Greece Raids Public Health Service Kitty as It Scrambles for a Short-Term Lifeline; ECB Refuses to Cut a Break. Updated: No Deal, Greece Given Ultimatum

As Greece continues to scramble to raise funds to avert default and keep paying pensioners and government officials, the end game is becoming clearer.

It was mystifying to have a reader of the German press maintain that Tsipras and Merkel had reached a deal in their Monday pow-wow. His conclusion was based on his reading of an authorized leak to FAZ, which described Merkel as having being in 2011 mode of not being willing to let the Eurozone fail, which he took to mean that Merkel had a deal for Greece in motion.

But like the oracular readings, official messaging can be ambiguous. Saving the Eurozone in 2015, when the ECB now has periphery bond yields firmly under control, is a vastly different matter than in 2011. Is the greater risk letting Greece default, or letting Greece get too many concessions, which would pave the way for France, Spain, Portugal, and Ireland to demand better, and in the eyes of Germans, more costly terms? Moreover, George Osborne and George Soros, whom one would imagine each have good inside sources, both warned that the risk of a Greek default had increased after the Tsipras/Merkel talk by virtue of nothing major having been resolved. Soros pegged the odds of a Grexit at 50/50 due to the fact that Greece’s primary surplus is on a trajectory to becoming zero.

Strange at it may seem, these two views may not be incompatible. Tsipras may have gotten a deal from Merkel. But if it is the one being bandied about in the press, all it is is a short-term stopgap. It does not signal any fundamental change in the creditors’ posture towards Greece, which is to keep the pressure high and push the new government to accept the terms on offer: work within the existing structural reform framework (Greece can propose changes in reforms or swapping out reforms for different ones), submit to review by and negotiation with the Troika, allow the Troika inspectors to have access to information. As we’ve said from the outset, the creditors were expecting to offer Greece economic concessions even before the talks (or more accurately, talking past each other) started, including lower primary surplus targets and a reduction in the financial cost of the debt, via extension of maturities and perhaps a further reduction in rates).

Greece is now raiding various agency cash stocks, including that of its public health service, to pay its bills. Yesterday, the rumor was that the government would be out of money by April 9; today the estimate is April 20. And Greece might stump up some cash prior to getting access to the so-called bailout funds, the €7.2 billion that it is set to receive when it gets its detailed reforms approved first by the Troika, then by the Eurogroup.

Even though various Eurocrats have suggested that Greece might be able to tap a portion of that €7.2 billion soon, it would have to go through the same multi-party approval process that it would take to get all the money, raising the issue of why release only a portion if all the steps to approve the reform list have to be fulfilled. But there may be another route for getting Greece a little breathing space. From the WSJ Brussels blog:

Athens has been trying to tap other sources of cash, successfully in the case of reserves in its bank bailout fund. Now it is looking at a €1.2bln refund from the European Financial Stability Facility – the eurozone’s bailout fund.

Greece’s bank bailout fund received €48.2 billion from the EFSF between 2012 and 2014 under the country’s bailout agreements so that it could replenish the capital of the Greek banks. While the money it received from the EFSF were in the form of bonds, Greece also used €1.2 billion in cash reserves from its own bailout fund to recapitalize its banks.

By February, when Greece’s new government signed an agreement extending the country’s bailout for four months, the fund had €10.9 billion left — which the government agreed to hand back to the EFSF, and keep earmarked for bank recapitalization.

But now Greece claims it should get back €1.2 billion out of the €10.9 billion it returned since that money didn’t originate with EFSF.

Here’s where things become complicated. In order to ask for the money officially, Greece will need a green light from the Single Supervisory Mechanism, the eurozone’s banking watchdog. This could prove tricky, as – under February’s agreement — Greece would only be able to use the money returned to the EFSF for bank recapitalization purposes.

What’s more, even if Greece can get around the request, it will need approval from both the EFSF board and from several parliaments across the bloc.

Eurozone officials caution that legally the whole process would be difficult, but say that a political decision could potentially bypass the legal snags.

Frankly, this sounds like a non-starter, particularly give the need for parliamentary votes, which takes time. Even a few days is a lot of time for a cash-strapped government. A Financial Times report concurred with our view:

Greek authorities have also been seeking €1.2bn in funding that they believe was wrongly taken out of the country’s bank recapitalisation fund by eurozone authorities. But EU officials said a quick decision on the matter was unlikely and even if Athens was awarded the cash it could only go towards bank rescues, not general government coffers.

However, the Reuters “a political decision” may be code for “If Merkel (and Hollande) want this done, it gets done.”

For now, the choke chain on Greece is still kept taut. Greece asked the ECB to raise the cap on how much in government T-bills that Greek banks could hold. Raising the limit would allow the banks to buy new bills from the government, letting Athens raise some fresh cash. The ECB said no.

Moreover, a new report from the Financial Times shows that European officials are as insistent as ever that Greece complete the steps delineated in the memo between Greece and the Eurogroup before Greece gets any of the €7.2 billion it desperately needs. And despite the obvious financial and time pressure, Greece does not appear to be taking the necessary steps. From the Financial Times:

Athens has promised to deliver a list of reforms to eurozone authorities by Monday. But officials cautioned that the list would still have to be agreed with bailout inspectors before eurozone authorities could make progress on any deal to free up new funding.

Though Mr Tsipras discussed his reform plans with Ms Merkel on Monday night, there were few signs that talks in Athens with bailout inspectors had become more active following the Berlin meeting.

“The big ‘if’ is that they seem to move at such a glacial pace,” said an official involved in the negotiations.

And the Eurocrats see the odds of that the Greek government hits the wall as real:

In the absence of progress, some EU officials were accelerating their preparations in case Athens runs out of cash before it agrees a reform programme. In Brussels, European Commission officials have begun looking again at EU law governing capital controls in case the growing uncertainty, or a non-payment to the IMF, spurs a renewed run on bank deposits.

The source of stress is not the payment of IMF loans; even though the government has yet another payment due in April, the agency tolerates slippage as long as the government intends to pay and can probably do so in the not horribly distant future. It’s maturing short-term debt that is the flash point:

A failure to pay either of the T-bills — one is due on April 14, the next on April 17 — would probably bring wider upheaval since they could trigger clauses in other debt obligations that would make them due immediately.

The ECB ceiling could make repayment of the April 14 bill particularly challenging. Greek banks have been the primary buyers of such debt and have essentially rolled over their existing holdings during recent T-bill auctions. But at least 20 per cent of the April 14 bill is held by investors outside Greece who are unlikely to roll over their holdings and Greek banks are now barred from buying up the difference.

The Financial Times also pointed out that pinching the health service’s cash was no mere budgetary finesse but would hurt the delivery of care:

In a sign that the cash crunch has become more desperate, officials at Greece’s state healthcare service, were asked on Tuesday to hand over a €50m reserve for paying arrears owed to medical workers.

Earlier this month about €150m of budget funding for hospital supplies was unexpectedly withheld, according to health ministry officials.

“The national healthcare service is already desperately short of resources after four years of cuts but both these moves are unprecedented,” one official said.

And remember, Greece’s hospitals are already in crisis. It’s hard to imagine how they function at all if things get worse.

Greece thus appears to have between three and four weeks to secure funding, and its best and probably only route is to submit to the process set forth in its February memo with the Eurogroup. The government still seems to be in denial that it must surrender or else default and run the risk that that entails a de facto Grexit. That comes about by virtue of the ECB taking the view that it cannot raise or must even cut off the bank lifeline, the ELA, and Greece being forced to nationalize and recapitalize its banks. The latter would necessitate reintroducing the drachma.

As we have said from the beginning, Greece was unlikely to prevail in the absence of outside help. The US was unwilling or unable to do much more than offer lip service early on. What passes for the left in Europe has also failed to apply remotely enough political pressure to have an impact. Greece is meeting its fate alone, and the outcome is not likely to be pretty.

Update 1:00 PM: As anticipated, Greece did not get its emergency money break. From Reuters:

Greece failed in a bid on Wednesday to secure a quick cash payment from the euro zone rescue fund to help stave off potential bankruptcy next month, raising pressure on Athens to deliver a convincing reform program within days.

