Greece Talks With Eurogroup Hit “Complete Breakdown”

We said as soon as Syriza was voted into office, in How Much Success is Syriza Likely to Have in Ending Austerity? that it was unlikely to prevail:

I see three stumbling blocks for the Greek negotiating position. The first is that there seems to be no overlap between what they want and the northern bloc is likely to be willing to concede….

Second is that the best idea that the Greeks have to square the circle of austerity v. the Greeks wanting a more pro-growth, more humanitarian solution, the so-called Modest Proposal, is not modest at all from the Eurozone perspective. While it is “modest” in that it works within the existing Eurozone institutional frameworks, it is such a radical departure from the negotiating terms that the Troika generally has on the table in these discussions that there is simply no way to get agreement by summer…even if the Troika had an unexpected change of heart and was willing to be far more innovative on the policy front, as opposed to the financial smoke and mirrors front….

Aside from the fact that this plan has too many moving parts to get done in an at best six month runway there is a third, deeper reason it won’t happen. The Germans do not want deeper integration and more cedeing of power to Eurozone/European level institutions. From their perspective, they are footing the bill of their neighbors, and they therefore want to maintain a position which gives them leverage. Of course, Germany is perversely in denial of the fact that it wants contradictory things, namely, to keep running large and sustained trade surpluses within the Eurozone, and not finance its trade partners. Nevertheless, the very assumption that Galbraith set forth on behalf of Syriza, that Syriza is pro the Eurozone project working, and to them that means deeper integration, is not what Germany wants since that would require it to give up its advantaged position.

As Syriza spoke more about its vision and plans, it confirmed our initial reading, that there was no overlap between its bargaining position and that of its creditors. When that is the case in business negotiations, the talks go a few rounds and either cease due to understandable failure to make progress (or the discovery in ones mainly about price that the bid and offer ranges don’t overlap at all) or end in a huff as both sides become disenchanted with each other. In international negotiations, there is more pressure to reach any kind of a deal, even if just a face-saving, empty statement. But when talks do fail, it’s often like the Doha trade round: the parties have lots of tries, make one last push to see if they can resolve differences, and then give up with a sense of defeat and exhaustion.

Today, an important date came and went. Friday was a Eurogroup meeting. There had been a dim hope that Greece and the Troika would make enough progress and have had agreed or largely agreed on the structural reforms that the Eurogroup could conceivably have approved the release of the so-called bailout funds. But instead, the regularly scheduled meeting took place with a deal on the structural reforms still looking remote. As a fallback, the Eurogroup wanted to hear about what progress Greece had made, presumably with a goal of reaching an agreement by the next Eurogroup meeting on May 11 (note that this will be after Greece has two more IMF payments to make, and it’s already under great stress to find the funds). The conversation got ugly, as if the other ministers wanted to pick up Varoufakis by his lapels and shake him. It reads like a divorce, when partners keep having to deal with each other when they’ve decided emotionally that they are done with each other.

Mind you, the Eurogroup is not necessarily the final arbiter; Tsipras has pinned his hopes on Merkel being committed to not having the Eurozone break up and having enough clout to force the others to heel. But any of the Eurozone members could stymie a deal around the bailout; it takes the approval of all members to release the monies. And the IMF and the ECB are not happy with Greece either.

Here is a sample of media reports. From the Guardian:

Eurozone finance ministers have blasted Greece for failing to make more progress towards a bailout deal, at an acrimonious eurogroup meeting in Riga today.

Ministers laid into Greek finance minister Yanis Varoufakis for not having reached agreement with creditors, two months after being given a four month extension to Greece’s loan programme…

Dijsselbloem also warned that it is very hard to consider a new programme for Greece to cover its funding needs beyond June, given the lack of progress recently. And he ruled out giving Greece a slice of the €7.2bn bailout cash that is being held back until reforms are agreed.

ECB president Mario Draghi also showed exasperation over the slow pace, and warned that the ECB could potentially impose tougher conditions in return for keeping Greek banks afloat.

From Jeff Black at Bloomberg:

Additional detail from a later Bloomberg report:

Euro-area finance ministers hurled abuse at Greek Finance Minister Yanis Varoufakis behind closed doors as they shut down his bid to find a shortcut to releasing financial aid….

The 19-nation bloc’s finance ministers were riled after Greek Prime Minister Alexis Tsipras tried to bypass their veto on financial aid with an appeal to Angela Merkel on Thursday. Tsipras sought to circumvent the finance ministers’ authority, pleading his case with the German Chancellor and French President Francois Hollande on the sidelines of a summit on immigration in Brussels.

Under euro-area procedures, it’s the finance ministers who have to sign off on any aid disbursement and Merkel said last month she’s not prepared to override those controls.

“I would describe today’s meeting as a complete breakdown in communication with Greece,” Maltese Finance Minister Edward Scicluna said.

We’ve noted before that the Greek government has repeatedly tried to circumvent the process it agreed to in the February memorandum with the Eurogroup: of having its structural reforms approved by the Troika, with the Eurogroup next having to approve before the bailout money would be released. Greece tried sidestepping the process by going directly to the Eurogroup, of trying to deal mainly with the more Greece-friendly European Commission, and by appealing to Merkel. Greece appears to have tried the end-run gambit one too many times.

The video that was included in the Bloomberg story pointed out that Yanis Varoufakis apparently attended a different meeting than everyone else did. He said that things went well, that they were making progress.

From Peter Spiegel at the Financial Times:

Months of mounting tensions between Greece and its creditors boiled over at a high-level EU meeting on Friday with eurozone finance ministers angrily accusing their Greek counterpart of backtracking on commitments and failing to grasp the deep differences that still divide them.

Athens is running desperately short of cash and many eurozone officials fear that, without an agreement to release some of the remaining €7.2bn in its bailout programme, the government could default as early as mid-May…

The contentious session undermined claims by Greek officials that a Thursday meeting in Brussels between Alexis Tsipras, the Greek prime minister, and Angela Merkel, his German counterpart, had narrowed the differences. The claims briefly sent the euro rallying in morning trading, but those gains evaporated after news of the differences emerged….

“This game of chicken is turning into Angry Birds,” said one official from a eurozone country.

Mr Dijsselbloem said the stand-off had reached a point that the negotiating process needed to be overhauled. Officials briefed on the private talks said Mr Dijsselbloem specifically requested a return to more in-depth evaluations by Athens-based bailout monitors — something staunchly resisted by the new Greek government…

While Mr Varoufakis said the government was “utterly undogmatic” about how to speed up talks, he made clear a return to intrusive inspections by the so-called “troika”, as the bailout monitors were formerly known, was unacceptable.

“The notion that everything would be resolved more quickly if we went back to the troika visits of yesteryear … from our perspective is simply groundless,” he said.

Greek officials have expressed hope that a portion of the €7.2bn in aid could be quickly disbursed to meet immediate needs, or that the current talks could be merged into a larger, third bailout. This could take Athens through the summer, when the largest debt payments come due.

But Mr Dijsselbloem ruled out both possibilities, saying that if the parties could not address the differences at hand, other issues could not be broached. “It’s very hard to talk about the future if you cannot agree on a period of four months,” he said…

Officials briefed on the talks said some of the most testy exchanges came over how much progress had been made in negotiations to release the funds. Mr Varoufakis in his opening remarks told his counterparts that he believed a deal could be reached quickly, suggesting a conference call could be held soon to agree an aid disbursement.

But other ministers expressed incredulity at the claims, with some suggesting a deal might not be achieved before the bailout expires in June. Mr Dijsselbloem suggested next month’s meeting of finance ministers, scheduled for May 11, would only “take stock” of the situation rather than serve as a chance to reach a deal.

It is hard to see how Greece squeaks through and makes its two early May debt payments to the IMF. A default may be imminent.

I have not verified it independently but a comment on the Spiegel article (search for “spookk3) said that many local officials were deeply upset that the national government was demanding that they make their funds be deposited at the Greek central bank so the national government could borrow them to make debt payments:

Today’s papers in Greece report that the Tsipras government has received a grand total of 430 million or so in “confiscated” money from local governments to fill the state’s till. Huge sum indeed. Given that the IMF is to receive 750 million on May 7 or thereabouts. Plus a few billion due here and there. A bunch of mayors and other local office holders are going to demonstrate in Athens,refusing to hand over their money to the state unless they receive guarantees that it will be paid back.

Greece has engaged in a game of brinksmanship for months, but it looks as if the wheels are about to come off. It’s too easy to second-guess outcomes, but cooler heads had suggested that if a Grexit looked to be inevitable, the Eurozone could take measures to ameliorate the pain. The relations between the two sides are so sour that this sort of conscience-assuaging sop seems inconceivable, unless Merkel insists on it as a statesman-like gesture.

Greece was almost certain to continue to face harsh times, but the likely outcome looks to be particularly difficult. I wish the long-suffering Greek people the best of luck. They need it.

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  1. Demented Chimp

    The numbers dont add up anymore and what they are discussing so divorced from reality that it must be hard to keep a straight face. Would like to be in Yanis’s shoes saying truth to power.

    Obviously getting under their skin if they are resorting to direct character assasination – time waster, gambler amateur. Actually all the attributes that the Eurogroup have in spades.

    1. Demented Chimp

      The Cardinal Richelieu’s wont stand for such behaviour of course. Expect some terrible expose about Yani’s past to surface soon.
      “If you give me six lines written by the hand of the most honest of men, I will find something in them which will hang him.”

    2. Edna M.

      Very true. And their words have made Varoufakis more popular in Greece and maybe even abroad. Who after all would want to be praised by the Europgroup and the troika? They only approve of those who wreck economies.

