Greece Submits Insufficiently Detailed Reform List; Tsipras Tells Parliament of “Peace with Honor,” Um, “Honorable Compromise”

The Greek government continues to climb down substantively on its promises of resistance to the dictates of its creditors as time pressure intensifies.

Last Friday, Greece submitted a longer reform list. The problem, from the Troika’s perspective, is that it was longer in the wrong way: more proposals, when what they need is sufficient detail so they can judge the fiscal impact. Recall that Greece is allowed to swap reforms out of the existing structural reform package if it can demonstrate to “the institutions” that there will be no negative impact. Bloomberg’s recap:

The 15-page draft, which was discussed Sunday in Brussels, requires more information and details and was a long way from serving as the basis of a deal, said one of the aides, who asked not to be named because the talks were private….

“The implication from early on has been that the Greek side doesn’t have enough flesh on bones of some of the new proposals,” said Michael Michaelides, a rates strategist at Royal Bank of Scotland Group Plc in London. “The surprising thing about even current proposals given leaks is the seeming lack of technocratic input, which would have helped the Greek case.”

And the information given wasn’t just too sketchy; it was disorganized. Bess Levin wasn’t exaggerating via her headline Greece Jotted Down Some Notes On The Back Of A Cocktail Napkin And Submitted It To Us: EU. From Peter Spiegel in the Financial Times:

People on both sides of the negotiations say that despite three days of talks, the list is not comprehensive as yet. “There was no such thing as an original list,” insists an official from one of the bailout monitoring institutions. “There were contributions, tables, pieces of paper.”

Indeed, on the Greek side, some involved in the discussions say a fuller, longer, and more detailed document is in the works. They argue the issue is not, as many among the bailout monitors claim, a lack of detail. The issue is getting all the details – some 72 reforms, according to one person in the Athens camp – into a well-organised document, in English, without mistakes in substance or politics.

Um, if the Bloomberg summary is correct, and Greece presented 72 reforms in 15 pages, or even 30 pages, that’s not enough information to assess fiscal impact. Angela Merkel pointed out what the issue is from the creditor perspective: while Greece, like Ireland, can have some latitude in what reforms it implements, “In the end, the overall framework must add up.” And as before, there’s a subtext of the Greek side seeming to believe that things are negotiable that just aren’t. One of the thing that is not negotiable has been the process set forth in the Eurogroup memo, which was that the Troika needed to review, negotiate, and finally approve its plans. They would then be sent for Eurogroup approval before the funds will be released. Greece lost the better part of a month trying to circumvent that process in a failed effort to get around the IMF and ECB. Now Greece is saying it has delivered enough detail when it is in fact the Troika that is the judge of whether it has enough information to make a determination. However, the Greek team does appear to be pushing hard to firm up their program.

Nevertheless, the Greek side seems to be unprepared for the degree of skepticism that some of their plans are encountering, and that the reservations might actually have a reasonable foundation. Again from Peter Spiegel:

Still, EU officials remain unimpressed, arguing that most of the measures rely on crackdowns on waste, fraud and tax evasion – estimates that are frequently unreliable even in jurisdictions with a proven record of efficient tax collection – and new efficiencies in public administration, something frequently promised by all governments seeking to squeeze cash out of the system, with mixed results.

The Eurogroup finance ministers have a phone call set for Wednesday, but it is clear the Greece reform list will not yet be ready for their review. Late next week appears to be the earliest conceivable time, and that seems heroic, particularly since the Good Friday/Easter weekend is coming up, and officials don’t expcet to be back in the saddle before next Tuesday. Greece has a €450 million payment to the IMF scheduled for April 9, but the IMF allows for slippage if a borrower intends to pay. The obligations that Greece can’t finesse are T-bills maturing on April 14 and 17 (€1.4 and €1.0 billion, respectively).

Greece continues to abandon campaign promises while standing fast with its bold claim that it is rejecting austerity and keeping its red lines. Tsipras called a parliamentary session Monday that was set to run 70 minutes but took over four hours. While the reform terms are still in flux, Greece has already given up on holding back on privatizations (it has them in its budget, projecting €1.5 billion from them this year), looks to be ready to cave on the unpopular property tax, Enfia, which Syriza attacked during its campaign, and has evidently given up on the campaign promise of a minimum wage increase. On the last issue, the government is now saying simply that it will not implement labor market liberalization. It has thus retreated to trying to fight the Troika to a standstill on labor market “reforms,” which mean reducing labor bargaining power.

Tsipras said he would achieve an honorable compromise. But that has far too much of a “peace with honor” sound about it. Despite the government’s repeated claims that it is rejecting austerity, it conceded on that issue long ago when Yanis Varoufakis said Greece would achieve a primary surplus of 1.0% to 1.5% of GDP and would continue to run primary surpluses. A government surplus is dampening even in the best of times; during a depression, it guarantees that the economy will get worse.

At best, all Greece will have achieved is trading austerity for austerity lite. But with the primary surplus targets it has set, it may not even achieve that much in the way of lessening of its pain. The main impact will likely be to shift more of the burden to the wealthy, and Greece may also get some humanitarian relief from the EU to improve the optics and assuage the creditors’ consciences (at least for the ones that actually possess them). That is not a meaningless outcome, but it clearly falls short of what Tsipras is trying to convince his coalition members and the Greek public that he will obtain. them.

