Latest Greece Talks End in Confusion, Dissent

It’s hard to fathom Greece’s approach to its dealings with its oppressors, um, creditors. As we’ve indicated from the outset, Greece was in a weak negotiating position and traded away its best card, that of the threat of a Grexit. Its only real hope was if outside forces applied pressure on its behalf. The US acted as if it might, but then backed off. Municipal and regional elections in Spain, if anti-austerity party Podemos performs well, could help the Greek cause, but Greece also needs to have enough of a financial runway to have the negotiating space to use any such gain to its advantage.

The reality is that the government’s situation is only becoming more dire. Its fiscal surplus has dwindled and is close to zero. That means it has had to rob Peter to pay Paul, or in this case, the IMF to make payments due in March, by using pension reserves to meet those obligations.

The negotiations over Greek’s reform package were at loggerheads, with Greece not putting forward the sort of granular proposals that the IMF wanted, leading the IMF to make derogatory leaks to the press. That was astonishingly tacky nevertheless one of many indicators of how terrible the dynamics are between the two sides. And another spat erupted when Greece passed a €200 million humanitarian relief bill, leading a European Commission official to object that Greece had agreed to no unilateral measures and that they needed to put forward an entire reform package, and not implement measures piecemeal. Eurogroup chief Jeroen Dijsselbloem also said that Greece should consider implementing capital controls (which as Rob Parenteau points out by e-mail, Greece should have imposed long ago, now is too late in the game to do all that much good). But he also mentioned that Cyprus had gone this route, and Cyprus got there by the ECB having threatened to yank the ELA, its banking system support. Cyprus also had to go through a bail-in, forcing many of its depositors to take losses. Greece howled that Dijsselbloem was engaging in blackmail.

Athens sought and won a meeting with the main players ex the most recalcitrant party, the IMF: Merkel, Draghi, Dijsselbloem, EC head Jean-Claude Juncker, French President Francois Hollande and EC council head Donald Tusk. Unfortunately, the talks appeared to resolve nothing. Each side declared victory and presented irreconcilable versions of what was agreed to.

From ekathimerini:

Tsipras insisted that his talks….had resulted in an agreement that Greece does not have to complete the bailout program and review that the previous government was not able to…

The Greek prime minister insisted that none of the measures would be “recessionary.” Merkel, however, appeared to give a different interpretation of what is expected from Greece, suggesting that the basis for the reform program should be the most recent troika review, which took place on December 10.

“The Greek government has the possibility of replacing individual reforms outstanding from December 10 with other reforms if these… have the same effect,” she told reporters, adding that Ireland had done something similar.

Peter Siegel of the Financial Times described the negotiations as ending in “disarray”:

Greece’s prime minister and fellow eurozone leaders emerged from a meeting early on Friday morning touting a breakthrough agreement to unlock much-needed bailout funds for Athens — only to fall into disagreement hours later about what it all meant….

Angela Merkel, the German chancellor, made clear at a post-summit news conference that the starting point for Alexis Tsipras, Greek prime minister, was a December 10 inventory of incomplete reforms promised by the previous Greek government. “The Greek government has the opportunity to pick individual reforms that are still outstanding as of 10 December and replace them with other reforms if they . . . have the same effect,” Ms Merkel said.

It is a potentially incendiary demand since the document Ms Merkel referred to — a letter written by Greece’s then centre-right prime minister Antonis Samaras and his finance minister Gikas Hardouvelis — was the focus of particular scorn for Mr Tsipras’s far-left Syriza party on the campaign trail.

Mr Tsipras insisted at his own press conference that Ms Merkel was mistaken. “Forget the commitment of the former government. There are no austerity measures. There is no letter of Hardouvelis,” Mr Tsipras argued. “I asked [the other leaders]: do you expect me to . . . go through this evaluation and implement measures that Mr Samaras was not able to implement? The answer was no.”

As much as I sympathize with the Greek position vis-a-vis the Eurozone, that both for Greece and the project itself, Greece needs to have its debts restructured and to have “reforms” that focus on growth, not austerity, it has been clear from when the February memorandum was agreed that all Greece had gotten was at most a bit more latitude in timing and a tiny loosening in its choke chain.

The memo was dictated to Greece, not negotiated, presented as a fait accompli with Tsipras reported as being allowed to change only one word. The memo clearly reaffirmed, repeatedly, the existing (and deservedly hated) structural reforms. When Greece provided its initial list of reforms, which merely serve as a basis for negotiation, both the ECB and the IMF made clear that they regarded them as deficient. The IMF was more extreme, saying that it expected Greece to stick with the existing structural reforms, while the ECB indicated it would allow Greece to swap out existing reforms for new ones, provided that the new reforms had no worse fiscal impact than the current ones.

Now mind you, as we pointed out yesterday in Links, some of the reforms sound like neoliberal hogwash. For instance, Greece has the highest electricity costs in Europe. So what is the remedy? Privatize the system. But as we’ve written, studies in the US have found that privatizing electricity has not lowered costs and in many cases has resulted in cost increases. But Syriza is not arguing against specific reforms on their lack of merit. It is making a more general case that its overlords have not regarded with much sympathy: that selling assets at bargain basement prices does not make a lot of sense. Unfortunately, that is the position bankrupts are often in, and their lenders are typically not very nice about liquidating assets either.

So the big issue is that no matter how unpalatable and unsound the Troika position is, it’s been clear what it is. Thus it’s hard to fathom what the Greek government is smoking. Do they really believe, when they come out of these sessions, that they’ve actually won big concessions when there’s no basis for taking their claims seriously? Is this simply messaging to their voters, which unfortunately for them is also picked up by international media? Every time one of these outtrades happens and the Troika keeps sticking to its guns, the Greeks lose credibility and sympathy with some of their supporters.

Mind you, it does appear that Tsipras scored one win: at least the IMF extreme version, that the old package has to be honored in full, appears to be no longer operative and the less stringent ECB view (Greece can swap reforms as long as the overall fiscal impact is no worse) will govern. But other elements of the Financial Times account make clear that Greece hit a brick wall:

According to people briefed on the talks, Mr Tsipras opened with demands for additional cash with few strings attached, acknowledging his government may not make it to the end of April without an injection of bailout funds. But his push lasted only the first 10 minutes before the other leaders convinced him it was unachievable.

Instead, much of the session focused on logistical arrangements in Athens, where Greek officials have thrown up hurdles to international bailout monitors seeking to access data to evaluate the country’s reform efforts.

Mr Draghi was particularly incensed, telling Mr Tsipras he believed the inspectors — from the ECB, European Commission and International Monetary Fund — had been badly treated by their hosts. Mr Tsipras countered that allowing such access would be a violation of Greek sovereignty. But he relented after Ms Merkel noted all IMF members are subject to annual reviews involving access to a country’s books.

Having Draghi upset is not a hot idea, since he has been the one at the ECB reining in the hardliners who’d love to cut Greece loose by refusing to authorize increases in the ELA as the deposit run continues.

Greece acts as if it believes that its creditors will relent and will throw it a rescue line, since even a mere default on the ECB debt coming due this summer would be explosive politically, since most analysts believe losses would be paid via budgetary allocations from member states, meaning charges to taxpayers. The Troika, by contrast, seems to think at a minimum that it if keeps starving Greece, it will be forced to capitulate well before then. And enough people in high places may believe that the ECB has done a good enough job of ring-fencing Greece that it can deal with the disruption of a default or Grexit.

As we’ve said, similar misjudgments led to the Lehman default. The Bush administration could not have been more clear that no rescue was forthcoming, yet Dick Fuld was convinced that the fact that Bear Stearns had gotten a bailout meant Lehman would get one too. Greece will not even get to talk about renegotiating the debt due this summer if it can’t reach a deal over the bailout funds that it desperately needs. Perhaps Greece is secretly planning for a Grexit, but this government is so lacking in discipline it’s hard to think that they could keep an initiative like that under wraps. And lacking a Plan B, the execution of its Plan A is sorely wanting.

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  1. Willem de Leeuw

    The only depositors who were bailed in in Cyprus were uninsured depositors with the two banks that failed. The dumb EU/IMF proposal to tax all accounts wasn’t passed by the Cypriot parliament. I just wanted to make this clear as there are a lot of people under the impression that this proposal actually happened.

    1. Georgie Welchade

      But we’d still get 2 two 2 euros. Hmmm…
      Euro #1 is the one you and I know and think will exist for many years to come (maybe)
      Euro #2 is the current Cyprus euro (+ maybe the Greek euro ?) not good outside as it can’t be transferred

      So, as we speak, the Greek ‘impossible triangle” keeps growing beyond manageable size as it ticks away its remaining shelf-life hours ever faster.
      By extending and pretending they are buying time, but also buying SIZE.

    2. Yves Smith Post author

      Businesses of any size cannot avoid having substantial levels of uninsured deposits. This was a big issue in the Indymac bankruptcy in the US.

