doesn’t repeat, but it rhymes. Apparently, however, it’s not something that gordon is “interested” in learning from.

  13. Jkiss

    It would be better if you are right.
    A. Yanis is a bumbling fool that wrongly thinks Greece must remain in ez, but after thrashing around, causes Greece to fall out.
    B. Yanis is clever, realizes he must alienate ez in order to get Greece into a position where it is forced out in order for syriza to retain popular support.

    A more likely, but either ok. Objective is to get out, the sooner much the better for long suffering Greeks. Yanis is doing yeoman work, don’t sack him.

    1. Yves Smith Post author

      I would never say bumbling fool. Varoufakis is very smart. But he’s been promoted into a completely different game than he’s ever been in before. He’s extremely effective in the media, and that may lead him to over-use that in how he tries to maneuver. But my bigger concern is that he may not know what he does not know. That can make otherwise extremely capable people operate poorly.

      1. Santi

        I don’t think he is trying to manoeuver, it is the EZ that wants him to “be polite”. He put the cards on the table since the beginning, the problem is that the EG think he’s bluffing. He has been again very clear today: :

        “We will not take the tranche if the price is the continuation of the memorandum. We could have gotten it; we could have signed the so-called Hardouvelis e-mail and received the money. However, this is not what the people voted for.”

        1. Yves Smith Post author

          I must point out he’s said things like that before and retreated. The ECB is willing to let them swap some reforms with others as long as they are persuaded that it won’t reduce the fiscal surplus. It is clear that everyone agrees on the humanitarian reforms, which are less than 2 billion euros. But the IMF doesn’t appear inclined to give much ground, so they may be less accommodating than the ECB.

          And Greek representatives just said (see the post) that they might stiff the IMF. It is hard to see how they make the payments if they don’t get the bailout money.

          Now getting the humanitarian reforms may be enough for Varouakis to declare peace with honor. But my contacts say Greece is unlikely to get break on pensions, which was an important promise by Syriza (as in not “reforming” pensions). And I honestly don’t know if the IMF is willing to concede to Syriza on privatizations. Varoufakis’ point is valid: selling at fire-sale prices makes no sense. But the IMF regards Greece as a problem child that has already demanded and gotten way too much in the way of attention and special treatment. So they may dig in their heels out of feeling they need to preserve their bureaucratic authority.

          1. docg

            I’m basically with you on this, Yves. Both Tsipras and Varoufakis have been saying all kinds of things over the last month, swinging from total defiance to (seemingly) total surrender, almost from one day to the next, so “kolotumbas” is the operant term, for sure. And since, as you say, there are no good options for Greece (or the Eurozone either, for that matter) they may be doing the only thing possible for them to do: dissemble. But with style (the Greeks love style, so I’ve been told — forgive me Teddy).

            I do happen to think they’ll get away with it, at least for now, because as I’ve said, a default is NOT what the Furies are looking for, no way. They’ll fuss and they’ll fume and Varoufakis will play them along, yes. But in the long run, Greece will get its bailout.

            The question is: what good will the bailout do them in the long run? And here it seems to me there is only one answer: Greece must learn to become self-sufficient. Forget about Euros, forget about Drachmas. Count your resources and double check to make sure you can 1. feed everyone; 2. house everyone; 3. find decent jobs for everyone to do; 4. provide some sort of basic health care; 5. and above all educate everyone — both academically and politically. Where foreign exchange is needed, there will be be income from the tourist trade and there will always be a market for olives and retsina. (Retsina could go viral if marketed with imagination.)

            So as I see it, preparing for “the worst” means more than designing new Drachmas. It means planning a whole new type of society. Are you listening, Yanis????

            1. jrs

              And dairy products, Greek cheese is great.

              Yea makes sense to me, only modern society is so trade dependent, but if you can cover basic imports like energy (hmm Russia …) maybe …

            2. Gerard Pierce

              Years ago, I was in an intense negotiation when I developed what I called the I-Ching strategy. Before each meeting, I threw the coins and looked up the meaning of the Hexagrams:

              One day the oracle said something like: “The wise man leads by reconciling all interests fairly”.

              The next day it said something like: “Conflicts to defend ones own ideas will always exist. Agressively seek what’s right for yourself and it will all be good.”

              After about a week of this my opponents pretty much had a nervous breakdown and gave up most of the marbles.

      2. participant-observer-observed

        Sounds eerily like 2008 Obama but without the ‘goldmanen handshake!

        Thanks for the nuanced reporting & commentary, Yves!

        Yes, commenters seem to wants a cleaner, ‘fairy tale romance’ binary cut through these messy dynamics, but that is what msnbc & fox are for!

        Long live NC! The Dostoyevsky of finance discourse!

      3. john bougearel


        No matter how smart anyone one of us may or may not be, we all have blindspots. And I for one appreciate it when others point out mine. It is an act of kindness. And I hope YV is following your threads.

    1. Brooklin Bridge

      Ditto. And consistently! And with empathy. The problem some are having is that the humanitarian crisis is simply so mind boggling.

  14. dbk

    If you think watching goings-on from a great distance is mind-boggling, imagine what it’s like for those of us who are here on the ground! It’s the most anxiety-inducing experience of my life, honestly, and yet, it’s also fascinating.
    Greek politics has been suddenly thrown wide open to full view by the Greek public – we are daily witnesses to the hardscrabble conflict between the party’s factions, chiefly its anti-EZ hard left and its more moderate pro-EZ as represented by the PM and Varoufakis, and between Syriza and its now largely-discredited rivals in the Greek Parliament (ND, PASOK – the latter scarcely exists now). It’s ugly, but it’s real.

