Wolf Richter: The Greek People Just Destroyed Syriza’s Strategy

By Wolf Richter, a San Francisco based executive, entrepreneur, start up specialist, and author, with extensive international work experience. Originally published at Wolf Street.

Greek stocks ventured deeper into purgatory. The ASE index dove below 700 intraday on Wednesday for the first time since the crisis days of June 2012. Then word spread that the ECB had raised the cap on the Emergency Liquidity Assistance for Greek banks by €1.5 billion to €75.5 billion. It’s the oxygen line for Greek banks. Without it, they’re toast.

The ELA provides the liquidity so that the Greeks can continue yanking their beloved euros out of their banks to stash them elsewhere before their desperate government confiscates them.

The government, under the cool leadership of Prime Minister Alexis Tsipras and Finance Minister Yanis Varoufakis, is already confiscating €2.5 billion in “idle” cash that state agencies, state-owned enterprises, and local governments kept at commercial banks, the same banks that the ELA is propping up and that the Greeks are fleeing. Now these entities have to transfer the money to the central bank so that the government can “borrow” it for other purposes.

When word got out that ELA money could continue to flow to the banks for a little while longer, the dreadfully beaten-down FTSE Athens Banks index jumped over 11%. It remains 74% below where it was last June. The overall ASE index recovered to settle above 700. It remains a mere shadow of its former self, down 87% from its cheap-euro-debt peak in 2007.

Greek 2-year yields and 3-year yields, unlike their Eurozone brethren that are blissfully bathing in the negative, jumped to nearly 30%. The 5-year default probability is approaching 90%. In short, the Greek financial markets are kissing the euro goodbye.

But the Greeks themselves love their euro. Enough of them believed the Syriza’s promises to sweep them into power. Now their choice is conflicting with their love for the euro. And by the looks of it, they’d rather hang on to the euro than the Syriza.

The sticking point to getting further bailout money from taxpayers of other countries, mostly those in Germany and France but elsewhere as well, is that Greece is playing game theory and is trying to elevate its extortion racket to a fine art, instead of trying to work out a deal that the taxpayers of those donor countries can live with. Donor countries, not creditors, because they know they’ll never see part of their money ever again.

Media-savvy characters in the government have been using leaks and outright pronouncements to threaten default and even an exit from the euro. It would be a terrible fiasco for the world financial markets, they keep saying, pointing back at the dark days of 2011 and 2012 when vague and subtle expressions by Greek politicians caused stocks in Europe and elsewhere to plunge. But now, stocks and bonds around the world are soaring to new highs. To heck with Greece. Embarrassingly, only Greek markets are crashing.

So the extortion racket no longer works, and the Greeks themselves are having second thoughts about how their representatives have been conducting it.

The approval rating for the government’s strategy has plunged to a measly 45.5%, from 72% just last month, according to a new poll. A terrible cliff dive.

On a scale of 0 to 10, the administration got whacked in its details, earning 4.6/10 on the economy, 3/10 on immigration, 3.7/10 on crime-fighting and security, 4.2/10 on education, 5.5/10 on foreign policy and defense, 4.5/10 on public administration, and 4.4/10 on health.

Only 3% of the Greeks were confident their household finances would improve over the next 12 months, while 26.5% expected their situation to get worse, and another 15% were certain it would get worse.

How did they feel about a “Grexit” – and a return to the drachma? “Fear!” That’s what 56% said – up from 45.5% in March. Only 23% claimed they were indifferent, down from 26.5% last month. And just 9% thought there was no chance of it happening, down from 17% in last month.

Greece’s exit from the Eurozone and return to the drachma, of which it could print an endless amount to pay its bills and salaries and other schemes, would entail a vertigo-inducing devaluation, and all that comes with it.

The Greeks know how that program works. They have experienced the drachma. They see it as a tool by which the government tries to steal from them. They don’t trust their government with the administration of a currency any more than they trust their banks. And Greek parliamentarians don’t want the drachma either. They want their rich pensions to be paid in euros, not in devalued drachmas.

Thus, a Grexit is off the table as far as threats is concerned. It might happen, but it can’t be used as a threat to extort better terms from donor countries. The Greek game-theoreticians can evoke it all they want to, through leaks and on the record, and they can bandy about the threat of blowing up the world markets, but if they want to stay in power and if they want to face their people at home, they can’t go down that road.

Alas, all their negotiating partners know that too. The global financial markets know that. They all could digest a Grexit, but the Syriza government could not. Time to stop playing games and start talking in earnest. Or face some very, very angry folks at home.

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About David Dayen

David is a contributing writer to Salon.com. He has been writing about politics since 2004. He spent three years writing for the FireDogLake News Desk; he’s also written for The New Republic, The American Prospect, The Guardian (UK), The Huffington Post, The Washington Monthly, Alternet, Democracy Journal and Pacific Standard, as well as multiple well-trafficked progressive blogs and websites. His has been a guest on MSNBC, CNN, Aljazeera, Russia Today, NPR, Pacifica Radio and Air America Radio. He has contributed to two anthology books, one about the Wisconsin labor uprising and another on the fight against the Stop Online Piracy Act in Congress. Prior to writing about politics he worked for two decades as a television producer and editor. You can follow him on Twitter at @ddayen.