      So businesses trying to minimize their exposure to a bail-in conflicts with basic operations…like paying payroll. You have significant macro-level impacts if businesses take protective measures on any scale.

      And you also seem to imply because only uninsured depositors were hurt, this was no big deal. In fact, the impact on Cyprus has been devastating:

      As an experienced politician, Nicolas Papadopoulos is accustomed to difficult times. He has been an MP and head of the Cypriot Parliamentary Finance Committee for nine years. He is also head of the socially liberal Democratic Party (DIKO) so no one can accuse him of being a political radical. But when the 41 year old tells this story, his voice breaks and his fury brings tears to his eyes. “My country,” he says, “is the victim of a daylight robbery.” “They stole three and a half billion euros from us and gave it to a Greek bank.” “People’s life savings, the money our citizens saved for their retirement.” Now many will even lose their homes. “The troika and the Eurogroup decided this, and we were forced to agree since they had a gun to our heads ‘. It was “one of the biggest scandals in the history of the Eurozone.”…

      “It had all already been decided” says {Finance Minister Michalias] Sarris. Yes, the Cypriot government would get credit to service its debts. But not a cent of that money could be used to cover the losses of their banks. Sarris was shocked. Without state aid, it was shareholders, creditors and ultimately customers that would bear the losses. Over the next fortnight, Sarris and the President of Cyprus argued that the loss of confidence would hit key Cypriot banks, and that the “bail-in” would be “economic suicide” for Cyprus, but their protest was ultimately futile.

      Under pressure from the German government, the foreign ministers of the Eurozone wanted to turn Cyprus into an example.

      This part applies merely to the asset-stripping that occurred via the deliberate underpricing of the sale of the Greek branches to Greek banks:

      But the remaining two billion belonged to ordinary savers, pensioners, pension funds, universities and companies, even if the account had the salaries of staff for the following month. The Cypriot economy then fell into a deep recession and thousands of people lost their jobs.

  2. charles 2

    “Perhaps Greece is secretly planning for a Grexit, but this government is so lacking in discipline it’s hard to think that they could keep an initiative like that under wraps.”

    Considering how Varoufakis played with the German media these last two weeks, with a good practical introduction to the theory of knowledge within game theory, maybe they are more disciplined and smart than you think.

    1. Moneta

      Everyone keeps on shaking their heads at how he dressed for those meetings. I can’t help think that dressing according to troika etiquette would be have only made him look weak, like the boy desperately trying to fit in the boys club.

      You can’t negotiate with the troika. But the population is probably only starting to get it and he had to play this game to show how intransigent it really is before being able to move on to the next step.

      1. Mel

        Lately I read a biography of Bismark. One of his early diplomatic coups was to light a cigar in a meeting where, by protocol, only the Austrian Imperial Ambassador had the right to light a cigar. This shook Europe, but was taken ultimately as a sign of strength.
        These people will get their shorts into knots over the damndest things.

        1. Cugel

          It seems that what the Greek government is doing is entirely sound. Greece is divided and did not support a withdrawal from the Eurozone, so they have no political mandate to do that, even if the results would not be catastrophic. But, what is constantly overlooked is that the results of agreeing to the Troika demands are EQUALLY catastrophic. There’s essentially no difference. If Syriza capitulates then they instantly lose all credibility with the Greek people and their party splits. Plus, of course, the Great Depression gets worse, and they’re already at the threshold of total economic collapse. They simply CANNOT agree to Troika demands because they cannot force the Greek people to accept them, and they cannot force these reforms through their legislature. So, capitulation is really not a viable option.

          So what they are doing is desperately pretending that they are getting what they want, while forcing the Troika to engage in political theater. The Troika is getting rapidly frustrated and angry with these tactics, but they are losing a political battle, not a negotiating battle.

          Meanwhile the Germans have apparently concluded that Grexit is the best alternative. It’s a mistake to think that they really believe that they have the situation “contained” – they may believe that but it’s less clever planning than self-righteous outrage that anybody is daring to challenge their basic assumptions about their moral superiority. In short, very stupid and angry people are in charge and they are going to punish Greece no matter what the outcome.

          Syriza’s real crime is in NOT playing the guilty supplicant, but in trying to turn the tables and accuse the judge of wrong-doing. That may look like a short-sighted strategy, but when the verdict is rigged in advance and you have no chance for justice, sometimes denouncing the court and mounting a political campaign against the verdict is the only option.

          In the meantime, Syriza’s game of pretend is probably going to result in forced Grexit, which is still better than surrender. Going down fighting is vastly different than pusillanimously capitulating, because it maintains your credibility. The Greek people are unlikely to blame Syriza because the Troika refused to negotiate. It will direct Greek rage outward, not inward. And that gives them at least a chance to try and surmount the difficult and lengthy road to recovery that will follow Grexit.

          Punishing the Greeks may make the Germans feel morally superior, but it will not play well in Southern Europe. They are going to lose far more than they gain.

          1. bruno marr

            @ cugel:

            …i like your analysis. The Greeks tactic may be a bit unconventional, but it may be the most appropriate one as events unfold.

          2. Calgacus

            I also. He is not known as “the Clever” for nothing. Syriza seems to understand “One must use his wits in dealing with maledictions” too. Cugel’s analysis is consistent with events, and what Varoufakis outlines in Greece’s duty to negotiate with Berlin: Part B of an interview – that there will be a period of a few months of difficult negotiations, which will probably fail and be followed by Grexit.

          3. Don

            Good analysis, and hear all of your points, but how does outward Greek rage impact Germany? What can outward Greek rage do? Greece is a fly on a horse that the horse swats away on a hot summer day. I think Germany has calculated that outward Greek rage doesn’t matter.

          4. Yves Smith Post author

            I do not see that the northern bloc is losing a political battle. This is wishful thinking.

            Syriza’s poll ratings have fallen by 20 points in the last few weeks.

            The leftist anti-austerity parties in the periphery are pointedly refusing to mention Syriza in their campaigning.

            Their plan is to continue to starve the Greeks. As conditions get even worse and the government looks to be flailing around, they expect support to erode further. Most Syriza voters are new to the party, and their vote was more an anti-Pasok vote than one deeply aligned with Syriza’s position.

        2. MyLessThanPrimeBeef

          They were perhaps fewer myths and legends in the 19th century, as this reminds me of Krushchev’s shoe-banging at the UN.

          That showed, or rather, would have shown, strength.

    2. MyLessThanPrimeBeef

      Maybe he’s trying to persuade the German public. Any indicator he’s been successful?

      Has he or others approached Ms. Nuland for help?

      1. German native speaker

        I beg your pardon? Persuade the German public about what? Why not refrain from this kind of paternalizing attitude. The “German public” has been inundated with articles and TV discussions (at prime time, no less) about Greece, countless press articles in every kind of magazine and paper (there are still local papers here). These discussions usually prominently feature someone from the left (we do have a real left here, contrary to the US!). Each time, some Greek point of view is presented.
        Mr. Varoufakis was not treated fairly when he appeared on last Sunday’s talk show, and many Germans have asked the TV station to apologize to him. Beyond that, in response to a question, he told the viewers (a lot of people watch this program every Sunday night!), that “Greece only has a small liquidity problem”. He lost a lot of sympathies with this downplaying of the reality. It’s in the ARD Mediathek, everyone can still watch it, I am not making this up.

        1. susan the other

          The brief clip I saw on RT last nite showed Merkel telling Greece that they could all come to terms if Greece would put the details of their reforms in black and white detail, and, and proceed to pass legislation that made these reforms the law of the land. Interesting. There is no Greek law about paying back odious debt?? And Merkel is willing to deal with Tsipras if his coalition will just pass the legislation. Not sure who is most vulnerable here. But we do know one thing and that is that the ECB decided to do its QE to save the tottering banks just in time, so that if Greece cannot con its citizens into legislating draconian debt servicing to Germany and France, then Germany and France will still be OK. But the jury’s still out on Germany’s obligation to Greece for WW2 debt because as Germany refuses to let Greece off the hook for the decisions of its former government; Germany will be held to the same standard. Chess game. My advice to Greece would be to pass no legislation obligating Greece in any terms, let alone express terms, to the repayment of the outrageous demands of Germany and France.

          1. German native speaker

            There is no question of Greece paying back debt, it does not have to pay back a dime for the next five years. Interest payments (very low interest) are due. Not many expect anyhow that the debt will be repaid at all. Why did Mr.Varoufakis tell the German public that he intended to pay back the debt, when he had a captive German audience a week ago? Everyone here knows that Greece can’t do it.
            Second, the war reparations. There are channels for addressing this, and this issue has been favorably discussed in Germany already last year, including most recently in a Spiegel editorial by the recent SPD candidate for Bundespresident, of course in favor of it. However, what everyone is against is that such funds be used to stuff the hole in the Greek budget, and instead will be in the form of a foundation that benefits the common good.

    3. Yves Smith Post author

      Huh? If you think the government, which is a lot bigger than Varoufakis, has been acting in a consistent manner, you have not been paying attention.