      1. Yves Smith Post author

        I hate to be a naysayer, but I have experienced, personally, in my limited dealing with Yanis (this before he was elected to Parliament and in a matter having nothing to do with Greek politics) having him tell me one thing, in writing (as in it was unambiguous what he said he would do), then reverse positions after he encountered pressure from someone else, and try pretending to me that his actions were consistent. . It was bizarre and frustrating to watch. It would have been no big deal to say, oops, I’ve changed my mind, but he instead did what amounted to say “black is white” and assume I would believe him. But Varoufakis does not possess a Steve Jobs type reality distortion sphere.

        Plus tell me how it helps the Greek people to tell them the negotiations are going just fine, they are getting near a deal, when the Eurogroup turned Greece down on getting a partial payment and Djisselbloem (the head of the Eurogroup) said they will not be able to consider the bailout (giving them the money they need) at the next meeting, May 11? Greece is scrambling to raise money to make two debt payments before then and is scraping the bottom of the barrel. As we indicate, some local governments are refusing to turn over the deposits from their governments. And Syriza is not taking any steps to prepare the public for a Grexit, which may be forced on Greece in the event of default (that decision lies in the hands of the ECB). And a default does not mean debt repudiation, it means restructuring negotiations. Greece will not get off scot free.

        Do you approve of this degree of misrepresentation by an elected official? Varoufakis is telling the Greek public that he still expects to get the bailout money soon without making any concessions when the IMF, ECB, and now the Eurogroup are telling him no way is that happening.

        The creditors are telling Varoufakis that they are not kidding when they say they aren’t going to cut him slack just because Greece might/will default and he acts as if that does not matter. The fall in Syriza’s approval ratings by nearly half, from 80% to 45%, says the public is losing faith in how Syriza is handling these talks.

        1. MyLessThanPrimeBeef

          Everyone says Yanis is smart. And that reflects on us and this age, in thinking intelligence is the only or primary way of relating to each other and to the world. So, people look up to the figure on the pedestal.

          So far, it looks to me that he is better suited to being in the background, as an advisor, (if there is a grand scheme, or a deus ex machina, an ace to be pulled out of the sleeve), it being perhaps a better use of his talent, as his, um, personality seems to clash with those of other negotiators. Maybe he believes in his own unique style of, er, charm. It, however, is not coming across to his or his counterparts liking. And perceptions, real or imaginary, such as insincerity or insularity (living in his own reality) get into the way, even as, or if, we agree with him tactically (the intelligence part).

          1. Ned Ludd

            I would guess that Varoufakis typically negotiates from a position of authority. It takes a lot of courage – for someone with comparably less status – to call out an authority as a fabulist or a liar.

            Many fabulists are smart, and not everything they say is a lie. Instead, it is bullshit – which may or may not line up with the truth. Arguments are based on rhetoric and sophistry. Despite Varoufakis’ intelligence, it is best to be wary of anyone who shows a lack of concern for the truth.

          2. Dan Allen

            You guys have bought in the Eurogroup’s bullshit. They loved Stournaras who did absolutely everything they requested. Until Stournaras told them he would not cut pensions anymore. The Eurogroup has been frustrated with the Greeks since August of 2014. People, we are here because the previous gov’t called an election in November because of complete frustration with the troika.

            Yanis’s position is that the troika medicine has failed. They say he is clashing with them? How, by pointing out their policies are failures? That’s clashing, right? It is. It is the actual position of the Greek govt. With further cuts, the debt deflationary spiral gets worse, thereby absolutely solifidifying Greece’s place outside the eurozone. The only thing that will save it something a lot more sensible.

            And they don’t like Varoufakis because he’s telling him the actual Greek position. It’s amazing. It’s as though the previous 5 years never happened, people have bought the entire public relations smear.

            1. Yves Smith Post author

              Please read the extensive coverage of the breakdown of the negotiations yesterday and point out where the Eurozone ministers criticized Varoufakis for calling out Eurozone policies. They are annoyed because Greece agreed to a very clear process set forth in the memorandum it signed with the Eurogroup in February as to what it had to do to get the funds it wants. It had to deliver a set of structural reforms that the Troika would deem acceptable and the Eurogroup would approver.

              Greece has instead done everything BUT follow the process it agreed to. It has repeatedly tried end running it, only to be told each time, “No, go do your part as you agreed.” Had you bothered reading the post. as opposed to reacting from your prejudices, you would see that the fury was over Greece pulling yet another stunt like that rather than delivering a more detailed structural reform proposal so the Troika could assess and negotiate it.

              Even though the pensions are a clear point of contention, there is no evidence that that was discussed at all yesterday. The Troika has made clear that cutting pensions is something they regard as an important commitment for Greece to get more funding. Like it or not, this is their game, their bat, their ball. The only way Greece MIGHT be able to satisfy the creditors on this issue and keep the pensions intact is to make cuts elsewhere to make up for preserving the pensions. They have not presented a plan that accomplishes that.

              The growing anger is that the creditors have told Greece it needs to deliver detailed plans for them to assess. Greece has not delivered anything remotely specific enough for them to evaluate. The creditors keep saying, “This is not up to snuff, we need more detail and information” and Greece keeps showing up with more or less the same caliber of plans.

              From their persepctive, Greece is either choosing to jerk them around or grossly incompetent and arrogantly in denial of how incompetent it is. Greece is going to default and may well have the ECB shoot its banking system in the head, and the Greek authorities keep acting as if they play the same game, the creditors will fold and give them the money. The authorities have tried delivering the message both through words and actions that this is not happening. Greece is acting as if has the upper hand when it is a supplicant (as in it has taken none of the steps to prepare for a disorderly Grexit, the most important being imposing capital controls).

              Greece is not speaking truth to power. With all due respect, this is your fantasy.

              As we discussed elsewhere, Greece has already capitulated on the most important issue and has agreed to continue to wear the austerity hairshirt by running primary surpluses. But Greece is continuing to fail to deliver even remotely adequate plans as to how it intends to live up to its bluster.

        2. flora

          “having him tell me one thing, in writing (as in it was unambiguous what he said he would do), then reverse positions after he encountered pressure from someone else, and try pretending to me that his actions were consistent. . ”

          A common occurrence in academia.

        3. Dan Allen

          How do you prevent the complete collapse of the banks if you announce to the people, “Things are going incredibly badly?”

        4. Tsigantes

          Yanis is NOT telling the greek public that he expects to get the bailout money soon. Far from it. Greeks are an extremely well-informed people politically and don’t require talking down to or ‘informing’; we gather our information by ourselves and don’t surrender that responsibility to politicians. Nor do we rely on the Anglo-American press.

          Please note that when Yanis gives interviews for the international press he speaks English: i.e. he is addressing an international audience.

          Meanwhile, 45% support is higher than the support SYRIZA had going into the election, and describes a comfortable majority. Broad enough to include the 4% that Golden Dawn has lost since the election.

          1. Yves Smith Post author

            You are straw manning my remark. You are also misrepresenting what Varoufakis has repeatedly done. He says, as he did again yesterday, that the talks are going well and that Greece made progress with its creditors. Please tell me how saying that you “made progress” does not imply that you are getting closer to a deal. In fact, as extensive and consistent media reports state, Greece and the other Eurogroup members had a terrible session, to the point where Eurogroup head Djisselbloem basically said, “Forget about getting to a deal on our May 11 session.”

            There were expectations before the meeting (see the Greece-friendly Guardian on its live blog, for instance) that Greece and its creditors would indeed narrow some of their differences yesterday.

            There are acceptable ways to obfuscate when things are going badly. What Varoufakis is doing is not that, He is baldly misrepresenting the state of play.

            Yes, there is not doubt enough media reporting from many sources for the Greek public to get a good reading of the state of play. But there is no way to pretend that the government is giving the people anything approaching the straight scoop.

            And that is showing up in poll ratings. Yannis Koutsomitis (@YanniKouts) tweeted today:

            #Greece poll [Kapa Research] – Feelings from government policies:

            Worried 52.9% (34% in February)
            Angered 32.6% (2.7% in February)

            1. Tsigantes

              I have no idea what straw manning means.
              I do know that even accepting the oligarch-owned To Vima poll [Kapa] as straight that 52.9% being worried is perfectly natural – I am worried too. The 34% worried in February represents ND+PASOK+Potami: a natural number. Ditto ‘Angered’ now: this can be interpreted as the same ND+ grouping but also anger at the Troika/Eurofin.

              Unfortunately there is no english language Greek press that is not oligarch owned and therefore can be considered reliable. They hate SYRIZA worse than the Europeans do and have much more to lose. The best bet in English are certain blogs such as press, MacroPolis and keeptalkinggreece..

        5. kemal erdogan

          Dear Yves,
          Your statements about Yanis is very harsh. Are you talking about the email that you quoted before, saying “we will not capitulate” before the February agreement? Of course, they essentially gave a lot of ground (hence actual capitulation for you I suppose). If that is so, I believe you are not fair to him. Such agreements are not made by a single person and surely a collective decision was made to that effect.

          I have been following his writings and speeches for quite some time. He likes himself a bit too much (which I don’t appreciate really) but I believe he actually meant that he would not accept such an agreement; I think he thought the other side would blink. This is what I conclude from his writings and speeches.

          Most probably the February deal was actually agreed by Tsipras and his clique in spite of his disagreement. I suppose Yanis could have resigned at that moment as that would be the most respectable act for his own sake. But, I also believe he cares about his compatriots and that perhaps he believed his resignation would be detrimental to the standing of the Greek government. All that is speculation of course, but that is my hunch.


          1. kemal erdogan

            Upps! forget my first paragraph. Sorry, your entrance completely failed to register in my mind. Now, grasping fully what you mean, I am puzzled. Perhaps that has also something to do with having too much self indulgence. Pity.