Athens had appealed for the European Financial Stability Facility to return 1.2 billion euros ($1.32 billion) it said it had overpaid when it transferred bonds intended for bank recapitalization back to the Luxembourg-based fund this month.

But senior Euro zone officials agreed in a telephone conference on Wednesday that Greece was not legally entitled to the money, although they said they would consider how to deal with the issue in the future….

EU paymaster Germany, to which Tsipras made a fence-mending visit this week after weeks of acrimony between Athens and Berlin, was among the countries that opposed handing back the 1.2 billion euros…

The German stance made clear that despite the improved atmosphere in relations between Tsipras and Chancellor Angela Merkel, Berlin has not softened its position in substance.

And Greece was given an ultimatum on the call. From Bloomberg (hat tip Ed Harrison):

Greece has until Monday to show how it will follow through on reform commitments after the euro area ruled out speedy access to aid funds, three officials said following a conference call of finance ministry deputies.

The euro zone’s other 18 members were adamant on Wednesday’s call that Greece needs to deliver specific plans to see any more bailout cash, the officials said. Prime Minister Alexis Tsipras needs to show that Greece can rebuild trust in its promises, they said.

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  1. vlade

    Greece is doomed.
    first by its politicians who thought they had to play along, and then by politicians who thought they didn’t but had no idea how. i was tought tsipras and co were a conaiderably more pragmatic. this is disaster for greece, as it leaves extreme right as the only untried option

    1. NotTimothyGeithner

      I don’t think Syriza ever recognized the structural failures of the EU. EU politicians answerable to German voters and distant interests is the problem. The ECB will only act if it’s threatened which it won’t be because it’s not answerable to Greek voters but to Berlin. Merkel is the head of a grand and unpopular government. Single female hooplah who are much more likely to vote SD than CDU normally and SocialDem betrayal from a few years back is the source of CDU strength. Merkel is weaker than is commonly realized, meaning she won’t rock the boat or her government could fail. A failed German government effectively ends negotiations for six months.

      1. Cugel

        “Greece is meeting its fate alone, and the outcome is not likely to be pretty.”

        It was never going to be pretty. But, this is a political struggle. Basically, the only failure of Syriza I can see is their thinking that if they simply told the truth to the Troika, and made them deal with reality, they could get them to listen to reason and take a course that would be best for everybody’s long-term interest. But, talking to the Troika is like talking to American “Birthers” or Global Warming Deniers. They live in their own fantasy bubble, and talking reality to them simply gets them angry.

        The part that is significant is that Syriza simply doesn’t have the power to capitulate. Remember that they are in power now because PASOK collapsed when attempting to institute the Austerity measures. Let’s review the history:

        1. PASOK wins big in the 2009 elections with 44% of the vote and 160 seats.
        2. By 2011, PASOK’s majority was down to 152 seats.
        3. In 2012 elections due to the hated Austerity measures, they fell to 4% of the vote and only 42 seats.
        4. Samaras (New Democracy), Tsipras and Venizelos try and fail to form governments.
        5. Papandreou signs the infamous Memorandum with the Troika implementing the current bailout. PASOK’s vote in the June 2012 elections falls to it’s worst showing ever.
        6. PASOK joins New Democracy and DIMAR coalition under Prime Minister Samaras and attempts to implement the Memorandum Papandreou agreed to. The economy continues its death spiral.
        7. PASOK joins Olive Tree coalition for the May 2014 European elections, but the coalition falls to 4th place with 8% of the vote and elects 2 MEPs.
        8. In December 2014, due to the failure of the government to elect a Presidential candidate, they called for the latest round of elections. Papandreou splits with PASOK and forms KIDISO to contest the elections, in which Syriza received 36.3% of the vote and 149 out of 300 seats. Tsipras becomes Prime Minister on the Thessaloniki Program to end Austerity and promote social justice.

        Every previous attempt to implement the Memorandum has failed and the party promoting it collapsed due to a total collapse of popular support. Essentially the Troika is insisting that Syriza govern by emergency decree without Parliamentary support in the manner of the Heinrich Bruning (Germany’s “Hunger Chancellor” of 1932). We all know well that worked out.

        The exact same thing will happen to Syriza if they capitulate. They can spin it any way they like as “necessity” but their coalition will immediately split apart and the Eurozone will simply be left without a partner to implement the program. At that point, the Germans can impose all the suffering they want (withdraw support for the Greek banks), but Greece will simply collapse into anarchy and chaos. The program is not going to be implemented because nobody can do it.

        This will not go unnoticed in the rest of Europe and the lesson learned will not be the one that Merkel thinks.

        1. docg

          Which is why I think Merkel is going to be the one to cave, not Tsipras. If he were smart, he’d just throw up his hands and say, “we don’t have the money, so there is no recourse for us other than default.” Actually he’s already said as much, but doesn’t seem to understand how to follow through. Rather than drawing money from pensions or the health system, and then, hat in hand, and head bowed, meeting with this one and that one to beg for time or money or forgiveness, or whatever, he should simply point to the inevitability of default and leave it at that. Without the bailout money, it’s inevitable in any case, so what has he got to lose?

          Once the “Institutions” realize the time for endless bargaining has ended, then THEY are the ones who will be left with the stark and momentous choice: to permit Greece to default or not. As I see it, they will have no choice but to cave and provide the bailout regardless. This will be done in the most indirect possible way, with all sorts of verbal camouflage, smoke and mirrors, whatever.

          And if they don’t cave, then, as I see it, all the better. The Ponzi scheme will be over and done with, the moment of truth will be at hand. And the chips will fall as they may.

          1. Cugel

            The problem with that theory is that the Germans are so stupid they think that the consequences of Grexit can be “contained.” It’s exactly like Bush & Cheney arguing “we’ll be greeted as liberators.” Well, anybody with sense could see at the time that idea was insane, and plenty of people said so. But, of course, they were so sure they were right that they bulldozed right over all opposition. Same thing this time.

        2. Tsigantes

          Exactly right, this is a political struggle par excellence.

          The mandate for SYRIZA was to make an honorable compromise within the euro, i.e. ease the humanitarian crisis & find a way to try urn the country to growth. At the time of the 2015 election support for the euro was 80%. This has dropped to 54% and support for drachma has risen to 42%.

          The illegalities and blackmail of the ECB and EU have not been lost on Greeks, backed up by the usual tepid words and functional non-support from US and IMF, backed up by non-stop media collaborative condemnation & inaccuracies. Greeks know where austerity leads. They know that default or worse Grexit will be painful. SYRIZA cannot quit negotiating until bankruptcy or the April / June dates no matter which comes first. They have to exhaust all possibilities before a) turning to the people i.e. referendum, or institute emergency measures in the case of an EU/ECB induced default.

          The opposition parties are not managing to offer an alternative, surprise, and restrict themselves to style issues or accusations of incompetency – ironic in the circumstances.

          1. Tsigantes

            I should make myself more clear.

            Greeks voted in the January election knowing that:

            1) ….the election itself was a set-up, brought forward 3 months by the preceding ND/PASOK government in the face of the political death they would suffer by signing off on Troika’s September demands. It was clear that SYRIZA was being handed this ‘poisoned chalice’ (Varoufakis), in unnecessary crisis conditions brought about by ND/PASOK’s scheduling of the Eurogroup for 10 days after elections – a move deservedly backfiring on ND/PASOK.
            2) Greeks went to the polls knowing that default was on the cards/ inevitable if Eurogroup/Troika absolutely refused to deal with SYRIZA’s mandate for an end to the humanitarian crisis and measures for growth. After 6 years the odds on their agreement were exceedingly low to nil.
            3) Nevertheless SYRIZA/ANEL was tasked with trying for the optimum position – humanitarian measures / growth measures / staying inside euro….since they were the only party determined to do this.

            This does not mean that we expected them to succeed.

            Nothing that has happened since then has been a surprise, and only a confirmation.
            It may surprise you to know that the mood here is calm.

            As for the bank run, apart from companies – the rich presumably off-shored their cash years ago – it is mostly ordinary people removing cash from their accounts against default / capital controls. How ‘treasonous’ is this? The Greek people were forced to take on an extra 55 bn in unannounced debt to recapitalize the banks, 2013-14, though profits were given to the bankers & new investors through share sales and not returned to the taxpayers / government. Our banks are ergo nationalized in all but name, and would be nationalized in the case of default. SYRIZA is not interfering.