  1. really disappointing

    why did a reputable website like this allow a capitalist europhile sycophant to write for them?

    1. Yves Smith

      First, Wolf has his own site.

      Second, Wolf is not “europhile”. Wolf is reporting on Greek polls and sentiments. Greek reader alex m has said similar things in comments, that he has no desire to go back to the drachma:

      greece is not marriner eccles america with a capital strike but infrastructure in place…

      I wish it was…

      it is a country with a future stuck in the past…with one too many political supplicants wanting to bow down to kyffhauser and find “acceptance” by submission…although the french are allowed to have a parallel currency, commonly known as the CFA, with French government backing for the former african colonies, the ECB does not see that as non conformity with the rules…
      because some vichy are more equal than others…

      the situation in greece legally is a mess…by example, here in the USA there is late night 1-800 operators are standing by marketing (or there was) for real estate investment training…part of that training was based on ignoring the road blocks banks may make and asking the existing owner to allow you time payments in your purchase…owner financing…well….go try doing that in greece…you will be told it is illegal for private owners to provide financing and record the security instrument…I tried a dozen ways of putting transactions together…but the human capital is not there to work around problems…it might be different today…but there were no business sections in the book stores…and no tax planning books either…
      it is europe in that it is west of the urals…

      map the national highway system with a satellite view…you might notice something a little south of athens…other than athens to thesaloniki…the road to the third largest city, patras, is an old road that has been there for 50 years plus…they are “sorta kinda” getting around to finishing the actual highway…and there is only a “planned” highway across northern crete..must be using the same people who worked on the boston bigdig…

      I wish it were different…if the human capital was there…forget the political capital…that could be dealt with…but the human capital is just not there…for those who are with the in crowd…they only worry that the pockets in their pants are full…too much zorba…not enough thinking…

      In theory greece could make a go of it…but the reality is no way in hell…it would not be in its current mess if there was the human capital in place…


      We have also mentioned that Syriza’s approval ratings have been falling, and that Greek voters have been solidly against leaving the euro.

      You are shooting the messenger.

      1. James Levy

        Then the only conclusion to reach is that, barring last-minute twinges from the non-existent consciences of their lenders, the Greek Government, including its highly respected (around here) Finance Minister is going to be taken to the cleaners and Greece turned into a debt vassal.

        Not snarky, just honestly: if Varoufakis proves impotent, what the hell are we all blathering on about here, because we are beaten, period. This is a man with an understanding of the situation, outstanding intelligence, and real political influence, and yet he’s going to be forcibly sodomized by the Troika. The implications are terrifying. Neoliberalism cannot be beaten from within the system. We’ve got to sit around rooting for systemic collapse (which will mean the swift or premature deaths of millions and a reset at 19th century levels of physical comfort and well-being, if not 17th century). Given the blind stupidity and greed of neoliberalism, they’ll eventually run the economy or the ecology into the ground, but many of us were hoping for amelioration (fixing the problems has become too much to wish for). Perhaps Greece will finally disabuse us of such notions. I fear that in a few days I’ll just go back to coping through imagining that something is going to keep my life livable down the road. But I’m embarrassed by that weakness of mind.

        1. Synoia

          The tipping point you so eloquently describe has another driving force. Climate Change.

          A huge percentage of our industrial infrastructure is on the coasts (Refineries in NJ, Power Plants, Sewage Works, etc).

          Relocating them in probably not possible. At what height above sea level is the investment in the new plant safe? Especially Sewage works, which rely on gravity for the delivery of their feedstock :-).

          1. bruno marr

            Actually, sewage works are a mix of gravity and pressure (pumped) flows. Been that way for a long time and the technology is mature. While creating “sea walls” for sewer plants will be expensive that cost is spread over a large population (everyone uses it) and engineers are good at reinforced concrete walls.

            Climate change poses real threats to any civilization. We do need to deal with the source not the symptoms.

          2. Gaylord

            And it’s “over the cliff we go” because of an endemic defect in the human psyche: greed and self interest.

          3. different clue

            The sewage problem could be side stepped by retro-fitting every dwelling and building with appropriately right-sized humanure capture-and-compost facilities. The resultant humanure “compoo” could then be used in agriculture, etc. So that particular example would actually be easy to solve.

        2. Cassiodorus

          Hopefully someone in SYRIZA has started to explore what an alternative to capitalism (for Greece) would look like. Neoliberalism is merely capitalism in its last and most destructive phase, in which the deaths of millions will be an outcome of the persistence of a society in which (as Michel Foucault put it at the beginning of the neoliberal era) “everyone is an entrepreneur.” At some point, then, for our own survival, we must all stop being “entrepreneurs” of ourselves.

        3. Yves Smith

          I hate to play my usual role of being the bearer of unpleasant realities.