  2. Dino Reno

    It appears Syriza’s wants to avoid a Grexit and restructure its debt. So what does a Greek default inside the Eurozone look like? Can Draghi bailout Germany’s Greek debt along with all the other sovereigns and make it go away? EU QE seems to provide ample opportunities to print their way out of the problem. Bonus feature: More Euro devaluation!

    1. Yves Smith Post author

      No, you are missing what the impasse is about. They are not negotiating about debt. The Eurogroup has said they won’t talk about debt levels and structure until Greece gets past these so-called bailout negotiations

      This fight is about structural reforms. Greece must submit a package of structural reforms and have them approved by the Troika and then ALL members of the Eurogroup for it to get €7.2 billion Greece needs. The deal is that Greece has to start from the existing package of structural reforms but it can make changes IF it can persuade its creditors that it won’t have a negative impact on the Greek government’s finances.

      The old package called on Greece to make “reforms” to its pensions, as in reduce them. Greece has the highest level of pensions relative to GDP of any EU country. Now in fact, when you adjust for demographics (Greece has an aged population) the level of pensions per person/household is not that high. However, it is a pretty much impossible sell politically for EU politicians to tell their taxpayers to give Greek citizens better pensions than their own citizens (in most cases) get. That is one of the big, if not the biggest, sticking point.

      Greece has a case it could make. I saw a story (IRC it was the Bruegel blog) that went through the pension issue in detail and showed why the Greek pensions weren’t unreasonably high. I have yet to see any Greek official make remotely that sort of case in the media, or related points: cutting pension spending in a depressed economy will only worsen the contraction and make the debt to GDP ratio worse; it would also worsen the humanitarian crisis and be at least partly offset by increases in other spending, etc. Instead, the government’s reaction has been “Voters want us not to cut pensions, how dare you tell us what to do?” This has only alienated opinion against Greece. And that matters because as we said at the very outset that Greece would never win on its own, it would need international support.

      Similarly, Greece should have been saying from the outset, “We have been been diligent about implementing structural reforms. Your own studies show that Greece has implemented more changes than any other IMF country. And we have the worst economic results to show for our efforts and sacrifice. We are still keen to implement reforms that will help us function better, like improving tax collection.” Instead, by digging in its heels over the negotiations, Greece has fed the misperception that it has not done much and it refusing to take its medicine.

      Greece has not made its case when it had a good one to make. As a result the only support is has is among those who were on its side already. And what little there is of the European left has not ridden in to the rescue or made much noise in the mainstream media.

      1. Brooklin Bridge

        Your willingness to explain again and again, really pays off over time (and by “again and again”, I in no way mean to imply any negative for the commenters you respond to) and I am really grateful for this repetition. Each time you present the information in a slightly different way that sheds light on an aspect one might not have paid attention to and gives (amazingly) a fresh view of the same tragic situation. That detail the other day, for instance, about the meaning of the acronym Syriza (radical left) although that is a rather narrow example. Another thing I find amazing is how you have maintained a cool (objective) view of Syriza and the players while at the same time being deeply sympathetic to the catastrophe that is taking place. Others covering Greece frequently fall victim to taking sides based on their sympathies; you maintain a balance seemingly with ease. You have noticed how hard it is for some of us to maintain a very natural deep sympathy for the victims and at the same time an objective view of the increasingly serious inconsistencies and weaknesses of the moderate Syriza players even though they themselves have a lot of legitimate reasons for many of their complaints – after all, Greece is being rolled – yet you are willing to explain (and be the “naysayer”) with sincerity and respect for your commenters, again and again. So take that!

        1. vlade

          Absolutely. This is, why I have/had more than a few differences with Yves (including on Greece, where she was right and I wrong), I still love the blog. It doesn’t matter (well, most of the time ;) ) who spews nonsense, Yves is willing to call all of them equally.

        1. Yves Smith Post author

          1. We said from the outset that defaulting in place was the best of Greece’s bad options.

          However, we have ALSO said

          2. Greece is not in control of whether it will be able to default and remain in the Eurozone. The ECB has made it clear that is is very uncomfortable with how much credit it has extended to Greece under the ELA, and that it is clearly propping up insolvent banks when the ELA was designed to be use only for short-term liquidity crises. If the Greek state is insolvent (which is what a default would mean), it is not clear that the ECB would feel it could continue to support the Greek banks.

          This is not just the ECB being mean (and it has been mean). A former IMF official polled three former central bankers on the matter of the ELA. One said he would have cut the ELA under circumstances that have already occurred. A second said he would keep the ELA going ONLY if Greece were continuing to negotiate. Now admittedly this is a very small sample, but it suggests that a majority of central bankers would cut off the ELA in the event of default.

          In addition, the ECB has taken a step that makes clear that it is not likely to be generous to Greece. It says it is considering increasing the haircuts on the collateral the Greek banks have. This is a way to force a collapse of the Greek banking system (by revising the conditions in light of Greece’s worsening financial conditions) so that it can’t (as in won’t) give the Greek banks enough ELA support to stay afloat.


          3. If you intended to default and stay in the Eurozone the strategy would have been to impose capital controls (to reduce vulnerability to the ECB) and to play super cooperative with the Troika while not getting to an agreement. You have lots of busy-looking negotiating sessions but make sure you debate things endlessly and make hardly any progress. The Japanese are masters of this sort of thing.

          Provoking the Troika makes no sense if you need their indulgence for your plan to work.

          So that means

          4. The odds are greater than 50/50 that if Greece defaults, the ECB will end or limit support under the ELA. That will force the Greek government to impose capital controls, nationalize the banks, and issue drachma to recapitalize them. It’s a de facto Grexit

      2. Dan Allen

        Biggest pensions in terms of GDP is not the biggest pensions. GDP has collapsed by 37%, and they’ve slashed pensions by a huge amount. Because people weren’t getting paid in 2010-2013, there were a lot of early retirements. Only 9% of unemployment benefits were paid in the last 5 years. People started plowing into the pension system since it was the only one that was paying out (not jobs, not unemployment), and the thing ballooned in total.

      3. MaroonBulldog

        “Greece has not made its case when it had a good one to make.” If so, then the advocates for Greece are terribly incompetent. The way to make a case is to make the strongest argument one has, and to forsake and abandon all the others ( the alternative arguments not so persuages), and either succeed, or otherwise fail nobly. The course that Yves describes is shaping up not only as failure, but as ignoble failure

      4. Sibiriak

        Yves Smith: This fight is about structural reforms.


        And you think Syriza can’t win anything on that issue by brinkmanship, so they should just capitulate ASAP, agree to the Troika’s demands, and end the show–since Grexit would be worse than any amount of austerity?

  3. gardener1

    Somebody enlighten me here because I’m stuck. (just your average nobody)

    1. Greece owes more money for ??? loans than it will ever be able to repay.
    2. The creditors keep loaning the Greek government even more money than it will ever be able to repay, in order for Greece to make interest payments on loans more than Greece can ever pay.
    3. Greece says that they can never pay off the debt.
    4. Creditors demand that Greece make promises to borrow more money for debts that Greece can never pay.
    5. Greece says no.
    6. Creditors demand ??? more loans. That cannot be paid.

    And they want to call Varoufakis an incompetent double dealer? He’s the straight man here. This is a clown show.

    Whatever kind of ‘business’ arrangement this is, I don’t get it. Who demands loans and payment from a debtor who has already told you they don’t have any money and cannot make repayment on the debt they owe? Then you demand they borrow more money.

    I must be stupid. I just really honestly do NOT see how this works, even on paper. Seriously, I don’t get it.

    1. financial matters

      This is standard IMF-type policy. Lend money in a foreign currency. Demand payback at all costs even if the loans need to be restructured. In the meantime proceed with asset stripping.

    2. Mr. G

      Your confusion is reasonable. The common media do not truly understand the situation and therefore describe it only superficially. By analogy think of it this way…Greece borrowed a lot of money on its credit card. The EU + IMF gave them a home equity loan to pay that debt off. The home equity loan for Greece has substantially lower interest rate and longer maturity. This lowers their annual debt payments as a percentage of tax revenue substantially starting in 2016. Because of the sums involved and because the EU and IMF wanted to ensure Greece would not get in this situation again, they agreed to payout the home equity loan in tranches in exchange for the Greek government instituting reforms which would make them more efficient. The reforms =austerity. The Greek people are tired of it, and elected Syriza to end the reforms. Hopefully this gives you some handles to start from.

      1. Pookah Harvey

        Don’t forget to mention that the credit card company authorized a credit limit of $17,500 on the card when they knew Greece had an income of only $10,000. Both the creditor and debtor used bad judgement. The Troika forced the loan on Greece to pay the creditors {European banks} and take them off the hook thereby unjustly laying the full blame on the Greeks.

        1. MyLessThanPrimeBeef

          The worst sin is that they borrowed from the real mafia.

          “You are on the hook even if you can’t pay now, or ever.”

        2. Mr. G

          No Pookah. The credit card issuer was Greece itself. They issued their own bonds well before joining the Euro, then proceeded to issue more bonds after joining the Euro. The Troika ( EU, IMF, ECB ). Issued the home equity loan to save them from themselves.

          1. skippy

            All of which would have not occurred if Goldman Sachs had not sold Greece that dodgy bit of – spaghettification of debt – out past its reasonable event horizon.

            Just to circumvent “lawful barriers” of entry into the EU.

            Skippy… so you have a non sovereign 3rd party which plays a key role.

            1. norm de plume


              The Goldman Sachs shenanigans were:

              conducted not by ‘Greece’ but by members of a Greek elite that (a) have bled that country for two generations, (b) whose interests are more aligned with the bankers behind the ECB than their own countrymen (e.g. Papademos, Christodolou), and (c) have shifted their wealth out of the country en masse ever since The Troubles began,

              performed on the watch of the gimlet-eyed Mario Draghi who has since ascended to the throne at the ECB, which although admitting knowledge of the swaps by April 2009 has refused access to the relevant documentation.