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  1. ambrit

    NC is beginning to sound like the Chorus in a Greek Tragedy.
    Syriza: “What? Do we not merit the victory? Our cause is just!”
    Chorus: “Alas! The fates are against you Syriza! Prepare to meet thy doom! Your hubris meets with it’s deserved end! But despair not. There will yet be a Golden Dawn for Greece!”
    Syriza: “What fell fate is this? To be the midwife to monsters?”
    Chorus: “Plead not. You threw away your shield and sword and strode forth into the dragons lair bearing an olive branch. Do not complain if the dragon gobbled up the olive branch as an appetizer before the feast. This thrice visaged monster has an appetite without curbs. Your eyes were open, yet you used them not!”
    Syriza: “How can the gods abandon just men to such a cruel fate?”
    Chorus: “Justice is blind! Just as blind fate propels us where it will, so will the six eyed monster assert its’ regnancy. Gird up your loins and take up your sword! Save what you can, prepare for strife!”
    Syriza: “This will not end well.”
    Chorus: “Nothing ever does. Learn this lesson and make peace with the gods.”

    1. Ned Ludd

      Sure, maybe Syriza got bit into pieces, but they also made the dragon look totally unreasonable. That has to count as a symbolic victory.

      1. ambrit

        But who can eat Symbolism? To thoroughly mix metaphors, the art of politics, as practiced by the “Instrumentalities,” now proceeds from Social Realism to Deconstructionism. I expect to soon see a satiric illustration titled something like “Nude Emperor Descending a Staircase.”

        1. Cugel

          Nothing has really changed in the “negotiations” from day 1. Syriza came into power promising to end the cycle of beatings, but remain in the Eurozone, because that’s what the strong majority of Greeks want, and they could not have won the elections promising Grexit. The Troika refused to budge and are demanding 100% implementation. That was and is a death spiral.

          So, now they are trying to sell horse turds to the Greek people and tell them “it’s nourishing!” It doesn’t matter how they try sell capitulation as success they will not be permitted to carry it out. Their support will immediately collapse as soon as the Greeks realize that nothing is going to change. 1/2 their party will bolt amid calls for new Parliamentary elections. Support for the Golden Dawn Nazis and Rejectionist left wing of Syriza will jump. In short the same scenario as happened in Germany in 1932, leading to Hitler. And the Troika will be left without a negotiating partner. The Germans can then revoke the ELA and blame everything on the “stupid lazy Greeks.” But, nobody in the rest of Europe will buy that tripe. Meanwhile the left in Spain and Le Pen in France will grow more powerful and the fractures in the Eurozone take a big leap in intensity. The whole project is unraveling.

          Remember that PASOK went from 46% in 2009 to less than 6% now from trying to implement the Memorandum. The Greeks continue to demand rejection of Austerity and SYRIZA is even less capable of implementing the Memorandum as is than the center-right.

          Meanwhile the Euro continues its steady drop towards parity with the dollar:

          If we’re looking at what’s the next trigger point for another move lower for the euro … I think it will be Greece,” said Ian Stannard, head of European FX strategy at Morgan Stanley in London.

          “If they (euro zone policymakers) have to put in place additional measures to keep Greece in, such as capital controls, then you have a situation where the monetary union itself is under question.”

          This says nothing about the possible collapse in the Euro value if a messy Grexit happens.

    2. docg

      LOL! How about this, from The Eumenides?

      [372] For surely with a great leap from above I bring down the heavily falling force of my foot, my limbs that trip even swift runners—unendurable ruin. But, as he falls, he does not know it, because of his senseless folly; pollution hovers over the man in such darkness, and mournful rumor speaks of a dark mist over his house.—unendurable ruin.

      [381] For it remains. We are skilled in plotting, powerful in execution, and we remember evil deeds; we are revered and hard for mortals to appease, pursuing our allotted office which is without rights, without honor, separated from the gods in sunless light—our office that makes the path rough for seeing and dim-sighted alike. . .

      [499] For the wrath of us, the Furies who keep watch on mortals, will not come stealthily upon such deeds—I will let loose death in every form. And as he anticipates his neighbor’s evils, one man will ask of another when hardship is to end or to decrease; and the poor wretch offers the vain consolation of uncertain remedies.

      [508] Do not let anyone who is struck by misfortune make an appeal and cry aloud this word, “Justice!” “Thrones of the Furies!” Perhaps some father, or mother, in new sorrow, may cry out these words piteously, now that the house of Justice is falling.

      [517] There is a time when fear is good and ought to remain seated as a guardian of the heart. It is profitable to learn wisdom under strain. But who, if he did not train his heart in fear, either city or mortal, would still revere justice in the same way?

        1. steelhead23

          Damn, I love this site. I get the feeling I’m in class with a bunch of scholars – folks who have read and continue to read. Analogies to Aeschylus no less. Won’t find much of that elsewhere.

          As regards Syriza’s apparent image victory over the Troika – that and 100 drachmas would buy you a cup of coffee. Bitter coffee.

      1. ambrit

        Boy! Those ancient Greeks were canny and wise. As the person below remarks, we should be relearning some basic truths from the Greek Tragedy.

    3. ckimball

      Thank you for this.

      In 2008 weeks before the Lehman crash and the bail out of AIG I saw this in a dream.

      I am seeing people grouped in clusters. I can only describe the scene as a fancy
      international cocktail party where people are being served by liveried waiters.
      The perspective of my perception is looking down on the event which is
      taking place in what I would describe as a large reception hall.
      Abruptly the scene changes. I am now looking at the ground. It is an off white or ecru
      color of Mediterranean sand. I look up and in front of me, his back to me, is a nude man.
      He is as tall as the sky and his body is the color of the sand.
      As I watch, suddenly, his knees buckle. I hear my voice or someone’s say ‘oh no!’
      What impressed me was that once the knees buckled he just let himself fall.
      There was no writhing or struggle. His body unraveled in small whirling eddies and I
      saw it dissolve into the earth/sand leaving no trace of itself. Finally all that I see are
      what look like little prairie dogs sitting up on their haunches watching.