          1. Most readers have not familiarized themselves with EU or Eurozone rules. They were explicit that the nations who signed up would surrender significant elements of sovereignity. Thus when Tsipras and Varoufakis say that Greece should be able to do certain things as a sovereign state, they are operating from incorrect premises. And I assume most people in the EU and Eurozone understand that too, which means that line of argument is a sign not of sincerity, but of an abject failure to do basic homework about the EU.

          2. As the polls have consistently indicated, Greeks do not want to give up the EU or the Euro. So if you claim to be in favor of democratic outcomes, you cannot rail at the choices made by citizens. Greece can pick its poison, submitting to the Eurozone rules or exiting, and the opinion of the Greek people, that they see staying within the Eurozone, even at its high cost, as better than leaving, remains unchanged

          3. As we have ALSO pointed out, leaders can (and we think should) try to change public opinion. Syriza has not attempted to change 2. Varoufakis in fact agrees that leaving the Eurozone would be a disaster.

          4. As we have pointed out, the Syriza refusal to consider a Grexit and take defensive measures (starting with capital controls) left it with NO bargaining leverage.

          5. I do not agree that Syriza has done a good job of making its case either domestically or internationally. Its ministers shoot from the hip, contradict each other, and regularly have the government deny their statements. Varoufakis has said things to the domestic press that got the international press riled up that he had to walk back. That does not help one’s credibility. Greece also assumes people understand how bad things are in Greece. The bloodless term “humanitarian crisis” isn’t gripping. Anecdotes are.

          Syriza has ALSO failed to make a case internationally for why it is bucking the reforms it objects to. Greece has the highest level of pensions as a % of GDP of any Eurozone country. That is actually due in large measure to the fact that it has a very aged population. But it is hard for other countries to justify lending to Greece to support pensions that appear to be better than what their citizens get. Similarly, other countries have adopted labor-crushing methods as a condition of getting loans. Why should Greece not be subject to the same conditions? I have yet to see a credible debunking. Instead, what I have seen is childish retorts, “We are a leftist party elected to make these changes. How dare the Eurozone tell us we can’t do this?”

          6. I have not seen a copy of the IMF structural reforms. I have seen a copy of the apparently largely similar OECD reforms. If Syriza had made them available in English, I would have enlisted a crowd-sourced effort to shred them. I did have our resident construction expert bob look at the section on building materials, and he said (in effect) it was ridiculous and showed no understanding of industry economics, and that the result would be to loot the Greek industry, with no likely improvement in performance.

          I have trouble sympathizing with Syriza because colleagues with direct access to senior people in Syriza have told them REPEATEDLY they needed to get a copy of the structural reforms out there in English, and they have failed to do so. They don’t take up offers of help in attacking what the Troika is doing to them.

          1. James Levy

            So the next, smarter, more media-savvy group to come down the pike will defeat neoliberalism on its own home field? Isn’t that Democratic hopey-changey wishful thinking? Are you saying that this doesn’t count, in some alternate do-over we beat the Troika because a brighter, shinier knight rides in and “gets it right”? I understand your points, but I don’t think they add up to much viz. my broader point about being effectively powerless to win this game without wiping the board clean first. I may prove wrong, but I seriously doubt it.

          2. Calgacus

            With due respect, I and others argue that some of these “unpleasant realities” may be unpleasant – but they are not realities.
            1.They were explicit that the nations who signed up would surrender significant elements of sovereignity. Thus when Tsipras and Varoufakis say that Greece should be able to do certain things as a sovereign state, they are operating from incorrect premises.

            Not entirely clear what is being referred to here. But I have pointed out very serious mistakes in the understanding of the relevant international law and specific papers on it made by NC posts and comments, which may include mistaken criticisms of supposed “mistakes” of Tsipras and Varoufakis.
            The governments of the Euro nations could only surrender what sovereignty that they had been granted by the ultimate sovereign, the people of the various Euro nations. Greece is still a sovereign state. And again, EU law is not the paramount law here. Nobody says it is, including the ECJ.

            Nobody disputes that Greece can simply decide to leave the Euro/ EZ and do so. Thinking otherwise is a serious misreading of the law and the relevant literature (e.g. Athanassiou’s paper) This may or may not entail exit from the EU. (My guess is it is very probably not a legal consequence. However, there is a real political likelihood the EU dick taters would throw a tantrum and force Greece out.) However, that threat would be the only automatic real “legal” consequence of leaving the EZ, and is pretty much the most that the EU can do to Greece.

            2. As the polls have consistently indicated, Greeks do not want to give up the EU or the Euro.
            The polls have NOT been consistent about this. As I have seen and reposted here, in response to
            If you were given the choice, would you prefer to have the Euro or your own national currency?
            32% of Greeks say Euro, 52% say national currency according to a Gallup / WIN poll

            3. Varoufakis in fact agrees that leaving the Eurozone would be a disaster.
            He is equivocal. There is a significant body of thought and analysis, which IMHO is correct, holding that Varoufakis substantially overestimates the cost of leaving and underestimates the benefits. Nevertheless, Varoufakis has often said essentially that staying in permanent austerity in the EZ – the current bad Euro – is an even worse disaster than leaving – Grexit.