              Questions remain as to whether Goldman profited from the improper arrangements but certainly they unlike other market participants were in a position to ensure that they did not lose. Handy then to have an alumnus in charge of the ECB to ensure foreknowledge wasn’t acted upon and then covered up when that foreknowledge was revealed.

              ‘The credit card issuer was Greece itself. They issued their own bonds well before joining the Euro, then proceeded to issue more bonds after joining the Euro. The Troika ( EU, IMF, ECB ). Issued the home equity loan to save them from themselves’

              Oh what magnanimous institutions they are! How lucky Greece was to have them about, eh?

              ‘they agreed to payout the home equity loan in tranches in exchange for the Greek government instituting reforms which would make them more efficient’

              Except that it didn’t and isn’t, unless by ‘more efficient’ you mean ‘transfer the assets of the nation to the bankers with more alacrity’

              ‘The reforms =austerity. The Greek people are tired of it, and elected Syriza to end the reforms’

              The Greek people are not tired of being made to be ‘more efficient’, they are tired of being ‘legally’ robbed, both of their wealth and their national sovereignty.

          2. Pookah Harvey

            So your argument is that the creditors were not responsible because when they issued the credit card they knew the Greeks had only a $10,000 income AND were already deep in debt. Yes I can see how that makes a difference..

            1. Pookah Harvey

              Besides Mr. G, if the Greeks issued their own credit card they would have borrowed the money from themselves, meaning they would have no debt. You need a better analogy than that.

    3. jgordon

      Hah, that’s how the entire monetary system works at the moment: everyone is extending credit that will never be repaid. Bad debt is choking the system and the all-powerful sovereign monetary authorities are doing all they can to hide that their little monetary system is at a dead end. Greece is just the most visible manifestation.

      1. docg

        There is only one reason for loans that can never be repaid to be extended in order to pay back older loans that could never be repaid if not for the newer loans. The point is to indefinitely extend the moment when any loans will actually have to be repaid by the borrower. What is being borrowed from is the future. And the idea behind it is that the future need never come as long as the sham is maintained. It’s a type of Ponzi scheme. Only it’s not illegal. Yet.

      2. MaroonBulldog

        “Hah, that’s how the entire monetary system works at the moment”. The Old Testament speaks of a time “when the money failed in Egypt,” though I think the translation may not be literal, because the statement was made in reference to a time centuries before the invention of stamped money. But I digress.

        You could equally well have said, “that’s how the entire monetary system fails at the moment.” Whether it’s working or failing may depend on one’s point of view, since what is counted by failure by most of us may be counted as success for the criminals who stand to gain some advantage from the corruption of it all.

        I am having a hard time getting to my point today. Maybe my money is not all that’s failing. Anyway, I insist that the money is failing, even though you do not see it collapsing everywhere all at once. No, first it collapses here, then over there, then yonder. Maybe we’re all Greeks now, or if not yet, in a little while.

    4. bh2

      Unpayable debt will never be paid. Obvious. Adding more debt simply ups the amount that will never be repaid. Obvious. Greece will default. Obvious. With the debt written down to an amount which can be repaid, Greece will eventually recover economically. Also obvious.

      1. MyLessThanPrimeBeef

        Never take a loan offer from the gangsters.

        Stay far, far away, so you don’t even have to refuse it (that’s an insult to them).

    5. Yves Smith Post author

      No you do have this wrong.

      1. Greece says it DOES want money. It is trying to get €7.2 billion in bailout funds from the Troika and the Eurogroup.

      2. Greece has said it will never miss a payment to the IMF, as in it WILL pay its debts. Varoufakis even said he would squeeze blood from a stone in order to pay the IMF and is doing just that (borrowing against pensions which means they won’t have the dough to make full payments in the near future, and now demanding that local governments turn over their deposits for the national government to take, um, borrow them to make the May debt payments.

      3. Greece has said it will continue to squeeze its people by ALWAYS running a primary surplus. That is contractionary in any economy, even more so in one already in depression. Despite its bold talk, in fact Syriza is totally on board with austerity, provided it is toned down a bit.

      You have been misled by Syriza’s PR. You need to follow their actions.

      1. JamesG

        My question is WHY does Greece want money and why does it want to stave off a GREXIT? Certainly the whole mess is a long chain of corrupt politicians in bed with a bunch of corrupt bankers scheming to strip/privatize Greek hard (in the form of tangibles like railroads, water, etc) and soft (pensions, natl treasury etc) assets. That operation has been repeated over and over on various 2nd and 3rd tier countries. For the Goldmans and their ilk there is money in poverty. The mystery, to me, is why not just bite the bullet and rebuild.

    6. German native speaker

      “And they want to call Varoufakis an incompetent double dealer? He’s the straight man here.”
      Not really. Mr. Varoufakis, when appearing on a widely watched German TV show in March, told the German audience that ‘Greece only has a small liquidity problem’. Of course, most people in Germany know that the debt cannot be repaid, and would like to put an end to the “pretend and extend”.

  4. Mr. G

    It is time for Syriza to concede. Live to fight another day. Think Return of the Jedi. Transformation of the EU will require allies, time and bigger reasons.

    1. ambrit

      It’s time to consider a “Government of National Unity” and prepare for seriously hard times in Greece. Either basic outcome of this economic loansharking will be horrible for the Greek people. One might as well start thinking long term and adopt those policies that insure Greek sovereignty and continuity far into the future. Nationalism does have its’ merits.

      1. Mr. G

        If the choice is between a 10% haircut to pensions vs a 50% reduction in the real value of those pensions, then I think the people will choose an honorable compromise over Drachmatization. Similarly if the choice is,between 26% unemployment or 60% employment then the honorable compromise wins. If Syriza is indirectly angling toward Grexit by seeking to blame Euro peers for “pushing them out”… one will be fooled. They are in charge of their ship and what happens under their command is their accountability. National policy is cemented in self interest. They know Drachmatization is horror show and an end to their power.

        1. ambrit

          I contend that this drama is leaving the realm of economics behind and entering the field of national identity politics. That is where the so called “fringe” political parties get the most support. Appeals to “the People” or “the Motherland” are sure fire bets when times get tough. The figures you cite may be true on a strictly intellectual level, but the life of a culture doesn’t run strictly along “intellectual” lines. Many political movements and power grabs have relied on an individuals emotional attachment to a symbol. Wave that symbol around enough and “strictly intellectual” arguments go by the wayside.
          Syriza is an emasculated power once the Eurocrats austerity policy is seen as being triumphant. That is why I mentioned a Government of National Unity. Syriza will need the support of the full spectrum of political actors to push forward any meaningful change in the status quo. Syriza was elected precisely on a platform rejecting the status quo. Repudiate that platform and Syrizas mandate collapses. (It looks to be collapsing as we speak. Syrizas poll numbers in Greece are going off of a cliff.)
          The final point to be made is that, in the lives of states, economics is always subservient to politics. The thirty year run of Neoliberalism and “Trickle Down Economics” in America and the West in general demonstrates that.

        2. Oakchair

          Greece has a significant amount of net foreign debt, and a primary budget surplus. Defaulting and getting kicked out of the Euro only means a reduction in pensions or other benefits if the government decides to create a larger surplus.
          Currently the ECB is refusing to allow Greece access to QE and is hinting at ending its support of Greek banks. There is no economic reason to not default and risk getting kicked out of the Euro in fact all economic data and logic says that would be the best course of action. Instantly Greece producers would be made competitive, the government could end and reverse (a portion) of the austerity measures, Greece would have more net wealth, it would be able to managed its own currency and adjust to shocks.
          Money only represents what an economy produces its not an actual product (unless there is demand to hold a currency which since Greece can’t produce Euro’s this doesn’t apply) Greece changing its accounts with a drachma symbol vrs a Euro symbol does not change what is produced by Greece..

          1. Benu

            Just an observation, by a non-econ person — tourism is a big part of the Greek economy and having those transactions valued and paid in Euros would seem to be very advantageous for that sector of the economy.

            1. Tsigantes

              Are Euros important for tourism?
              Yes and no.
              Our biggest tourist group are Russians, followed by non-Europeans. EU tourists spend the least: some are from eurozone countries, others not.

          2. docg

            Yes. And there is no reason why Greece could not be self-sufficient as far as food, clothing, shelter and health care are concerned. If they are able to cement a good relationship with Russia, they could be supplied with oil and gas, as well as medical supplies and pharmaceuticals. As I understand it from a friend, the people in the countryside are not seriously affected by the current situation as they are already self-sufficient.

            All Greece needs to do is default. Completely and totally. Then they will be free to mold their own destiny.

          3. Yves Smith Post author

            Yes there is. Most estimates are that Greeces’s GDP would fall 20% upon a Grexit. Please tell me how an economy in a depression withstands a blow like that. Varoufakis has dismissed a Grexit for this reason.

            Second, as we have reported earlier, Greece’s current primary surplus has been achieved only via means that are unsustainable, such as deferring payments to vendors.

            Third, Greece’s tax receipts will fall sharply when its economy contracts due to the Grexit. That means bye bye primary surplus. Of course, Greece could simply “print” but that will weaken the drachma even more, which plays into…

            Fourth, drachma will be worth less than Euro. That means that Greece will find essential imports that is is already finding it hard to afford, like pharmaceuticals, will become even more costly in local terms. And if it “prints” it will plug its budget hole but make the import problem worse.

            Fifth, a default does not mean Greece has repudiated its debts. Look at Argentina. It will still have to negotiate a deal with its creditors.

