Negotiations with Greece Close to Breakdown as Budget Strains Worsen

Things are not looking good for Greece.

When Greece and the Eurogroup signed a four-month deal delineating how Greece could get access to desperate needed, so-called “bailout” funds, our reading of the agreement was that it reaffirmed the so-called Memorandum of Understanding, meaning the structural reforms that were part of the IMF loan program. That was very much a minority view at the time.

It has proven to be correct. But Greece, which has a very different interpretation of the same text, is refusing to move forward with the discussion of the reform program, at least as envisaged by the Troika and the Eurogroup. That in turn is pushing already-strained relations to the breaking point. And notice that this is consistent with another early reading, that the two sides had no overlap in their bargaining positions. That meant unless one side or the other decided to capitulate on a key point, the negotiations would fail. That is the current trajectory.

That means the inertial path is that Greece does not in fact get much or any of the bailout funds it had hoped to obtain by the end of April at the latest. While the government is scrambling to find cash to make payments to the IMF and perversely, on a Goldman swap this month, it is borrowing from the pension kitty to do so. That means if tax collections do not improve, it may come up short on pension payments in upcoming months. It is not clear whether Syriza will be able to maintain public support if it fails to meet its pension obligations in full.

And there is other evidence of the stress the government is under. Fresh releases of government data show that the government’s primary surplus was revised from an estimate by the previous government for 2014 of 1.5% to 0.3%. Worse, the primary surplus of the last two months was achieved only by virtue of cutting spending even further. Less government spending will only intensify the depression in Greece.

If you’ve been following the negotiations, there have already been signs that they are going pear-shaped. For instance, the Trokia has insisted that Greece submit a much more detailed version of its reform proposals; Varoufakis has not gone beyond a now-seven-page memo. And we have the bizarre contretemps stirred up in the German media over whether Varoufakis gave the finger in a presentation over two years ago when suggesting what posture Greece should take towards its creditors.

Here are some current sightings. From Reuters:

Greece frustrated its main creditors on Tuesday by refusing to update euro zone peers on its reform progress at a scheduled teleconference, insisting instead that the discussions should be escalated to Thursday’s European Union summit.

Describing the annoyance that has been building up among euro zone countries with the new Greek government’s approach, one euro zone official said: “For many people the teleconference this afternoon could be something of a last straw.”

Euro zone deputy finance ministers held a teleconference at 1530 GMT to get an “update on the state of play” on Greece, which is running out of cash and time to negotiate and implement reforms that would unblock loans to prevent it from defaulting.

But three sources with knowledge of the call said that, instead of an update, a Greek official had said these issues would be discussed by Prime Minister Alexis Tsipras at the EU leaders meeting in Brussels. Tsipras, whose left-led coalition took power in January, is due to meet German Chancellor Angela Merkel and French leader Francois Hollande as well as top EU officials.

Two sources said that one of the officials on the call, which the sources described as short, said following the Greek refusal to update that the creditors were “riding a dead horse”, suggesting the talks were getting nowhere.

European officials said they did not understand what Greece hoped to achieve by bringing the issue to the summit, where Greece is not on the formal agenda and could only be discussed in meetings on the sidelines and only in broad political terms.

This is at a minimum the second time in which Greece has tried to circumvent the process that it agreed to in the memo of late February, in which it would negotiate a detailed reform list with the Troika, which would then be subject to approval of the Eurogroup. Trying to renegotiate the shape of the table at this juncture is just about certain to fail.

And Greece’s moves to proceed with its own reforms in light of the lack of an agreement with the Troika are also being rebuffed. From Paul Mason of Channel 4:

At less than 24 hours’ notice the European Commission has vetoed a key law set to be passed by the Greek parliament tomorrow.

The so-called “humanitarian crisis bill” was set to provide free electricity for some households, and address poverty among pensioners and homeless families.

But in a communication seen by Channel 4 News, Declan Costello, director at the EC’s directorate for economic and financial affairs, has ordered the radical left-led coalition governemnt in Greece to stop. A planned law to allow tax arrears to be paid in instalments, set before the Greek parliament on Thursday, has also been vetoed.

Notice that the letter does not bar the humanitarian reforms per se, but stresses that Greece can’t implement measures willy-nilly but needs to do so as part of an agreed, coherent program. But Mason adds:

The European Commission had been seen as the most conciliatory of the bodies formerly known as the “troika”. Mr Costello’s letter effectively says that if the Greek parliament votes on the new law tomorrow, it is a violation of the compromise deal signed by finance minister Yanis Varoufakis on 20 February in Brussels.