    Re: Varoufakis specifically:
    -he’s not a party member, and I suspect he’s been brought on for one purpose and one purpose only: to reform the EZ (the “long game”), or to lay the groundwork for exit. Syriza was elected by people who believed in the European Union as a political project, first and foremost; if the next four months prove that it’s only a monetary union in which the creditors dictate the fiscal policy of debtors, well, the Greeks may not believe in it so much in four months – in the latest polls by the Univ of Macedonia (results released last Friday), the percentage of Greeks who felt there was “no way” Greece would leave the EZ had dropped by about 15 points.

    -Varoufakis is being attacked from all sides – from abroad by the Troika (sorry, the “Institutions”), and at home by long-time party members and the hard left wing of the party. He’s not one of them. He’s the son of the CEO of Xalyvourgiki (, and a graduate of the Moraitis School in Athens. His wife is an heir to the family that owned Peiraki-Patraiki ( They are members of the Greek 1%. Honestly, if he wanted to wear a tie and tuck in his shirt, he knows how to do it a lot better than most of us.

    -I think what probably happened was that there was a deal struck within the party pre-election: Tsipras and the inner council decided that, okay, the Greeks want to stay in the EZ-EU, so we’ll give it one last fighting try, and we’ll enlist Varoufakis to do it. But: we won’t conceal what’s really happening in Brussels from the Greek people; we’ll give the man in the street the chance to understand how the North (Germany et al) really view us. So Varoufakis – who believes that Greece shouldn’t have joined, but also believes that it should stay and try to reform the currency union from within, iiuc – was brought on for this purpose and this purpose alone. As someone upthread noted, Lapavitsas is the real FinMin in waiting, and he’s opposed to Greece remaining.

    -Given Varoufakis’ social class and education, he is eminently capable of behaving like the last three or so Greek MinFin and then some. There may have been a perception on the part of the Eurogroup that “okay, he’s from this silly pseudo-leftist party, but at heart he’s really just like us,he’ll come round.” This was a mistake. The problem he has to confront is partly domestic – the Greeks lost all trust in their last few FinMins, and if Varoufakis had behaved like Papakonstantinou or Hardouvelis (Stournaras, now Governor of the BoG, may be a different story, imho), the Greeks would have seen his behavior as “more of the same old same old.” This would not have been acceptable domestically. (Papandreou’s FinMin is now on trial for concealing the names of relatives on the “Lagarde List” – it’s all pretty awful, though the Troika liked him just fine.)

    – Presumably, trust is a two-way street. Varoufakis/Syriza/Greeks/Greece are not trustworthy; okay, agreed; I see this everywhere in the Anglophone financial blogs and press. The reasons are extremely complex and historical, and I won’t elaborate here. But now that ordinary voters are being privileged to see how the North views Greece, on what grounds should Greeks trust them?

    -On Varoufakis’ lack of diplomacy: I can appreciate this perception, and there are many days when his incessant interviews with the Greek press drive me nuts. Varoufakis, however, is not Greece’s MFA – nor its PM. (Can anyone name the new MFA or his Deputy for International Finance without looking them up?) The actual new MFA is a model of diplomacy, as is the Greek diplomatic corps itself. I happen to know two of its members (both with the rank of Ambassador), and they are superb in every respect. Was Varoufakis brought on board to be diplomatic, or to try to bring the impossible situation of relentless – and failed – neoliberal “austerity” front and center to the world financial stage?

    1. hemeantwell

      dbk, aside from intra-Syriza arguments, are you seeing anything about Syriza’s coalition partners, the Independent Greeks?

      1. dbk

        ANEL, the “Independent Greeks”, are admittedly an unlikely partner for Syriza. The ministerial post they have been given, however, is interesting – Defense. The new Minister, Kammenos, is a “patriot” (a term with a very special, coded meaning in Greek), but he’s also a very rich man and to all reports, incorruptible. He’s vowed to crack down on war materiel purchases that don’t deliver what they’re contracted to do, and in fact, three German / German-French arms providers have already been blacklisted, which will not be well-received by TPTB. It looks like he will be popular among the military itself – important for staving off any possible military intervention in domestic affairs. Rumor has it that the agreement between Syriza and ANEL (reached before elections, certainly) was that Syriza would be given carte blanche in financial negotiations with the Troika (aka, the “Institutions”). IMHO, this was a masterstroke by Tsipras/Syriza for domestic reasons. The military has not been heard from since his appointment.

        1. Santi

          No doubt he will be very useful when Greece downsizes the absolutely outrageous military budget in the next years… and this will be surely needed.

          1. John Jones


            I have said this before. Greece unfortunately can not have a weak military with Turkey next door. I and many Greeks would love for Greece not to have to spend billions on the military but it has suffered when not doing so.

    2. Yves Smith Post author

      All very helpful. But to your last point, the problem is that as Finance Minister now, a big part of Varoufakis’ job involves negotiating, or at least overseeing negotiating. That is a really really specific skill set and I emphasized the diplomatic elements of that to make a point with readers. since these negotiations are far more difficult than the usual two-party negotiations most of us encounter (and even there, it’s much better to use a professional negotiator if you can afford to bring one in). So a great deal has been thrust upon him.