      As I awakened I thought …I just saw a God fall. What is it, western civilization,
      democracy? I didn’t know what to think. I never imagined that Greece itself
      could be in jeopardy. But the image that made least sense of all to me was
      of the little creatures watching.

      Recently, these many years later, I awakened one morning realizing that the position of the
      ‘little creatures standing on their haunches watching’ most accurately expressed that
      of myself as one of the people only able to watch.

      If Greece is lost it will be the world’s loss. I am hoping that the chorus will get louder.
      I believe Greece and its people represent the roots of the tree of western civilization
      and that garden rats are gnawing at its roots. Will our western mind begin to
      remember what was given by the likes of Socrates and Plato? At this most crucial juncture
      it seems the values are still being enacted for us by those representing Greece in our time.

      1. ambrit

        Thank you. This reinforces my belief in the Jungian idea of the Archetypes. There is much more to existence than we can even dream.

        1. dbk

          Which in turn reminds me of:

          There are more things in heaven and earth, Horatio,
          Than are dreamt of in your philosophy.
          – Hamlet (1.5.167-8), Hamlet to Horatio

          Indeed there are.

  2. Ned Ludd

    In February, Varoufakis said, “One thing we will not do is capitulate.” Action, as always, speaks louder than works.

    “What you are stands over you the while, and thunders so that I cannot hear what you say to the contrary.” – Ralph Waldo Emerson, Social Aims

    Syriza is the radical left that is not radical nor particularly left (unless “socialism-to-save-capitalism from collapse” is the new left).

      1. ambrit

        Your original version has real possibilities too. Action can be construed as any movement, constructive or not. Works, on the other hand, has connotations of solidity and constructiveness. Works exist, and can be apprehended and utilized. Actions, on the other hand, are often ephemeral and futile.
        A good Emerson quote. I’ve always liked that Divine.

    1. financial matters

      “unless “socialism-to-save-capitalism from collapse” is the new left”

      That’s an interesting point.

      From the Tcherneva link today:

      “”Returning to a more equitable variety of capitalism requires resuscitating and modernizing those labor-market focused policies left behind by the shift to a trickle-down, financial-sector-driven policy regime. More extensive progress will not be made until steps are taken to ensure that incomes at the bottom and the middle rise faster than those at the top. This can be achieved by refocusing policy on labor markets—including a mechanism that links wage increases to productivity gains, prioritizes decent work for decent pay, commits to pay equity, reexamines comparable worth policies, and, importantly, implements an effective employment safety net at living wages for all. These are policies that would ensure that (1) the incomes of the vast majority of people grow rather than shrink in expansions and (2) the majority of the gains from growth go to the majority of families.””

      Many in Syriza have ‘Marxist’ leanings but when pressed as to what that means they take a practical heterodox viewpoint. They want to improve the lot of working people and others not at the top of the ladder.

      Is a job guarantee with a living wage a ‘Marxist’ program? It does seem to give more options and respect to labor and treat it as less of a commodity.

      With the US Congress intent on austerity, the ‘Greek problem’ is hardly limited to the Greek population.

      1. cassiodorus

        A marxist program (or “programme,” as you wish) would be a union of free producers. Cut out all of the crap by which parasites stake their claims upon the capitalist economy (insurance, law, policing, bureaucracy, investment, wasteful entertainment etc.) and create systems of cooperative participation in the actual creation of good things.

    2. Doug Terpstra

      Emerson never encountered anything like the Obama phenomenon, in which perception eclipses and recreates reality, and propaganda has largely achieved its unholy grail of mass cult mind control. Yet to be seen whether Tsipras is a disciple/understudy of this new order or is playing a smarter game while groveling and licking the Troika’s boots.

  3. Greenguy

    Syriza’s reformism is a dead-end; the solutions are going to be either a Grexit and further radicalization of the working class or the rise of Golden Dawn and austerity at the end of a bayonet. This is probably going to repeat itself across Europe.

  4. madisolation

    I think the Greek government is stalling until it meets with Russia:

    Recently Petrakos told Spiegel that Greece wants “to deepen its relations with Russia in the energy sector” with the two counties gaining significant mutual benefit from this.

    For an interesting survey of Greeks approval of Russia’s leadership over the EU’s leadership, see this poll.

    1. Yves Smith Post author

      Russia has already said it is not lending money to Greece. And Greece really backtracked when its loose cannon defense minister early on was trying to make stronger overtures. This is more theater for its domestic audience. If Russia were to ever get involved, it would be well after a Grexit. It is cheaper to buy out of bankruptcy than on the courthouse steps.

      And as Mark Ames points out, Russians always have a way of selling out their closest friends. So even if Russia was to be unexpectedly friendly, it won’t add up to much in reality.

      The way Russia could do the most good would be to push on the reparation claims. I believe Russia is owed by Germany too. But it will be years before Greece sees any of that money, way too late to help with scramble for cash now. That is absolutely not going to be included in the bailout talks, and Greece probably has to sue to get Germany to take the claims seriously.

      1. docg

        “If Russia were to ever get involved, it would be well after a Grexit. It is cheaper to buy out of bankruptcy than on the courthouse steps.”