And this might also be the reason that Eurogroup head Jeroen Dijsselbloem suddenly started talking about the idea that Greece should impose capital controls. From a second Reuters story:

After acrimonious negotiations in February, Athens got a bailout extension to the end of June and promised not to make any unilateral moves that could burden its budget.

With tensions still running high, Greece attacked comments by Jeroen Dijsselbloem, head of the Eurogroup of euro zone finance ministers, who said pressure on Athens was growing and an emergency loan depended on real progress on reforms.

He said he wanted no repetition of events in Cyprus in 2013, when “the banks were closed a while, and capital controls – cash flows in the country and out of the country – were tied to all manner of conditions”.

Dijsselbloem is being more than a tad disingenuous. The Cyprus bank closures/bail in weren’t the result of some sort of misstep by Cyrus; it was a plan devised by the ECB. And the weapon that the ECB brandished to force the bank holiday and bail-in was the threat of the removal of the bank lifeline, the ELA.

Understand what is happening: if Greece proceeds with its humanitarian relief plan and violates the February 20 memorandum, the ECB would have a ready excuse for withdrawing the ELA. In fact, some former central bankers believe that in the absence of a refinancing deal being at least arguably on track, the ECB would be required to withdraw it. That would force Greece to impose capital controls and nationalize its banks. And to recapitalize them, it’s not clear that Greece could do so adequately with scrip like TANs. If Greece were to reintroduce the drachma, that would amount to a de facto Grexit. How the authorities react to that is very much open to question. Past legal analyses (the most germane is by the ECB) finds that there is not exit mechanism from the Eurozone; it is described as “irrevocable.” The EU, by contrast, does have a sketch of an exit process defined in the Lisbon Treaty: a member can ask to leave, and if the EU and the member can’t negotiate how to do it, it nevertheless becomes official two years later. Needless to say, two years is an eternity in financial time. And the ECB analysis hand-wrings that that provision contradicts other sections of the treaty.

As we have said, the best solution for Greece would be to default but stay in the Eurozone. But it is not clear that its creditors would tolerate that. A default will trigger politically costly loss recognition on the ELA and on Target2 balances, and those losses would almost certainly trigger assessments to taxpayers in Eurozone countries (even though the ECB could monetize the losses, like the Fed, the Bundesbank is allergic to that approach, so the ECB would need to get new capital from taxpayers). The creditor countries or the ECB on its own could get bloodyminded and force a de facto Grexit by removing the ELA pour decourager les autres from defaulting and daring to defy the Trokia.

Greece seems to believe that the Eurocrats would not dare go this route, that the cost of not giving them new money is far too high for them not to relent. But so far, the Troika is not budging. The authorities are acting as if their commitment to austerity, in the form of structural reforms, is so deep that they are prepared to put the Eurozone at risk to enforce them.

This is far from the first time we’ve seen this movie, where practical considerations were at odds with the political calculus. And in the cases of Creditanstalt and Lehman, politics won out.

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    1. Georgie Welchade

      The Greek “impossible triangle”
      The name of the game is the arch-famous ‘impossible triangle’ that Greeks and their sisters talk oh so much about on every street corner.

      The sooner that Greece leaves the euro (in whatever way, shape, or form) the better for greeks and –surprise surprise– most probably also for Europe as Syriza will not ever ratify the Trans-Atlantic Trade and Investment Partnership (TTIP) the international trade agreement that both Germany and the US are so keen about.

      Capital controls
      … possibly soon in Greece just as they were imposed onto Cyprus (and still in force) according to Dutch Finance Minister Jeroein Dijsselbloem, head of the Eurogroup of Finance Ministers.

      Not one, but two ?

      So we have two euros. Great. (Go figure !)
      Euro #1 is the one you and I know and count on existing for many years to come (?)
      Euro #2 is the current Cyprus euro + maybe the Greek euro, only good within those two countries, not outside, and never ever in cash (hmmm…)

      See ?… The Greek ‘impossible triangle” keeps growing unmanageable as it ticks away its remaining shelf-life hours ever faster.

      1. different clue

        Oh HO! So THAT’S why Greece insists on staying in the Euro and why TroikaNazi Europe insists on torturing Greece into leaving? Because Greece stands like The 300 against the New Barbarians of TTIP? And TroikaNazi Europe wants that “NO! ” vote out of the way?

        1. Georgie Welchade

          Maybe my friend, maybe.
          At the very least, the Greek TTIP non-approval should be an important factor on everybody’s mind.
          There are others though.