      Now the Eurogroup also has all the finance ministers negotiating on their own behalf, so Varoufakis had no easy way to bring in someone to work in tandem with him even if he had wanted to.

      1. dbk

        I agree 100%, and in fact on one of your posts from last week had proposed that someone like you be retained to advise Varoufakis on the next round of negotiations. You probably won’t remember, but I had asked whether Lazard had negotiation specialists, even though they’ve only been retained to deal with the debt per se. My own very humble opinion is that you’d be great at this job. :)

          1. Haralambos

            Despite my handle, I am American and not Greek, but I have lived here in Europe, in Greece and Portugal for 37 years. There is one more skill set I would note: tactics. I think the negotiations or talks or whatever they are called aim at is largely tactical advantage at this point on all sides.

        1. Sibiriak

          dbk: I agree 100%, and in fact on one of your posts from last week had proposed that someone like you be retained to advise Varoufakis on the next round of negotiations.


          Thanks for the insightful posts. In your opinion, what specific concessions could Syriza realistically have gotten from the Troika et al. which they failed to get because they did not negotiate. optimally?

    3. John Jones

      “if the next four months prove that it’s only a monetary union in which the creditors dictate the fiscal policy of debtors, well, the Greeks may not believe in it so much in four months”


      It is not just now. They never should of believed it Greece .
      All Greeks should view it as nothing more than monetary union in which the creditors dictate the fiscal policy of Greece. The E.U and Eurozone have been nothing more than that for Greece. As I was told Greece was more prosperous before joining both. The per capital income in Greece measured in Purchasing Power Standard was 91% of the EU15 in 1979. It was only 78% of the EU15 in 2007. The gap between Greece and the EU-core has been increasing continuously during the last three decades I wonder what it is now.

      So what good is it to Greece and Greeks long term? None. It is complete opposite it is harmful as those decades proved and the recent years have nailed home to those that want to listen. Get out no matter how much pain it causes and build something new and better.

      1. John Jones

        I forgot to add. How can any Greeks start any business producing something Greece needs when it can easily be out competed in Greece by more powerful E.U and Euro core countries for there advantage. That is another thing the E.U and Euro have done in Greece and the periphery deindustrialization.

        1. Dan Allen

          Greece’s main problem has been tens of thousands of small-sized businesses (50-200 employees) shuttering their windows after 2009. I don’t think it’s a question of them competing but rather getting back to a semblance of a life.

          When I think back on this all, I think of Treuhand in East Germany, when the West Germans intended to liquidate East German manufacturing and then use the proceeds to start more competitive businesses. They estimated they would make hundreds of billions from the liquidations. In the end, the Treuhand project was actually in the red. And many thousands of businesses were eradicated. And many people were out of work. For a decade or more. And these were German brethren.

          It stuns me to think that the Greeks might have known how the East Germans were treated and that they still agreed to go along with the bailout in 2010 and 2012.

  15. Benedict@Large

    Meanwhile, the German military is so strapped for money that it is apparently using broomsticks as a substitute for guns during exercises. This is what Germany says is ahead for Greece if Greece simply adheres to Germany’s example? I suspect there’s a clock on Germany’s game, and it is running out.

    [Note also today’s Billy Blog: Germany is not a model for Europe – it fails abroad and at home. Germany’s economy is a mess, and is going down.]

  16. Pookah Harvey

    Is it possible that Varoufakis has more leverage than is commonly believed and the grayness in the final accord is to give the Europeans cover for actually compromising.? The German vote to accept the accord was surprising after the Syriza comments for domestic consumption on how the greyness of the accord was a big win for Greece. Syriza is indicating that they have quite a bit of discretionary action under the new accord.

    Varoufakis believes that the southern European banks are insolvent despite the stress tests. He has also stated that in the case of the bankruptcy of the Greek banks their books will have to be inspected which will open up a can of worms for the other banks, especially in Italy. Varoufakis could be playing a game of chicken where the outcome would be hard for Greece, but they don’t have much left to lose, but devastating for Europe if much of the banking system for southern Europe collapses.

    Hopefully this might be a reason for the disparity of comments. Conciliatory for the European press to give cover for the Troika, and actually truthful for the Greek domestic audience to keep their support.
    When Syriza starts to implement policies that run against austerity it will be interesting to see the reaction from the Troika.

    1. Yves Smith Post author

      Please review the post. The memo was presented to Greece. They did not negotiate it. That indicates that Greece is in a weak position.

      As I stated in the post, what matters is not what Varoufakis believes but what the people negotiating against him believe. The Germans, Baltic countries (which fall in with Germany), the Finns, the Spanish and the Portuguese, for different reasons, all believe that having Greece leave the Eurozone is preferable to giving it too many breaks. The IMF appears to be willing to give Greece a bit of room on the primary surplus target, recognizing it is unreasonable, but appears to be pretty insistent that Greece stick with pretty much all of the structural reforms. The ECB in many ways is the real power player here, and rumors out of the ECB that were not denied were that the ECB is extremely frustrated with Greece and can explain its conduct only via Greece actually wanting a Grexit but not wanting to be responsible for setting it in motion. That the ECB believe that when the Greeks appear to really want to stay in the Eurozone is an indicator of how bad communications are among the key parties.

      And I must take issue with the claim of Greek truthfulness. It is NOT truthful to confidently say, “We don’t need money any time soon, we’re OK for March, and if we need more money, we can find it” and then within a week have that revealed as false.