            Grexit by the way is a non-starter in that Lisbon rules state that only the nation can apply for leaving, a process that takes 2 years. It cannot be imposed by others, nor the ECB. Of course, “unbreakable rules” [Merkel, ECB, Djiesselbleom] have been broken before.

            SYRIZA has no mandate to pre-empt the final conclusion, which will be brought on by bankruptcy or the outcome of the April/June meetings. It politically suicides by signing on to the September measures. Honourable compromise is a possibility that depends on EU.
            Greece refuses to be the “bad” partners. So….we continue to the end.

            Cugel is right: this is a 100% political struggle. A Greek political struggle, not SYRIZA’s.

            1. Calgacus

              Cugel is right: this is a 100% political struggle. A Greek political struggle, not SYRIZA’s.
              “No revolution can be made by a party, but By a Nation”. (Marx)

  2. Demeter

    Since the miracle hasn’t arrived, isn’t even on back order, and won’t be in the foreseeable future, it’s time for Greece to save itself and Grexit. There truly isn’t any other alternative. No white knight will come riding up with cash, no amount of blood, sweat and tears will soften the Reich’s technocratic heart. Uncle Sam hasn’t shown the slightest inclination to even notice what is going on–he’s too fixated on Ukraine and regime change for Russia.

    The money flows faster than the political situation changes. Save Greece and the Greeks; let the rest of the world go hang.

    1. Georgie Welchade

      The original Yanis Varoufakis PLAN failed miserably.
      The idea was that all parties involved would engage in a soul-searching process to allow for a new design of the EZ (paradigm shift ?). But that project failed, miserably, slamming Europe’s trapdoor shut.

      So now there is NO PLAN no matter how hard we all try to half-guess one. It’s just two separate solar systems with lots of impossible planets revolving around each sun.

      Both sides just react on the fly off the seats of their pants. No coordination anywhere in sight while money keeps flowing out of Greece in unstoppable tsunami waves. It may soon start to flow out from other places too. So now Greece stares ice-cold at its ‘impossible triangle’

      (1) The Syriza ruling party staying in power.
      (2) Reversing the current Troika austerity programs.
      (3) Greece staying in the euro.

      The uncompliable list of promises made to the Greek people by Syriza has now been replaced by an equivalent uncompliable list of promises made to the Troika.

      It just doesn’t cut it, this will end badly, and certainly beyond Greece.

      1. jgordon

        If that was the plan, then someone was smoking hopium. It at least makes some sense if Syriza had already come to the conclusion that the situation was hopeless and that it should just show everyone how intransigent the troika is so that Greece appears at least somewhat blames for the fallout that’s coming.

        As for all the bad stuff Mr. Varoufakis says will happen when Greece is booted from the Euro… uh, yeah. Bad stuff happens when terminal cancer patients die too. But it’s not like they were going to be saved in the first place. Also there is something to be said for bringing an end to the pain.

    1. Georgie Welchade

      OKay, Greece defaulting makes sense, doesn’t it ?
      And what about contagion guys ? No contagion ? No knock-on impact either ? Really ?
      ‘Patent pending’ invention maybe ?

      The big PROBLEMA here guys is Spain, Italy, Ireland, Portugal and (yes indeed) FRANCE.
      The $ 100 Trillion derivatives problem can’t be just be swept away under the rug, can it ?
      Unless we have yet another ‘patent pending’ process here guys !

      Don’t kid yourselves: just brace and CYA for hard-landing, ’cause it won’t be fun.

  3. Georgie Welchade

    …”…the whole issue is not even about Greece… the reality is that SPAIN, ITALY, and ultimately even FRANCE are in or approaching similar financial straits as Greece…”… (also Portugal, I might add)
    …”… At that point you’re talking about well over $3 TRILLION in sovereign debt, which is likely posted as collateral on well over $100 (one hundred) TRILLION in derivatives trades…”…

  4. JTMcPhee

    People posting here are mostly bystanders, it appears, with not so much power over policy. But also, as with all the other bankster/Kleptocorporatocracy-engineered bleedings, liable to at least get their toes crushed as the Juggernaut rolls on, if not becoming just another bloody smear under the wheels.

    What is the whole thing about? What’s the desired, versus actual, frame of the political economy? Power decides what is, but at what point if ever do the little people who do the work that feeds the parasites who define the Game via their organized and wasting synergies get up and say No Mas!?

    All this concern about preserving the parasite called the Eurozone, with the assumption that ordinary people will once again just have to suck it in and suck it up and donate their labor and lives to refill their emptied pantri3s and larders again and again and again. Yes, deconstructing the EZ will entail a huge lot of pain, as the Kleptocrats designed it to keep themselves in beluga and Bentleys. And us mopes don’t seem capable of generating and sustaining organized effort and effective and durable alternative structures, except interstitially. Dissociation into tribalism and another easily hijacked round of idiot nationalism ain’t the panacea, though from the history is too likely. No kind words or ins0irations or advice for the few people in the little country who are trying to avoid another generations along crushing descent into servile poverty? Is “knuckle under and play your defeated part” in a game that is so obviously part of a much larger, longer rape-with-cancer-and-vrnereal- disease that a very few greedheads are committing the only option? I would hate to think so, since continued triumph of neoliiberalißm or whatever this carapace that rides most of us is most accurately called means I in my old age and my grandchildren, and all the rest of us ordinary people, are in for a long darkness at noon…

    1. Cugel

      But, it’s not just another “body smear under the wheels”. This is the unraveling of Europe. The wheels are falling off the car. Syriza’s negotiating posture was “let’s all get together and save the Eurozone from itself.” Their failure is Europe’s failure. The only reason the Germans can’t see it is because they are wedded to their psuedo-religious Austerity policies in defiance of reality. The crash will not be good for Germans or Scandinavians, not even the elites.

      1. JTMcPhee

        …and on August 1, 2014, the great Continental and British newspapers shouted “IT’S WAR!” Happily! Triumphantly! The great catharsis and Inevitable March to Victory, so carefully planned and profitably prepared for so very long, were about to ensue! In a lot of places, people apparently took to the streets, jubilantly, “patriotically,” doing their tribal dances. All of it so poignantly limelighted in Barbara Tuchman’s “The Guns of August.”

        And now, even voices in the Salmon Pink Paper, that speak directly to Power, point out the futility and idiocy of it all: “Failing Elites Threaten Our Future,” People posting here say “WE need to do something different.” Who’s that “WE,” again? Or the “Our” whose future is threatened?

        Lots of bits of the idiocy are apparent, remarked upon, dissected and analyzed, given taxonomy and nomenclature, twisted and re-cast and footnoted to support particular parochial interests. But where’s the cure?

        Maybe the people of Syriza have an actual vision, the Lourdes of political economy? A place to go and be healed? Please?

        Oh well, whatthehell, here we go again — all for the lack of a compelling organizing principle that points anywhere healthy and decent, to counteract the seductions of the pleasure- and power-seeking parts of our “intelligently designed” brains… Stupid effing humans…

      2. juliania

        I like the phrase “the unravelling of Europe” but I am rather thinking of the great river of ice that is austerity economics, and that is what now is inevitably breaking up with a spring thaw underway, and it cannot be stopped. We can’t see the warm flow under the ice until the cracks appear, but appear they do, and Greece is Eliza on the ice, an unforgettable symbol for the plight of slaves in the first attempts to rebel.

        Germany is enslaved; France is enslaved; Great Britain is enslaved, and all the other countries of the western world enslaved by austerity programs. It is now universally perceived that these nations are slaves. Perception is the warm flow beneath the ice. Imperceptible at first, but it is coming.

        It is coming.

      3. Tsigantes

        I would turn this around and say that if SYRIZA fails to make Europe see sense (which is up to Europe, not SYRIZA), it is Europe’s failure and no dishonor to SYRIZA.