          The big PROBLEMA in today’s geopolitics also is that the double and triple and quadruple rebounds and unintended knock-on effects of each and every move within the European – Middle East chess board are mind boggling. It’s like a dynamic Rubik cube of sorts…
          And as no algos can (yet) be applied to foreign relations, I bet good money that the teams of human beings involved on every side (diplomats, economists, politicians, etc.) just can’t wrap their minds around it all. And thus the constant messy decisions and resulting confusion…

          What’s definetly SURE is that the TTIP – Trans Atlantic Trade & Investment Partnership is BIGGGGGGG STUFF for both the US and Germany (plus a few Northern others) as Plan “A” of their currently predominant 21st. century geo-political philosophies.
          But Plan “A” has a limited shelf-life because, should the TTIP not be approved soon enough (and as events are picking up speed along very different lines everywhere else) at least some parts of Europe will have to revamp their Ostpolitik to the tune of Cossack prisiadki folk music rather than the American fox-trot.
          Such Plan “B” is roaming around the scene ready to kick-in at short notice.

          Russia’s role (or non-role) so far in Greek affairs could very well be indirectly related to the above.
          Mind you, team Russia usually plays good chess.

    1. Georgie Welchade

      Guys, just a reminder

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

    2. a Texas libertarian

      Agreed. Along with the U.S. Government… at some point, when foreign governments and citizens no longer feel the need to hold dollars and they all come flooding back home. At that point the Fed will have to monetize 100% of the debt, and since we’ll no longer be able to export our price inflation (nobody else wants dollars), we’ll see much more of it, and not just in asset prices on Wall Street.

      The U.S. Government has ALL the same problems as Greece, except it happens to have the biggest gun on the block, so what’s in its wallet (U.S. tax payers), seems more secure than the alternatives.

          1. Georgie Welchade


            At the end of the day, Fofoa will most probably end up being the ONLY one that was right about the US dollar debacle, sequence and timing included.
            Gold’s reset value in the several thousands per ounce would set the new (?) rules of the game. SDRs would be the initial step. Forcefull “debt jubilee” through dollar’s hyperinflation would come next.

            Understanding Fofoa in depth is NOT easy reading.
            Fofoa requires time, patience, previous knowledge, and an open mind.
            It’s worth it, trust me.

            1. a Texas libertarian

              Thanks Georgie,

              I’ll give it a shot when I have some time. Thanks for the reference! Always looking for alternative views to test against my Misesian – Rothbardian understanding of economics and money.

              While I’m not counting on debt jubilee to save me from my personal debts, I wouldn’t be surprised if something like that happened, especially after the U.S. Gov defaults on its loans when the IMF bailout fails to keep interest rates and price inflation down. Of course this would destroy the creditor debtor relationship causing extreme volatility. This might be the only way the world gets back on sound money though. Maybe even money divorced from government. Imagine that for a moment!

              1. Georgie Welchade

                Texas Libertarian, you must know Ron Paul right ?
                Just thinking…

                At any rate, below please find a summary of some of Fofoa’s key posts so that you get the gist of his analysis and, maybe, continue reading other stuff.
                Good luck, take care


                * Deflation or Hyperinflation?
                * Big Gap in Understanding Weakens Deflationist Argument
                * Just Another Hyperinflation Post – Part 1
                * Just Another Hyperinflation Post – Part 2
                * Just Another Hyperinflation Post – Part 3

                1. a Texas libertarian

                  Thanks for the links! I will definitely check them out.

                  I know of Ron Paul of course, but I don’t know him personally. I’d say Texas is a big place, but we actually do not live very far from each other; I think he’s down in Lake Jackson, and I live in Houston. And yes I’m a fan of his service in Congress and his written work. Also he and I both learned economics through Murray Rothbard’s writings, although he knew Murray personally.

                  If you know of Ron Paul, you may know of the Mises Institute. If not, here’s a link to a trove of free resources on freedom and Austrian Economics.


  1. plantman

    If Brussels and Berlin really believe that Greece either has no place in the euro or will not be able to meet its obligations, then why don’t they create a less excruciating glide-path for leaving? From a public relations point of view, that seems like the logical approach. After all, when you read stuff like this—

    “At less than 24 hours’ notice the European Commission has vetoed a key law set to be passed by the Greek parliament tomorrow. The so-called “humanitarian crisis bill” was set to provide free electricity for some households, and address poverty among pensioners and homeless families.”

    This makes the E Union look like a collection of cutthroat corporatists and bankers sucking the blood out of their subjects. Is that the image Brussels really wants to project??