      1. Dan Allen

        About his Greek truthfulness, he has an enemy trying to cause a bank run.

        You want him to tell the truth that they have no money and are headed out?

        Whatever he says has to be weighed against the fact that he can’t control his banking system.

        1. Yves Smith Post author

          They didn’t have to say anything. They could simply keep repeating that they did not want to take bailout money. They said far more than was necessary. That is why Talleyrand recommended discretion, as in saying as little as possible.

          And the Greek central bank is part of the ECB, so they already have direct access to information about the state of the banks.

  17. Santi

    See how it is not Syriza who “kolotumbas”. There is a lot of disinformation going on. Today’s De Guindos one according to Peter Spiegel:

    In Pamplona speech @Luis_De_Guindos says €zone in talks on 3rd #Greece bailout, €30bn-€50bn. Guess my math was close!— Peter Spiegel (@SpiegelPeter) March 2, 2015

    Later it was apparently retracted:

    Madrid apparently walking back @Luis_De_Guindos statement 3rd #Greece bailout is €30bn-€50bn. More abt Spain-Greece politics than economics?— Peter Spiegel (@SpiegelPeter) March 2, 2015

    I don’t think Greece wants a bailout at all, Varoufakis made it clear. They need repayments linked to growth, plus stimulus, which is something that clearly must go on at the European level. Probably what TPTB want is to bailout Greece a third time so that they can keep paying the second bailout and engrossing the debt with the new interests due, but if Tsipras and Varoufakis are clever they will not accept it. It does not make sense at all.

    1. Yves Smith Post author

      Huh? Greece said it wanted debt reduction. And it absolutely DOES need a bailout. It has payments to the IMF and the ECB this summer it has said it cannot make. You may want to call it something else, but that sort of thing is widely called a bailout.

      After Varoufakis got a loud no on debt reduction talked about other ways to restructure the debt:

      Attempting to sound an emollient note, Mr Varoufakis told the Financial Times the government would no longer call for a headline write-off of Greece’s €315bn foreign debt. Rather it would request a “menu of debt swaps” to ease the burden, including two types of new bonds.

      The first type, indexed to nominal economic growth, would replace European rescue loans, and the second, which he termed “perpetual bonds”, would replace European Central Bank-owned Greek bonds.

      He said his proposal for a debt swap would be a form of “smart debt engineering” that would avoid the need to use a term such as a debt “haircut”, politically unacceptable in Germany and other creditor countries because it sounds to taxpayers like an outright loss.

      The deal he is trying to negotiate for June most assuredly is a third bailout.

      I don’t see how anyone would take De Guidnos seriously, since Varoufakis has not tabled any proposal for the June restructuring yet (he needs to make some progress on the current bailout first) and the Troika would get any proposal before Eurogroup ministers like De Guidnos. So at best this was his guesstimate of the size, and he made it sound like an official Greek position (and more cynical interpretations may have legitimate foundation; I have no idea whether De Guidnos is normally careful or is a hack). I agree that is not cool, but Peter Spiegel had a tendency to run out on Twitter ahead of facts. He’s more careful in his published stories, needless to say.

      1. Santi

        Yes, sorry, I got confused with terminology. What Varoufakis basically says is that Greece does not want new money, and the giving them money to pay back the old debts is a fiction, specially if it makes an onerous debt grow more and more. No matter if you call it bailout or refinancing. I would not call bailout (re-floating if I understand correctly the term) to a process that is looting what remains of value in the ship while making the ship sink slighly faster, so that there is more water to bail out next time.

        The fiction that Europe is “giving” 30b€ to Greece that goes back to the donating pockets is the one that must be clearly unmasked. Specially when the process gives the Greek people economic pain and depression while depriving them of their public goods.

        1. Yves Smith Post author

          It has gotten confusing. The memo signed last week, which the Greeks wanted to call a bridge, is a continuation of what is referred to among the negotiators and the press as a bailout. So “bailout” can mean both the specific deal that is still being wrangled, and bailouts in general. I didn’t clarify that, apologies.

          1. Dan Allen

            The thing Tsipras signed last week differs substantially from not only what Samaras was offered in November, but also what was on offer at the first Eurogroup meeting.


            It is substantially different, but also very ambiguous, and both sides claim it means something else.

            I might agree with you that this is not at all what the Greek electorate signed up for, but it is much better than the renewed cuts demanded on Samaras’ gov’t, and beyond that, I don’t think the people who elected Tsipras are so ignorant as to not understand the February negotiations were hardly a disappointment. The people know their foes were implacable, and they know the gov’t is new.

            1. Yves Smith Post author

              What matters is what the Eurogroup and Troika think it means. They agreed on it among themselves without any involvement of Greece. Their reading, and not Greece’s reading, is controlling here.

              You act as if any ambiguity in the agreement will be resolved to the advantage of Greece. The negotiating process strongly suggests the reverse.

              1. Dan Allen

                I didn’t say it would be resolved in Greece’s favor at all.

                I said it was better than what was on offer on the previous two occasions.

                Have you heard of any demands for Greece to cut pensions yet? I haven’t. But I’m sure they are coming.

                Regardless, the Greek people are fully aware of the negotiations and the stakes. This is why they support Syriza in such high numbers. 48% would vote for them and their popularity is in the 80% range. I think people realize Greece is being offered crumbs at best and that any hardline negotiation risks the euro.