  5. Edna M.

    Why can’t there be a default (and soon) that would not entail exit from the euro? I thought that was what Varoufakis advocated before becoming FinMin. It is my understanding that there is no mechanism for kicking a country out of the Eurozone. It does not appear to me that Germany or the EU want Greece to exit. But they do seem to be doing everything in their power to make the Syriza government fail. They seem to have thought that people would immediately rise up against the Syriza government once it did not produce results. Schauble thought Tsipras would have a hard time explaining the February agreement to his people, but this was not the case. Since Germany has made billions from the Greek crisis, I think it put its efforts into undermining the government, hoping the old guard would make a comeback. I don’t think that all the EU members have agreed that kicking Greece out is the next best alternative, after they failed to undermine Syriza (assuming they even have the authority to kick it out and assuming the US would allow it).

    1. Edna M.

      I wanted to add that in my personal opinion Greece would be better off outside the EU, but Syriza would rather starve than leave the EU. People might say that this is because that is the will of the people. But I disagree. Syriza helped persuade the people that Grexit would be the end of the world. The public might not have needed much persuading, but still Syriza does have some responsibility. It seems to be typical of Syriza to blame the people for ideas that it itself helped promote. For example, Tsipras in Berlin spoke about how it was wrong for Greece to blame everything on Germany. Yet he himself blamed everything on Germany. In fact, the Syriza party, along with their coalition partners, were the only parties who primarily blamed Germany and “German Europe” for the situation. (The Communists, for example, never mention Germany. Rather they blame capitalism and the EU.) Syriza has a vision of an ideal Europe, just over the rainbow. I don’t mean to be too harsh on Syriza. But sometimes I can’t help myself.

      1. financial matters

        That’s an interesting point. Syriza in multifactional with independent thinkers and not all think it is best to stay in the EZ or even the EU. They have a practical viewpoint of wanting to end austerity but also know that Greek society has to be prepared for the steps that may be necessary for this. When thinking of the overall battle against neoliberalism, Germany may be the wrong focus.

        As Stathis Kouvelakis stated in his interview with Sebastian Budgen in Jacobin:

        “Greece is a periphery, if you like, but it is the periphery of Europe. And Europe is still one of the major centers of the world capitalist system.”

        “one has to recognize that it is still the case that the perception that the main contradiction is within Europe and with Germany has somehow displaced the question of American imperialism.”

      2. John Jones

        I wanted to add that in my personal opinion Greece would be better off outside the EU, but Syriza would rather starve than leave the EU. People might say that this is because that is the will of the people. But I disagree. Syriza helped persuade the people that Grexit would be the end of the world.

        Exactly right Edna about been better off outside the E.U and about SYRIZA. They had a responsibility to educate the Greek public about the alternatives. And to have a Plan B after their stupid and naive attempts to save the euro at the cost of Greece. Leaving the E.U and reintroducing the drachma. But the idiots couldn’t even do that.

        If you are in Greece look up Dimitris Kazakis and EPAM and consider voting for the instead.

    2. Yves Smith Post author

      If Greece defaults, the ECB may decide to or feel it has to cut Greece off from the ELA. That support is essential to its banks. If the ECB were to either end ELA support, or simply refuse to increase it (there would almost certainly be a resumption of the bank run in the event of a Greek default), Greece would have to impose currency controls and nationalize its banks. To do that, it would also have to recapitalize them. It can’t do that when the government is already so broke that it can’t meet its obligations. It would almost certainly have to reintroduce drachma. That’s a de facto Grexit. Greece will not have exited formally, since the Eurozone is supposedly irrevocable and a formal exit from the EU under the Lisbon Treaty requires a country to ask to exit and can take up to two years. But investors would depict reintroduction of the drachma, the forced conversion of bank deposits to drachma, and the redenomination of contracts to drachma (the latter two steps also seen as inevitable as part of the “rescue the banking system” operation” to be a Grexit.

      1. Georgie Welchade

        Okay, okay, I understand (it all makes sense)… but…
        Question: What about contagion ? No contagion ? No negative consequences outside Greece ?
        Spain, Italy, Ireland, Portugal and FRANCE keep on with business as usual ??
        No bank runs ? No derivatives problems either ?

        Greece would be defaulting on euros which happen to be the currency of the Eurozone

      2. Santi

        I’m not so sure of the legalities, but Greece is supposed to have money for recapitalising banks from the EFSF. They might default o delay payments: as I pointed somewhere here and got eated by moderation, the IMF accepts with little consequence up to 3 months delays, and provided the announcement of the delay is accompanied with capital controls and other measures, Greece is probably trying to play a selective default and keep returning pressure it receives to Europe. There is barely a different thing they can do now, provided they won’t cave in, as I expect because of reasons already stated in comments here.

        They will pay IMF when they get some liquidity and remain skipping payments while they have no money. Capital controls will remain while needed; the bank system is borken enough so that it barely makes a difference by now. I don’t think Greece is going to exit Euro, they will stay using Euro as currency.

        A slow motion train wreck is possibly the last card Syriza can play, and they will do it. This will give some time to the rest of the EZ to measure and understand consequences…

        1. Yves Smith Post author

          1. Greece should have imposed capital controls ages ago. The ECB (via a clearly authorized leak) and Dijsselbloem more recently have said they should. The government bizarrely seems to think its to their advantage to have the banks bleed to death.

          2. I’d not bet on any EFSF funds. Greece was rebuffed today on a mere €1.2 billion on which it appears to have a good claim. I should be more expert on the facility, but I would imagine it has risk limits and Greece would be found not to qualify in the event of a default or as a substitute for the ELA.

          3. The Eurocrats, even the EC, which is the body most sympathetic to Greece, has been taking a tough line on “special purpose money only gets used for special purposes”.

          1. Georgie Welchade


            Following up on your physiological analogy re …”…bleeding to death…”… what we are all witnessing is how a EuroZone toe (maybe half a foot ?) is becoming necrotic.
            As any run-of-the-mill nurse would attest, necrotic tissue is never allowed to remain for long in the human body because otherwise gangrene would pursue.
            So, amputation is the only “solution” yet the toe (as George Soros has put it) goes down the drain.

            Now then, we are all talking about the details of how Greece is going down the drain, yet little importance is payed to the fact that Greece IS going down the drain.
            Guys, this amputation won’t be for free,did you know that ?

            (1) the cost of surgery itself (grexit) is high
            (2) physical impairment of the EZ + non-accrued interests nor return of principal to the tune of USD $ 0.5 Trillion real, effective sovereign debt *
            (3) risk of infection (things get worse and worse)(think euro area GDP reduction)
            (4) risk of contagion onto others (banks runs, money transfers intra and extra EZ)


          2. Ishmael

            Yves, as you indicate you always want to declare bankruptcy before you run out of cash which is effectively what capital controls would have enabled Greece to do. My spouse is Greek. Most people here talk like Greece was just fine before joining the EU. Over the last 100 years Greece has lurched from political catastrophe to political catastrophe. In the mid-50’s Greece has a civil war and subsequent to that until approximately 1977 it was ruled by a military junta (granted much of these problems were brought on by outsiders from the Ottomans who ruled Greece for 400 years to German and then the UK). However, subsequent to junta and joining the EU Greece was full of corruption by a few political and connected families (basically oligarchs). Greece joining the EU just opened up the small time graft up to the big time.

            Basically Greece is ungovernable because in general lots of Greeks do not obey the law. Here is an example. A number of areas around Greece are suffering from depletion of their fish stock. These area are designated as no fishing but Greeks are still out there fishing. The payment of taxes is another area. To keep the country under control basically a large percentage of the country was put on the dole. Austerity ends the dole (paid by other European nations) and the Greeks are fighting this. I have some what of problem getting teary eyed over a country which per capita has the highest Porsche percentage in Europe.

            I have sit in many meetings with Greeks from the US and Greece and there is strong feeling about not leaving the Euro. Why is that, because it means moving back to Greece becoming third world again.

            Greece needs to make a decision. Either it needs to (1) decide it wants to be a third world country or (2) realize that its population needs to grow up and follow the law. This will be a painful process as it realizes that “Das ist verboten.”) When a sign says no fishing that means no fishing or the penalty will be large. You do not want to pay your taxes that has severe ramifications. You want to defraud the public that means confiscation of the stolen money and severe punishment. It will also mean reorganizing the government so that not everyone in the country works for the government. Even the prostitutes have a union in Greece. These are things that the Greeks are fighting. They want to continue their old corrupt ways which goes from petty corruption all the way up to major corruption, but at the same time they want other nations to pay for it.