    1. Dan Allen

      Because Greece can’t be allowed to successfully rebound outside the euro.

      You have to discourage all others.

    2. Tsigantes

      “This makes the E Union look like a collection of cutthroat corporatists and bankers sucking the blood out of their subjects. Is that the image Brussels really wants to project??”

      While knowing full well that it is at huge political cost to themselves, the traditional centre right parties and go-along Social Democrat parties. Even in Germany now they are failing to keep voters in line, and the coalition partner Social Democrat party is also starting to dissent . Since the electoral cost is so high I beg to differ that the motivation is political: it is financial and of life & death nature for the EU’s underfunded, over-exposed banks. NOT the kind of financial problems that can be tabled and discussed, but the reality hidden behind false claims of stress test health, recapitalisation, raised deposit levels etc.

      Watch the Heta story closely, it is being underreported.

      The bottom line is saving the euro-ponzi, particularly French, German & Belgian-Dutch banks. Greece makes little difference inside the euro, but has the capacity to crash the system with a default.

      Because so much is financially on the line the pressure on Greece will only increase & Erogroup etc. will not blink until the moment Greece prepares to default.

      1. a Texas libertarian

        Well said.

        The Euro-ponzi is only the enabler of the Greco-ponzi, and the only losers are the taxpayers of all countries involved (some are taxed to loan, and others are taxed to repay). It’s all a massive intergovernmental scheme to extract more wealth (via direct taxation to repay or devaluation to loan) from your average individual with which to bath the elitist cronies of the region (Banks, politicians, export focused corporations, etc.).

        With capital controls on the menu for Greece, anybody with the ability should get their money out of that country and fast.

  2. Gerard Pierce

    One alternative that has not been mentioned recently is presenting the alternatives in the form of a plebiscite. and letting the Greek electorate present the Troika with the stink-finger.

    If Syriza cannot achieve any of it’s promised reforms it’s leadership might as well “surrender”, move to Argentina, and let the EU figure out how they are going to feed the population of their newest colony

    1. JTMcPhee

      One does not feed colonies. That is exactly backward. One extracts from colonies.

      As an aside, why do the banisters get away with calling the current extractions “reforms?” At least in English, that word used to caary as the biggest part of its freight of meaning, “improvement and betterment and a reduction of corruption.” Not any more, thanks to media convention and the power of the Narrative?

      1. Gerard Pierce

        You’re right of course, but isn’t it still necessary to pretend that rape and pillage is for the best in this best of all possible worlds? Of course, our elites have forgotten the first rule: “pillage, THEN burn”.

  3. Dan Allen

    I don’t think the Tuesday conference call was an example of Greece trying to circumvent any thing.

    The timeline is important.

    The Eurogroup head’s calls for capital controls happened prior to both the Tuesday call and prior to the rejection of the bill for tax arrears (which was also rejected) and humanitarian measures. And the call for capital controls followed the German FM’s talk of Grexident in Austria over the weekend.

    I think what is happening is that Greece is being squeezed by the ECB on the one hand and now public statements by interlocutors on the other hand.

    Reforms are absolutely meaningless. There is no point in discussing them in this context.

    Which is why the Greek PM requested a meeting among the top guns tomorrow.

    1. Yves Smith Post author

      With all due respect, Tsipras is missing the plot, and I should have spelled this out with reference to earlier posts. And while he may regard the sequence of events of recent days as important (and I fed into that with my hasty drafting of the post), that is really not what is at stake.

      The issue is that the Trokia and the Eurogroup see Greece as not complying with the February 20 memo, most of in digging in its heels as far as structural reforms are concerned, but also (as a result) in trying to change the process set forth in the memo, which was one of the few unambiguous things about it. So the particular events of the last few days, while they are illustrative, are less important in terms of what Dijsselbloem said than the general pattern. Dijsselbloem is basically saying it looks like there won’t be a deal and Greece needs a Plan B.

      It’s been clear for a while that negotiations are at an impasse. I said this weeks ago:

      In other words, the two sides’ reading of what the February memo is about is so different that there is no deal here.

      What has happened in the meantime is that the Greeks have become louder and more difficult as the financial vise has tightened, while the other side has made threatening noises. It’s been mainly the Germans in public (see here: but there’s also been other developments, like Greece insisting on meetings being held in Brussels when the would be customarily held at this point of negotiations (technical meetings with technical staff at the IMF and perhaps also ECB level) that have also annoyed the Eurocrats. Tsipras and Varoufakis may be trying to shift the negotiations to a higher level, but the IMF and ECB are not amused. The February memo made clear that getting to a detailed list reforms was a precondition for Greece getting the so-called bailout money. From the perspective of the creditors, Greece is now rejecting a process that it agreed to earlier.