      Varoufakis cannot arrange a Grexit (even if he were on board with the idea) without consultation within the party and without the involvement of quite a few people, over months, with the execution. Party officials regularly disagree with each other, vehemently, to the point where it is not clear what policy is until the matter is resolved, either by Tsipras saying something or the official who went out of line recanting his earlier position.

    4. Georgie Welchade

      Charles 2
      No, no way, not in a million years because (as Yves is saying) Greek political reality does not allow for YV to execute something as consequential as a Grexit, beyond the fact that he is not even in favor of such.

      Now then, had you said that everything that goes on both inside and outside Greece is necessarily leading to a Grexit (or more probable, a head-on Graccident) then I would agree with you 100%… although it wouldn’t be pretty, trust me.

      It is literally im-possible for Syriza to stay in power, backtrack austerity, and remain in the euro. Among other things, the Greek ‘impossible triangle’ and its analysis makes the above crystal clear for everyone to see.

  3. salvo

    I read an article in junge welt, a redical german left newspaper sympathatic to syriza. It states that allegedly the usa intervened in person of Ms Nuland the very same day Tsipras announced to prepone his trip to Russia, the intervention allegedly resulting in the Eurogroup backing away from its ‘tough’ stance towards Greece. The artcle also states that that intevention leads to the withdrawal of Mr. Schäuble from the negotiations. On the blog of Norbert Häring I read also about a call Mr Obama had with Merkel on last Wednesday having Ucraine and Greece as topic. The german mainstream press reported about the call but ignored the part concerning Greece. According to Häring in the talks „They also reviewed recent
    developments in Greece and efforts to reach a pragmatic agreement that builds upon recent reforms to return the country to growth within the euro area.“ Häring also confirms Nuland’s visit. In any case, there seems to be considerable diplomatic efforts by the usa to influence the negotiations

    1. sd

      Nuland’s presence is not a positive. She represents the military industrial complex’s asset strippers.

      1. Ruben

        That rings a bell, considering that Greece has the second highest military budget to GDP of NATO (2.5%), second only to the USA (3.8%), and that curiously all talk about reforms touch this item very tangentially. A Spanish observer (in Spanish)
        notes that by reducing military expenses to the level of Spain (0.9% of GDP) Greece would release 2.9 billion euros, enough to fund a humanitarian relief package double the size of the one that Syriza has passed through parliament.

    2. Yves Smith Post author

      Huh? Greece got slapped down in a major way over its weak flirtation with Russia. NATO officials chewed out the defense minister and he walked his remarks back.

      Plus the Russians are not interested beyond increasing agricultural trade with Greece. Turkey is a much more important ally and they do not want to upset the Turks, who are fierce enemies of Greece. Plus the Russians know Greece is an economic albatross, plus the Russians already have an overfull plate, geopolitically and economically. They get as much benefit much cheaper and with much less foreign ire if they let things go on an inertial path, which is for Greece to become a failed state and for them to intervene later.

      1. madisolation

        the Russians are not interested beyond increasing agricultural trade with Greece.

        What about the trans-Macedonian pipeline, a precursor to South Stream, and Greece’s participation in project? It seems to me the Russians are interested in that:

        The latest reports are that Greek Prime Minister Alexis Tsipras pushed his planned visit to Moscow ahead by a full month, and it remains possible that the Balkan pipeline could be on the itinerary of discussion for when he arrives in Russian on 8 April.

  4. joecostello

    the top of Syrizia are all members of Greek political class and intelligentsia, they all think they can talk their fellow top Europeans into seeing that they are right, its that simple really

      1. lyman alpha blob

        And they have such high standards in determining who the Important People are:

        “[Varoufakis] has 345,000 followers on Twitter, where he pugnaciously engages with his critics (for comparison, the British Chancellor, George Osborne, arguably a more important figure, has only 100,000).”

    1. financial matters

      I agree that the top of Syriza are intelligent but I would say very different from what we are seeing in most political classes, especially those with power.

      They are composed of strong, independent, heterodox thinkers who resonate with the working classes because they support their aims.

      “We should note that the party’s cadres and activist base are mainly wage earners — people with degrees. It is a very urban electorate, a party with very strong roots among intellectuals.”

      “It is a party that’s at ease among feminist movements, youth mobilizations, alter-globalization, and antiracist movements, while also continuing to make a considerable intervention in the trade union movement. ”

      Not to disparage people in their 60s or older, I think the party made a wise move in choosing to put the 40yo Tsipras in charge.

      ” Alekos Alavanos, who used to be the Synaspismos president, organized the handing of control to Tsipras in order to mark a break with this kind of generational sclerosis. It was a great act of political will.”

      “That said, Syriza took off in the opinion polls only in the last few weeks of the 2012 electoral campaign. The real breakthrough came when Tsipras focused his discourse on the theme of constituting an “anti-austerity government of the Left” now, which he presented as an alliance proposal reaching out to the KKE, the far left, the parliamentary left, and the small dissident elements of Pasok.

      That’s what literally changed the course of the electoral campaign, setting a whole new agenda. That was when we began to hear a stir — it was almost something physical — and Syriza’s polling numbers soared. From that moment onward, the other parties had to react to Syriza’s offer, which had emerged as a concrete political perspective — indeed, one within reach — allowing Greece to shake off the yoke of the memorandums and the troika.”

    2. tiebie66

      Is it not becoming clear that their incompetence and erratic behavior merely reflects Greek society at large? Throwing more money at Greece won’t fix anything that needs fixing, it’ll merely be enabling, rather than helpful. Access to the Euro was obtained under false pretenses and thereafter the opportunity provided by low interest rates was squandered. Greece needs to get its act together, this is very plain by now. Only then will new funds have the potential for doing good. Debt write-offs? Unfortunately, it is a lose-lose proposition: it won’t help improving the situation and the debts can not be sustained either.

  5. Tsigantes

    Plan B is not Grexit but default-within-the-euro.

    Try looking at this from the Greek political point of view. SYRIZA is in because after 6 years the EU intimidation / Grexit fear factor has been well & truly put to rest. The population knows down to the last atom where more-of-the-same leads. However SYRIZA’s mandate was to negotiate within the euro. Not because Greeks love the euro or EU – not! – but because they understand the pain Grexit will entail (esp. on a society with no ‘fat’ cushion left) and they also know that the present Greek economy is not constructed so as to benefit from Grexit. Further, they assume [IMO 100% correctly] that EU / IMF will make Greek exit as painful as possible: not only is there is NO good will but the need to punish will kick in even more forcefully once out.

    So SYRIZA must go through the steps of ultra-sincere negotiations. It does this deliberately transparently (unlike the 3 previous governments): reporting on what happened inside the meetings and publishing all documents. And each negotiating failure is radicalizing the Greek public more: NOT in favour of capitulation [done that, been there, dead end] but toward re-thinking its mandate to SYRIZA:

    as of 19 March: 48% favour staying in the eurozone, 42% favour drachma.
    Note, pro-euro is down from 80%.

    MacroPolis 20 March 2015

    Palmos Analysis for SBC TV
    SYRIZA 42.8%
    ND 16.3
    KKE 3.9
    G Dawn 3.6
    Potami 3.4
    Ind Grks 3.2
    PASOK 2
    Others 5.1
    Undecided 8.9
    View on Twitter

    To sum this up. As of 2 days ago the SYRIZA coalition is polling 46%. The pro-Austerity/pro-EU opposition [ND, Potami, PASOK] combined = 21.7%. The 2 non-players / anti-EU/anti-Austerity KKE (communist) and Golden Dawn combined = 7.5%; and incidentally, these supported the government in the humanitarian measures vote this week, as did all parties.

    “Others” are the parties who did not make the 3% needed to enter parliament, and include both pro-austerity and anti-austerity parties. Note too that PASOK at 2% presently will soon be out of the game if it doesn’t reinvent itself.

    Undecideds at 8.9%, even if [generously!] added to the pro-austerity opposition led by ND would only bring that total to 30.6.

    What is at issue here is the changing acceptance of alternatives inside Greece….

    1. salvo

      Further, they assume [IMO 100% correctly] that EU / IMF will make Greek exit as painful as possible: not only is there is NO good will but the need to punish will kick in even more forcefully once out.

      yep, that’s the crucial point concerning grexit, what is in the meantime obvious to anyone capable of an unbiased view is that the so-called partners the greek government is negotiated with are criminals, capable and willing of inflicting immense pain on everyone daring to oppose them.

      1. Cugel

        “So SYRIZA must go through the steps of ultra-sincere negotiations.” This is exactly right and explains exactly what Syriza is doing. From lack of any better alternative they are playing the battered spouse who displays her bruises in order to elicit sympathy. That is really what is enraging the Germans, that the Greeks are putting them in the position of playing the bully. Of course, the bully’s reaction to being exposed is to double-down on the beatings in order to force the woman to admit that it is all her fault. But, this convinces nobody and only increases the public reaction against them.