            1. different clue

              If the majority of Greeks feel instinctively that leaving the Euro would mean leaving Europe as in ” admitting to being neither really White nor European any more” . . . then that majority of Greeks would consider such leaving Europe to be an unbearable ethnic/historic/cultural humiliation. They would rather endure a genuine slow motion “holodomor” within Europe then be branded as less than White and less than Western outside of Europe.

              It would require a real change of “self-concept” for the majority of Greeks to decide the time has come to Leave Europe, Leave it Ugly, and Burn the Goddamn Motherfucker Down on their Way Out The Door. So what is Syriza supposed to do, exactly?

              1. Calgacus

                As I said above, I dispute these premises. Greek attachment to the Euro is overstated and hardly instinctive – thankfully. I am more worried about the political classes (including Marxists, Syriza) believing in the possibility of a “Good Euro”. Much of the basis of this is that many socialists “instinctively” fall for what Abba Lerner rightly called “sentimental internationalism”, which just doesn’t make financial sense.

                Whether leaving the Euro would burn the EU/ EZ down is unknowable, but I doubt it a lot. Sure, might cause a financial crisis. But a smaller one than in past years, and one that the ECB etc could and probably would easily deal with, since the interests of a few rich people would be involved, rather than a peccadillo or desirable outcome like wrecking the economy of whole nations at a time. The smarter Eurocrats realize that the true danger of Grexit to the Eurozone is not financial “burning down”, which is avoidable, but the clear and present danger – to them – of a Greece that prospered after it left the Eurozone. How are they going to keep the other captive nations down in the Eurodungeon after they’ve seen Athens?

                1. vteodorescu

                  Well said, Calgacus – the probable swift return to prosperity after being out of the Euro is the main threat here…

                  1. Calgacus

                    Thanks, vteodorescu. Yes – Mark Weisbrot says: The Message of Syriza’s Victory:
                    “The real fear [of European authorities] is Greece might leave and – after an initial crisis and capital fight – recover much more quickly than the rest of the eurozone, prompting other governments to also want to leave the euro. Bluff and bluster fill the financial press at the moment, but the smarter people in Brussels and Frankfurt understand this reality …”

                    or his Greece Has a Real Choice citing Subramanian’s Greece’s exit may become the euro’s envy
                    “Whatever the German government says, it has a real and justified fear of kicking Greece out of the eurozone. The fear is not what will happen to financial markets … but the prospect posed by former International Monetary Fund economist Arvind Subramanian in 2012: That Greece would, after an initial crisis, recover so much faster than the rest of the eurozone that other countries will also want to exit. …A robust recovery is by no means guaranteed – it would require good economic management – but for a number of reasons it is the most likely outcome of leaving the euro. “

              2. financial matters

                Sebastian Budgeon asked Costas Lapavitsas this question in a Jacobin interview (Greece: Part 2)

                “Being white?

                Yes. That’s very, very important. And it must not be underestimated. And for us, for the Left in Greece, but also for the Left in Europe, an alternative narrative is vital. Because the same problem of identity has also emerged in Western Europe. In a different way.

                There, it is not a matter of becoming European. There it is a matter of internationalism. “Because we use this money, we’ve overcome all divisions. We’ve become real Europeans. We’ve transcended our old nationalist outlooks, and so on.” That’s nonsense, of course. But it’s very powerful nonsense.

                So the Left, in Greece and elsewhere, must urgently begin to develop alternative narratives of internationalism, of European-ness, of solidarity, and so on, that break from these diseased concepts and these diseased phenomena that financial capitalism has created — most prominent among which is, of course, the common currency.”

                1. tom papas

                  I am Greek but I have been away form Greece for 50 years.
                  I came back 3 years ago and I still don’t understand these people.
                  It’s like living in another planet. Compared to Western Europeans, most Greeks come across as uneducated, primitive and backward peasants. Very rude, paranoid, vindictive and always lying and cheating when they get the opportunity. I see it everyday. Imagine tourist shop owners hate foreign tourists, don’t want them around, but somehow they want their money! They even call them “malakes”, stupid is the meaning of the word. There is no end to their stupidity. Does anyone disagree?

            2. Yves Smith


              You argue with me about EU governing treaties without having done basic homework, and tout “international law”. The EU governing treaties EXPLICTlY required states that joined to renounce all other laws save those of the EU, and their only of member states to seek redress was in the EU legal system and courts. Your “international law” is not applicable. Greece renounced that years ago when it joined the EU.

              Giving up the Euro means leaving the EU. Every legal analysis I have seen confirms that. The Greek public is opposed to leaving the EU, and most polls have shown them to be opposed to adopting the drachma. You can cite only one dated poll. The magnitude of the bank run alone demonstrates how severe the reservations are about going to the drachma.

              Please provide links to support 3. Most economists and financial analysts disagree with you.