        2. Yves Smith Post author

          Oh, and now I see that Peter Spiegel has used that De Guindos speech, and the partial walkback, as a proper FT article. This section caught my eye:

          Negotiations have begun on a third bailout package for Greece worth between €30bn and €50bn, the Spanish economy minister said on Monday.

          “We are negotiating a third rescue for Greece,” Luis de Guindos told a conference in Pamplona. The minister added that the Spanish government, which has been locked in a war of words with Athens in recent days, would contribute 13-14 per cent of the bailout. The accord would provide for “flexibility” and would include fresh conditions for Greece…

          Other officials appeared to play down his claims or suggest they were premature. A spokeswoman for Jeroen Dijsselbloem, the current eurogroup head, said: “It’s not something that is being discussed in the eurogroup.”

          A spokeswoman for Mr de Guindos clarified later on Monday that the minister had merely wanted to give an estimation of the size of a future Greek bailout, and to indicate the likely Spanish contribution…

          Mr de Guindos’s remarks may have been intended as another volley in an unusually sharp diplomatic spat between the Greek government and the political leadership in Spain and Portugal. In a speech on Saturday, Mr Tsipras, Greek prime minister, accused Madrid and Lisbon of leading an anti-Greek “axis” in Europe…

          The war of words suggests that tensions remain high despite the agreement.

          In Berlin on Monday, the German government said Mr Tsipras’s conspiracy comments amounted to “foul play”. The finance ministry said: “By European standards, this was very unusual foul play. We don’t do that in the eurogroup, that’s not appropriate.”

        3. Calgacus

          Quite right, Santi. As Dean Baker puts it:

          The piece also asserts that “leaders in the rest of Europe do not want to join or, more important, finance the Greek-led revolt.” Actually the financing is going from Greece to the rest of Europe since Greece is now running a primary budget surplus. That means that the government is collecting enough revenue to finance its spending, excluding interest payments. It is the size of the interest payments, which go primarily from Greece to the European Union, European Central Bank, and I.M.F. that is at issue. Greece is not asking for additional money from the rest of Europe. In the event that Greece leaves the euro the payments on its debt will almost certainly stop altogether, so the question is how much financing the rest of Europe gets from Greece, not how much financing Greece gets from Europe.

          What Does “Keep a Lid on Spending” Mean to the NYT and the Troika?

          But “making the ship sink slighly faster” is wrong. Austerity makes the ship sink much faster. Greece’s creditors insist on programs that make Greece’s debt less likely to be paid, not more – therefore the matter is not about this financial debt.

          1. Yves Smith Post author

            You are omitting that even with the primary surplus, Greece cannot make the scheduled payments to the IMF and the ECB. And like it or not, politically this is seen as important. Hence it is perceived as a bailout.

        1. Yves Smith Post author

          This is what the Wall Street Journal reported. One Greek official, on the record, did say Greece would come up short, and it appears Varoufakis and perhaps others made statements that were less definitive but generally consistent. Notice that they only thing they said they were sure of being able to pay were pensions and government salaries:

          In interviews this week, Greek Finance Minister Yanis Varoufakis and other officials, while assuring the public that government-paid pensions and salaries weren’t at risk, said debt payments to the IMF and the European Central Bank were. Greece owes the IMF more than $20 billion, including $1.7 billion due in March.

          Mr. Varoufakis told Greek radio Wednesday that it was “certain” Greece would have a problem “paying off the installments of the IMF” falling due in the coming weeks, and those owed the ECB this summer.

          A senior adviser to Prime Minister Alexis Tsipras on Thursday said Greece was prepared to ask for an extension on its IMF debt. “If we haven’t collected the 1.4 [billion euros] and, say, have collected 0.8 [billion euros] we will ask for an extension of two months,” said Greek Minister of State Alekos Flabouraris. “I don’t understand, what is the difficulty?”

          1. Dan Allen

            Too much faith in translations. I have repeatedly seen mistranlations. Even Tsipras’s axis comment from this weekend. Axis is a typical word in Greek without the connotations it carries in English. A bad translator suddenly turned Portugal into Mussolini.

      2. Jkiss

        It apparently goes without saying, Greece needs a another bailout
        A. Only to repay troika, assuming Greece is still running a primary surplus, and
        B. Has no need of further loans/bailouts if it leaves, and
        C. Will continuously need more loans/bailouts if it stays, apparently without end.
        Imo worth repeating at every opportunity.

        As an aside, what would a curve of Greece indebtedness, past, present, and logically extended a decade into the future look like?
        Related to this, what would a similar curve showing Greek cohort 20-40 look like?

  18. Dino Reno

    Great discussion. Yves, thank you for exposing the Greek’s rather sorry position. Instead of playing the Exit Card, they played the No Exit Card and thought that this entitled them to act crazy–the German description of their behavior. They thought they could say or do pretty much anything and some of it would stick. After all, they weren’t going anywhere. The EU would forced to deal with them just to shut them up and prevent a southern contagion. Unfortunately for them, it’s not working and they have no plan B.
    Spain and Portugal turned on them, the Germans are not amused, the Russians are not interested, and only two marginal players, the U.K and U.S., are totally freaking out because, unlike Germany, they are levered up and couldn’t withstand a market shock. The Germans have already wrote them off and are willing to take the hit.
    So you are right, this is starting to take on the look of a surprise event brought about by numerous miscalculations.