            Greece is going to exit the EU for a while. The ECB is going to hover up any debt problems that might cause contagion (why else did German approve the QE after fighting it all of this time). Greece will really become a failed state. The rest of the citizenship of the EU will see what happens to the population of Greece and say we do not want any part of this and queue up. Greece in the end will get down on their knees and beg the EU to come in and save them from themselves.

            1. Tsigantes

              Back in the beginning of the crisis, 62% of greeks were employees and thus their taxes were PAYE. There was no possibility of evasion. 6 years later with the near-death of the private sector, this percentage (PAYE employees) is circa 80%.

              The tax evaders are primarily the top cream of the economic scale: much of it – as in England, France, Belgium etc. – is even legal. What really is at issue is the big amounts passing around off the accounts in the top sectors – arms dealers, oil and gas, banks, maritime, etc..

              The OECD in 2012 estimated for Greece that even if all small fry evasions (hairdressers, plumbers, restauranteurs) were brought to book the total would only make 4% difference to the tax take. Since then, many small fry have shut up shop. The entire construction industry & related professions, materials & supply has completely gone under. In 2014 a total of fifteen building permits were issued in Greece.

              But please, continue with your ‘knowledge’.

              1. Ishmael

                You seem to miss the main point. Greece had a large number of issues before it joined the EU. Greece even had to doctor its books to meet the requirement (once again this demonstrates an underlying problem of respecting the law — “What the laws says this, no problem we will just doctor the books.”) Once Greece became a member of the EU put its past structural problems were put on steroids.

                When the Greece population says it wants to end austerity, it basically is saying it wants to continue with its manner of operation before the EU but fellow EU countries are suppose to furnish Greece the money to do so.

                I am not saying one way or the other. Do a Grexit and go back to the old ways or bring in significant reforms and negotiate once the country starts functioning again. That is the choice that the Greek people need to make

                However, I hate to tell you the old ways did not work so don’t get your back up over it. When I talk to relatives who left Greece in the middle 60’s they did not even have running water in the Peloponnese at their house and had to go to the village well every day.

              2. Ishmael

                Not saying it is true but Wikipedia on Greek tax evasion seems to indicate that there is a long history of tax evasion:

                Tax evasion
                Main article: Tax evasion and corruption in Greece

                Greece suffers from very high levels of tax evasion. In the last quarter of 2005, tax evasion reached 49%,[189] while in January 2006 it fell to 41.6%.[189] A study by researchers from the University of Chicago concluded that tax evasion in 2009 by self-employed professionals alone in Greece (accountants, dentists, lawyers, doctors, personal tutors and independent financial advisers) was €28 billion or 31% of the budget deficit that year.[190]

                The Tax Justice Network has said that there are over €20 billion in Swiss bank accounts held by Greeks.[191] The former Finance Minister of Greece, Evangelos Venizelos, was quoted as saying “Around 15,000 individuals and companies owe the taxman 37 billion euros”.[192] Additionally, the TJN puts the number of Greek-owned off-shore companies to over 10,000.[193]

                Following similar actions by the United Kingdom and Germany, the Greek government is in talks with Switzerland in order to tax bank accounts in Switzerland owned by Greek citizens.[194] The Ministry of Finance has revealed that Greek Swiss bank account holders will either have to pay a tax or reveal information such as the identity of the bank account holder to the Greek internal revenue services.[194] The Greek and Swiss governments are to reach a deal on the matter by the end of 2011.[194]

                Ish here again – this might also explain part of the reason that Greece is having such a hard time getting its economy going and probably reaches to the roots of some of the reforms requested.

                Greece is ranked 69th in the world on the Corruption Perceptions Index, alongside Bulgaria, Italy and Romania.[69] Greece also has the EU’s lowest Index of Economic Freedom and Global Competitiveness Index, ranking 130th and 81st in the world respectively.[70][71]

                1. John Jones

                  All your posts always reek or the same bigoted and moralizing portrayal of Greeks. And typical neo-liberal economics.

                2. John Jones

                  Even if what you said was a 100 percent true. None of these reforms would allow Greece to compete in the E.U or euro.
                  Something that extracts far more money then tax evasion in Greece due to trade deficits to the core of Europe. But you keep on repeating the same things the neo liberals economists say.

              3. Yves Smith Post author

                Huh? It is widely reported that all sorts of professions, like doctors, insist on payment in cash. Ditto small business owners. These people are upper middle class in a society with less wealth disparity that the US, not oligarchs.

                1. John Jones


                  I am not 100 percent. But I have been told doctors and lawyers don’t earn the large amounts in Greece as they do in countries like the U.S and other more industrialized countries.

      3. ian

        “To do that, it would also have to recapitalize them. It can’t do that when the government is already so broke that it can’t meet its obligations.”

        OK, stupid question: how can a sovereign government be broke? (assuming they leave the EZ and go back to the drachma).

        1. John Jones

          They don’t have euros because they keep paying interest on debts. They are broke in the euro currency. And they are broke in Drachma because the state refuses to reintroduce it.

      4. Ishmael

        In addition, I would also like to say, that it would have been far easier for Greece to have negotiated a debt haircut (and I believe a very large haircut is called for) if they had actually implemented many of the reforms that the Troika was asking for. Reforms would have included dramatically reducing the cost of the government, implementing property records, tax collection, ending corruption, decreasing the military, and basically enforcing the laws. Probably Greece could have probably clawed back several billion dollars stolen by prior government officials. At this point the Greek govt could look the Troika in the eyes and said we are a functioning country now and not a basket case. We want a debt haircut if not we are going to just default and we do not need the Euro any more to prop us up. If the government of Greece had positive cash flow the default looks a lot scarier to the EU.

        1. Tsigantes

          And who didn’t do that? The EU-backed oligarch kleptocrat parties that have ruled Greece for 40 years.

          SYRIZA was voted in only in January. With clean hands I might add.

          1. Ishmael

            I am not going to argue that the EU is the best system because it has tragic flaws. Personally, I never thought it was a good idea for Greece to even join the EU and in fact it has turned out kind of how I thought it would, but I do not think you can blame the EU for 40 years of oligarch kleptocrat parties in Greece.

            I have to tell you that reeks of its everyone’s fault except our own. I mean how can you say that. The EU only really started coming about in 1993 and that is only 21 years ago and I doubt in the beginning they were even that interested in Greece. Are you saying that since the end of the military junta that Greece has basically been governed by outsiders? Isn’t that a stretch?

            I would say Greece over the last 40 years has the basic problem that most democracies have including the US. Politicians have thrown out small fish to the masses to get elected while they raped and pillaged the country and once again I am including the US in this category. The first stage of curing the problem is to recognize it. Personally, I like a lot of the platform of SYRIZA and have respect for some of their leadership. I just do not believe they approached the whole EU situation properly, and I believe this game of chicken is going to end poorly for them and Greece. I also believe that any country who choose socialism/communism is going to end up far worse off.

  6. papicek

    Generally I like Naked Capitalism, but regarding Greece, there’s just too much rumor going around (elsewhere) and I’m disappointed to see NC piling on. So I won’t be tweeting this. Has Tsipras tapped public health revenues to pay off eurozone banks? Maybe. Possibly. We still don’t know.

    What do we know? Not much, but the signs seem to indicate that “the institutions” are still playing hardball and Greeks are losing. Germany’s trying to recreate a situation like Lord Cromer in Egypt.

    1. Yves Smith Post author

      Huh? This is reported in the Financial Times and the article quotes anonymous official sources in Greece. MSM stories are subject to fact-checking. So you are basically saying you don’t like information when it does not agree with what you want to believe.

      1. Tsigantes

        If the MSM was subject to fact checking they would not continue the fiction that Grexit is in the gift of the EU or ECB.

  7. kolyn phlabyn

    I wonder could Greece stay in the Euro but introduce the drachma at the same time, and have two currencies operating simultaneously? paying public services and running day to day life in drachmas but keeping all loans, contracts, EU subsidies in euros, would that be workable or totally incompatible ?