      Moreover, the idea of capital controls is hardly new; we reported that the ECB had leaked that idea in an article in February. And the ECB has clearly been sending Greece the message that it is on thin ice by giving the most minimal increases in the ELA possible. The ECB and the implicit threat of tanking the banking system, which would force Greece to have to impose capital controls, has been a threat in the mix for weeks.

      Now one can argue that Dijsselbloem talking about capital controls in public is an escalation, since it presumably will spook depositors and lead to a resumption of the bank run.

      And unless Merkel decides to lay down the law with everyone else, I doubt Tsipras’ appeal will go anywhere. The Bundesbank clearly wants Greece out. Draghi would prefer Greece not exit, but I suspect he believes in strucutral reforms as much as the IMF does. Perhaps more important, the IMF must agree to any deal in the next four months for Greece to get more funds. If Greece does not get an interim deal, a default on ECB debt over the summer is inevitable. That means the ECB is looking at the politically charged issue of loss recognition regardless. In that event, it may regard forcing losses onto the Greek banking system, as it did with Cyprus via a bail-in (accompanied by capital controls) as essential to reducing costs. Greece is thus faced with capitulating as Cyprus did or imposing capital controls and reintroducing the drachma.

      Thus from the Trokia/Eurogroup perspective, Dijsselbloem is not making a threat. He is pointing out where this is going, since the Greeks seem to refuse to get the message.

      1. Sanctuary

        I liked that you referred to Creditanstalt and Lehman as politically derived disasters because that is precisely what I’ve been arguing as regards Grexit. I feel that Grexit is inevitable precisely because of the political not economic nature of the Euro itself. The entire thing is a vanity project for the European political elite and this is why, regardless of its fundamentally failing nature, you see them still hewing to this notion of an austerity inducing Euro. This is why you will see the Euro-elite (and most especially the Germans) force a Grexit even though it will be a disaster beyond recognition. In their small-minded calculus, they’d rather have Greeks to blame for the upcoming disaster than to admit the creation of the Euro itself was the fatal mistake.

        1. a Texas libertarian

          The Euro was a bad idea; any mixing of banking and politics is a bad idea, but the less area this particular toxic mix oversees the better. Decentralization of authority is the way to go politically and economically. Greece needs to default on its debt and start over. Anything less will just kick the can further down the road to an even greater disaster.

          Maybe the Greek people should just say to hell with the government and the banks for getting them in this mess and jump ahead of the political curve into anarchy.

          1. Georgie Welchade

            In the 20th century, Europe attempted 5 re-foundational projects:
            communism, WW1, nazism, WW2, and the euro.
            All 5 failed.

            Europe should have conformed a Free Trade Agreement.
            At best (hmmm…) a Customs Union.
            Never a Monetary Union.
            Greece is Exhibit “A”.
            Other Exhibits are lined up behind Greece

  4. German native speaker

    Big blockupy protest against ECB on occasion of the inauguration of their new fancy office tower in Frankfurt today. A special train with 1000 protesters came last night from Berlin, dozens of buses from all over Europe. Promise of peaceful protest broken by some radicals already early this morning, burning police cars, police station attacked, a lot of broken windows e.g. of retail stores, dozens of hurt policemen. Some radical sub-groups said to be from Italy. ECB building completely sealed off for the ceremony, the bank’s employees told to stay home.
    A very large protest march (“Stop Austerity!!”) by the German unions, about to begin now, they had to find different route, because Frankfurt center is partly shut down.

  5. salvo

    there was a must read interview with Greek MP Costas Lapavitsas on Jacobin recently

    in his view the only reasonable option for Greece is a “negotiated exit” (second to a ‘contested exit’), which he believes would be acceptable even to the monetary union, though I somewhat agree with Dan Allen when he writes that Germany-EU cannot permit politically Greece to rebound outside the euro-cage

  6. cassiodorus

    So do the Greeks actually have plans for the reintroduction of the drachma? Since the financial powers will not respect any of SYRIZA’s agenda, that is. If the idea is that Greece needs to be “forced” to exit the Euro, well, that depends upon one’s definition of “forced,” doesn’t it? It doesn’t quite have all of the glamor of Bill Clinton’s dispute about the definition of the word “is,” but that’s what it amounts to. What counts as “forced”?