        This explains why the Greeks are pretending that the negotiations are producing real results. It’s like the battered spouse emerging from court ordered mediation saying “my husband has agreed to stop beating me!” The enraged husband has to deny it, and demand that she retract her statement. This makes him look even worse. No matter what the Germans say, all the blame is ultimately going to fall on them for deliberately worsening the humanitarian crisis.

        I’m beginning to think that inflicting this level of suffering is ultimately not going to play well, even in Northern Europe. It’s going to divide Germany and France, and further push Southern Europe to consider alternatives to the Eurozone.

        1. Oregoncharles

          They’ve also been playing up the WWII debt that Germany still owes, which further infuriates the Germans – and further invokes WWII and the Nazis. So part of the strategy is to set Germany against ALL the rest of Europe (ex Austria-Hungary), based partly on memories of the war.

          The deep strategy, which I think Yves is overlooking, is to threaten the Euro itself if they don’t get some help. It may not work, it’s a nuclear option, but the politics in other countries is working for them.

          Once again, and easy to forget: Merkel lost the last election, and is PM only by grace of a shaky “Grand Coalition.” And the Left has been gaining even in Germany.

        2. Yves Smith Post author

          Syriza is doing everything BUT going through the steps of “ultra-sincere negotiations.” They keep trying to renegotiate the shape of the table and already broke the interim agreement. I know readers are resistant to hearing this, but this is bad faith conduct.

          1. Daize

            It may not appear “sincere” to the Germans, but what counts is it appears sincere to the Greeks and many others on the left throughout Europe.

          2. Kemal Erdogan

            Hi Yves,
            I believe there is cultural issue here. You believe keeping promises made in dealings are important to retain credibility. However, it is not perceived so down here.

            In fact appearing to agree to something and then changing the course the best Greeks can do as their position is weak (although it looks stupid). Unless the other side is willing to cut all negotiations, they cannot do anything about it. I think this play of “stupid greeks” is going quite well for Greece.

            I also believe what they are preparing for is default within eurozone first, and after ECB kills their banks (which I think will happen) throw their hands and reintroduce drahma.


          3. Don

            “They keep trying to renegotiate the shape of the table and already broke the interim agreement. I know readers are resistant to hearing this, but this is bad faith conduct.”

            It seems to me this might be a stall tactic, contemplated at one time to see if other players come to the table such as Podemos to make it a fairer fight. This might be a vestige of what seemed possible just after the election, but it seems evident to all that they are just going to run out of time to make it to the Spanish election in November, and now seems like that they are stalling for time just to find a strategy.

          4. susan the other

            I’m beginning to think it is entirely possible that Germany, France, Italy and Greece are sick and tired of NATO. And NATO is panicked enough to engage that idiot Victoria Nuland to save its bacon. But I doubt it will work. Even if China is failing and Russia is overextended militarily, NATO still cannot function with just Poland and Lithuania, maybe Sweden, as allies. And without NATO there is really no reason for Germany to deal with Greece. It seems very chauvinistic, but Germany and France basically think they are the entire EU. And clearly, they are pretty sick of NATO. It was mentioned last week here that Russia would deal with Greece if Greece withdrew from NATO. So if that’s true, why doesn’t the US step in and save Greece? That’s the big puzzle.

    2. Pookah Harvey

      “Plan B is not Grexit but default-within-the-euro”.
      Varoufakis has stated that this is not Plan B but Plan A.
      Interestingly Varoufakis states this in the infamous “fingergate” talk.
      Pertinent excerpt found here
      Full hour long talk found here
      V continues his position starting with a question at about 47;00

    3. Yves Smith Post author

      It is not clear that Greece will be allowed to default within the Eurozone.

      Greece will default on ECB debt if it cannot get a longer-term funding deal by July.

      Some central banking experts say the ECB would have to stop making advances under the ELA in those circumstances. Others say the ECB has discretion but many governors would take the position that they could not longer make advances. Either way, there are reasonably high odds that the ECB would yank the ELA. That leads to an involuntary, de facto Grexit, since Greece would have to impose capital controls, nationalize its banks, and recapitalize them. And the only way to do that is to print drachma. Special scrip like TANs are not likely to provide enough money to fill the balance sheet holes.

      1. Pookah Harvey

        Varoufakis has been pretty consistent over the last few years on his position. This consists of:
        1) The Greek economy is gone and there is nothing the Greeks by themselves can do to rescue it. He has compared Greece to the state of Ohio during the Great Depression. Ohio could not pull itself out of the depression by any sovereign action.

        2) The cause is a dysfunctional economic system in Europe.
        3)The only solution is drastic change in Europe

        His suggestion for Greek action has been to lay their cards on the table, do what they can to make the situation better for the Greek people ( fight corruption and the oligarchs, increase tax collections, make the government more efficient) and simply tell Europe that they cannot pay the debt, it is simply impossible. And not take any austerity actions that will make the situation worse. He is adamant that Greece should not voluntarily leave the Euro because he realizes the danger. . But then let the chips fall where they may.( while preparing as much as possible for a forced exit)
        The perception of how well Greece has been firewalled would probably determine European actions.

        It’s interesting that the anti-austerity Sinn Féin party has been leading in the polls in Ireland and has been calling itself the Syriza of Ireland . Is Sysiza’s audacity in prolonging the inevitable stoking a revolt? Meekly dragging their feet certainly wouldn’t.
        Add in Podemos and is it possible that change is in the air?

  6. docg

    Not sure what you expect of Greece, Yves. There’s no way they can implement the Troika’s reforms, nor ever pay back those absurd loans. I think Varoufakis caught on some time ago that Merkel and Co. are bluffing, and he’s happy to play along, telling them what they want to hear, but never actually giving in. What he’s actually doing is giving them an out, so they can explain their baffling actions to their irate European constituencies.

    Do you really expect to see a headline such as this — ever? EUROZONE LEADERS RESCIND BAILOUT OFFER — GREECE DEFAULTS ON LOANS.

    C’mon. NGH (Never Gonna Happen) Actually I’d love to see that headline myself personally. Because that would be the moment of truth that spells the end of extend and pretend. But they will never let that happen. Instead they’ll find words to justify their bailout and ultimately Syriza will have its way.

    There once was a Eurozone crisis
    That wasn’t exactly the nicest.
    But then came an end
    To extend and pretend
    Crashing all those inflated stock prices.

    1. Yves Smith Post author

      I have long said that Greece is in a terrible position. But they are not playing their weak hand well. For instance, I have Syriza-sympathetic readers in Greece writing me that there is increasing unhappiness with Varoufakis over him spending so much time with the media and not delivering the detailed reforms that has clearly been an explicit requirement for getting the bailout funds released.

      Now maybe the Greek strategy is to keep temporizing and not deliver the detailed agreement till close to the deadline (end of April) on the assumption that the Troika and Eurogroup will have to give them the money. This is a very risky strategy, particularly since the intransigence of the Greek government has the potential to lead their creditors to get petty with Greece. And remember, last time, the creditors handed Tsipras a document and told him it was a take it or leave it deal. So the longer Greece foot-drags, the more the odds increase that the Troika drafts the reforms instead because Syriza has failed to deliver a detailed list.

      The better strategy is to go Japanese: passive aggressive, nice as pie, logical-sounding explanations as to why you are doing the least important 40%, slowly.

      The other danger of their present course, whether it is a strategy or a default path, is that as Greece becomes more cash-strained, more and more parties that are suppliers to the government are not going to get paid. That erodes popularity through two channels: directly, as those who need money and aren’t getting it lose faith, and indirectly, as the fall in government spending intensifies the contraction, imposing costs on all Greeks.

      1. docg

        I understand very well what you are saying, Yves. And yes, you are being very sensible (I like that in a woman ;-) ). However . . .

        “Now maybe the Greek strategy is to keep temporizing and not deliver the detailed agreement till close to the deadline (end of April) . . .”

        The deadline was actually last Friday. And the deadline before that was last Monday. And the deadline before that was the Friday before last Monday. Now it’s not until April? Maybe Varoufakis isn’t actually playing the game I think he is, but the effect is the same nevertheless. Greece is getting and will continue to get whatever it needs to forestall the dreaded default. There will never come a day of reckoning because the reckoning will be disastrous for the Eurozone as well as Greece.

        “The other danger of their present course, whether it is a strategy or a default path, is that as Greece becomes more cash-strained, more and more parties that are suppliers to the government are not going to get paid. That erodes popularity through two channels: directly, as those who need money and aren’t getting it lose faith, and indirectly, as the fall in government spending intensifies the contraction, imposing costs on all Greeks.”