    1. Yves Smith Post author

      The point of going on the drachma is for the government to be able to recapitalize the banks. Given how much money that would entail, it almost certainly means deficit spending to a significant degree. That means breaking Maastrict treaty rules (which countries have done but they are otherwise seen as countries in good standing). Plus if you put the domestic currency on drachma but don’t allow redenominate all contracts in drachma, it means anyone who has borrowed in euros goes bankrupt very quickly. That probably means lots of businesses as well as households with mortgages. For instance, at a minimum, all Greek civil servants would be paid in drachma. How do they pay their mortgages? Their drachma pay will be worth less than their former pay, so they lose their houses.

      1. Oakchair

        Screw re-denominating debt contracts in Drachma, just nationalize all debt and default on every single penny of it.

        1. William C

          I do not know what the legal situation is (which obviously has a bearing) and do not claim to have thought this through carefully but if the Greek government needs to recapitalise the banks and does not want to reintroduce drachma, could it not do so by imposing a haircut on depositors (especially larger ones)? They could tell depositors that x percent of their deposits are now equity stakes in the banks? It might be very unpopular but – if they cannot reach agreement with the other EU countries – I doubt there are any popular options available or they would have used them a long time ago.

        2. hunkerdown

          A debt jubilee, you mean? A fascinating idea, that, and one that would really throw the shoes into the political machine by providing a new fact-on-the-ground with regards to the possible.

          1. EoinW

            Is Syriza truly left wing or another Trojan horse? I would have thought a revolutionary party would want debt jubilee as a first option. Hard to believe an admirer of Che would be kowtowing like this. Is the Left all talk and nothing else? How much suffering must people endure before revolutionary options are taken? Is the political left once again showing itself to be pseudo-revolutionary, even pseudo-left? I’m sure there are many nationalist right wing parties out there who are hoping so. Shall we see how revolutionary Golden Dawn will be?

  8. vidimi

    i think i am reading this greek drama differently than most.

    to me, it looks like syriza is purposefully steering towards being kicked out of the euro. by explicitly taking grexit off the negotiating table and convincing the troika that they fear it above all else, they have tricked the latter into pushing greece out. they have cleverly used the troika’s true nature against itself, knowing that if they give them an inch they’ll take the whole yard. the troika’s intransigence on even the most minute details, even as ridiculous as whether to call themselves the institutions instead, was made possible by their complacent belief that greece desperately wants to avoid a grexit; an idea steadfastly reinforced by key figures in syriza. the ongoing negotiations along with financial complacency have bought varoufakis and co time to create a contingency plan which will keep greece afloat on the drachma when the time comes.

    here’s hoping. either that, or this has been the most stunning show of incompetence on a national level in a long time.

    1. Rosario

      I tend to agree. Though I’m being hopeful. SYRIZA is full of sharp knives. I’ve noticed even the criticism of SYRIZA leaders is high-level (something hard to do when critiquing most American politicians). It is hard to imagine they are not planning something intentional in the midst of the chaos.

        1. Oakchair

          Successful capital controls would mean people couldn’t take out much money from banks. So banks would need less Euros from the ECB because they’d be losing less money. So in the time period of “negotiations” and “transition” less Euros from the ECB would of flowed to Greece making Greece as a whole poorer.
          Id say the best thing for the Government in this case is to cause as much bank panic as possibly and still insure ECB backing of its banks in order to ensure that the most amount of Euros flow into Greek hands. The government serves the people so why should it care if the people get more of their own Euros in their hands? With the new Drachma the government can print currency.

          1. Yves Smith Post author

            Huh? The money from the ECB is only to compensate for deposit loss, not to enrich the banks. And the ability of the ECB to tank the banking system by withdrawing the ELA, which is meant only for temporary liquidity problems and has to be renewed every two weeks. The ECB has already indicated that it is concerned that the ELA isn’t temporary in the cases of Greece.

            It was the threat of withdrawing the ELA that forced the Irish government to have taxpayers eat the losses of Irish banks, even though Ireland had no deposit guarantee and hence bank problems were in theory not to be funded by the government. It’s an extremely powerful weapon and Greece has made itself more vulnerable than it would be otherwise by not imposing capital controls early on.

            1. Oakchair

              Would the ECB be more or less willing to compensate Greece for deposit loses if there were less losses and signs that Greece was leaving the Euro?

              If the answer is less willing then capital controls would make it so that when/if Greece leaves the Euro fewer Euros would be in the hands of Greeks.

              When/if Greece leaves the Euro the government/banking system just re-denominates in Drachams, and since Greece can now print Drachmas viola no banking system implosion. Only difference is that without capital controls Greek citizens were able to suck a few extra Euros out of the ECB. Greece having more money is a net good not a net bad.

        2. Rosario

          Then torches and pitchforks? That being the case, Greek citizens would have been screaming for blood. I don’t think SYRIZA wanted to be politically stillborn.

    2. vidimi

      forgot to add, that while syriza had no mandate to exit the eurozone as the greek people were against it, by conducting the negotiations in an open way and reporting everything to their constituents, this is changing in a big way. it’s quite masterful if being done on purpose.

      1. Gaianne

        Greeks still lack the national unity to oppose their destruction. What will give them unity? Perhaps abuse at the hands of Germany and the European Central Bank. If so, what has just transpired is success. (If not, it isn’t.)

        The Greek nation will survive only if the Greek people realize fully that that is what is at stake. Only then will they be able to face the hard circumstances that are inevitable anyway, and map strategies and tactics.

        One thing nobody is mentioning: Growth is over. Return on productive investment is over. Productive (as opposed to non productive–scamming) investments do not exist. That is why the financial system is coming apart everywhere. In a shrinking economy the only thing the oligarchs can imagine is to grab as much as possible, by any means available. That is why Germany is committed to austerity economics for the Eurozone periphery. This will not change. Ever.


        1. JTMcPhee

          Too bad that the only significant “strange attractors” that seem to bring people together are common enemies and tribalism… But then there’s a reason why, rooted in the nature of the beast, that ponderous “Paradise Lost” is much longer and “richer” than “Paradise Regained” from the same genius.

      2. Tsigantes

        Top marks Vidimi. Of course it is being done on purpose – not to mention on principle.

    3. Steven

      I suppose it is just nickels and dimes but surely there is some NC reader with enough business expertise to set up a post grexit travel agency specializing in Greek vacations? How about a medical supplies import business? Maybe even a Greek bank that would be immune from bail-ins to pay off European kleptocracts and Greek oligarchs?

      (I’ve never been to Greece, a condition I intend to remedy ASAP providing the Global Minotaur doesn’t piss its people off so badly they might want to take out their frustrations on an American peasant.)

      1. Ishmael

        As I indicated above my spouse is Greek and when her father died she was left a sizeable plot of land not too far from Kalamata. We discussed moving there and living. Hey, I could stand living on the Ionian coast and I have always spent a lot of time reading ancient history. When discussed with her relatives (and this was in early 2000) we were told don’t move here it is too corrupt. See my post about the rating regarding how difficult it is to start a business. Forget about it.

    4. kolyn phlabyn

      I really don’t think Syriza is playing a bluff, YV has repeatedly said Grexit would be disaster and the population doesn’t want to leave the euro, and it’s hard to imagine that it wouldn’t leak out or at least a hint that was the strategy. They’re really trapped between the trokia and their population who both demand completely opposite things from them, and there’s no way to reconcile the difference.

      Syriza strategy was by plainly speaking truth the EU would ease up and help Greece recover but it’s backfired and only made the EU more determined to bring Greece to heel – maximun neoliberalisation. It’s all going to end in default I think everybody knows that the only question left is how the default is managed

    5. ChrisFromGeorgia

      While I’d like to believe that myself, I’m starting to notice some disturbing similarities between the current post-election period in Greece and early 2009 here in the U.S.

      I recall a lot of progressives getting themselves deluded with false hope that the Obama administration would really be “different”, even after the nomination of Geithner and the TARP 2nd tranche that bailed out the banksters (this was well after Bush II left the scene.) We all know how that one turned out – rather than going on offense we’re still fighting rear guard actions against abominations such as the TPP that would have fit right into the Bush administration.

      While I suppose it’s still possible that Syriza has a big trick up their sleeves that will send the “Troika” clowns into the massive defeat they deserve, I have to go with simplicity here until I see evidence to the contrary.

      Vanis and Co. aren’t playing rope-a-dope. They apparently are the dopes.