  19. Mattski

    I’d go with Frances Fox-Piven rather than Talleyrand here: poor people’s movements tend to end up being run by middle- and upper-class people, who are more afraid of violence and more comfortable with their enemy counterparts: they sell their followers out. It’s hard not to read a lot of this kind of waffling in Varoufakis’s Guardian piece.

    That is, of course, not to be categorical about the need for tactical compromise. But at some point we all have to acknowledge that finance capital contributes nothing to our well being, plump for the petty economies that we need to build around us (and the needed wider connections that must go with them) and saw the dead limb (which thinks it’s the whole tree) away.

    The poor are not as afraid of violence because they live it, hourly. Spare many any comment that this amounts to some kind of denial that we (the poor)feel pain, or that I am discrediting our pain, because that’s doesn’t follow.

        1. Dan Allen

          The whole reason Varoufakis was selected is that, together with Galbraith and Stuart Holland, they proposed a plan for stimulus inside the eurosystem which would not require a vote to national parliaments and courts. In other words, he has always been a euro backer. This isn’t waffling. It is his actual deeply held belief. Which is why the piece written 2 years ago is not incongruent with current actions, because 2 years ago (and in fact 2 years prior to that) he had already published his so-called “modest proposal” which envisioned enlargement of the European Investment Bank in concert with the ECB.

  20. DJG

    A blog may be the place to ask this question: Are we witnessing a situation in which there is too much access to media? Would the Greeks be better not trying to negotiate via the airwaves? Your quote from Talleyrand above reminds me that he conducted his diplomacy in person, by courier, or by letter. He didn’t feel compelled to run out and talk to the newspapers. So would the Greeks, likewise, have been better off not trying to communicate with the EU by means of media, and should communication with the Greek public have come from a designated person, rather than scatter-shot from Varoufakis and Tsipras?

    Contrariwise, we have Obama trying to smash legitimate uses of the media, and we have Obama trying to conduct negotiations for the TPP in secret. So he’s no wiser than the Greeks.

    Is this the post-modern condition? And what other crises is overuse of media inflaming?

  21. TheCatSaid

    In a recent post in Inverted Alchemy,, David Martin makes the interesting observation that one of Greek’s proposals is something the US is already doing–but the US has buried that in a footnote. He wonders whether the Greek situation is in part a distraction to keep everyone from noticing that the US position is an order of magnitude worse:

    As I sought to untangle the bailouts and refinancings of the Greeks, I thought I’d check in on the lovely U.S. of A. and see how we’re doing with our post-2008 financial house. For that, I pulled up the February 19, 2015 H.4.1. – a document that I find deeply informative and more Greek tragedy than I’d like. It’s always mind bending to see that in a country where we have about $1.3 trillion in circulation, the Fed holds $1.7 trillion in mortgages, $2.5 trillion in Treasury securities and other assets totally about $4.5 trillion in reserve funds. Over the past week, it picked up another $14 billion in mortgage-backed securities just to beef up a health economy! Well done. But footnote 17 – you know the one – at the bottom of the footnote section where you never actually go to read is that pesky little line item “liability for interest on Federal Reserve notes due to the U.S. Treasury” which currently sits at $65.4 billion.

    Four years ago, through a technical accounting gimmick, the Federal Reserve created a mechanism whereby it could never show a capital loss. Let’s examine this more closely. The Federal Reserve is required to send its profits to the U.S. Treasury and, given their amazing investments in things like AIG’s Maiden Lane, Mortgage Back Securities and the like – this amount should be sizable. As long as interest rates stay anemically low, the Fed’s ability to earn income in excess of interest paid on bank reserves is totally cool. However, if the Fed ever had to sell assets – like mortgages and other securities – at a loss, it would lose money, right? Not so fast! Now, if the Fed loses money on saleable assets, it reports it as a negative interest due to the U.S. Treasury. In other words, if the Fed loses money, such losses will be offset against future remittances to the Treasury thereby making the Fed incapable of having a negative capital position. And clearly, smart people who are watching our economic interests care, right? The ultimate anti-Cassandra clarity award goes to Bank of America’s Ralph Axel who stated that: “We will not make too much of a fuss over this accounting change, but the overall theme of reduced government credibility is strengthened by it.” Wow! The theme of reduced credibility is strengthened…. beware of bank executives and their beguiling Fed double speak.

    Whether or not there is any element of deliberate distraction, it was sobering to learn what the Fed is doing but burying it in a footnote rather than having public debate (and negotiations) as in Greece with EU.

  22. alex morfesis

    Harold Washington and Deng Xiaoping
    Syriza is fighting for whatever they can get…and most greeks know that…for the most part, there are very few characters in syriza from the two party kleptocracy that ran hellas into the ground…
    I was not a fan of either Tsipras nor Varoufakis before the election…I am fully impressed by their moves since that day…HW amd DX were men who were dealt really bad hands and made it work…when Dr Strangluvauble cried out trojan horse, he was correct…there will be no right wing turn nor any military takeover…but…
    europe should worry about greece taking its military budget and turning it into a means to obtain assets and options…cyrenaica was once a greek province…and it has oil last I checked…

    1. ohmyheck


      Why would Eastern Libya want to reunite with Greece? Oh wait…
      Misery loves company? Or- desperate times means desperate measures?
      Or Libyan oil will stabilize Greece in the EU, which will then stabilize Eastern Libya?
      Don’t tell Hillary….

  23. mpr

    This is a great thread.

    Yves, I take the point that Syriza’s day to day messaging could be more disciplined, but I think this is a minor issue, because their broader overall messaging since the negotiations started has been remarkably consistent, for example regarding their red lines.