    See also Costas Lapavitsas, “The Syriza Strategy Has Come To An End.” This one is about how the strategy of actually doing something for the Greek people while at the same time sticking to the Troika’s payment plans is not going to go any further.

  7. samhill

    Maybe EU plan is to drive Syriza to new elections with Greek population panicked. Safe bet Pasok defaults back into power and EU rewards them with a nice meaty bone showing how much better it to not stir up trouble and play by the rules? In other words, maybe the EU sees the need to ease up on austerity in Greece but why reward the radical left and make them a pan-EU model when you can engineer it to look like a neo-liberal success.

  8. Jose

    Greece has no need to default on TARGET2 debts.

    Such debts have no maturity date and thus cannot be “paid back”. Only interest (currently near zero percent) is owed on those balances. So, in a sense, the higher the proportion of its total foreign that consists of TARGET2 balances, the better for Greece.

    1. Yves Smith Post author

      I’m not sure re how senior they are. If they are subordinate to the ELA or the ECB loans on which Greece is likely to default this summer, the ECB would have to recognize losses on them. I said loss recognition, which can happen in events other than default. I’ve read commentary consistent with that view, but haven’t verified it myself.

  9. mpr

    I have to admit that for the first time, I am a bit perplexed by what Syriza are doing. I’m not sure why they aren’t trying to comply with the form of the agreement by proposing a detailed list of their own reforms. This is the fig lead the Troika needs.

    I’ve seen reports that they are going to go ahead with the bill ‘vetoed’ by the EC. I still don’t believe the ECB will cut off ELA, although its possible they won’t get a disbursement without meeting the form of the agreement.

  10. generic

    Actually Greece’s budget woes have improved, just not to the extent envisioned by the old government. There is no prospect that tax arreers will be paid before the new installment plan is in place. Anyone know what happened with it after the Commission objected? It is conspiciously absent from official statements and media coverage, which focus somewhat understandably on the humanitarian bill.

  11. docg

    “if Greece proceeds with its humanitarian relief plan and violates the February 20 memorandum, the ECB would have a ready excuse for withdrawing the ELA.”

    For years, Yves, you’ve been kvetching about the “extend and pretend” policies of the Eurogroup. And I’ve been with you all the way. So now, thanks to our friend Yanis, those policies are facing a serious threat. So, rejoice! Either the powers that be will relent and loan him the money anyhow, which is what I feel sure will happen — or the whole house of cards will come tumbling down. Which is the opposite of extend and pretend, no? What we’ve been waiting for, no?

    There was a disciple of Bacchus,
    Named Yanis Varoufakis
    He thought it was fine,
    After drinking some wine,
    To turn Schäuble into a jackass.

    1. Tsigantes

      docg, you are right on target.

      Writing from Athens I can only say that I have never in my life seen such relentless support for any government; and even in the oligarch-owned television stations, the political discussion programmes, in which all political stripes are represented, it’s the same.

      We are going through a process of theatre here: the theatre comes from outside. It’s the usual and more: not just threats, lying press, trolling, disinfo etc. – we’ve lived it for 6 years – but illegal ECB moves, demonisation of our Finmin, demands for change of ministers, Schauble losing his cool / nous…it’s almost funny: all this over a few humanitarian measures?

      Meanwhile keep an eye on Heta and now Bank of Madrid…

  12. diptherio

    Slightly OT, but related:

    Occupy, Resist, Produce! International Solidarity With the Workers of VIOME Facing Possible Liquidation

    The workers of VIOME in Thessaloniki, Greece, have stood up against unemployment and poverty by carrying through a long struggle to self-manage the occupied factory in very adverse conditions. For two years now, they have been producing and selling ecological cleaning products at the occupied premises, ensuring a modest income for their families. They have been working on terms of equality, taking decisions collectively through the general assembly. At the same time they have received a big wave of solidarity from Greece and abroad, converting their struggle into an emblematic struggle for human dignity in crisis-stricken Greece.

    The ex-owners of the factory, the Fillipou family, have never stopped trying to obstruct the process, posing legal hurdles in every step along the way. Four years ago they abandoned the factory, keeping all the benefits to themselves and leaving hundreds of millions in unpaid wages to the workers, condemning their families to poverty and misery. Today they appear again, conspiring with the state-appointed bankruptcy administrators and the judicial system in order to liquidate the company.

    While the ex-owners were convicted to 123 months in jail at first instance for the millions owed to the workers, the court of appeals reduced this sentence to a 43 months suspended sentence, thus in effect absolving the ex-owners from having to ever pay back the workers.