      1. Oakchair

        It would be so much better, and more exciting for Vanis and the rest of SYRIZA to be playing rope-a-dope then for them to be the dopes.
        We know the result of Greece not defaulting and bowing to Europe; so I’ll blind myself (even if just for a short while) that something else is going to occur. There’s been enough government let downs that one more is just a repeat of yesterday.

  9. Steven

    More than a month ago Michael Hudson in an interview with Real News Network – said:

    Remember a few years ago when Europe said, Greece owes 50 billion euros in foreign debt? Well, it turned out that the central bank had given to the Greek parties a list of tax dodgers. It was called the Lagarde list (for Christine Lagarde, head of the IMF), featuring Greek tax dodgers who had Swiss bank accounts. These Swiss bank accounts added up to about 50 billion euros. So in a sense, Greece could pay off the debt that it’s borrowed simply by moving against the tax dodgers.

    But this would be at the expense of the Swiss banks and the other banks. So in effect the banks would be paying themselves. And they don’t want to pay themselves. They want to squeeze income out of labor and let the tax dodgers and the Greek tycoons succeed in stealing from the government. So, in effect, the troika – not the troika really, as much as the finance ministers – are backing the tax dodgers and tycoons in Greece that SYRIZA is trying to move against.

    I haven’t heard any more about it. What’s happening here? Is this a potential source of money?

      1. Steven

        I’m beginning to smell a rat. The list Papaconstantinou altered and PASOK later lost can’t be the only copy!! It’s only $50 billion but it sounds like these days every little bit would help.

          1. generic

            You seem to be under the misperception that the Lagard list has something to do with the IMF. If I’m not completely off the list came when MS Lagard was still working for the Sarkozy admin. The IMF is not opposed to corruption at the Swiss banking level.

    1. MyLessThanPrimeBeef

      That’s what the Greek voters are saying – get the loot from the rich and stay in the EU.

      We don’t need none of this cunning, reverse-psychology game theory bluff and cult of personality stuff

      “There is money. It’s about where it is concentrated/hidden or how it is distributed…in Greece or in America.”

      1. John Jones

        Which is naive because the sort of money they think exists to stay in the E.U and euro doesn’t exist in Greece. Never has and certainly never will if they stay in.

    2. John Jones

      Steven I doubt it is 50 billion dollars.
      But say it is. You are then saying every person on that list is a tax dodger just because they have a swiss bank account. And then how much of each individual account is due to tax dodging.

      Either way the debt will just build up again as Greece will have to finance lost money to the state due to trade deficits building up to the core of Europe again if it wants to stay in the E.U and euro.

      The sooner the Greek public learn in is not good for them to stay and that is what is causing the problems in the sooner things will eventually get better for them.

    3. Ishmael

      This is the corruption I was talking about above, but several misconceptions here. It had nothing to do with the Swiss Banks preventing Greece from pursuing the tax dodgers. It was the Greek govt who did not want to pursue them. Why, they were one and the same. Just yesterday the Greek Fin Minister during this period was found guilty of removing family members from the list. Of course he was found guilty but did not suffer any consequences (another of the problems I mentioned). Just because the Swiss bank had the deposits does not mean it is the Swiss banks money. It is the money of the corrupt Greek officials. Of course the Swiss banks would hate to lose the deposits but that happens. It probably would not be the Swiss Banks that would be repaid but DB.

      Another area of corruption that leaves me wondering is that I have heard that the Greek Orthodox church owns 1/3 of the real estate is Greece. How did this come about? This sounds like corruption there. As I have told my spouse, I have never seen a skinny Greek Orthodox priest.

  10. Rosario

    This tragedy is becoming comical now. Seems the Troika and now SYRIZA are beating the dead horse to the finish line. Politically, they are defaulted, that won’t change in the eyes of Germany, The Netherlands, etc. If economic planning is intended for the public good, they are defaulted. Numerically (by the books), the only measure that matters apparently, given enough time and the wonder of compounded interest, they are defaulted (even if the diagnosis is somewhat premature).

    1. ChrisFromGeorgia

      Pretty much dead on, if I may I’d tweak the analogy a bit – there is no finish line. The dead horse will be stuffed and propped up on display like that corpse at “Weekend at Bernie’s.” Syriza apparently won nothing other than the right to hold up the stiff for a while until the next elections, unless they have the courage to bury it with a proper funeral.

  11. kaj

    The Euro-Zone is a cooperative with many weak members in addition to Greece, like Spain, Ireland, Portugal, Finland and now, even Austria and France. Italy is a peculiar case with most of its debt being bought mostly internally.

    Its situation, I believe, is quite different in that the debt is not owed to mostly to private institutions, like banks as was the case with Argentina which can be forced to take haircuts and loss of equity, or, like Russia’s, whose debt was mostly to countries like Germany and private debtors. Its new debt is to Institutions like the IMF, ECB, etc. which are ” permanent” institutions with members like the ones mentioned above with weak economies and politically weak governments. How does one expect such governments to be generous to Greece’s current problems when their own economies are in poor shape.

    Chancellor Merkel keeps alluding to this concern in a back-handed way (in the meetings with Tsipras) and considering the German Protestant mentality is unwilling to sacrifice her government for Greece.
    Even if Greece were to leave the Euro-Zone, the debt is permanent till is paid back in one form or the other. & I think that is the problem for both Greece and Syriza, Grexit or not.

  12. Calgacus

    How does one expect such governments to be generous to Greece’s current problems when their own economies are in poor shape.
    One could expect – or hope – that such governments had some understanding of basic economics. But then they would not have signed on to the Euro. The point is that it is not a zero sum game. Greece’s gain is not Germany’s sacrifice or loss. On the contrary, Greece will spend what they get, and Germany will get what it spends. Germany and everyone else would gain economically from a healthy, sanely run Eurozone, a “good Euro”.

    Even if Greece were to leave the Euro-Zone, the debt is permanent till is paid back in one form or the other. & I think that is the problem for both Greece and Syriza, Grexit or not.
    Sure, the debt is permanent in some sense. But the problem is not the debt, but the “structural reforms”, the austerity that the Eurocracy inflicts. They make the debt less payable, not more. This proves that the debt is not the core of the crisis. The irrational beliefs, sadistic desires and absurd demands of the masters of the Euro – and the internalization of such illogic in the minds of the oppressed is. So the primary thing that the government of Greece should do to benefit itself and everyone else – is to act like a government of Greece – and it has to some extent. That probably means Grexit eventually – which after a short transition should be at least as good for Greece as Argentina’s default and reconstruction was for it.

  13. Andrea1

    James Petras has it in for the left in Greece, France and Brazil. 22 March 2015.

    Bit hard on Syriza I thought, in the sense of too soon to judge (~see for ex. vidimi above.)

    It is years, almost 10 now that the Swiss have solicited the Greeks for some ‘fiscal’ agreement, or cooperation, and there has never been any response, no answer, nothing. (Agreement similar to that with Italy, etc. In recent months because of pressure from the main Unions has escalated once again…) Until last week, when the press reported that the new Greek Gvmt – finally – did make contact with the Swiss banking authorities, no details were published. In case anyone thinks Oh Swiss banks, from a purely selfish pov it is in the interests of Swiss banks to clean up and appear worthy etc. before automatic exchange of info is mandatory in 2017.

    1. Tsigantes

      Petras didn’t notice either that the humanitarian measures have been voted through, and primary residence bank seizures ditto.

  14. Edna M.

    For anyone interested in the lighter side of the news in Greece, here’s a short video of Varoufakis from today’s Greek Independence Day celebrations in Crete. Everyone wants a selfie with him.

    The response of the crowd to members of the Syriza government is very much different from crowd reactions to the recent previous governments. The prior government officials had to go out with much protection so as to avoid being yogurted, egged, cursed at, or worse.

    1. Yves Smith Post author

      The practice of the ECB for weeks has been to increase the ELA only barely enough to cover the ongoing bank run. This is not a change in its current posture.

  15. Oregoncharles

    Interesting. The price of silver is suddenly shooting up. Mr. Market is finally reactinng to the shenanigans in the EZ?

  16. dbk

    Since it’s way-past-bedtime here in Greece, I’ll try to respond to the passel of comments-so-far on this thread.