            Six, Greek citizens will be able to sue Greece for the loss of their rights as EU citizens (various legal analyses have concluded that a Grexit means an EU exit; Varoufakis agrees with this reading, since he has mentioned the loss of important EU agricultural subsidies as one of the costs of a Grexit). It is conceivable they could lodge those cases in EU courts.

            1. Bobbo

              Yves asks: “Most estimates are that Greece’s GDP would fall 20% upon a Grexit. Please tell me how an economy in a depression withstands a blow like that.”

              Answer: Devaluation. It’s a necessary step to jump start an economy in depression. One needs to consider the tradeoff that short term pain may be necessary to turn things around.

              Yves says: “Fifth, a default does not mean Greece has repudiated its debts. Look at Argentina. It will still have to negotiate a deal with its creditors.”

              Answer: In that case, the solution is to repudiate the debt.

    2. kemerd

      EU don’t want to win an argument, they want Greece to submit. Not only that they want to make sure that Greece would be made an example of what happens when you do not obey the orders of EU overlords. They will extract blood from Greece until they feel like it is enough. Thus a long term pain is inevitable in either case. Since they will be suffering anyway, exiting the euro and at least trying would be a much better choice.

      1. Mr. G

        As Yves has pointed out on this blog before….drachmatization is A dramatic wholesale reduction in the real value of the Greek Economy. It is not akin to austerity. It would be much worse with no clear outcome. A military dictatorship could not be ruled out were Greece to revive the Drachma. Do ordinary Greeks really want to risk living without say/vote in their country? Those who banter about the drachma being an “option” are ignorant of the severe short term geo-political-Economic consequences or have very dark motives indeed.

        1. financial matters

          This proposed devaluation is not accepted by everyone.

          Out of the Euro strait-jacket, Alain Parguez

          “Would there be an unbearable depreciation of the new currency leading to a collapse of purchasing power ? The sensible answer should again be NO ! The inverse is to happen ! The Euro will soon strongly depreciate relative to the new engine of growth currency.

          This proposition stems from the theory of exchange -rates. According to the general theory of the monetary circuit (Parguez and Seccareccia 2013 ) the real value of a currency is the amount of real wealth created by productive expenditures in this currency. To be simple it is positively related to the rate of effective employment. Thereby the real or natural exchange-rates is equal to the ratio of effective rates of unemployment.

          Now the effective exchange-rate is determined by “speculation” bets on the relative market value of the currencies. The effective exchange-rate should converge towards the normal rate and stabilize at this level, or at least gravitate around it. This theory is supported by second empirical data for Argentina (Forstater 2012 ).”


, Warren Mosler

          “Not to forget that ongoing tax liabilities will be payable in drachma, and Greece is currently running a primary surplus, which means there will be a severe drachma shortage in the economy and a strong desire to sell euro to buy drachma.”


          Bill Mitchell

          “This is a common claim. That the currency will depreciate so much it will wipe out any real prosperity as a result of the devalued savings (expressed in drachma).

          Why would that happen? Foreign exchange parities are determined by supply and demand.

          Who would be issuing the new Drachma? Answer: Only one institution – the Greek government via the central bank.

          What is the current volume (supply) of new Drachma in the foreign exchange markets? Answer: zero – it doesn’t exist.

          If the Greek government restricted its supply but were able to require people to demand it – to pay taxes etc – then why would the currency depreciate violently in the period after issue?”

          1. Mr. G

            So if I’m a business or individual in Greece and I get paid in new drachmas by the government, but all my debts are in Euros and my suppliers and business partners are requesting payment in Euros…then what do I do with my drachmas? I sell them to buy Euros. That’s the link that Bill Mitchell misses. He assumes that Greece becomes a closed economy and the world disappears. I concede that the amount of devaluation is debatable….but the notion that the drachma would stay at parity or appreciate relative to the Euro is not born out by history, and also brings into question what productivity value a newly issued drachma would give Greece?

        2. Oakchair

          So In order to give Greece a say in government Greece needs to listen to unelected Greek finance minsters of the Euro, remind me what was your goal again?
          How is changing the symbol behind money from a Euro to a Dracham decrease what is produced? I find it hard to image going from E to D would cause producers to suddenly stop or stop being able to produce goods. However Greece not having to send billions to foreigners would allow greece to reverse austerity which would allow more to be produced. And Greece being able to print its own currency would allow that to occur which would increase flow in the economy causing more to be produced.
          Greece has 26% unemployment and is in an economic depression, its far right neo-nazi party which dislikes democracy and praised its former dictatorship has leaders who are currently either in jail or being tried for crimes and you imagine greece getting more control over its economy would result in the overthrow of its democracy, how? Please explain how the powers at be will suddenly go, “you know what 26% unemployment was bearable but now being in control of our currency and not giving German and French banks billions of our wealth is something we can handle lets screw democracy.”

          1. norm de plume

            Yes, the choice is being framed as ‘keep living on your knees, or die on your feet’ with ‘stand upon your own hind legs’ apparently not being an option.

  5. Schofield

    Money is not a thing. It’s a “relationship debt” in the shape of efflux and reflux transactions on a balance sheet. What a healthy economy needs is lot’s of individual balance sheets operations effluxing and refluxing so we can can do each other “favors,” contract with each other to produce the goods and services we all need. Private banks can’t sustain this double process of “effluxing and refluxing” on it’s own because it wants to profit from it through the payment of interest which is “efflux.” A balance sheet accounting of the domestic private sector as a whole shows that piling “efflux” upon “efflux,” or rather interest upon interest, or rather profit upon profit is a Ponzi operation because aggregate “profit” has to come from somewhere and the only logical place it can ultimately come from is a sovereign government. This is also true of a global balance sheet accounting exercise ( the United States is a main supplier of “profit” or “efflux” to other countries). Private banks are therefore no different than any other business they are in it to make a profit by taking a position in a multiplicity of balance sheet transactions enacted by their customers. In consequence the Eurozone can’t operate successfully until it realizes that only a single sovereign government can support the multitude of balance sheet transactions necessary for a unified healthy Eurozone economy.

  6. JTMcPhee

    All complicated stuff. Again, from the unsophisticate’s view, why is it that the Greeks have to abide by a bunch of text (that is subject to interpretation, of course) when German banks commit fraud with the LIBOR, EU institutions and national elements and “business interests” conspire with our Empire to trash other nations’ sovereignty and steal their stuff (Ukraine, and lots of others), when our own rulers refer to similar foundational texts as “quaint” and no longer operative and act as if they in fact are inoperative (NSA, police state, “too big” or too “defense” to f_ck with, “property rights” for little people?) except as a club to beat the unwashed and unbeneficed with.

    We are assured repeatedly by those intimately familiar with the Eurotexts that there’s no way to exit, that debt must be serviced whatever the cost apparently because “ruleoflaw” which the rulers flout on a whim or at will or change the rules to suit themselves, that unlike other contract law, impossibility of performance is not a defense to enforcement (which in our system, historically, required the plaintiff seeking to enforce to approach the bench with “clean hands,” patently not the case when it comes to EU rulers and central banks.) And bankruptcy only applies to corporations wanting to steal pension funds and avoid their other obligations, no “fresh start” for ordinary people or “weak governments” via that route.

    Big “agreements” like the EZ have historically come apart, often violently, no matter what the “texts” say — people obey and follow agreements only to the point that it’s not suicidal or terminally painful. Or if their elites see a chance at a Bigger Better Deal. Folks who post here no doubt have plenty of examples readily to mind of the fraud and rank hypocrisy of our rulers. Though too many of us seem to have swallowed, whole, the notion that little people in deep and irretrievable debt or subsisting in the lowest levels of poverty are there because they are lazy, incompetent, “it’s their own fault.”

    So one has to enquire what intimate familiarity with the words of the various documents counts for, when the fundamental nature of the system is no longer consonant with the puffery and selling points of “featuresandbenefits.” And the real nature of the larger frame of the political economy becomes clear as a pretty pure manifestation of parasitism and cancerous disease state. And where does “sovereignty” stand, any more? Looks to me that “we” are on a path to devolution and demolition, that becomes even more painful to the crush-ees when they know that the individuals who are the architects and managers and executioners of the growing horror are personally IMMUNE to and way above any consequences for the pain their pleasure-seeking imposes on the rest of us.

    There are a few people who are trying to soften the Damascus-steel edges of the swords and axes we’re being disjointed with. Not enough, never enough — and there are a few people who are setting up to try to survive what’s coming in little small invisible communities. There’s a lot of reference to polls here, as proof of one thing or another. I wonder what a poll of NC readers would indicate, just on the one point of how the Greek Drama will play out. And when the Crisis will come, and what the denouement will look like.

    1. Schofield

      The relentless imposition of payment of debt led to the collapse of the Roman Empire according to Peter Turchin ” War and Peace and War: The Rise and Fall of Empires.”

      1. djrichard

        Came across this in 334 by Disch (wetted my appetite to learn more, waiting for Origins of the Medieval World by William Carroll Bark to arrive):

        … Salvian, a priest of Marseilles, described the process whereby the free citizens of Rome were gradually reduced to a condition of serfdom. The upper classes had arranged the tax laws to their own convenience and then administered them crookedly to their further convenience. The entire burden of supporting the army—Rome’s army, of course, was vast, a nation within a nation—fell on the shoulders of the poor. The poor grew poorer. Finally, reduced to utter destitution, some fled from their villages to live among the barbarians, even though (as Salvian notes) they did give off a dreadful odor. Others, living far from the frontiers, became bagaudae, or homemade vandals. The majority, however, rooted to the land by their property and families, had to accept the terms of the rich potentiores, to whom they made over their houses, their lands, their possessions, and at last the freedom of their children. The birth rate declined. All Italy became a wasteland. Repeatedly the Emperors were obliged to invite the politer barbarians across the borders to “colonize” the abandoned farms.