    Thus the question you ask somewhere up in the comment thread of how much flexibility they’ll be “given” on required pension and privatizations is in my view the wrong question. They could not have been clearer that pension cuts, and further fire sale privatizations are off the table. The question is what will the IMF/ECB do regarding medium term funding when those things *do not* happen. I think they’ll cave, probably after other measures on tax evasion etc are taken, but we’ll see.

    As for having taken Grexit off the table. I don’t understand why you and others take such a black and white view of this. Officially they say its off the table, but everyone understands its an option. Just from AEP’s article today

    Mr Varoufakis said Greece did not want any further money if it meant having to buckle to Troika terms. “We won’t take the next tranche if the price is having to continue with the ‘Memorandum’. That is not what the people voted for,” he said. It is a thinly-veiled warning that Greece will default on €300bn of combined liabilities to EMU entities and states if pushed too hard, regardless of what this implies for monetary union.

    1. Yves Smith Post author

      They have not been consistent regarding their red lines. They have articulated very few, but one was that they were not taking the bailout money, which is the term of art for the deal that had to be agreed by February 28. They in fact agreed to take the bailout and are going to be subjected to conditionality, or structural reforms, which is what they rejected.

      Two red lines they have drawn are pension reforms and privatizations. They have had to retreat a bit on privatizations and agree not to undo any that are in progress. I am told the IMF is not inclined to given in on pension reforms, that it is politically unacceptable since Greece is seen as having a higher level of pensions than anywhere else in Europe (in GDP terms this is true, but less so when you adjust for age). It apparently won’t fly with the Eurogroup, and perhaps with the ECB too, to have Greece continue with its current pension regime. That will likely be a real test of whether the Greek government is really walking its talk.

      1. Yves Smith Post author

        Actually, per Ambrose Evans-Pritchard today, Greece is again threatening to undo a current privatization, so that appears to have changed again.

  24. mpr

    Really excellent analysis by Paul Mason today

    In particular, regarding whether exit if off the table, and the complexity surrounding this issue.

    The five laws announced on Saturday were designed not to provoke a veto from the ECB/IMF/EU. Any attempt to block them would probably push another tranche of Greek society towards the inevitability of default and exit, strengthening Mr Varoufakis hand as we approach April and June – in the sense that it would strengthen the realism of the exit threat.

    1. Jkiss

      Paul’s point is that exit will only be accepted following more pain/depression, and the sense that tsipras first did everything possible to get an acceptable future within ez… Suitably Machiavellian, but sad thinking of the continued suffering. I suppose there are people in worse conditions, e.g. Syria.

    2. Sibiriak

      mpr, yes good article.

      The laws announced on Saturday were:

      … a write off of small debts for 3.7 million people; an instalment scheme for people who owe up to €50,000 in tax; food stamps, free electricity and free housing for those in extreme poverty. Plus the reopening of the state broadcaster ERT and the closure of a controversial gold mine, in Skouries, which has been the target of bitter environmental protests.”

      1. Yves Smith Post author

        I read the list quite differently, that these were items that were clearly popular but would not be troubling to the Troika. However, it is aggressive and risky to start implementing reforms, even not very controversial ones, when the Troika and Eurogroup have not agreed to them. In other words, the process issue strikes me as a bigger deal than the substance of the measures.

        Varoufakis said that the Troika had agreed to the humanitarian reforms, which are not much money. The measures that cost money are all on that list:

        1st PILLAR: Confronting the humanitarian crisis

        Total estimated cost €1,882 billion

        Our program to immediately confront the humanitarian crisis, with an estimated cost around €2 billion, amounts to a comprehensive grid of emergency interventions, so as to raise a shield of protection for the most vulnerable social strata.

        Free electricity to 300.000 households currently under the poverty line up to 300 kWh per month per family; that is, 3.600 kWh per year. Total cost: €59,4 million.
        Programme of meal subsidies to 300.000 families without income. The implementation will take place via a public agency of coordination, in cooperation with the local authorities, the Church and solidarity organizations. Total cost: €756 million.
        Programme of housing guarantee. The target is the provision of initially 30.000 apartments (30, 50, and 70 m²), by subsidizing rent at €3 per m². Total cost: €54 million.
        Restitution of the Christmas bonus, as 13th pension, to 1.262.920 pensioners with a pension up to €700. Total cost: €543,06 million.
        Free medical and pharmaceutical care for the uninsured unemployed. Total cost: €350 million.
        Special public transport card for the long-term unemployed and those who are under the poverty line. Total cost: €120 million.
        Repeal of the leveling of the special consumption tax on heating and automotive diesel. Bringing the starting price of heating fuel for households back to €0,90 per lt, instead of the current €1,20 per lt. Benefit is expected.—THE-THESSALONIKI-PROGRAMME.html#.VPVEemCxrgk

        I suspect the writing off of the small debts can be justified in that they’d cost more to collect than they are worth, and the installment scheme is similar budgetary realism. So those probably have no or only a small budget impact.

  25. John Jones

    Hopeful the Greek readers here can translate the full article better. As it hold important information I believe.

    “Τα τραπεζικά στελέχη φέρονται τις τελευταίες δύο εβδομάδες να τηλεφωνούσαν διαρκώς σε πελάτες τους και να προέτρεπαν να επενδύσουν τα χρήματα τους σε αμοιβαία κεφάλαια του εξωτερικού, προκειμένου να διασώσουν τις καταθέσεις τους.”