        Excellent point! No way Russia will bail out Greece so it can pay back its European creditors. Putin will tell them “First default. Then we’ll talk.”

      2. alex morfesis

        ok I lied

        well…not really…

        greece will not have a long term humanitarian crisis if it gets forced out of the euro…that is just a red herring…greece is quite self sufficient when it comes to food in general and it only needed EU subsidies since the price of food stuffs went up when Hellas moved into the euro, making the existing sales with the draxma suddenly inoperative and non competitive…and dr strangelouvable knows this as he was there when it happened…so his “shock” about all these funds greece has gotten is cute but not convincing…and a bold faced piece of…(don’t want to get moderated by the software…)

        greece needs russia to do a PIK joint venture for oil…greece actually exports gasoline and other refined products…she has excess refinery capacity…

        a joint venture with russia for oil is better than sending the greek navy to take over cyrenaica…the draxma or glaux lives if the need for oil is figured out…cars can come from korea or india…or HERO can establish a factory in greece to sell its put putz…greece has an excess of vehicles…and no malls to have to drive to…

        the only real thing greece needs is a source of oil willing to trade at a reasonable price with the draxma…it can source its pharma needs from india if it does not produce enough internally…

        greece will not die if forced into the fact, short term it might do well…short term meaning after the 6 month shock it will take to adjust to the draxma…short term meaning the next 5 to 7 years…but long term, it would be a total disaster…sooner or later, foreign debts will need to be paid off…and hellas does not have the human capital to take advantage of its actual economic advantages to turn the new glaux into the swiss frank…draxma is a dead instrument…long live the glaux…

        welcome to plan b…

        1. German native speaker

          “….since the price of food stuffs went up when Hellas moved into the euro.”
          The prices in Greece exploded in the 80s shortly after it joined the EU, as all tourists knew, which greatly helped to develop Turkey into a tourist destination.

          That increase in prices could not possibly have had anything to do with the ‘Greece back to the Greeks’ propaganda shortly after they finally were permitted to join the EU after trying /begging for 5 years to become part of it. Could not possibly have to do with the raises of wages/pensions at that time, and the deficit that jumped tremendously in the year following the EU.membership.
          The memory of the EU about Greece is a few decades longer than the memory of most commenters here.

          1. Santi

            If you want to know what caused the deficit, the German native speaker Heiner Flassbeck will explain the causes, in English. Wage deflation by Germany brings big surpluses, which force the rest of the economies to, first, have big deficits themselves, second big unemployment and, at the end, deflation and depression. Here we are now. Greece will be the first to explode, but Italy and Spain are not far away. Keep doing the wrong politics and the EU will not last more than 5 years. And Germany will suffer too.

            1. German native speaker

              What Flassbeck talks about is a fact, and I do take note of the condescending tone in your response. I challenged the statement above that Greek prices rose after it joined the Euro, No, they rose after it joined the EU, in the 80s, and your link did not explain that. That link has a subtitle, about how the narrative of ‘Greece guilty and Germany innocent”. Equally false is the opposite.

              1. Santi

                I don’t really know in Greece, all I know is that when I last went there in 1988 the prices were like 30% cheaper than in Madrid, which was way cheaper than the North of Europe. What I know is that in Spain the prices went up, and very fast, first with the EU and then with the Euro. It is logic: if one kilo of oranges costs 5 times more in Germany than in Spain, they will sell it there, and so prices went up. With Euro we got more of that: it is valued in the same currency, no tariffs or commercial barriers, it should cost about the same. “Because markets”, as Lambert would say. Not so with salaries: Unemployment took care of this. When I was fired, three times since 2012, as University professor, Software Developer and Researcher it was, as Flassbeck explains, because Germany was exporting unemployment to the South of Europe. In this time unemploment has more than doubled in Spain, and more than tripled in Greece. Spain has the highest inequality in Europe, more so than Greece. There they are more uniformly poor. ;)

    2. generic

      I mostly disagree with Yves’ take on Greece but in the case of Russia she is absolutely right. Putin will not commit resources to an undertaking if he isn’t certain of the results. And Syrizia is a pro EU party they can not be trusted with acting as a trojan horse in the EU. Really no one could be. And they have pretty little else to offer. Russia might buy some energy infrastructure, but they won’t pay more than they have to.

    3. Georgie Welchade

      As you’ve rightly indicated in a previous thread…” Greece is a mess“… which could be taken advantage of.
      “You should never let a serious crisis go to waste… it’s an opportunity to do things you think you could not do before.” (Rahm Emanuel)

      Now then, how about Russia throwing a monkey wrench inside Europe’s already puffing engine by threatening to help out Greece (and itself) right NOW, not later ?
      Helping Greece and complicating Europe’s game re Ukraine, ISIS, etc., works in Russia’s favor. Having Greece turn anomic here and NOW would only mean a massive threat at Europe’s doorsteps.

      Possibilities :
      Russia could transfer to Greece its (heavily discounted) Ukranian bonds for full nominal payment of Greek debt to the IMF. How about Russia getting a jumbo-size military base in exchange ?

      What if Russia invested in Greece (jobs) starting with the now re-directed massive Russian gaspipe through Turkey right up to the Greek border, plus other required infrastructure.

      How about Russia buying Greek stuff, particularly in view of Europe’s sanctions that today don’t allow Greece to sell Russia.

      By having Greece still within the EU, it can veto against the TTIP which Russia does not want.
      Interesting times.