      2. MyLessThanPrimeBeef

        I think The Prime Mover for the collapse was not the imposition of payment of debt.

        Something came before that.

        It was the burden (excess taxation?) of supporting imperial adventures, that is, satisfying the legions. That would prompt borrowing and, later, imposition of payment of debt.

    2. Yves Smith Post author

      Please read this comment:

      Most readers have not paid close attention to what the ruling coalition has said and done.

      By saying from the outset that it was pro Euro and pro EU and reaffirming that repeatedly, the new government volunteered to stick with “all that complicated legalistic stuff” you try to dismiss. Greece has wanted to achieve objectives that are internally inconsistent

      1. MyLessThanPrimeBeef

        From below, by James Tennier, posted at 10:39am:

        Screw the IMF and the German bankers. They should never have fallen for the Citi/GS lies in the first place. For 85% of “new money to Greece to used to service existing debt is criminal.”

        And Varoufakis is working within that framework, only if we can all agree to turn down the austerity to a more acceptable level.

        You, the reader, have to decide if that is the right move.

    3. Linus Huber

      @ JTMcPhee

      This is definitely the best comment here.

      What means the rule of law, when the rules are set by those who simply have the greatest influence (power) to serve their own benefits? What means democracy if elections do not matter? What is the influence on trust and confidence by implementing policies that institutionalize moral hazard which is nothing more then legalized theft? What kind of perspective and hope is created for a people when the debt mountain simply increases further? What means money when there is no distinction to credit as the costs of credit risks are simply transferred to the general population via monetary policy? ….

      Times will be hard for the Greek people in any case but the wellbeing of a population depends to a large degree not simply on the present circumstances but on the feasibility to improve one’s livelihood within a reasonable period of time. To avoid the bankruptcy, even if associated with a higher degree of temporary hardship, is killing the chance to regain hope and a new perspective.

      1. Yves Smith Post author

        The new government, reflecting the popular vote in Greece, wants to stay in the Eurozone.

        It is Eurozone’s game, their ball, their rules.

        1. Linus Huber

          Yes, they presently seem to want to stay in the EURO Zone. To stay in the EURO Zone does not necessarily mean to negate bankruptcy. I do not agree with all aspects of this new Greek government but simply put forward my own thoughts, e.g. I find it nonsensical to make any payments in this context except in the rather questionable hope to get more money back within a short period of time. When however no new money will be spoken, the attitude will probably change within a matter of months and every Greek will change their opinion. The simply fact is probably that as long as more money flows in the direction of Greece than out of Greece, the Greek population will be in favor of the frame work, sustainability be damned.

        2. Pookah Harvey

          But what if the rules are self destructive. Peaceful protesters often use civil disobedience to make a point concerning unjust government actions that are destructive to society. They don’t just exit the society.
          Varoufakis has often written of the destructiveness of the 2010 bailout to all of Europe equating it to the Versailles Treaty..

          My claim here is simple: The EU-ECB-IMF package is a most peculiar sort of punishment. Indeed, it is an irrational sentence both because:

          (a) it constitutes a cruel and unusual punishment and
          (b) it is bound to hurt the punishers disproportionately more compared to a fairer punishment for Greece.[6] Ironically, from this perspective, it is not very dissimilar to the original Versailles Treaty!

          Syriza wants to stay in the Eurozone. They seem to have bent over backwards to make compromises to the Troika while not breaking everything that they were elected on, but bending them quite a bit {surplus, privatizations, etc.}. As a good citizen they may feel that the time has come for civil disobedience to try to make a better society

    4. norm de plume

      100%. Well said JT.

      ‘”When I use a word,” Humpty Dumpty said in rather a scornful tone, “it means just what I choose it to mean — neither more nor less.”
      “The question is,” said Alice, “whether you can make words mean so many different things.”
      “The question is,” said Humpty Dumpty, “which is to be master – – that’s all.”

  7. James Tennier

    Percentages: If Germany had 25%+ adult and 65% youth unemployment would they be singing out of the other side of their mouths?
    If Germany had not had great debt forgiveness after WWll, would they be the “super producer” of Europe today?
    Euro QE will be buying paper in exchange for digital credits (to bankers) in Europe just as it is here and benefiting the same “class” while denying any benefits to the former middle class as has happened here. Making the same mistakes over and over while expecting a different outcome seems pretty nuts to me (too.)

    Why does Greece not nationalize the banks, using existing euro “deposits” for foreign purchases as long as they last and use Drachmas for their internal transactions of all kinds. Screw the IMF and the German bankers. They should never have fallen for the Citi/GS lies in the first place. For 85% of “new money to Greece to used to service existing debt is criminal.”
    This is really about Germany losing the upper hand with borrows throughout the rest of Europe. It is just a matter of time. Someone must take the first step towards the dancefloor.

  8. hemeantwell

    The repeated attempts by the Troika to brand the Greek negotiators as “immature” etc. are an attempt to explain their own lack of humanity by claiming deformity in their opponents. Syriza had to mount a fundamental challenge to the Troika, and they could do so only at an analytic level due to the weakness of the European left. A refashioning of the the political economy of Europe along the lines of Varoufakis’ Modest Proposal, even partial incorporations of it would, it seems, call too much into question and make the elites more vulnerable to challenge than they can tolerate.

    I agree it’s come to a point where it seems that Syriza has to end the farce in order to retain any politcal coherence. I hope the Greek people, aka enough of the subordinate classes, don’t accept the Troika’s hollow faulting of Syriza.

  9. mpr

    What I don’t understand is why they seem to be still intending to pay the IMF in May. It seems clear that they need to skip those payments to get their attention. I had hoped that after the Lagarde-Varoufakis meeting where she promised ‘maximum flexibility’ in return for assurances the April payments would be made, that this change of tone would filter down to the technical teams. But obviously it hasn’t.

    Of course those who claimed that Syriza had already/would cave have also been proven wrong, but it may be that Europe is incapable of finding the win-win outcome. It would be consistent with their recent history.

    1. Yves Smith Post author


      Greece caved in large measure early on. You deny your own evidence.

      1. Greece has said it will never miss an IMF payment. Varoufakis said it would squeeze blood from a stone if that was what it took and that is pretty much what the government has done. It has even cut service levels in the hospitals, when they were already in desperately bad shape.

      2. Greece has VOLUNTEERED to continue austerity. Varoufakis has said Greece will always run a primary surplus. That’s contractionary, particularly so in a depressed economy.

      3 Greece is still trying to get bailout money and keeps submitting reform packages that the Troika says are too sketchy (in terms of details) for them to proceed with negotiations.

      4. Greece capitulated on one of their big fights, the Pireaus port privatization deal. That is going forward.

      5. Various Greek ministers try flirting with Russia, first the defense minister, now the energy minister. The press takes up the PR of those ministers, and the government repeatedly denies them (FWIW, Russia walks them back too).

      1. wally

        Things set in stone in other times eroded, too. Eventually reality will assert over all else.

          1. dbk

            It’s not a desirable outcome, and there surely are some enlightened technocrats standing in the wings who realize it, but no one has the courage to act rationally. Appalling, really.

  10. McWatt

    It is so late in the game it’s like the creditors are finally calling Greece at work.

    “We are going to tell your boss that you owe us money!”

    “Catch-22 says they can do anything we can’t stop them from doing.”

  11. susan the other

    If Greece declares bankruptcy within the EU (is that a legal option?) then the EC and the ECB will have to deal with it somehow. Can it pit the EU against the IMF? It might be the only way Greece can get some of its modest proposal implemented. Unless the EU thinks that what they are doing now, austerity, is the only way to deal with bankruptcy. But just the fact that the word “bankruptcy” is not allowed indicates that austerity was not meant to deal with total bankruptcy. And that there is no other mechanism to do so. Which is pretty irresponsible for the likes of the EU which meets to deliberate all sorts of political and economic events. Merkel brags that the EU is the great compromiser. Really, Angela? In order to get their modest proposal to be considered, Greece must be so bankrupt that there is no other option for the EU. This seems to be necessary politically because it is a lesson in abject misery and you have to be 99% dead before you will get any attention.

    1. Yves Smith Post author

      Greece can’t declare bankruptcy. There is no process for governments to do that.

      Greece naively thought it could play the various parties off against each other. That was never going to work. These Eurocrats know each other, personally and institutionally, very well. They know they will continue to deal with each other over time, so their incentives not to betray each other and generally get on are vey high.

      The new government has no knowledge of the histories and no foundation of trust or shared experience with any of the important or even second tier players. It is grossly lacking in the insight and personal leverage to even begin to play that game.

      1. Susan the other

        The EU can’t have it both ways. They either have to give their confederate nations monetary sovereignty, or they have to deal with the bankruptcy of any EU nation. No? What on earth do they think they are doing?

        1. Yves Smith Post author

          Huh? California, which is vastly more important to the US than Greece is to Europe, had a budget criss and no one considered making California monetarily sovereign. There is no legal process for the bankruptcy of a nation. It is all negotiated.

          We have said that the Eurocrats have underestimated the risk of political contagion. If Greece makes a de facto exit, it will force the paving of the procedures for other nations to leave.

      2. IsabelPS

        Plus, this is an incredibly crass mistake:

        “The 19-nation bloc’s finance ministers were riled after Greek Prime Minister Alexis Tsipras tried to bypass their veto on financial aid with an appeal to Angela Merkel on Thursday. Tsipras sought to circumvent the finance ministers’ authority, pleading his case with the German Chancellor and French President Francois Hollande on the sidelines of a summit on immigration in Brussels.”
        The whole European construction is a balancing act between equal sovereign States, some of them more equal than others, granted. But acknowledging it publicly as Tsipras has done more than once is bound to alienate Greece’s natural allies, the smaller States, who are supposed to be crushed under the thumb of mighty Germany.