              1. Christer Kamb

                “Giving up the Euro means leaving the EU”

                That is not thrue. It is “only” a legal interpretation of the treaty(made by the “EU-establishment majority-pack-lawyers”). Explicitly there is no such rule.

                If you were right then ECB is breaking the basic rule of the Maastricht Treaty regarding the explicit rule that the centralbank is forbidden to buy sovereign member-debts, period! Buying on auctions/directly or in the second market is only legal mumbo-jumbo really. In who´s interests is the interpretation made? For the member-state or the community(or the unelected EU-elites)? So, using hazy “emergency-clauses”(not to mention the ELA) for the benefit of the union is really built-in circuit-breakers made unilaterally to save a system(not a member-state) that the founders from start knew was going to creat future errors. Having sovereigns bonds/debts without national centralbanks and a common interest-rate managed by one (impotent) centralbank(ECB) is a very, very big system-error. An error made to overstep the will of the european people(we said no to a fiscal federation). Don´t forget what Romano Prodi said when EMU was launched; “There will come a crises when we will further integrate the union”. So by failure the unelected can force(blackmail really) the union towards a real fiscal union/federation(bankunion for starters). This explain the simple thruth. The wholeness is more important then the integrety of the parts. Even if it´s severely miss-constructed.

              2. Calgacus

                I have provided links for most of the above many times, like the one asked for referring to Varoufakis statements in #3. Which I will later.
                I sometimes intentionally omit links because I am always pressed for time, like right now & because if I do include them, I usually comment to a dead thread. And as in this case – to see if anybody was listening. :-)

                Your “international law” is not applicable. Greece renounced that years ago when it joined the EU.
                No, it did not. To correctly do the “homework” of reading treaties one sometimes has to do the reading of “the textbook”, to understand the universally-acknowledged framework the treaties are embedded in, just as the treaties implicitly assume & are overridden by elementary arithmetic.

                Giving up the Euro means leaving the EU. Every legal analysis I have seen confirms that.
                Not Jens Damman’s analysis, which we have discussed before. And Athanassiou really argues against his apparent position IIRC. And as I have noted & quoted before, Athanassiou explicitly agrees with what I have said on the lack of consequences of Grexit, the meaninglessness of “legality” here -against what some commenters have misunderstood his paper to say.

                From Damman’s paper “the doctrine of rebus sic stantibus constitutes a rule of customary international law. As such, it is binding on all the Member States as well as on the European Union itself. No less an authority than the Court of Justice of the European Union itself has acknowledged this fact.
                Damman quotes the ECJ: “the rules of customary international law concerning the termination and the suspension of treaty relations by reason of a fundamental change of circumstances are binding upon the Community institutions and form part of the Community legal order.”

                The strongest kind of international law, which binds the EU & its members, is treaty law which is also accepted as customary law. This includes all the law in my question #1 below:

                Since there have been comments that show that knowledge of the basics is not as widespread as it should be, a couple of questions:

                1) Does EU law (or the TPP for that matter) supersede the UN Charter, the genocide, slavery and piracy conventions and customary international law, Jus Cogens (“compelling law”) & Erga Omnes (“towards all”) norms? Would it even if it explicitly said so?

                2) More particularly, if Greece or any other state said : “We won’t pay this debt.”: Can anybody invade Greece to make them pay up?

                “Yes”es indicate a need to do some homework.

                One of the thing that the USA should be proudest about is its role at San Francisco in making war to collect on debts illegal. A major, practical difference between classical and modern international law, but nowadays it can be as invisible as water to a fish. See Stephen Schlessinger’s excellent book Act of Creation: The Founding of The United Nations.

              3. Calgacus

                I provided many relevant links to the “significant body of thought and analysis” that includes Lapavitsas & Flassbeck’s Against the Troika etc, Mark Weisbrot’s papers and Warren Mosler’s defense of them here, in February .See also my and others’ comments in The ECB Tightens the Choke Chain on Greece, for links and discussion of Varoufakis’s important “Greece’s duty to negotiate with Berlin: Part B of an interview…”, where YV (a) puts the probability of Grexit at >50% and (b) clearly says exiting austerity is more important than remaining in the Eurozone.
                More recently Varoufakis said ‘We are ready to lead an austere existence, which is something different from austerity.” (see first link) To repeat Weisbrot, cited above in reply to vteodorescu, more briefly: “A robust recovery … is the most likely outcome of leaving the euro. “

          3. Jackrabbit

            Yves: incompetent!
            James Levy et al.: lacking courage!

            You are both right if Syriza is not sincere. The most benign explanation is cognitive capture. Do they see themselves as European more than Greek? So far, they are ‘muddling through’ while making payments that just dig the hole deeper.

            But there is a less benign explanation, too. The good-cop/bad-cop routine of the US duopoly has made me cynical and suspicious. Yanis/Greek negotiations are reminiscent of Obama’s 11-dimensional chess. The overriding need for bi-partisanship never accomplished anything for ordinary people but did run down the clock on the Democratic Congressional majority that Obama enjoyed when he first took office.