    1) the Lagarde List: of course it hasn’t disappeared, it’s been available for years and been exhaustively analyzed by Panagiotis Nikoloudis, who probably knows more about the topic of foreign bank deposits than anyone in Greece (maybe the EU). But this is a long haul, involving intricate documentation and cross-checking, and requiring the willingness of foreign banks (in the Lagarde List case, this is HSBC, which has a few issues of its own at the moment) to open all records. Greece has signed an agreement with Switzerland now, and this investigation – of the Swiss deposits as well as of deposits in Germany, the Netherlands, Britain, the US, and elsewhere will proceed. But this is at best a mid-term source for “extraordinary” (one-off) funds.

    2) the “bloated military” of Greece. This will change, but again, change cannot happen overnight. Greece currently spends twice what Germany does of its GDP on “military materiel” (2.9% vs.1.4%). German and German-French military hardware providers who have stiffed Greece in the past fifteen years have now been summarily shut out of public procurements. This includes Siemens and the German-French consortium which produced the 20 Euro-copters of which only 11 ever arrived in Greece, and of those 11, only 1 is currently operational.

    3) On a (disorderly or orderly) Grexit, conversion to the drachma, and the loss of their homes by Greeks: the government has prepared legislation to protect primary residences from loss to lenders. The proposed bill will be somewhat like what Sheila Blair had proposed, viz., an en bloc “reset” of mortgage payments. I do not anticipate this would change in the event of Grexit.

    4) On the new government’s ignorance of the structural failures of the EMU: the new government is intimately familiar with these structural failures; the economist members of the government are experts in this area. The governing bloc of Syriza as represented by the PM, Dragasakis, Stathakis and Varoufakis (an outsider and non-party member) are fully aware of these flaws, as are the economists in the true power bloc of the party (Lapavitsas, Tsakalotas). The impossibility of the government’s position brings into high relief these failures, which are becoming clear to the Greek populace.

    5) On Syriza’s strategy: I haven’t a clue, any more than other commenters. But I’m starting to suspect that this government is employing a different sort of strategy from any employed to date to respond to austerity ideology. I think I need to read up on Gramsci and Poulantzas (the major Greek political economist of the 20th century, a hero of the Greek left).

    6) On the 150 million raid of the “public health service kitty” detailed towards the end of Yves’ opening post. This seems quite possible, and I would add that there has been a silent suspension of payments to all service providers to the Greek state since 25 January. I read the OP as soon as it came up, and listened to the Greek news reports all day. They’re citing the same source as the OP, viz. the FT. However, when the FT was pressed by Greek journalists to elaborate on their sources, there was apparently a back-track to sourcing “EU officials” rather than the “Greek healthcare service”. It’s possible, but there’s no Greek source.

    7) It’s important to understand that the Greek MSM are as hostile – more hostile – to the new government as, well, the German MSM. I would urge considerable caution in citing any Greek MSM being translated into English for international readership during this period. In correspondence with a close friend who is a leading expert on EU political communications, this was confirmed – basically, at present there’s no trustworthy MSM source in Greece itself.

    8) For all Greek and pro-Greek (Philhellenic!) readers of this wonderful blog: Happy Independence Day. Yes, today is Greece’s “4th of July” – on this day in 1821, Greece declared its desire to be liberated from the Ottoman Empire. It was ultimately recognized as a “free and independent state” in 1830 with the London Protocol, but its status was ever-threatened by war debt after war debt, beginning with debts to Great Britain for warships never built/delivered.

    9) From the OP (sans update): “Greece is meeting its fate alone”. How true, and how profoundly reminiscent of another landmark date in modern Greek history, 26 October 1940, when Greece issued a resounding “NO” to the Axis ultimatum to surrender to Italian occupation. Those familiar with Greek history will know what ensued, as Greek stood alone and during the bitter winter of 1940-41 defeated invading Italian forces.

    It seems strange to think of the European Union without Greece, which bequeathed to Europe its foundational culture and civilization, not to mention its very name.

    1. Ruben

      Superbly informative comment dbk. I noted previously the anomaly of the proportionally large Greek military budget (proportionally the largest of the EU, and NATO’s second largest) and of course it makes sense that this will change if Syriza stays in power but it will take time. I guess the most important aspect would be to reduce spending on toys, contracts with foreign providers such as Siemens, as you point out. Please keep up the informative posts on Greece though it might mean stealing some more bedtime. I am not a Philhellenic (although it struck me as lovely that Athens is the city with the greatest number of mathematical symbols on its streets that I have ever visited) but just the same a belated happy independence day!

      1. John Jones

        People keep mentioning the military budget. But don’t seem to realize it can not be cut. And they can only reduce it by shopping for cheaper deals. Simply cutting it would be a dangerous mistake for Greece which it has committed before. Greece faces threats that most other countries in Europe do not face. So it unfortunately does not have the luxury of having a small military budget.

        1. Oakchair

          Can you source some modern Aggression from Turkey towards Greece?
          Given that Greece spends 18bn and Turkey is Greece’s only boarding country that spends over 2bn on its military its really its only threat. Also given that if Turkey wanted to do a land Grab invading Syria would be a much easier and more international accepted route then invading Greece.
          Sure Greece has been occupied for much of modern history but past invasions aren’t an indicator that Greece is currently under threat.
          Sure one could emotional argue that cutting defense is political suicide but emotional arguments aren’t rational and are spending based on emotional prejudices are luxuries.

          1. John Jones

            Read these. There is some information in them.

            Can you source some modern Aggression from Turkey towards Greece?

            What you do not see in the English press is that Turkish jets on a routine bases fly over deep into Greek territory. Turkish naval ships enter deep into Greek waters. Drilling in the Aegean for oil is seen as Casus belli by Turkey so we cant do that either in our own territory.

            If I am on a Greek English speaking site and I come across anything. I will send you the link if I see you posting. But there are far better people than me to explain this topic.

            Given that Greece spends 18bn and Turkey is Greece’s only boarding country that spends over 2bn on its military its really its only threat. Also given that if Turkey wanted to do a land Grab invading Syria would be a much easier and more international accepted route then invading Greece.

            Yes it would be easier to invade Syria because Greece has some sort of military left even under current circumstances as a deterrent. As for international accepted. Please don’t make me laugh. A lot good that did in Cyprus. Look at Cyprus something Greece and Turkey are still officially at war over. Turkey violates U.N agreements but nothing is done about it. They still occupy Cyprus with their military and their settlers they brought over. The international community hasn’t done anything. Often it suits them just fine because it is in line with their interests. Plus they have more important interests from Turkey. So Turkey gets away with what it does.

            Turkey recently sent an oil and gas exploration ship into Cypriot waters. Mind you into waters that are not even under occupation but waters in the south. How is Cyprus supposed to respond to this? It has tried to do this in the Aegean in the past as well.

            Sure Greece has been occupied for much of modern history but past invasions aren’t an indicator that Greece is currently under threat.

            It is not about the past threats. But in this case it is an indicator if the country you face has not changed. And never has admitted to any wrong doing.

            Sure one could emotional argue that cutting defense is political suicide but emotional arguments aren’t rational and are spending based on emotional prejudices are luxuries.

            It seems you have made your mind up already. So unless I can bring someone far more educated on this topic than me to post to you. I am unlikely to change your views.

            Having your populations go through multiple genocides and ethnic cleansings and losing the land you have always been culturally and historically attached to and were your families are buried to a country that still does not admit or atone to any wrong doing. And then also because of ongoing aggression having to match the military spending of said country. One that is also far larger than yours is not an emotional prejudice or luxury.

            Most Greeks would love to spend those billions on Hospitals and education and any number of things in the country. But unless Turkey stops its aggression an has a rethink of its history like Germany has. It is unlikely that Greece will ever be able cut its military spending in any meaningful way.

    2. Tsigantes

      Thanks dbk, from a fellow Athenian I would guess.
      There’s a lot of tough-talk know-all-ism on this otherwise excellent blog and I for one am very grateful for your input!

  17. Ignacio

    A default is not the end of the world. It might be the only way to force debt restructuring.

  18. RanDomino

    Declare a default and jubilee, announce that all homes are now the free-and-clear property of their occupants, collectivize the means of production directly into the hands of the workers at each facility on a workers’ councils model organized through industrial federations, disband the military, police, and bureaucracy, and then the government resigns?

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