  5. mike

    Beyond its famous intro, the Declaration of Independence is actually a list of particulars addressed to the royal-ruled European audience and to fence-sitters at home detailing all the things the colonies had done to prevent a break from the developing British Empire, things that were all ignored or dumped on by that evil King. In the end, despite their demonstrated and unquestionable reasonableness and willingness to work with that King, the colonies were forced, forced, we tell you, to declare independence. You’ll have to check Wiki to find out how that turned out. Too bad the colonists didn’t have blogs and commenters ready to demand to know what they’d been smoking, whether they could read, if they knew how silly they looked going back on some of the things they’d said, and why they’d rolled over to get their tummies scratched.

    1. Yves Smith Post author

      Colonial America was the richest part of the UK, far wealthier than the British Isles. And it was not economically dependent either. No comparison to Greece.

      And the colonies were not “forced” to declare independence. They wanted lower tax rates and tariffs. The British didn’t have gulags or secret police. Get a grip.

      And it might help if you follow what is actually happening in Greece. Like it or not, the Greek government is the one that is deciding not to leave. This is not in response to the peanut gallery making noise in the US. Tsipras said two days ago that he wanted to find solutions. Last night, he said he wanted an honorable compromise.

      Syriza is not revolutionary. I said early on that this was a bourgeois party with a harder-left minority. You want then to be something they aren’t, and even more perversely, insinuate that writers like me are responsible for its shortcomings.

        1. Yves Smith Post author

          “Richest jewel” is a metaphor. It certainly was not wealthy on a per capita basis. And England had not consolidated its rule over India at the time of the American revolution. India was not governed directly by England until 1860. The British East India company had been in charge before that. That means commercial exploitation but no colonial status per se. Admittedly, Barbados was the wealthiest colony for over a century prior to the Revolution; its luster had faded a smidge by the time of the revolutions.

      1. David Holmquist

        I understand Mike to be making a point about politico-diplomatic strategy and process, not drawing a historical parallel. The point is not that the colonies were forced to declare independence, it’s that they wanted to make it appear as if they were. Yves’ comparisons of the two situations in terms of relative wealth and economic dependence miss the point entirely. And to state, in the context of the argument, that “Syriza is not revolutionary” is to imply that the American colonists were—at best an arguable assertion. Rebellious, yes. Revolutionary, hardly.

        Gulags and secret police? Get a grip, indeed. Where did that come from?

        1. Yves Smith Post author

          No, you are missing the point. Greece is in desperate financial condition and an Grexit will make it vastly worse off, not just short term but longer term. Varoufakis has stated that repeatedly and that view guides Syriza’s negotiating posture. By contrast, for colonial America to rebel against England made it better off by reducing taxes and tariffs.

          Greece is a supplicant to its creditors trying to act as if its isn’t one. It has not taken the most basic step to prepare for an exit, which is to impose capital controls, a step it should have taken immediately after taking office (and it should have done this regardless to combat the bank run).

          There was no “forced to rebel” issue for the US and I see no reason to think Mike was not being literal, hence my retort regarding the lack of political oppression.

          By contrast, Greece actually did, by treaty, give up significant amounts of national sovereignity when it joined the EU and Eurozone and agreed that it was submitting to a new set of institutional arrangements.

          There’s no comparison between the two cases.

          1. alex morfesis

            it has a euro crisis…not a financial crisis…and a policy crisis…the eu allows parallel currencies to function with whomever wants to have them…the WIR in switzerland is not LEGAL TENDER but it exists and the world does not think it is some sign of weakness…not that anyone on the other side of the pond will listen, but the new draxma or glaux can be government issued on a sunday (electronically and only used with atm cards, no hard currency)…and people given the option of using either the euro or the new glaux/draxma…15 to 25% of the population will for “patriotic” purposes start doing business in draxma/glaux the way the WIR operates…it will establish a value and a price point…making the current governments position much stronger…

            and as long as the meme and talking points…are…’JUST LIKE THE SWISS USE THE WIR” it will be hard to jump all over it, unless the financial press will suddenly turn on the canton confederacy just to hurt greece…

            by allowing greeks first to use the new draxma and glaux, and to also accept it for partial payments of taxes…not 100%…but maybe up to 35%, there will be an internal market for draxmas…greeks have been trading physical dollars for a long time internally…I suspect a large number of those EURO withdrawals that everyone is talking about have been converted to dollars to prevent the EU from stealing those “withdrawals”…it is not a bank run…it is a currency hedge…which might be why to the EU central bank it looks like money is vanishing…

            as to the new glaux/euro, I hope no one imagines it being the one for one trade that idiot financial editor from kathimerini suggested in his 10 things to get to the draxma thing he wrote…the draxma/glaux needs to be traded (in the beginning) at what greeks remember it trading at…250 to 300 to the dollar…otherwise, it will not connect mentally with their history and memory of the instrument…

          2. Oakchair

            Greece’s net external debt is around 130% of GDP[1].
            Why shouldn’t Greece default on all its debt and exit the Euro (besides for political reasons?)
            When Iceland defaulted and devalued its unemployment rate never went above 5.5%, when Argentina did a similar thing after around 2 years it was seeing almost double digit GDP growth.


            1. Yves Smith Post author

              In the 2012 restructuring, Greece imposed haircuts on its private sector bond holders. It could because they were Greek law bonds.

              All the bonds it has issued since then are English law bonds, plus the official debt is also English law bonds. So it can’t redenominate them to drachma.

              Have a talk with Michael Hudson. He and Jeff Somers don’t regard Iceland as a success. We ran an “Iceland is doing better” post and got our head handed to us by Hudson, who is an expert on Iceland. The government and bank PR is really thick.