      3. MyLessThanPrimeBeef

        These Eurocrats know each other…

        The Greek negotiators, it seems from what you describe, have been outsiders from the start, trying to get in, spearheaded by Yanis’ ‘charm,’ when a better strategy might have been to become true radicals, that is, stop ignoring the left faction of SYRIZA and stop overlooking the fact of 85% proceeds going to banksters…unless there is an ace somewhere there.

      4. Linus Huber

        A sovereign nation can declare bankruptcy as this is a democratic decision. Off course, the off chance that the EU will send tanks to enforce their supposed rights exists but this thought is rather illusory in today’s word. Breaking contracts is not simply reserved for the powerful who simply change the rules to serve their interest. Democratic functions are being more and more undermined by the increasing centralization of power. But exactly this development is increasingly countered by centrifugal forces that attempt to move the decision making process on a lower hierarchical level.

        1. Yves Smith Post author

          Bankruptcy is a legal process by which creditors are held at bay while a court determines who has valid claims against the debtor and what to do about them.

          There is no legal process for a nation to declare bankruptcy

        2. Linus Huber

          It simply requires the previous agreements to be classified as violating basic human rights, as immoral and therefore invalid without any consequences for repudiating the debt resulting from it by a declaration by the Greek parliament to be confirmed by popular referendum. It can’t be the Greek population’s responsibility to pay for the bank’s lack of diligence when providing credit to a corrupted government. Is it the beggar’s or your fault if you provide him with credit? You do that only when you feel rather certain that the credit losses due to poor judgement are to be carried by the general population which is at the core of today’s moral hazard.

          1. Linus Huber

            When there is no legal process you create it and declare those who were involved as guilty and subject to prosecution. Countless laws are created daily.

  12. Schofield

    The achilles heel of capitalism is that it can lead to some individuals believing they can “reap what they do not sow” which in turn has led to the absurd fantasy of some private bankers creating the Eurozone governments’ debt ignoring the fact that they alone cannot also create the “efflux” (money) to “reflux” that debt. Other more cynical bankers, however, know it’s always a “margin call game” and it’s always possible to “reap” (as long as the law holds good) through enforced sales of government infrastructure!

    1. Tsigantes

      A not very well researched or reliable article, just more churning. For one thing, Greek banks hold no greek bonds; the ECB holds the biggest tranche of greek bonds. Changes the picture somewhat.

  13. Dubious

    I am just an outsider looking in. I am not involved with finance other than the normal businessman. And I know this comment is slightly off topic.

    I feel there are similarities between this destructive fiasco and the current Fast Track authority to usher in the TPP. I can’t help but feel that Greece is the harbinger of things to come for all of us who are not a large corporation. The age of a nation’s sovereignty is nigh? The value of being a citizen has been determined and the value is worse than 0.

    We are all Greeks at this point.

    1. Gaylord

      One can easily get bogged down in details, but the overall picture appears quite clear to me: human civilization has overshot the limits to growth on this finite planet due to greed and stupidity. We are in the early stages of collapse that is being reflected in a forced contraction of the worldwide economy. The hegemonic forces in the economy (corporate capitalists) will fight for supremacy while vast numbers of disenfranchised people suffer and die, until the most aggressive ones also succumb to the far more powerful forces of nature that will squash them like tiny insects underfoot. Greece is but one of the many casualties to come from an evil system, but I see numerous signs that all of us humans and most other life on earth will soon be extinct. The human experiment has failed because we used our resources to destroy each other and our only habitat.

  14. George Phillies

    Governments cannot declare bankruptcy. They can repudiate their debts. It’s been done before. I have someplace in the basement some Tsarist Russian war bonds if you don’t believe me. The Greeks might then affect to remain in the Eurozone, while also issuing 1-Euro notes good for payment of Greek taxes.

    Note that the Greeks have been playing the Europeans. There was this great fuss over blocking the Troika inspection. After much noise, the Troika was replaced with a team of three that Herr S******* foolishly kept calling a troika. The team of three folks arrived in Greece and discovered that they were there, but…current complaint of the Eurocrats, seen in Bloomberg …they had no access to Greek financial accounts or the insides of Greek Ministries. The Greeks had accepted the symbol and won on the substance.

    1. Yves Smith Post author

      In the modern world, governments cannot repudiate their debts. Look at Argentina. Modern governments need access to international payment systems in order to participate in trade. Greece needs foreign goods like pharmaceuticals, advanced machine tools, and cars. It is pretty hard to be an autarky these days. So defaulting in the modern world is not tantamount to repudiation. It starts a renegotiation over restructuring.

      1. Bobbo

        Becoming an autarky again would take care of the unemployment problem. This is actually a desirable outcome, an important step in wresting control over lives away from the international banking elite. Our salvation lies in returning to localization.

        1. Linus Huber

          Yes Bobbo, that should be our aim in order to marginalize the centralized power and achieve renewed freedom. The temporary hardship is easily justified when one does not simply believe the mass media that tries to infantilize the population by creating the believe that no alternative exists. A renewed freedom will invigorate society probably to a high degree.

        2. MaroonBulldog

          If your country became an autarky, what would you substitute for number 2 graphite wood pencils with rubber erasers and tin strips binding wood to rubber? There isn’t a nation on Earth that could produce these simple things exclusively from resources within its own borders.

          1. JTMcPhee

            It’s the (possibly inevitable) perversion of “trade” into “hegemonic Kleptocracy” that is the problem with all of this. Appetites for “stuff” and entertainment and novelty, along with really smart dudes figuring out how to game everything, gain ownership and rentier power over everything, are what enslaves the many and empowers the few. On becoming an autarky, I would bet that members of most any polity would figure out how to make or substitute for those old #2 pencils — maybe even 3-D print them.

            Humans have some knack for interdependence, but also a strong drive to dominate. What we very definitely are not smart enough to control is our ability to create huge, global, assymetric vulnerabilities, starting with nuclear weapons and poisons and biological horrors, and now electromechanical and increasingly “autonomous” devices at all scales, from weaponized “droneflies” to the kinds of “battlefield mechs” that my son used to glory in creating (by “trade,” or conquest) in role-playing games. And of course the Matrix, and other cyberdangers we collectively have built.

            We are horribly vulnerable to devices and ideas and “novelty” created by the worst of us, too many of whom are, or think they are, completely invulnerable (in their ordinary lifetimes of greed and domination) to any of the consequences. Though one can take a schadenfreude delight in noting that the collapses “we” (actually, “they”) have built for and triggered will take some of them down, destroyed by “threats” and powers that are outside their control or even understanding.

          2. Linus Huber

            If your country became an autarky ….

            You seem to suggest that there is no life except within the given frame work of centralized power. I do not believe in such an outcome but rather the opposite that real freedom will invigorate the creative power of man.

            Let’s look at trade. Why should there not be trade between people of one country with people of another country? The reason for such thought is actually the recognition that so called “free trade” is the exact opposite, namely trade monitored, controlled and manipulated by governments who function as serfs to the leaders of large corporations. Free trade does not need a regulatory frame work of countless numbers of pages but could be agreed upon on one single page or simply stay unregulated and devoid of any interference by governments. The payment system serves the same purpose of centralized control.

            As JTM states, humans have also a strong drive to dominate (especially people working in governments) which is not a positive attribute except when combined with the corresponding responsibility of ensuring the wellbeing of those under their care. Governments do not exist for a self purpose but only in as far as they serve the population, a fact that is largely ignored by politicians and government employees. When centralizing power into less and less hands this responsibility is increasingly flaunted as it separates the decision makers from those who bear the brunt of those decisions. I am certain that humans on a personal level (low hierarchical level of decision making) where they directly recognize the result of their decision or domination of other humans, they will be empathetic and considerate and social pressure reinforces responsible behavior.

            Are we still able to seriously challenge our governments as probably half of the population depends on hand-outs from this same government? This is the present dilemma that people depend to such a high degree on the government so that they cannot envision a life without this high degree of benefits with corresponding control. Would an overthrow of a corrupt government, like it happened in the Ukraine, be possible in a Western country and if not, why was it possible there? Well the main difference between most Western countries and the Ukraine exists in their centralized welfare-system that does not exist. People depend on each other (families, friends) and do not expect any help from the government.

            We have been brainwashed to believe that any alternative to the present status quo will be disastrous and destructive; I for myself believe in the positive attributes of individuals and reject such notions. We do not require to know all the results in detail and beforehand to stand for more freedom and independence. The greatest crimes of history were all hedged out in the womb of central power i.e. governments. We also will not end up in the stone age, as some lovers of central planning are suggesting, because technological progress is independent from the organizational structure of society.

            1. Yves Smith Post author

              Please tell me how Greece gets by without (for starters):



              Ascorbate (a critical food preservative, these days manufactured ONLY in China)

              Greece needs to trade to get these and other goods.

              1. Linus Huber

                I was of the opinion to explain this aspect that it is not really Greece as a nation that trades but individual people and firms. Governments often represent nothing more than an obstacle to real free trade and this may actually be a chance to cut through the red tape. Do you really believe that the whole of Europe and the Greek people will simply stand by while their governments would first repress trade of essential goods between Greece and the rest of the world and secondly show disregard for any loss of life due to such a tragedy developing within the geographical area of Europe? It would actually show the obstructive nature of most governments in this whole affaire. What you do not seem to understand is the fact that governments have to learn to live within their means and as sooner such an objective is achieved the better the population will be as new hope and new perspectives open up with the financial integrity and sustainability attained. We do not require to plan everything in detail but let things develop in a natural way where the ingenuity of man can flourish.

                1. skippy

                  The “ingenuity of man” is how Greece got in this predicament in the first place, albeit a few.