        Here I agree completely. All this temporizing is lots of fun and in the short term Greece is going to get its “bailout.” But in the long term (and by “long term” I mean months, not years) what Greece really needs is not to avoid defaulting on all those old loans, but to avoid total economic collapse regardless. I find this to be a very interesting situation, what the Japanese would call “mumonkon,” or “gateless gate.” If you’ve ever seen Bunuel’s film “The Exterminating Angel,” that’s the sort of dilemma I’m talking about. It’s essentially like a Zen koan:

        “In trying to answer the Koan, the student will come to a mental “precipice”, as it were, where all the methods and procedures of accepted thinking no longer function. The purpose of the Koan is to shove the student over this precipice into an area of experience that is completely new. This is the spiritual reality that the Zen master is attempting to guide the student towards” (from Understanding the Meaning of Zen Koans, by Gary Smith).

        1. Yves Smith Post author

          No, the only “deadline” that is operative is the one in the written agreement, that Greece has until the end of April to get its detailed list to the Troika, get it approved by all three parties, and then also get it approved by the Eurogroup. Anything besides this is mere hectoring. None of these “get the list to us” requests was a deadline. They are not part of any formal timetable.

          And one more bit of sexist condescension and you go into moderation. No one has license to talk to me like that.

  7. Swedish Lex

    I attended a conference the other week at which a person that that the EU’s, and the Member States’, approach to handling the euro crisis more than anything resembles the pure intergovernmentalism of the 19th century and is as inefficient as it was back then. This is clearly right.

    Also resembles the Polish Parliament from before:

    Difficult to imagine a worse way of (not) dealing with the situation.

    And the risk of a Grexident increases the longer this mess goes on.

    1. hunkerdown

      “Polish parliament”: okay for the US Senate (holds), not okay for Occupy General Assemblies?

  8. generic

    Where does the end of the primary surplus come from? It was still there in February. Are numbers for march in?

    Note that the 100 installments plan involves a discount for paying immediately so there is no prospect for obtaining a single cent from tax arrears until it is law. And according to correspondents from Greece it passed. (Greek
    So Syrizia has no intention of having its laws vetoed whatever was written in the memo. And the Euro side still has no intention to hand over even a single cent. Furthermore the Greeks seem to think that the Euro’s don’t have the nerve to throw them out.

    Another question that occurred to me was over the wisdom of introducing capital controls. As long as ELA flows would they help anything? On the other hand the higher the ELA balance the higher the potential damage of a default for the Eurosystem. You can’t have a Cyprus like bail in if the other side doesn’t cooperate.

    1. Yves Smith Post author

      The Greek government is now projecting only 0.3% for 2015, and says maybe they could get it to 0.6%.

      If they don’t get their bailout money soon, that will deepen the contraction. Odds are then not trivial that their actuals fall short of projections.

  9. Brooklin Bridge

    Now mind you, as we pointed out yesterday in Links, some of the reforms sound like neoliberal hogwash.

    Some? I thought all of the “reforms”, basically, were neoliberal hogwash. Are there actual reforms required in the February agreement that have value to either side beyond punitive or setting an example? From what I gather, the terms are simply unworkable or politically/humanly untenable or both and realistically guarantee a default. And a default seems to guarantee an exit primarily due to German/IMF/the fu*king inhuman institutions intransigence.

    The mistakes Syriza made, particularly those critical ones at the beginning where they gave up real bargaining power before necessary, are generally acknowledged and agreed upon, but at this point their position of talking as reasonable humans, meaning talking past the grand European financial inquisition torture masters – even if it totally contradicts their part in the February agreement/capitulation and chafes at standard diplomacy – seems to make sense given the humanitarian non starter they are confronting. Anything else puts not only their blunders, but the blood of their fellow countrymen on their shoulders.

    Even if the alternative, Grexit, is worse and everyone knows it, they are still currently against a wall which is largely not of their choosing. The minute they accept the “reforms” (at least as I understand the reforms) in all their hideous cruelty, they instantly loose the one thing – human existential legitimacy – that has given them the right to exist as a political party and movement – including the blunders.

    I suspect like many others, I am simply so incensed at the impossible cruelty of what is being done to Greece, that I can’t see clearly (though I have the additional excuse that I don’t see all that clearly anyway…).

    1. Jonf

      I agree with what you say but am curious why you think an exit is worse than reforms. I actually agree but would like your viewpoint, since others ( a few in MMT) are in clear disagreemmt. Could you explain your reasoning? Thanks.

      1. Brooklin Bridge

        Here are some of the reasons, as I understand them, against an exit that Yves has made elsewhere.
        1) Greece looses valuable farm subsidies
        2) Imports and exports are more difficult and more costly with boarders and exchange rates.
        3) Exit will be made as painful as possible as a lesson to other periphery countries.
        4) Exit greases skids; potential breakup of EU resulting in depression having terrible effects on Greece

        The above list translates to massive human suffering.

        That said, Greece is facing a sort of “When in the course of human events…” moment where an exit may be unavoidable now. I’m asking if there are compromises Syriza simply can’t or at least shouldn’t make such as a fire sale of it’s public assets – regardless of what happens. It doesn’t need to request an exit; it only needs to keep making rational, sensible, humane requests (perhaps toning down insults) and it will get an exit slammed in it’s face. Finally, I’m asking if in the end, it can make any other choice – and maintain it’s legitimacy – since an exit seems to be in the cards regardless, unless Greece is willing to sell its citizens’ hides for the manufacture of lamp shades and such.

        1. ambrit

          If I remember rightly, it was another Koch, Ilsa by name, who first tried the human skin lampshade and glove business. It most definitely did not end well for her,and I hope it won’t end well for our American Kochs.

        2. jonf

          Thanks for your reply. I did not know about your number one. But exports and foreign debt require a currency to trade. So number two is certainly true. Some of the pain you talk about may be self inflicted since they will still owe a euro debt. Using the drachma could be a problem. And I suppose the inability to collect taxes doesn’t help. So it will be painful.

    2. Yves Smith Post author

      Some of the reforms are sensible and necessary, like improving tax collection and improving government efficiency. Greece has a bloated civil service.

      1. jonf

        Are they doing anything at all to fix the tax collection problem or the civil service? Those would seem a source of funds to help with their debt and deficit problem. If I were sitting on the other side (and I am not) I would be most insistent on those issues. The Greek government should too. Fixing the economy does not always mean to spend more money or allow the crooks to steal money needed to support the government. Crazy place.

    1. mpr

      I can answer it for you right here !

      If – admittedly a big if – they can improve tax collection, and be running a primary surplus, then the Troika will no longer be able to blackmail them with liquidity. That strengthens their hand in the debt reduction part of the negotiation.

      1. Jonf

        I read somewhere that Greece has an endemic problem of tax collection from the elite. In fact they pay little and there exists no real enforcememt mechanism. That would in turn make capital controls necessary. If so then that would appear to be rather important. Your thoughts.

        1. MonkkeRench

          There is in fact no enforcement mechanism for not only tax collection, but also nothing motivating throwing tax evaders and fraudsters in prison and seizing the many billions of Euros that have been stolen from the Greek commonweal. The puny Lagarde List has never even been investigated, even though a courageous (and indicted/released) Greek reporter published it. If the government doesn’t start at least a token effort on it, the list seems headed for extinction by ‘suicide’ or assassination. The massively bigger Falciani List is also uninvestigated, not only by Greece but by the UK, Belgium, etc. except the intrepid and victim-hungry French Intelligence.

          If Greece can’t return the favor of blackmailing Eurozone banksters into behaving humanely, then there must still be too many corrupt Bushie “Grecians” in charge who fear exposure by demanding something called justice in an upside-down world run by corporeal criminals.

          1. jonf

            Then that is a problem, a rather large one. Actually., since they are not sovereign in their currency it is worse in the euro. Within the euro the budget deficit must be controlled. So at the moment they have the worst of all worlds. Exhibit one is the unemployment condition. And no tax collections leads directly to exhibit two, the inability to pay debts. If or when they exit it will not be nearly as important. But they will still need to collect monies to stabilize the currency and perhaps to pay foreign debts. So I agree this world is upside down, but then that seems the way the world rolls these days.

  10. Sibiriak

    Yves Smith: “It’s hard to fathom Greece’s approach to its dealings with its oppressors...”

    It’s hard NOT to fathom Greece’s approach, which is: to resist austerity by any and all means available–including non-compliance, feigning, foot-dragging, re-interpreting, misinterpreting, misdirecting, even perhaps lying–while nevertheless clinging to the EZ/EU.

    Greece was in a weak negotiating position and traded away its best card, that of the threat of a Grexit.

    Yes, if you mean an explicit threat of deliberate exit. No, however, when you consider that by stubbornly resisting austerity, Greece IS threatening default, which itself threatens Grexident. So the default/Grexit card has not been traded away–it’s just being played it an indirect, deniable way.

    1. Yves Smith Post author

      Foot dragging is NOT a realistic or helpful strategy if you really need the money, and Greece does. And if that really was their strategy, as I said earlier, the smarter way is to go Japanese: be super nice, passive aggressive, and do the least important part of what the other side wants done slowly, with entirely plausible explanations as to why (“we barely took control of the government, we are short handed due to budget cuts, the outgoing government didn’t make an orderly handoff, so we are finding it hard to get at the relevant data…”).