              See these comments from Hudson:



              1. Georgie Welchade

                No Yves, Greece does not have to redenominate English law bonds into Drachma nor anything of the sort.
                Greece just has to DEFAULT on its foreign debt just like Argentina did. Guys: no money, no pay… what part don’t you understand ?

                As my dear Michael Hudson would say: “Debts that can’t be paid, won’t be”

                Let’s not beat around the bush.
                The Greek ‘impossible triangle’ rules no matter how we slice it or dice it.

                Once they DEFAULT, Greece is on its own (outside the Euro) and has got to make ends meet on Drachma without external inflow of loaned Euros.
                Foreign debt is NOT paid for (we defaulted, remember ?) the only problem is paying for imports.
                Argentina went through this, most fortunately helped by international price increases in agricommodities (specially soy beans).

                Thus, it grew at Chinese rates (almost 10% p.a.) with twin surpluses during almost 10 years. Now the problem for Argentina is that agricommodities have lowered prices dramatically.
                At any rate, the Greek way out today is to (a) DEFAULT (b) to make ends meet on Drachma (c) possibly confiscating German property as WW2 compensation and (d) getting outside help from Russia et al.

                Any other strategy is wasting time and Euros that still remain in the Greek banking system

                1. Yves Smith Post author

                  The risk is that the ECB feels it has to end the ELA if Greece defaults. That is the sword of Damocles here. The ECB is keeping mum on its view. I’ve seen experts argue mainly on the side that the ECB would have to end the ELA support, but central banks have been known to fudge before.

                  I agree that a default in place is Greece’s best option, but it is not clear that the creditors won’t want to make sure Greece serves as an examples so that no one else in the periphery gets ideas. The ECB has the power to force Greece to make a de facto Grexit.

                2. Georgie Welchade

                  Ives, you’ve said before that …”…Greece is a mess…”…

                  Well, if ELA stops (50-50 chance it could happen) then Greece will be a HELLUVA MESS that not even Rahm Emanuel would care to take advantage of. There’s where game expert Yanis V. should make a difference.
                  Furthermore, by having Greece turn anomic here and right now would only mean a massive threat at Europe’s doorsteps (think Syria + Libya + ISIS, etc.) so Super Mario will sleep over it before pulling the trigger.
                  At any rate, Argentina’s 2001 default procedure is a reasonable roadmap for Greece to take into account, although the Hellenics need to substitute Argentina’s agri-commodities foreign currency injection (badly needed for imports) with something else, probably of Russian origin…

              2. Oakchair

                Iceland had arguably the worst financial crisis ever and their unemployment rate is at an unbearable 4.4%. Sounds like a success to me.
                Hudsons rant about how “things are horrible” isn’t evidence its just a long winded rant.

                1. Yves Smith Post author

                  Not even remotely comparable cases.

                  1. Iceland defaulted at a peak of prosperity.

                  2. Iceland has its own currency.

                  3. Iceland has a really small population.

                  The combination of 1 & 2 made it really easy for tourism alone to take up a lot of slack.

      2. sid_finster

        IIRC, at the time of the American Revolution, Haiti was the richest and most profitable colony in North America.

  6. Edna M.

    I thought Syriza hired Lazard for its technical know-how. My impression is that the Troika is just looking for ways to delay giving money and humiliate the government. They are doing everything possible to get rid of this government. The next time around they will probably complain about the font.

    1. Yves Smith Post author

      Lazard is there to negotiate a debt restructuring. They are not there to devise and cost out reforms, which is what needs to happen now. They don’t do government budgeting. That is an input to Lazard’s work.

      I hate to tell you, but a lot of the humiliation here is self inflicted. While I agree that the creditors are merciless, Syriza made matters worse (a tall order) by acting as if they could somehow get around the process clearly stipulated in the Eurogroup memo it signed. Varoufakis said on Greek TV that they were going to play the parties off against each other. If they actually believed that, they were smoking something very strong. The top Eurocrats have known or at worst known of each other for years. They understand all the major institutions and their priorities. The new government lacked any personal relationships with key players and the knowledge of the terrain to try to create divisions.

      So all it looked like was that Greece was trying to break china by repeatedly trying to do anything but negotiate with the Troika, which it had agreed to do, in writing. It tried going to the Eurogroup directly, then to the European Commission, then to Merkel. All gambits failed. It was told it repeatedly it needed to deliver the detailed reform list to the Troika and work with them. The government, after losing almost a month when it is desperate for cash, has finally gotten the message.

      1. Ned Ludd

        “Varoufakis said on Greek TV that they were going to play the parties off against each other.”

        And Merkel and the rest of the E.U. somehow found out about this cunning strategy. I hate to venture into promulgating conspiracy theories, but I suspect that someone was translating Syriza media appearances into other languages…

        1. Yves Smith Post author

          Huh? The Varoufakis remarks were widely reported in the media. There were several times where Greek officials said something they thought was only for Greek consumption (TV and radio interviews) and all were picked up more broadly and the government was embarrassed because what it was saying at home differed markedly from what it was saying in its meetings with foreign officials. The Greek government wised up after a few instances.

          As to this being a plant, the evidence is strong the opposite. For instance, there were cases where the Greeks said the translation was inaccurate.

          1. Ned Ludd

            Just a joke. Syriza seemed unaware that other Europeans could find out what government officials were saying on Greek T.V.