            Syriza talks of reforms but what have they done? The Troika have not been happy with suggested reforms (naturally) and AFAIK, Syriza haven’t yet tried to hold anyone accountable for the disaster (make an example of bad actors). Nor have they tried to effectively publicize the plight of the citizenry (as Yves notes)? They moan about the unfairness of IMF and EU negotiators without highlighting the human cost. This reluctance to go “populist” is also reminiscent of Obama.

            I noted how Yanis failed to talk about the hardships of the Greek people during his big presser after the first round of Troika negotiations concluded. Instead of talking of the people, he spoke of working with “the institutions”. But I stopped writing about Greece because I don’t have time to follow it; Yves and others were doing such a great job, and I wondered if there was some strategy that Yanis/Greece was working on that would cause “the institutions” to relent. It seems that they had nothing – except the divisiveness of WWII reparations which never seemed like it would amount to anything. That’s as much of brick wall to bang one’s head on as slavery reparations in the US.

            And, as the payments continue, the press that Yanis got about being socialist is looking like messaging meant to disarm critics on the left. Where have we seen that before (hint: Obama)?

            H O P

            1. Jackrabbit

              I might be too harsh on my judgement regarding the WWII reparations. While it might normally take years to reach an agreement on such a matter, due to Greece’s dire straits, raising the issue now gives Germany a golden opportunity to settle the matter for pennies on the euro (I’d imagine something like 5 billion Euro for 60+ billion Euro in claims). Never let a crisis go to waste!

              That would help the Greek government to make a few more payments to “the institutions”. #winning

              If so, the Greek government would likely tell their people not to let the perfect be the enemy of the good, and of course: think of the children!

              No sure whether to add a snark tag . . . because Obama.

              1. Mr. G

                oh come on. The WW2 reparations Issue was just a ruse to keep certain Extremist elements of the Greek coalition happy. Everyone knows it.

            2. Jackrabbit

              Since Syriza was elected, billions more Euro have left Greece and billions more have been paid to “the Institutions.” Greece is in even more dire straits as (futile) negotiations drag on. It only gets more difficult to leave.

          4. charles 2

            Regarding 1. The German constitutional court did its homework indeed and itself stated that it was the ultimate authority in Germany, and that the EU Treaties didn’t change that. If it is true for Germany, it is true for any country. Actually, every country, including Germany, violate the EU Treaties routinely, both by the letter and by the spirit. (For instance, do you remember that countries who got an opt-out of the euro are supposed to make effort to get in ? Of course, none of them do…), so the moral argument doesn’t hold. In the same way that taxes are for the little people, rules are for the little countries…

            There are no EU or Eurozone rules that say that a State cannot default on its debt. Greece can perfectly default while staying in the Eurozone. It can also use EU Courts to challenge any decision of the ESCB that it think it is “ultra vires”, and take conservatory measures in the interval (such as printing euro banknotes)

            1. Yves Smith

              Not correct.

              1. The German Constitutional court referred its decision to the Luxembourg court. It did not hold itself out as the final authority.

              2. The ruling opposed ECB bond buying. Did you miss that QE is on, and therefore the ruling has indeed been ignored?

      2. Brooklin Bridge

        So the extortion racket no longer works, and the Greeks themselves are having second thoughts about how their representatives have been conducting it.

        Extortion racket? I thought 90% of all “loans” to Greece went straight back into the pockets of German and French banks and the ECB. Who is extorting who and why would “messengers” use such loaded terms?

        Particularly this business of setting the Greeks (citizens) as questioning why their government is soaking the French and German tax payers,

        The sticking point to getting further bailout money from taxpayers of other countries, mostly those in Germany and France but elsewhere as well, is that Greece is playing game theory and is trying to elevate its extortion racket to a fine art, instead of trying to work out a deal that the taxpayers of those donor countries can live with. Donor countries, not creditors, because they know they’ll never see part of their money ever again.

        The tone of that paragraph is not simply “messenger”, it is dripping with the inflammatory style of pitting one group of EU people against another group of the EU, as if the taxpayers of any of those countries are actually making any of the decisions. It takes a particularly nasty jab at Varoufakis, “game theory”, when based on your own articles and on what Varoufakis has said, that is the opposite of what he has tried to do (possibly not to his credit).

        Wolf may indeed get some of the facts right, but this is hardly an unbiased description of what is going on. To see the difference most strikingly, just read what you have written time and again and compare it with this article. It’s night and day. One can be very frank about the problems Tsipras is having including their blunders without passing off the horrific part being played by the Troika and Germany and even the periphery governments as “extortion of the German and French taxpayers”.

        As always, I disagree with the style of introduction, How can NC print such an article as if different POV can never be discussed, but the underlying sentiment seems reasonable; Wolf is using pretty loaded terms to describe the situation and what he omits is more loaded still.