      The Troika’s plan is to starve the Greek government. Syriza is loudly and aggressively playing right into that. I don’t see how you don’t see that.

    2. Georgie Welchade

      Guys, things are far simpler… and far worse.
      There are no plans, no strategies to speak of, neither from (1) Greece nor (2) its Europeans partners.

      Both sides just react on the fly off the seats of their pants. No chain of command anywhere in sight while money keeps flowing out of Greece in unstoppable tsunami waves.

      (1) Greece does not have any “Plan” as such, so don’t try to figure it out.
      Greece only has lots of confronting internal interests and lots of wishfull thinking.

      (2) Europe has plenty of troubles, PIIGS waiting in line, guaranteed deflation, Ukraine, etc., and no leadership to speak of.

      So it’s two separate solar systems with lots of planets revolving around each sun… with us all trying to allign them straight. Mission impossible.

      1. Yves Smith Post author

        I suspect that it really what is happening and am trying to give both sides the benefit of the doubt.

        And I also agree that if you are right, it’s hard to see how they avoid a train wreck. If they do, it will be sheer luck.

  11. mpr

    Yves, the root of your confusion about what the Greeks are doing is this:
    Greece was in a weak negotiating position and traded away its best card, that of the threat of a Grexit

    No. Its true that Tsipras has said that they will avoid a Grexit while loosening austerity. But making such a statement is not the same as negotiating in a way which takes Grexit off the table. In fact this point was made explicitly and publicly by Varoufakis in the parliament I believe (certainly it was reported as having been made in the Syriza party room).

    In fact you yourself point out
    As we’ve said, similar misjudgments led to the Lehman default.
    So you seem to believe that Varoufakis and Tsipras are so naive that they think their current strategy will lead to guaranteed success (I don’t get the impression you have such a low opinion of V.). Isn’t a much more plausible explanation that they are making a calculated bet ? In which case, as a practical matter of negotiation, they haven’t taken Grexit off the table.

    Now I suspect that V & T’s estimate of their chances of success is more optimistic than yours. One can argue about that. I also think you are too pessimistic. Specifically, I think they will get a disbursement in April to keep them going without making any major concessions. They’ve already been told that they could get something after presenting details about just some of the reforms. The one point which isn’t clear to me is why they haven’t done that already. The most likely explanation is probably just acrimony with the technical teams, as well as just governing inexperience.

    1. Tsigantes

      “Specifically, I think they will get a disbursement in April to keep them going without making any major concessions.”

      Agree. Extend & pretend, on a drip feed….

      “They’ve already been told that they could get something after presenting details about just some of the reforms. The one point which isn’t clear to me is why they haven’t done that already.”

      Since Greek banks are non-systemic in EU terms, Grexit has been a semi-believable threat and option.
      My sense is that there will be extremely painful-for-Greece brinksmanship up until April, then June, amid some concessions. So far the Greek drama has been about terrorizing Italy (primarily) and Spain….but too many of the PIIGS’ right wing governments are barely hanging on against a political groundswell and elections are due. Worse, parliamentary gov’ts (like Ireland’s) can also fall from one day to the next. Thus, concessions.

      tMeanwhile, events could overtake all this if Austria’s Heta bank fallout spreads further.
      Frances Coppola in Forbes: Why has Germany just bailed out a tiny bank?

      “The reason is the nature of Duesselhyp’s liabilities. Duesselhyp is an issuer of Pfandbriefe, the super-safe covered bonds that are the bedrock of the German financial system. A look at Duesselhyp’s 2014 interim balance sheet shows that Pfandbriefe backed by public sector loans are by far the largest proportion of Duesselhyp’s liabilities: it has issued a rather smaller number of mortgage Pfandbriefe too. The remainder of Duesselhyp’s liabilities are institutional deposits (it has no retail deposits), which are covered by unlimited guarantees from the German deposit fund. In short, almost all of Duesselhyp’s liabilities are covered by explicit or implicit German government guarantees….

      “The underlying issue is the supposedly risk-free nature of the Pfandbriefe. It is inconceivable that Pfandbriefe could ever default. Back in 2010, Tracy Alloway of FT Alphaville sarcastically observed that the gold-plated nature of the Pfandbriefe meant that their ratings could remain AAA even when their issuers were being systematically downgraded. The ratings agencies Moody’s and S&P attempted to link Pfandbriefe ratings to the ratings of their issuers, and received a dusty response from the German authorities.

      To this day, the fiction remains. Suddeutsche Zeitung reports the real reason for the bailout of Duesselhyp (my emphasis):

      Düsselhyp funded primarily through Pfandbriefe – these are secured bonds, which are regarded as virtually risk free and are acquired with the insurers and pension funds. The financial industry wants to avoid casting doubt on the soundness of the mortgage bond market under any circumstances.

      “So we pretend that Pfandbriefe are backed by dedicated pools of assets, when in reality they are backed by unlimited guarantees from the German banking system as a whole and, as a last resort, from the German government. And similarly, we pretend that the issuers of Pfandbriefe are private sector banks bearing private sector risks, when in reality they would never be allowed to fail…”

      1. Yves Smith Post author

        Covered bonds are a bedrock of German mortgage finance. Nada to do with Greece. Strictly an internal matter (from a regulatory perspective, there may be some foreign investors in covered bonds).

        By contrast, the ECB is believed to have ringfenced Greece. Periphery bond yields have barely budged with all of the negotiating and bank run melodrama.

    2. Yves Smith Post author

      If their objective was to loosen austerity, they are failing totally.

      1. Varoufakis has committed to maintaining primary surpluses. That is austerity.

      2. Due to all the flailing around and the failure to impose capital controls., the government has had to cut spending which is making the economy worse on a current basis. Individuals are also hoarding cash, again making the downturn more severe.

  12. German native speaker

    What I can report for sure is that in Germany, there was no “spat” about the 200 million emergency assistance measure.
    Also, Greece has had access since years to an Economic development fund (it could be that he meant EFRE, a fund for European regional development). According to a German government official, Greece could have drawn money from that billion Euro fund, for example to modernize their energy supply. But they never claimed a cent. Why not? What about the airport deal, why is it postponed? Would have brought some billion in revenue and new jobs. Greece is a major tourist destination and has almost no hotel by an international chain, an exception is the Hilton in Athens. Why?

    1. hunkerdown

      In other words, why aren’t they selling their public treasure to big business, you ask? With due respect, they’re NUMBERS on a COMPUTER and you’re refusing people food because of it, and most of us believe that’s socially ill. I kindly suggest you, other Germans, and other Protestant peoples 1) kindly get outdoors more and 2) stop demanding other people live their lives through your abstractions.

      1. Yves Smith Post author

        The electricity point is not as off base as you think. Greece has the highest electricity costs in Europe, and the failure to modernize the system is now being used as the reason for having it privatized (that’s on the outstanding structural reform list).

      2. German native speaker

        The regional development fund does not come with any ‘privatization’ strings attached, nor does the airport deal because it is a lease. They do want growth, don’t they.
        Other than that, not wanting to communicate on your level.

    2. dbk

      Actually, it’s not clear that ultimately Hellinikon won’t be sold/leased long-term, but there was a problem with the particular sale, which was deemed by the Court of Auditors to be three times less than the 6200-acre site’s (depressed, current) value. The purchase price was 900 million dispersed over ten years, whereas the actual market value is ~ 3 billion even today (with 40% real estate devaluation).

      1. German native speaker

        Fraport, owner of Frankfurt airport, wants to develop a number of smaller airports. It does not want to buy them. It buys a concession for developing them, such as Xanterra is a concession that runs food and lodging in US national parks. The price it is due to pay is more that one billion.
        The airport that you cite is not one of them. It has been sold to a development company owned by a very rich Greek. He paid much too little for it, and the the official Greek privatization organization that sold it to him charged way too little. Tell me who has given the finger to the country in this case.

        1. dbk

          Oh, sorry, thought you were talking about Hellinikon – it’s no longer an airport, though, it’s the most valuable piece of remaining real estate in Attiki; the Athens airport is now “Venizelos” …

          Are you referring to the peripheral (aka regional) airports? I recall there were around 14 regional airports the troika wanted sold. Actually though, these may go through – probably as long-term leases, but still.

          Or are you referring to some other airport?

          1. German native speaker

            There are 14 regional airports supposed to be operated by Fraport, including Thessaloniki and tourist destinations, and it is not the airports that are being sold but the concessions for operating them. From what I heard, even Ryan Air refuses to fly to some Greek government run airports these days.

            Just from yesterday, this link,with one small hotel operator commenting that he informed the authorities in mid January that his fire certificate was about to expire. He called them back in the beginning of February and was told that he should wait until after the elections. But when I look at the comments on this blog, the fault is always with other nations.