      1. cassiodorus

        Well OK, let’s move on to substantive issues. From this (cross)post:

        The idea is to Europeanise three or four basic realms of our political economies: Europeanise the banking sector, Europeanise a portion of the public debt, Europeanise aggregate investments (through the European Investment Bank and in association with the European Central Bank) and, finally, Europeanise a hunger and poverty alleviation program. Once these realms are Europeanized, national governments can manage painlessly to run balanced budgets even if the external position of a country (like Greece or Portugal) is negative.

        The problem is capitalism. Capitalism has gotten to a historical stage in which the capitalist ruling classes make money off of Ponzi schemes. Debt is likely to expand, then, because debt is how financial entities hide the difference between their claims to owning vast sums of wealth and the actual realities of a global economic system moving rapidly toward exhaustion.

        Greece is now a victim of some of these Ponzi schemes, by being the Official Nation Holding The Bag. As I read it, Varoufakis is essentially arguing “here is a more efficient way for Europe to extend and pretend than the one we’ve tried so far.”

        Isn’t there some way the Greeks could give Varoufakis’ current job to Costas Lapavitsas?

  7. Oakchair

    So will Greek voters flee Syriza and flock to the anti-Euro KKE and Golden Dawn parties?
    I bet Orville Redenbacher is pouring money into “grassroots” groups to organize those two parties to go into a coalition together to leave the Euro.

  8. Santi

    I’m not seeing any capitulation in news today, including this recent update by Reuters. While it is possible that a deal ends up close enough that the Greek government steps a bit in one of the red lines to save the pact, for the moment I see more anxiety in the bragging of TPTB than in the Greek side. I have been wrong a number of times, but my bet now is that Greece will delay the payment to the IMF while the negotiations keep going. Let’s see what Wednesday’s teleconference brings.

    1. Yves Smith Post author

      Delaying the payment to the IMF is not a big deal, as we have stated repeatedly. The IMF deadlines are not hard and fast. As long as Greece is still negotiating, they easily have six months. But Greece has acted as if paying the IMF on time is of great concern. It had 3 payments in March, all of which it made.

      As we stated in the post, the real problem is the T-bills that mature on 14th and the 17th.

      1. Santi

        I didn’t understand about the T-bills, I have read in other sources that they can just roll them by issuing new ones for the same owners, Greek banks supposedly. Isn’t that true? They had to roll about 4b€ of bills in March, which they did by rolling them into new ones. Much more than the 2b€ of April.

        1. Yves Smith Post author

          No, Greece has to repay the old bills and issue new ones. The main, if not the only, buyer was Greek banks. The ECB is no longer allowing Greek banks to buy Greek debt of any kind. And they can’t “roll” the debt. They have to resell new debt at current rates, which would be catastrophic.

          Greece can try selling new bills, but the action might fail. If they do get the financing done, it will be as super high interest rates.

  9. samhill

    looks to me the EU’s plan is to send Syriza home with a cake box with a fetid gag inducing turd inside or Syriza just goes home head high in default, both work equally well here – New elections, desperate, scared average Greek not looking for a Golden Dawn maelstrom but a safe beach to wash up on, will be presented with a cloven hoofed Pasok spawned ND approved/ ND spawned Pasok approved Renzi clone appearing in white linen, a laurel wreath, and a boy scout smile and a rouge’s wink. Probably too soon to unleash this beast, or they are still turning over stones looking for it.

  10. mpr

    Greece lost the better part of a month trying to circumvent that process in a failed effort to get around the IMF and ECB. Now Greece is saying it has delivered enough detail when it is in fact the Troika that is the judge of whether it has enough information to make a determination.

    I initially agreed with this, and wondered why they didn’t conform with the process having won some concessions on substance at the Eurogroup meeting. However, this is now less clear to me. The point is that the concessions were vague and open to interpretation by the Troika technocrats. Making them fight to get Greece to conform to the process, give them access to needed data, and spell out reform details, may make them less likely to fight over the substance of proposed reforms.

    This fits politically. For example, what the Germans need is to show their voters that they’ve made Syriza buckle, and buckling on process is better than buckling on substance. So its actually good to make a big show of resisting the process before complying with it. Another point, is that the technocrats are less likely to insist on further concession when the final decision is going to be made right at the cusp of Greek default.

    I like the Greek chorus analogy. Yves do you really think they would have been treated better had they just come up with a detailed list of reforms post the Eurogroup meeting, instead of giving them the run around ? The Troika et al are bullies; there is no question of ‘good will’ here.

    1. Yves Smith Post author

      The Eurogroup memorandum was very clear on two things: the process for getting the bailout funds, and that the existing structural reforms were reaffirmed by the memo, multiple times.

      1. mpr

        I read the memo, and recall that it was deliberately vague about structural reforms.
        However, be that as it may, I’m not sure what the relevance of that is for this discussion.
        You seem, in general, to be adopting a very legalistic approach to what is a political situation.
        Even the German insistence on ‘following the rules’ is in the end political.

        1. Yves Smith Post author

          Greece passed all of one 200 million euro law and it got chewed out. Tsirpas had to spend over 4 hours in Parliament last night. He pitched restoring some of the old labor bargaining rights. No law was passed. And in any event, a unilateral action in the memo is not laws in general, it’s things that have fiscal impact.

          The Greeks retreated on the Piraeus port deal, which alone is a much bigger ticket item than the 200 million humanitarian relief law.

          You can’t work with someone who signs something and then repudiates it within weeks. They’ve just demonstrated that they are untrustworthy. They’ve flip flopped repeatedly and are misrepresentng that to their own voters. And the government acts as if it has no idea what is it doing. I was sympathetic but I’m not any more.