    People at the Greek banks were basically telling customers to take there money out and send it out of Greece. So this is what Tsipras and Varoufakis had to deal with from the get go. The banks were undermining the new government. So while Tsipras and Varoufakis were trying to help Greece JP Morgan said they received 3 billion euros from Greece.

    1. Dan Allen

      I heard from ordinary people that they were given stern rebukes when they went to take their money out.

      Its interesting to see how this works within the eurozone where any transfer causes imbalances in the Target2 system. Does that mean the country, in the event of an exit, is better off taking money out now? Weird.

      Also, someone looked at the Danish banking system in recent weeks and saw billions pouring in. Which could be the result of decisions on Danish currency rather than flight from elsewhere.

  26. John Jones

    Professor William Mallinson

    “Lets remember that the loan agreement signed in June 2011 was not legal. It was only signed by Papakonstantinou the finance minister. It was never approved by parliament and never signed by the president. So I think that SYRIZA will start right there and that’s how it will save money by declaring perhaps even unilaterally part of the whole loan illegal.”

    So SYRIZA did not end up doing that but I wonder if it could have? I have heard it before but don’t now whether it is possible or allowed?

    It is towards the end of the this clip.

    1. Yves Smith Post author

      That argument is of no help. In legal terms, that means there was no contract formation. Greece would therefore have to return all the money it got under the loan immediately.

      1. Dan Allen

        I recently read an article in which Citigroup determined that the ECB has breached is legal duties to Greek banks. I suspect that Greece is largely on the hook for all its debt regardless, but that there are going to be plenty of legal wranglings which involve:

        1. The conversion of Athens based debt to London debt (and the Athens debt did not contain collective clauses for creditors).

        2. The IMF’s and the EUs good faith efforts in the bailout agreement

        3. Timothy Geithner’s claim that the intent behind the Greek bailout was to punish Greece and make an example out of it.

        4. The ECB’s legal responsibilities vis-a-vis a national central bank

  27. charles 2

    I concur with mpr that it is a great thread.

    Three times two cents from me :
    – I don’t know for Syriza, but Varoufakis is NOT throwing away the possibility of a Grexit. Just watch this from beginning to end, especially the last sentence. He just understands that one must first create the Drachmas. Actually it worth watching the whole talk.

    – It is the the “hard core” eurogroup members who don’t want a Grexit. They just want a “Kosovo-ization” of the Greek economy (it is in the same paragraph of the interview where Varoufakis states that there will be “problems” to repay the ECB and the IMF). I.e., no banking system at all, and no possibility to print currency. In Steve Keen’s terminology linked by Yves recently, they want to demonetise Greek economy and reduce Greece to barter inside the EU.

    – If there is no set-up of a transfer Union, The best outcome from the point of view of Varoufakis and the Greeks (and indeed many well informed economists in the world, even Martin Wolf !) is to have Germany exit from the Euro. A good way to trigger this would be to create a crisis of confidence in the currency through default on international holders of Greek Debt and EFSF and “reckless” behaviour of the Central Bank (such as creating dollops of euros using the NBG printing presses to fill the ATM’s, nationalizing the 4 big banks and order them to buy T-BILLs with ELA over approved threshold, and even repaying the IMF with newly printed banknotes for the fun of it (“Dear Christine, your March repayment is ready for pick-up in container 32847 stationed in the Piraeus port” ;-), ) TOGETHER with a stubborn insistence that the currency created is still real euros.
    This insistence would essentially be supported by arguing that all the measures curtailing the power of the NBG to create money that would likely be initiated by the ECB (ELA restriction, purchase of T-Bill restriction by the Banks, Suspension from TARGET2) are indeed motivated by political bullying and are CONTRARY to the stated objective of the ESCB as defined in the Treaties,inter alia “The ESCB shall act in accordance with the principle of an open market economy with free competition, favouring an efficient allocation of resources”. If indeed, fulfilling my foolish hopes, this outcome was indeed Syriza’s plan, Varoufakis is probably one of the most competent to argue the case in front of European Court and European polity. Even if Greece was to loose, legal time would play in Greece hands and a politically negotiated outcome would likely end the case before it goes to court.

    To take Yves’s terminology, the whole game right now is changing the perception of the BATNA of the hardliners. They won’t do it before it stares them on the face.

  28. RBHoughton

    Re saying as little as possible so as not to reveal your position, it was certainly the case with the British government at the time of Talleyrand but that was because firstly Pitt and then his successors did not want the opposition Whigs or the people being informed of matters (recall this was well before democracy at a time when seats in the Commons were bought and sold publicly) and because there were usually some secret clauses that they were ashamed to reveal.

    I cannot agree that secrecy is appropriate at any time, its merely convenient for negotiators to not have to go over things repeatedly when adverse publicity comes out and threatens to derail a treaty. We cannot make international relations subject to diplomatic convenience – that is a giant leap backwards. Syriza has it right whereas we have become inured to getting it wrong.

    When the Eurogroup speak of establishing trust they mean if I offer you a bribe you must not go and tell the world about it. We should explicitly repudiate that way of negotiations. We have to settle our quarrels openly and if it can’t be done today then we must wait for the opportune moment, don’t you think?

    Excuse me blowing off like that but before you always said what I agreed with and I cannot really deal with the world without a daily dose of Naked Capitalism so I am hoping to change your mind.

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