                  When corporatist ram rod their agendas via government, have been for decades, whats this impediment your gabbing on about… signed, sealed and delivered…. gezzz.

                  Skippy… and to rub salt into the already gaping wound, you trot out the “Natural Way” Trope.

  15. PBlacque

    This Greek tragedy should be a great opportunity for MMTers to make their case. Unless I have missed posts in this or other blogs, I have seen/read few, if any, posts arguing for an MMT-based solution for Greece. While James Galbraith has been a lead advisor of Varoufakis in this debacle, I wonder what he believes the “modest proposal” can truly achieve, especially in light of the institutional reasons given here for the communications breakdown.

    So, how would a MMT finance minister handle this crisis … given Greece’s minor export sector, how would a sovereign currency issuer stimulate (via external devaluation) growth without triggering significant inflationary pressures via imports? Given the high propensity of Greek nationals to avoid paying taxes, how would that “sovereign currency” gain any traction? etc. ..

    I wish MMTers would use this sad case as a teaching moment … fact they are mum is troubling.

    1. Yves Smith Post author

      As we wrote earlier this week:

      Having your own currency is not a magic bullet. MMT discussions are in the context of 1. A sovereign currency issuer that 2. Already has its own currency. Greece is NOT that.

      I wanted to put in a chart I had seen yesterday, and I could not find it again in time (I am under the weather) that showed the economic trajectory for Greece if it left the Eurozone. The GDP would fall by about 20%. Do you seriously think Greece can take that from where it is now? Greece would suffer even more capital flight (no rational person would hold currency in Greece to take losses from conversion to drachma), massive disruption due to having to sort out all its contracts in Euros, would be subject to suits from citizens over the loss of EU rights, would sacrifice valuable EU agriculture subsidies, and would be a less attractive trade partner to the rest of Europe than it is now, due to having to deal with border issues and a volatile currency.

      And essential imports like pharmaceuticals and energy become vastly more expensive. Imports are nearly 34% of Greek GDP, versus 16% for the US. And the US is much more capable or ramping up production to replace some of its imported goods if we really wanted to than Greece.

      None of these are problems that having your own currency will fix.

      1. PBlacque


        1) Please provide a link to the post you refer to … I cannot find it even looking back 2 weeks from today … thanks
        2) Your opening quoted points from that post seem to contradict both Mitchell and Mosler (here and here) on their vision for a solution
        3) Specifically, the below 2 quotes clearly state that MMT currency sovereignty could apply and work …

        Here’s Mosler:

        Due to popular demand, I’ve begun outlining a Greek exit strategy to exit the euro currency,
        and instead use its own new currency to provision itself:

        1. The Greek government would announce that it will begin taxing exclusively in the new currency.
        2. The Greek government would announce that it will make all payments in the new currency.

        That’s it, deed done!
        The govt can now provision itself and continue to function on a sustainable basis.

        And here’s Mitchell:

        It have considered the claim that a new Greek currency would significantly depreciate against the euro once issued previously.
        Why would that happen? Foreign exchange parities are determined by supply and demand.
        Who would be issuing the new Drachma? Answer: Only one institution – the Greek government via the central bank.
        What is the current volume (supply) of new Drachma in the foreign exchange markets? Answer: zero – it doesn’t exist.
        If the Greek government restricted its supply but were able to require people to demand it – to pay taxes etc – then why would the currency depreciate violently in the period after issue?
        You are thinking (like most people) of an existing tradable currency that is unpegged or something like that. Then the depreciation can be sudden because there is a lot of supply.
        A significant exchange rate depreciation of the new drachma in the short-term given the fact that supply would be limited. The examples often used, such as Iceland and Argentina, all relate to currencies that were already supplied in volumes to the foreign exchange markets.

        4) My point was that it seems that MMT would be pounding the table day in day out about how their “theory” could alleviate Greece’s plight … and if it couldn’t, then to acknowledge MMT’s limitations under specific conditions …

    2. financial matters

      Jobs are an important prescriptive part of MMT policy.

      “In the Levy Institute’s April 2014 report, Responding to the Unemployment Challenge: A Job Guarantee Proposal for Greece, Papadimitriou and his colleagues wrote that “to mobilize Greece’s severely underemployed labor potential and confront the social and economic dangers of persistent unemployment, we propose the immediate implementation of a direct public benefit job creation program.” It would cost between 1 and 3 percent of the crippled country’s GDP, they calculated, and would have large magnifier effects on employment and consumer spending. The election results suggest that a large segment of Greece’s electorate, still facing nearly 26 percent unemployment and an economy one-quarter smaller than it was in 2008, want their leaders to push just such an anti-austerity agenda.”

      One of these colleagues is the new Deputy Minister of Employment for Greece.

    1. Tsigantes

      If you were greek you would know instantly that poll numbers in the context of To Vima (oligarch owned) should be given 3-4% doubt/leeway. The only straight polls in Greece are produced by the University of Macedonia.

  16. Dan

    Yves, really appreciate all the good commentary both in your articles and responding to comments. This is definitely the best source of information I’ve found on the Greek situation. Question though: Seemingly a Greek default is imminent whether to the IMF on May 7 or assuming they can raise the cash for this payment, sometime else. Any thoughts on how that will play out with the Euro bank exposure to the debt? I’ve seen some charts showing what countries and banks have exposure but curious what you think will happen as a consequence of default. Do the banks have enough exposure or feared exposure that it sparks a Lehman-like event? Perhaps it increases the scrutiny on Spain/Portugal and other peripheral states? Is there a possibility of the ECB simply buying (monetizing) the debt of those exposed? With several years to prepare for the inevitable default, it seems they’d be prepared for whatever event this may trigger but curious to your thoughts. Thanks as always Yves!

    1. Yves Smith Post author

      I will confess that I have not looked at that issue in any detail However, with QE on, there have been complaints that there are not enough bonds for the various national central banks to buy (each country has a specific amount it is supposed to buy). Moreover, periphery bond yields have not moved much despite a default looking more likely (Mohamed El-Erian put the odds at 45% last week, before the fractious Eurogroup meeting). And the ECB has said it does not prefer a Grexit (and presumably not a default either) but it is prepared.

      I’ve said that the authorities have underestimated the long-term risks, in that if Greece defaults and that leads to a Grexit, the EU and Eurozone will have to tidy up the processes for a departure, and that would make it easier for other nations to leave. It is very hard to judge the short term risks. The authorities seem awfully assured, and Draghi has been a master of getting maximum mileage out of confidence tricks. We’ll see if he’s overestimated how well his playbook works in this particular case.

  17. George Phillies

    Repudiation and leaving the Eurozone are independent events. This was covered on Bloomberg recently. The Greeks might stay in the Eurozone, while issuing a second currency or tax anticipation notes, thus avoiding the loss of the open border. They might lose the agricultural subsidies.

    1. Yves Smith Post author


      We have pointed this out regularly, and discussed it at length last week:

      However, Greece is not in control of outcomes if it defaults. The ECB can force a Grexit by failing to renew the banking system support, the ELA. which is supposed to be only temporary liquidity support for banks, and has to be reauthorized by the ECB every two weeks. The ECB has made clear that it is uncomfortable with the size of the ELA and the fact that it is essentially propping up the Greek banking system (which is insolvent but the ECB can’t say that and continue to lend under the ELA). If Greece defaults, it will be hard to justify continuing to provide the ELA. Moreover, the ECB is sending Greece the message not to expect it to be treated well. The ECB has said it is considering increasing the haircuts it imposes on Greek bank assets in light of the deterioration of Greek bond markets. Higher haircuts means Greek banks need to get even more funds from the ELA. This change would require the banks to get even more money under the ELA, and if the ECB refused to make the increase in the amount authorized under the program, the Greek banks would come up short. That as described in the post would force a disorderly, de facto Grexit.

      Finally, Greece cannot repudiate its debs. It can default, but that leads to a negotiated restructuring.

    2. Linus Huber

      A slave cannot repudiate his enslavement?

      Well, maybe not when simply adhering to the rules set by the slave master.

  18. NotSoSure

    Perhaps the rich people in Greece should just buy government debt to account for their tax evasion …. yeah right!!!

  19. Tsigantes

    Well worth reading, and why SYRIZA’s apparently ‘weak hand’ is strong:

    We can wonder why this show is dragging on so long after Draghi’s initial ambush, with default predicted by the MSM for 26 Feb., 11 March, 24 March, 14 April and still under endless discussion. If Troika 2 was really comfortable with the idea of default they’d have engineered it by now. Yet twice now Draghi has continued to drip feed ELA to Greek banks, including enough to pay IMF, keeping his ‘enemy’ in the game. Given that soon – i.e. Greece’s upcoming payments – ECB and Eurofin will have to either put their money where their mouth is – or – call their own bluff, the insults supposedly hurled at Varoufakis in Riga and carefully leaked to the press show a certain mounting of loss of control.

    Another way of looking at things.

    1. Mr. G

      The article kind of describes the scenario I foresaw. Please critique. Greece exits. This leaves Remaining Euro members who’ve loaned money with holes to fill until a structured settlement can occur. To fill the gap those countries issue bonds and the ECB monetizes to cover. This devalues the Euro further and puts pressure on Euro banks holding dollar denominated loans. Some go bust and this triggers a wave of recapitalization by national governments. Those governments issue more debt to over and ECB buys….again devaluing Euro. At some point it levels out but where and when….is impossible to calculate. Intermixed within this is a CDS explosion in London.

      Schaubles bold statement that everything is covered in event of Grexit, to me, was nothing more than “Euro banks no longer hold Greek debt directly.”

      I’ll echo Dan’s comments above. This is a wonderful blog. The audience here is informed and well connected. The debate and comments show mastery of the topics. Thank you all.

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