    At the same time, on March 23 there is a new trial to evaluate the administrator’s request to liquidate the machinery and the premises. If the court rules in favour, big financial and real estate interests will have the opportunity to gain a foothold in the VIOME premises.[…]

    Our destiny is now in our own hands, we manage our work and our lives ourselves. We will not permit anyone to destroy what we have built with so much effort. We declare to the judges, the police, the administrators, the ex-owners and any prospective buyers:



    There will be a protest on March 20th, in front of the hearing on the 23rd, for anyone in Greece. VIOME is also accepting donations at their website.

  13. No one in particular

    Yves, very good summary; the comments added a lot of flavour. NC is awesome to get an unbiased view. Congrats.
    Not sure what its’ worth, however: EZ has shoved roughly euro 100 bn since Jan 15 down to Greece, and counting, via ELA and Target. As there is no bank run in Greece yet, I assume there is another channel to allow the daily deposit drippings – one which has not been discovered by the interested public. So Tsipras is getting money galore without any commitment – the Troika has budged, but the public presentation is somewhat different. Because the Troika cannot allow Grexit – and Tsipras knows it – for several reasons – a) all the losses orbiting the EU banking system would need to be revealed – and consequences to the derivate market… brhhh b) if Greece goes, contagion risk is back – [no, I do not think Greece will recover outside (or inside) the euro; as the issue is lacking trust by the populace in the corrupt failed state of rent-racketeering – and almost all Greeks are somehow involved] ba) loss of face for all the bailout defenders for once, and Ireland and Portugal potentially could do much better outside the euro, especially bb) if debt restructuring is included, – which is “impossible” without imploding the EU Banking system; c) the euro elites fear for the union, if the euro is threatened, which means their own power. that is why “apres moi, le deluge” is so much in favour from Berlin to Brussels.

    1. Yves Smith Post author

      Um, there has been an ongoing bank run, and of pretty large scale. The ELA was increased from 15 billion euros to 65, and then has been increased pretty much weekly in hundreds of millions increments.

      1. No one in particular

        The banking system is loosing a lot of deposits, too true. But the cash mashines are still working, and I have not heard that anybody did not get the amount of money they wanted – i.e. not really a bank run. ELA is currently at eur 69.4 bn – at least that’s the offical figure. However, if history is anything to go by, I would not put it past the Bank of Greece to have fiddled the figures, or used another channel (Target? something else) – because the Greek banks must be somewhere short before the dark side, aka. insolvency or beyond. Time will tell, I and bet it is worse than any of figures.

  14. kevinearick

    Debtors Prison

    For those not playing along with the illusion of due process, a dress for per pressure politics, Family Law serves as a catch-all, and now women are being thrown in the clink. Congratulations, you can’t get a job without a license and you can’t get a license without a job, and if you happen to get a job, you lose it, because you don’t have a license. That’s credit for you.

    Placing an ad in WSJ or Telegraph, a column proposing a tightening titration against the backdrop of global QE, will certainly get the job done. Bank isn’t any more your friend than family sitting around on welfare, gossiping about whoever isn’t in the room, and complaining about government in between, misery loving company. Warren Buffet is a prisoner like all the rest; he just has a better box seat, to watch the sh-show.

    Empire and Debtors Prison are one and the same, just another form of prisoners dilemma, the game theory of feudalism, normalized with public education, robbing from the back of the line to pay the front of the line, spiritual bankruptcy begetting intellectual bankruptcy begetting physical bankruptcy, in the other direction. The Revolutionary War was no such thing. Manifest Destiny has always been the means of the passive-aggressives, divide and conquer. The colonists simply moved feudalism and saw no reason to pay the King.

    IPOs, M&A, and Government are all the same. Whether military steals from university healthcare or vice versa is irrelevant, because they are the same. Once upon a time, in the West, US Navy didn’t tolerate Family Law. Now, feudalism prevails everywhere, and bred behavior isn’t changed in real time. Putin is a moneychanger like all the rest, as Greece expected, but not everyone in Russia, China and everywhere else is a dupe.

    If US Navy controls international trade, and the Imperial Admiral just said it did, why is the global economy contracting, with ever-growing hubs?

    Funny thing about large, ineffective organizations; to become large, effective organizations, they must pass through small, effective organizations, so they build a system to gobble up small, effective organizations, maintaining the status quo, until they can’t. The Fed, Congress and State are the problem, in a positive feedback loop, a problemsolution, not the solution. Productive Family is the only possible building block, and the single mother is still the poorest performing unit, by design, upside-down economics, in an ivory tower built for the purpose.