        1. susan the other

          I agree about the tone of Wolf Richter’s piece. It almost didn’t sound like him at all. And he’s pretty conservative – so this was over the top even for Wolf. Vilifying Greece-the-Debtor is a pointless exercise. If Greece cannot pay the debt back, it will not pay the debt back. Life is full of choices, even for Germany. Germany can let Deutsche Bank go the way of Lehman. Why should Greece continue to pay to keep DB alive? And whatever French bank too, SocGen? Why is the collapse of a stupid bank not an option? It would be the lesser of all the evils.

          1. Icarus

            Reading comments like the two above me are really helpful and solidify my understanding, lo be me the typical “man-on-the-street” who knows so little about international finance but wants to understand what the heck is going on! Thank you for your comments and 3 shouts of “Wassup!” for this best site evah!

          2. RA

            Wolf is a right-winger who despises debt and he has gleefully anticipated the demise of the municipal bond market for quite some time. He believes debts should be paid regardless of the costs and looks forward to their moral comeuppance at all times..

      3. Dan Allen

        I find the problem with Richter’s analysis is in its critique of Syriza. Because the alternative is doing what New Democracy did, which is to heap the costs of austerity on the weakest.

        I also think that Richter is wrong and that eventually a deal will be made that gives Greece room to change its policy mix. The previous gov’t (which I assume Richter advocates for) would never have done that because they are captured by other interests.

        1. Yves Smith

          I hate to tell you, but a Grexit will be vastly more damaging to the Greek economy, and it will also hit the weakest hard. You are acting as if a Grexit will make things better, when it will make things worse. Even Varoufakis has stated that repeatedly. The Greek opposition to a Grexit is not uninformed.

          Greece can choose between having the Trokia cut off an arm or cutting off its own legs. These are not good choices.

          1. bruno marr

            Yves, the reason there are not good choices (losing any limb is not good) is there is no “reasoning” with the Troika. Greece cannot repay the “debt”. Period. Reasonable people see that. Germany, and others, refuse to look for solutions.

            1. MyLessThanPrimeBeef

              They have borrowed from the real Mafioso, unfortunately.

              Even though Greece can not pay, she will have to pay.

              “Candide, we live in the worst of all possible worlds.”

            2. Yves Smith

              You are missing what the issue is.

              First, debts to not have to be repaid. They do have to be serviced.

              The Greek debt has already been reduced substantially in economic terms via extensions of maturities and reductions in interest rates. In economic terms, it is only about 70% of GDP. That is not in and of itself a problem. Moreover, as we have written repeatedly, the Troika fully expected to give Greece some additional debt relief, likely in the form of extending maturities further (which among other things would reduce the size of refinancings).

              What IS a problem is that Greece is in a depression, and that the Troika believes in austerity. Austerity has consistently been shown to make matters worse, but its adherents think those failures are due to not doing enough austerity (mind you, the research arm of the IMF has changed its view on this one, but the research arm has no power with the Lagarde or the “program” side that is in charge of managing debtor countries). And in keeping, the row with Greece and the Troika is over the structural reforms, and not over debt negotiations.

              Greece needs a massive amount of fiscal spending. That could happen in the Eurozone via an European Investment Bank infrastructure program but won’t.

              1. James Levy

                What is at stake is the Greek people’s ability to make their own policies and get out of their imposed depression. You seem to be missing that in all the details you so expertly wield in defense of what appears to me to be an “if the Troika was more reasonable and would negotiate then things would be better” discourse. The question for me is do the Greeks want to be well cared for slaves, beaten down slaves, or burst their shackles, take their medicine, and stand on their own two feet. Freedom, as Captain Kirk so earnestly said, is never a gift: it has to be earned. The Greeks are going to suffer either way. They can either suffer and come out their own men or they can suffer and stay the subalterns of the Troika. That would be the unpleasant reality I’d like to bring to this discussion.

                1. OpenThePodBayDoorsHAL

                  Since when did “bank underwriting” cease to exist? When Commerzbank loaned Greece billions so they could buy submarines from Siemens…was that not a business decision made by said Commerzbank, full of interest rates, terms…and presumably an analysis of the creditor’s ability and willingness to pay? And can we acknowledge the cultural differences without being called a bigot? My German friends tell me that taking a loan is like a sacred covenant, you pay it back at all costs. Greeks, perhaps not so much?

                  1. John Jones

                    Only that there are times Germans have not paid back loans and times that Greeks have. So its only stereotypes that leads to bigotry.

                2. MyLessThanPrimeBeef

                  Do you think Greece needs Plato’s Philosopher Prime Minister to guild the people (who currently are not in favor of such moves, per polls), to be for leaving the EU and the Euro, so they can make all their policies on their own?

                3. Yves Smith

                  No, you are straw manning me, and your reasoning seems to be uncharacteristically clouded by emotion.

                  1. Greece is not sovereign under the EU/Eurozone treaties. Repeat that after me. It can default and undergo a disorderly Grexit if the ECB pulls the plug on the ELA and become a failed state. You don’t want to hear that.

                  2. We said from the very outset that Greece would not prevail without outside assistance. That is why Greece’s poor job in making its case (putting more focus on the international crisis, demonstrating that the structural reforms were misguided, telling the world it had done more than any other country in implementing structural reforms and got terrible economic results) mattered. The Greek officials seemed to assume that the rest of the world was conversant with what was happening in Greece.