            1. John Jones

              Hopefully one day a leader comes across in Greece that will kick out the German owned Fraport and any other parasite company. Enough money leaves Greece to go to Germany and the companies it owns in Greece the same for the rest of the euro core. Fraport should go milk revenues out of some other struggling nation if there is not enough at home.

              Well the Greeks better get those fire certificates renewed. That will surly save the country. I didn’t know that the expired fire certificates in a struggling economy near collapse is comparable to a bunch of more powerful and mostly larger countries forcing their will on to a smaller weaker country and forcing its population into misery.

  13. Marko

    As an alternative to outright privatizations at fire-sale prices to raise funds , why not offer the assets ( utilities , ports , etc. ) up as collateral for loans , valued at those same fire-sale prices ? Structure the loans such that sufficient time for economic recovery is allowed so that repayment is at least somewhat feasible. Make the offers first to counterparties like Russia or China so as to encourage the U.S. to make an even more generous and flexible bid.

    Hell , just float the idea even if it’s not serious , just to witness the U.S. peeing their pants.

    1. Dana

      why not offer the assets ( utilities , ports , etc. ) up as collateral for loans

      Quite! I’ve thought from the beginning that Greece should use, among other, its considerable, known, offshore oil and natural gas reserves as collateral, which, according to various estimates, are worth at minimum hundreds of billions of dollars.

      Trouble is, the Troika and “interested parties” [shadow players in the negotiations] are bent on exploiting Greece’s difficulties to get their hands on these resources.

      It will we interesting to see what comes of Tspira’s upcoming trip to Moscow …

    2. Dana

      why not offer the assets ( utilities , ports , etc. ) up as collateral for loans

      Quite! I’ve thought from the beginning that Greece should use, among other, its considerable, known offshore oil and natural gas reserves as collateral, which, according to various estimates, are worth at minimum hundreds of billions of dollars.

      Trouble is, the Troika and “interested parties” [shadow players in the negotiations] are bent on exploiting Greece’s difficulties to get their hands on these resources.

      It will we interesting to see what comes of Tspira’s upcoming trip to Moscow …

    3. Daize

      The essence of the concept of collateral is that it must be able to be seized (ie car, house) . Lenders would be unable to do this in your suggestion short of invading Greece and so your “collateral” is in fact not collateral.

  14. Gerard Pierce

    Some semi-serious questions: 1) If they were so motivated, what could Russia do to prop-up Greece – i.e. how much dough would it take and could it be made available. 2) What economic value could be realized (short of something over the top like throwing out NATO and giving Russia a Greek port.)

    Considering the new improved sanctions of a few days ago (Re: Ukraine), the Russians might be ready to give the EU a poke in the eye with a sharp stick

    1. Georgie Welchade

      What could Russia do to help Greece you ask ?

      You mean AFTER a Greek default right ? (meaning that Greece would probably have “some” primary surplus available)

      (a) Invest in Greece (jobs) starting with the now re-directed massive Russian gaspipe through Turkey right up to the Greek border, plus other required infrastructure
      (b) Buy their stuff, particularly in view of Europe’s sanctions that today don’t allow Greece to sell Russia lots of stuff.
      (c) Loan them roubles and/or swap them roubles for drachmas. Maybe some euros for importing key items.
      (d) Joint military deals, taking Greece away from the NATO sphere.

  15. Rosario

    The Grexit is their explosive on body. Why would SYRIZA make clear that they will prime it before absolutely necessary? I believe the strategy has been play nice for as long as possible and if absolutely necessary utilize the option to leave the Euro completely if there is no alternative. A Grexit is the only option completely within Greece’s power. The Troika cannot force them to stay within the Euro (short of declaring war and occupying the country). This alone makes clear that Grexit was never off the table. It has always been the 800 pound gorilla in the room.

    1. Yves Smith Post author

      They have not been playing nice at all. That is the point you are missing. The aggressive talk and actions with a weak bargaining position makes them look either foolish (way overestimating their hand) or desperate (hoping someone will believe their bluster because that is all they have).

  16. ltr

    I am saddened by the seeming disarray and lack of resolute direction in the leadership of Syriza.

  17. dbk

    Some (er, make that many, for which apologies in advance) observations “from the ground”, not all directly relevant to this OP, but germane to multiple posts and threads over the past couple weeks.

    (a) General financial stuff
    (1) the strategy within the EU looks like a delaying one to me. Because:
    (2) the Greek people need to understand what’s at stake if Greece stays/goes (both scenarios). Support for remaining in the EZ at all/any cost must fall, and indeed is falling, at the rate of about 5% weekly. If it continues at the current rate (see Tsigantes’ comment above for polling figures), by June it will have fallen to around 20% for “stay in the EZ at all costs”. At which point
    (3) Grexit becomes a real bargaining strategy.
    (4) June-July: hard months, in which large interest payments come due. But recall that
    (5) June-July are high intake months: (a) income taxes are paid (or at least were, in the recent past – there are rumors that all who pay their full tax on the due date, instead of the usual five installments, will get a 10% reduction – a huge incentive for full payment), and (b) peak tourist season begins.
    (6) “Reforms”. I anticipate two problematic areas – first w/r/t privatizations, secondly w/r/t pursuing tax evasion/ money laundering/oligarchs. Syriza isn’t going to privatize public goods (energy, water), it just isn’t. TPTB (IMF in particular) are going to be displeased. Things will be fraught. As regards tax evasion/money laundering, much lip service is being paid to something I suspect TPTB aren’t really very keen on. All those millions squirreled away in Switzerland, Holland, Germany, France, England and elsewhere (everywhere) came from somewhere, and some of that somewhere is EU companies engaging in bribery big-time.

    (b) Other stuff
    (1) Geopolitical synergies. All the major players (Germany, Russia, U.S., China) are ticked off with each other for multiple reasons right now (Middle East, Ukraine, the CIB … ). Yikes.
    (a) U.S.: needs that base in the Eastern Med. Who owns it?
    (b) Russia: rumors of a reroute of the natural gas pipeline through guess-where?
    (c ) China: purchase of 67% of Piraeus, to become the major transshipment/ point of distribution site for Chinese exports to EU.
    (2) The Greek Parliament
    (a) Reparations. This case has been ready-to-roll (i.e. fully prepared) since the sixties. Syriza is the first government in fifty-odd years which doesn’t look likely to yield to threats (last time it was ready to proceed to the ICJ in the Hague was 2000; the Simitis government abandoned it because Greece wanted to join the EMU).
    (b) the Greek debt (including pre-bailout debt, maybe back to 2000). A Parliamentary Committee was formed last week to conduct a formal audit of the Greek debt with the assistance of Eric Toussaint.
    (3) Domestic politics
    (a) Syriza is the last man standing, there’s nobody left (cf. Tsigantes’ polling numbers above). Consider:
    1. The Greeks have tried the far right. They study it in their history books. Bummer;
    2. The Greeks have tried the military. Lots of people remember it. Ditto (bummer);
    3. The Greeks have tried neoliberalism. Everybody alive is intimately familiar with its results.
    (b) What’s Syriza’s mandate?
    1. Stay in the EZ + end austerity (viz. the EZ’s modus operandi). This appears prima facie
    2. Impossible. Therefore,
    3. Negotiate openly so the Greek people can see how the EZ operates. Total chaos, but
    4. Gradually, public opinion is altered so that
    5. If a disorderly exit or “default within the EZ” becomes inevitable, the populace is prepared.
    (4) On Cyprus
    I anticipate rapprochement. The Cypriots are furious with Greece, partly due to the 2013 bank bail-in (which was also a bail-out for Greek banks in Cyprus: read “PIraeus”), but the fact that the two countries – apart from sharing a common pre-colonial culture/history/language going back ca. 3,000 years – rest on vast shared reserves of natural gas is not insignificant. Greece will pay a price for rapprochement, and I expect the “Cyprus issue” to resurface at the UN, to everybody’s chagrin. But Cyprus has to be resolved sometime. (note: Wednesday is Greek Independence Day. For the first time ever, the Cypriot MinDef has been invited to Athens to join the Greek MinDef at the ceremony/celebration. This hasn’t been reported anywhere I’ve seen in the Anglophone press, but it’s very important symbolically.)

    On Greek banks: How is it possible the EU MOTU (read: Dijsselbloem et al) imagine the Cypriot banking debacle hasn’t been analyzed to death and beyond by the Greek banking sector? To paraphrase one of my favorite “Yves expressions,” what are they smoking? The Governor of the Bank of Greece is very intelligent (he hired Varoufakis at the Univ of Athens, we recall), and he’s not smoking anything. (One of the greatest ironies of all this imho is the destruction of the Greek banking sector, which despite improprieties by Piraeus [alas], never fell for toxic instruments. Greek banks, which are constitutionally required to purchase a percentage of all Greek bond issues, had their hair cut mightily. But no toxic ARMs, no CDOs, no hedging. Greek bankers are old-style conservative bankers).