    Things happen. Whether they are opportunities or threats depends upon whether you have a surplus or not, beyond the empire, whether you think and work ahead. Divine Providence is always a gold rush, trading wealth for money, going nowhere, faster and faster, always rebuilding the past. Set that circuit board on a table by the beach, and watch what happens. University doesn’t hide STEM in a black box by accident. It’s just paper, looking in the mirror at itself, in the past.

    I wake up in the morning, not worried about an utterance from the Chairperson, but because 1 in 100 actually does the work required, despite the gravity of empire. Don’t lose heart; apply yourself where it does some good. Kindness of a Stranger is the only path, because once adopted, habits are hard to break. If you should find yourself in debtors prison, remember, you can only change yourself. Whether others follow the example is up to them. Many a lifeguard drowns attempting to help those who do not want to help themselves, damsels in distress.

  15. MartyH

    From the original post (not the clarification in comments by Yves):

    Greece seems to believe that the Eurocrats would not dare go this route, that the cost of not giving them new money is far too high for them not to relent. But so far, the Troika is not budging. The authorities are acting as if their commitment to austerity, in the form of structural reforms, is so deep that they are prepared to put the Eurozone at risk to enforce them.

    This is far from the first time we’ve seen this movie, where practical considerations were at odds with the political calculus. And in the cases of Creditanstalt and Lehman, politics won out.

    If you truly believe your country is bankrupt … how does extend and pretend help? How does a “Lehman” help? What does help? Yes, Yves, DieselBOOM is merely pointing out what he feels is “the obvious.” Without having to decide if Tsipras and Varoufakis are geniuses or fools, I can understand not understanding “business as usual.”

    1. Yves Smith Post author

      Did you miss that Tsipras and Varoufakis have relented and are effectively giving in to extend and pretend by seeking bailout funds when debts mature? They want the debts written down, and they’ve been told that is not happening. What they almost surely would have gotten is an extension in maturities and a further reduction in interest rates, which from an economic perspective does lower its value. So they are not breaking the frame anywhere near as much as they hoped originally.

  16. loserssansfrontieres

    Please pardon my nit-picking pedantry. I am a great fan of nc in general and of Yves Smith in particular — not least for the wit of her prose. I have read and enjoyed “Econned”. Recently Yves has become fond of the expression “pour decourager les autres”. The phrase coined by Voltaire in “Candide” is “pour encourager les autres” which is intended ironically ( not surprising considering its parentage ) and is much funnier. The historical background is given in the Wikipedia entry on the Battle of Minorca
    I recommend the original to Yves who in many ways is the Voltaire of our age.

    1. Yves Smith Post author

      I am very flattered by the comparison to Voltaire! You are too kind.

      Oh, yes, I’m aware that “pour decourager les autres” is a bastardization of Voltaire (since the expression is too easily misunderstood if you don’t know the source), but it actually has gotten some currency as an independent meme.

  17. George Phillies

    The Greeks still have a weak primary budget surplus. They have the option, when they do not get money in a week or two, of reneging on all debt issued before Syriza took power, imposing capital controls, issuing tax payment notes, maintaining the Euro, and remaining in the EU.

    Their strategy is fairly clear “People of Greece, we did everything we could to stay in their deal, and they didn’t want it. We are no longer in debt to foreign bankers.”

  18. stephen

    Thanks for another great post about Greece. One really has to wonder if the northern elite is bluffing or going for broke, that is, full-on rentier colonialism.

    I for one would love to read some analysis of the Heta situation. I had missed that and thank people here for mentioning it. I am not sure what is really going on but it seems that for awhile the taxpayer had been forced to take on the losses and then someone there in that German region had the bright idea to put the losses back onto the banks. I wonder if this the beginning of a revolt against the Euro banking racket that some of us have been hoping for. The timing seems unfortunate given what is happening with Greece. But I guess it always seems to be bad timing when the peuple don’t cooperate . I just went over to the WSJ and read an article that quoted a banker as fuming at the illegality of it all and shocked that politicians could ever think of reneging on a pledge. Ha!

    When reading about this today I was reminded of the time (way back in 2006 or was it early 2007?) I had read about that young hedge fund trader at a big French bank that was doing funky things and blamed for huge losses, as if he were a lone wolf acting on his own. I can’t recall the names right now but I do remember thinking at the time, ‘Uh Oh! What’s really going on?’ Then the Bear Stearns story came along, then . . . well you know the rest of the story.

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