          1. mpr

            I don’t see anything they’ve done as a repudiation. The memo was deliberately vague and open to interpretation. T&V made it quite clear what their interpretation was immediately after, and this should not have come as a surprise, since it was consistent with their position ante.

            Of course you can claim that to the extent that T&V didn’t adopt the Troika interpretation they’re ‘repudiating’ the deal, but everyone knew what their interpretation was.

            As far as not going through the process, its hard to say if this is strategy or incompetence; of course the two are not mutually exclusive. As I’ve said, I find it very plausible that immediately after signing the memo it became clear to them that the Troika technical teams were not going to play ball (I don’t think you would disagree with this), and they had to be softened up as much as possible politically.

            We’ll see in the next week how successful that was.

            1. generic

              Obviously I’m not a mind reader, but going by his earlier writings something like this except not a joke. At least most of the plans that have been presented by the Greeks look like the infrastructure for just such a scheme.
              Problem is that this will take at least halve a year to set up and I have no idea how he plans to survive the interim.

    2. generic

      But in a lot of ways they have subverted the process successfully. The memo explicitly stated that the Not-Troika decides what’s fiscally neutral and that Greece will refrain from unilateral actions. Yet after the recent kerfluffle they are passing laws happily, ELA is still provided as needed and the creditors are just demanding a list again.
      What they haven’t is an agreement on substance except from Junker who doesn’t count.

      1. Yves Smith Post author

        Your assessment is tantamount to saying that a car sitting on a railroad track is doing just fine as a train is bearing down on it and the driver refuses to take it out of park.

        Greece needs the 7.2 billion in bailout money since its primary surplus is now gone. It will not be able to pay government salaries and pension payments if it goes not get the dough very soon. Greece’s defiance over producing a list (and you airbrush out of the picture that that’s over, Greece is now scrambling to satisfy the Troika) has been the step it was self-destructively refusing to perform when it has NO Plan B. And you call this a success?

        1. generic

          I did say they had successfully subverted the process while getting nowhere on substance.

          But really the core of my disagreement with you is that for all practical purposes there was no deal. We’re still running toward the cliff and the whole monetary union might follow. And at least from everything I’ve seen the Greeks still seem to think that the €’s will blink. But both sides seemed unwilling to force the decision. ELA kept getting increased and Greece kept paying its creditors.

          This time seems different though: Note that they no longer negotiate in open letters.

  11. German native speaker

    Default and leave the Euro, and the SOONER the better, is what the majority in Germany wants.

    1. alex morfesis

      well…perhaps you might stop reading BILD for your economic news…

      look…I have no clue what information is available in germany or northern europe on factual financial information…greece has the perception of high national debt since the rating agencies for some reason do not choose to combine state, regional and city debt of france and germany and other northern european countries…greece does not borrow money at the state or local level…so ALL its government debt is at the federal level…greece certainly has paid a price for allowing its two party system to mismanage its finances for so many years, but mostly, there was no economic press in greece and since I have not lived nor visited for over 7 years, I can not speak on those matters…but I think you might poke around in your own landesbanks and ask whose collateral Deutsche Bank is using or borrowing for its counterparty positions on its derivatives…your “german miracle” is a bit more smoke and mirrors than you might understand…and as to your earlier argument about greek price rising for tourists…well…perhaps you might ask if it was the mark that was the currency making the moves…

      1. German native speaker

        I said what the majority in Germany wants, and you infer arrogantly that I am reading Bild.
        The ad hominem attacks, due to the fact that I identified as “German speaker” here, are quite remarkable.

        1. John Jones

          It has nothing to do with you been a “German speaker”. It has everything to do with what you post. People here are not stupid.

        2. alex morfesis

          i don’t see any massive protests on the streets of germany calling for the removal of greece from the euro…

          taking polls is an art that is quite easily manipulated…
          and unless you have 80 million alemanz as followers on some media platform…you only speak for yourself and your experiences…..

          a bit difficult to say anyone “speaks” for germany…

          the german people are not some monolithic clown crowd that follow anyones lead….it never did…the events of 1933 were not a choice nor an election…it was a coup…anyone who challenged it directly was fed to the lions…i know where kyffhauser is but I don’t expect barbarossa to rise up and “fix” things…I took german for six months (or tried to…) at the jesuit school I went to…have dated women born in germany…yes, I am from Ithaki greece (or my family is…) and yes, two of my grandmothers brothers were killed by northern europeans with a capital in berlin for trying to supply food to families whose relatives had been taken away for daring to not bow down fast enough ( or perhaps for killing a few german soldiers…details details…) but life is complicated…I also have fotopoulos and mazarakis in the family…for those who might know a bit about greek history…so life is complicated… history is never clean…people do what they do to survive in difficult situations…it is easy for everyone to cry that “someone else” should be a hero…

          but we can fight together for peace and prosperity…or we can just fight….

          peace hope and caring is not easy…but the alternative is not much better…

        3. mpr

          I said what the majority in Germany wants, and you infer arrogantly that I am reading Bild.
          The ad hominem attacks, due to the fact that I identified as “German speaker” here, are quite remarkable.

          So you’re setting yourself up as the arbiter of what the ‘majority of Germany wants’ and calling *other* people arrogant. Nice.

    2. Sibiriak

      German native speaker: Default and leave the Euro, and the SOONER the better, is what the majority in Germany wants.


      You could be right. Are you basing that on opinion polls?

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