    On the Syriza government: I feel a need to reassess this government daily. TPTB see them as The Gang That Couldn’t Shoot Straight, and I’m often inclined to agree – I mean, if you follow them here in Greece 12 hours a day, 7 days a week, it’ll drive you nuts. But then I remember: hmm, a party dating back to WWII (before, really), which was shut out of power in 1944 and has had 70 years to duke it out among themselves. Can they really be so totally inept, when they’ve effectively neutralized every party in this party-rich country in less than three years? I don’t understand what they’re doing, but I’m starting to glimpse the possibility that a very, very long game is gradually being put in play. One thing Syriza has is experience in the very long game. And I’m thinking maybe my responsibility is to try to figure out what that long game is …

    Finally (endlich): it’s important for us all (myself included) to remember that “Varoufakis” and “Tsipras” are shorthand. The Greek MinFin and PM are not acting unilaterally, but in accordance with collective counsel by men with thirty, forty, even fifty years’ experience in leftist politics. As I’ve noted on several threads here and elsewhere since January 25, leftist politics in Greece is the toughest training ground going – people outside Greece just can’t conceive how brutal leftist politics here is.

    1. JTMcPhee

      Is there a prayer that the current face of leftist politics in Greece has minds behind it that understand sustainable and decent governance? That maybe this is a catalyst that might, if they aren’t just murdered in their beds, trigger a whole wave of actual Hope’n’Change?

      And Yves, are the Syrizans exceptionable because they appear not to be sufficiently Serious?

      1. financial matters

        Yes indeed. They have a solid history of supporting worker rights.

        “We should note that the party’s cadres and activist base are mainly wage earners — people with degrees. It is a very urban electorate, a party with very strong roots among intellectuals.”

        That’s what literally changed the course of the electoral campaign, setting a whole new agenda. That was when we began to hear a stir — it was almost something physical — and Syriza’s polling numbers soared. From that moment onward, the other parties had to react to Syriza’s offer, which had emerged as a concrete political perspective — indeed, one within reach — allowing Greece to shake off the yoke of the memorandums and the troika.”

    2. Lambert Strether

      Can you give an example of “how brutal leftist politics here” is (leaving aside assassinations, car bombings, and the like, which I assume aren’t the baseline).

      Thanks for the thoughtful comment. I hope you’re right.

      1. dbk

        A long-form piece on Syriza’s historical evolution and typical modus operandi, including what are permanent and sharp – irreconcilable, really – divisions between the governing wing and left wing (the party’s internal power block)

        Re: the Cypriot bank bail-in and Piraeus’ role in same two years ago I mentioned above:

        One has to maintain hope, but there are many days of despair interspersed.

        1. financial matters

          Two very good links. It seems that neoliberalism has finally met its match in Syriza.

          We have been wondering when people would finally stand up and say this is enough. The horrible conditions in Greece have led to that point and they found a group of seasoned advocates, (I hesitate to use the word politicians).

          Ian Welsh had a good piece in the links yesterday saying that even the serfs had it better than this.

          1. Calgacus

            Yes – Alain Parguez used to say the aim of the Euro & the Eurocrats was to reimpose feudalism, but he recently said [in one of the papers you posted links to IIRC] that he must correct himself, feudalism wasn’t that bad, the lords had obligations to the serfs.

    3. different clue

      I have wondered for a while whether Varoufakis (and Syriza) have indeed been being painfully honest and transparent and even projecting an appearance of hopeless naivete’ precisely in order to get the TroikaNazi European authorities to reveal their true face on stage in the spotlight beyond anybody’s ability to avoid seeing what they are looking at.

      And might it be that the Syriza authorities are slowly getting ready to get Greek public opinion ready for the eventual application of War Socialism in order that austerity may at least lead to reclaimed independence of action for Separate Survival? Might the Syriza authorities refuse to Grexit at all costs and force TroikaNazi Europe to order a Grexpulsion from the Euro?

  18. docg

    “How can we in the modern world get along without money? . . . And maybe the simplest answer is: well, we’re going to find out. Real soon now. Whether we like it or not. Because the meaning, and value, of our money is dissolving before our eyes. It could take the form of runaway inflation but there are other forces that could also come into play that would do the trick — such as a complete and total meltdown of the stock market.

    Regardless, there’s no question that we can survive in an economy without money, at least without money as we now know it. What’s important even in our present situation is not really the shuffling around of money (as in the shell game run for so long by our beloved plutocrats) but the production and allocation of resources. . . ”

    from “Cutting the Gordian Knot — Part 2,” — Mole in the Ground (

  19. Reede Stockton

    Okay, I guess I must inhabit an alternate universe, but far from ending in confusion and disarray, it seems much more plausible to me that we will discover over the course of the next week that the short-term standoff between Greece and the Eurogroup was actually solved in the Euro mini-summit late last week.

    While it is true that Merkel and Tsipras described the flexibility available to Greece in very different terms, the key elements are ones upon which they agree.

    Greece is not taking direction from the technical team. From the press release: “Within the framework of the Eurogroup agreement of 20 February 2015, the Greek authorities will have the ownership of the reforms and will present a full list of specific reforms in the next days.”

    All sides agree that Greece is free to propose replacement reforms as long as the net effect is unchanged.

    In addition, no one from the Euro side of the negotiation provided any support for the incendiary email from an EU official complaining of Greece’s unilateral action to address the humanitarian crisis. That was an important implicit walk-back by the Euro side.

    The lynchpin of this mix of elements is the phrase “as long as the net effect is unchanged”. What does that mean exactly? It means exactly what the Eurogroup decides it means, but one plausible interpretation is that, given the same set of assumptions about what to expect from the Greek economy over the period of the agreement, any changes to the package of reforms cannot result in Greece ending the period in worse fiscal position than would have been produced by the original reform package.

    If that is the operating definition of “no net change”, then Jean-Claude Juncker quite possibly eliminated the need for conflict by making available 2 billion euros to deal with the humanitarian crisis in Greece. Simply by making clear that funding for Syriza’s humanitarian and growth plans will come from this fund, it seems quite possible that the “net effect” test can be met, or nearly so. For context, the humanitarian relief bill passed by the Greek parliament is estimated to cost roughly 200 million euros.

    I suppose there may be something about this 2 billion euro fund that I do not understand, but given the fact that everyone was wondering whether Greece could make its 1.5 billion euro payments to the IMF in March, I am completely baffled by the apparent lack of interest on the part of the press in this 2 billion euro fund to address the Greek humanitarian crisis.

    1. Yves Smith Post author

      No on the Euro side needed to address the e-mail. It’s a clear violation of the Greece/Eurogroup memo signed in February. See this section, emphasis ours:

      In light of these commitments, we welcome that in a number of areas the Greek policy priorities can contribute to a strengthening and better implementation of the current arrangement. The Greek authorities commit to refrain from any rollback of measures and unilateral changes to the policies and structural reforms that would negatively impact fiscal targets, economic recovery or financial stability, as assessed by the institutions.

      Greece committed to a standstill until it got a complete list of reforms completed and approved. Greece violated that agreement still not submitting a detailed reform list and then passing that humanitarian relief bill. That involves spending money and hence has a negative impact on meeting fiscal targets. There is no two ways about it.

      The fact that the EU officials didn’t press the matter is not a walkback. They probably decided that making a public fight over a 200 million euro matter was penny ante and could deliver Greece a PR victory they didn’t need to give them.

      But Greece with this action has established that it is untrustworthy, that it will not honor clear written agreements. This will be at best a Pyrrhic victory. And if you think the ECB or the IMF won’t find a way to make Greece pay for this intransigence down the road, you are smoking something very strong.

      As for the 2 billion euro fund, as indicated earlier in the thread, this is not a gift. Greece already had access to this money and for some weird reason never took it. Juncker is insisting the funds “not go into Greece’s coffers” so this is most assuredly NOT to help relieve the budget stains. It looks as the EU will implement humanitarian measures. I’m not sure how it can keep the funds from being used to help the Greek government stresses but there must be lots of strings attached, which would explain why Greece did not use it earlier.

      1. mpr

        And if you think the ECB or the IMF won’t find a way to make Greece pay for this intransigence down the road, you are smoking something very strong.

        What exactly do you think they are going to do ? To me this statement is just a category error. The ECB and IMF have no independent mandate to do anything. True they are the chosen enforcers of the Eurogroup, but the parameters of the enforcement are decided at the political level.

        Reede Stockton’s remark about no one backing up Declan Costello’s letter is very much on point. As one might expect, the technical teams, which as Yves has pointed out consist of the same people as before, are taking time to adapt to their new role. One can argue about the whether the legislation is a technical violation of the agreement (I personally don’t think so), but this misses the point. The agreement is a political document, not a legal contract.

        What the Eurogroup needs from the IMF and ECB to resolve the crisis is a rubber stamp on the revised list of reforms. I presume that what was pointed out to Tsipras at the mini-summit, is that even if its just a rubber stamp, then need to put it on something , and he was given assurances that the list of reforms would be treated sympathetically.

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