                  The odds of 2 working were never high but it was the government’s ONLY chance, and they did not make the best go of it.

                  1. James Levy

                    I will cop to the claim that my emotions are running high and may be unduly influencing me. You could very well be right about that. But since no one is going to launch a military invasion of Greece if they say adios to the EU, then the “they have to stay in, they have no choice, it’s the law” meme is not really the case. You may be right that Greeks don’t want to leave, but barring the use of armed force they can, and I don’t see German panzertruppen slashing through the Balkans and occupying Athens any time soon.

              2. Stelios Theoharidis

                Not to say reform isn’t seriously necessary in Greece, but overall my takeaway from this is that it is a timing issue, how leverage and bargaining changes over time. Greece had leverage when money was owed to the European banks and the PIIGS were all in economic trouble. They could have defaulted on the debt owed to the private financial institutions and the core Europe would have had to bail out their own banks or negotiate with the Greeks for a haircut on their debt. All the PIIGS are still in poor economic straits but now the core European countries have managed to bail out their financial firms via the backdoor. Now it is just funny money and the Troika is in a stronger position. It is a similar problem with the US financial crisis. When there was leverage for policymakers via imminent financial collapse and political capital to punish the bankers there was no political will.

                1. MyLessThanPrimeBeef

                  Sounds like it was not a propitious time to promise the voters to take on the Troika when elected.

                  “Vote for us. We will reform the country and go after looters. We have less leverage with the Troika now.”

              3. dw

                not sure that the EU (Germany, and others) dont demand the debt be repaid, maybe i missed that, but its always been the impression that it just must be repaid. and that the required austerity is make sure it is. even of thats not realistic. and while i get Greeks want to stay in the EU, they can only do that with the required austerity. which makes repayment almost impossible . look almost like the allies and Germany after ww1. might have the same result only time will tell. seems like when Germany had its depression because of its debt to the allies, that didnt turn out well for the world

                1. JTMcPhee

                  Time for a goddam Jubilee. Way past time. It cab be be agreement, with people looking for the least-harm path, or it can be by black swan or collapse. And did I not see that the effing high-collar so very rectitudinal Lutheran DeutscheBank was just docked €2.5 billion for its role in manipulating LIBOR? And that’s just one item they’ve been caught at, which of course is actionable because it involves stealing from their fellow thieves. ” Ach, boys vill be boys…”

              4. charles 2

                “The Greek debt has already been reduced substantially in economic terms via extensions of maturities and reductions in interest rates. ”

                In economic terms, extension of maturities does not reduce the burden of the debt in a zero nominal rate environment. This is not the nineties any more, sorry…
                As far as interest rates are concerned, they are still in real terms way above the growth rate of the greek economy.
                The bottom line is that Greece was bankrupt before the restructuring, and still is after.

                Considering Greece situation, a recovery rate of ZERO on its external debt is the only viable conclusion and it will NOT bring mayhem to the Greek economy : there will be plenty of SWF ready to recycle their euros to a Greece with 40% debt/GDP at interesting rates. Most of it will be vendor financing of course (Gulf countries, Russia for energy and Asia for about everything else). The only change that you will see in Greece is that the Peugeot and Daimler dealerships will go bankrupt, while the Geely and Hyundai dealerships will take over.

          2. djrichard

            I would argue the weak get a better outcome with a Grexit. But that doesn’t matter, because the weak go where their leadership goes, especially when they think they’re seeing capitulation by their leadership. If their leadership looks like it has no option but to capitulate, then the weak capitulate.

            So the Troika simply needs to get the Greek leadership (including elites) to look as if they’re capitulating to whatever the Troika wants. And that means deal making needs to happen between the Troika and the elites.

            But I can easily see this whole thing going south. The Troika seems hell bent on even teaching the elites (the whole lot of them) a lesson (because you know, they deserve it). In this case, the capitulation of the elites won’t be towards the Troika, but towards exiting the euro.

            1. Yves Smith

              The polls disagree with you, and as we stated from the very outset. Syriza is a bourgeois party. 2/3 of its representatives in Parliament are moderates.

              I fully anticipate Syriza will fold. They don’t have public support to exit the Eurozone. If the party tries agreeing to the current structural reform package, however, the left 1/3 of the Syriza reps will bolt, which will cause the government to fall. The anti-Euro parties lack the votes to form a government. The most likely outcome is the moderates in Syriza form a government with Pasok. I’m not up on Greek electoral rules, but if new elections are required, I’d expect Syriza to lose seats, either directly or by the more hard-line left members forming a new party, so you again get to a Pasok or a Syriza-Pasok coalition.

              1. Edna M.

                A coalition with Pasok would spell the end of Syriza. I don’t see it happening. There is no way that people will return to the old parties. If the choice is properly presented to the people as a referendum– continued austerity with the euro or return to national currency– people will likely choose national currency. Different polls suggest different things. For ex.,

                1. Mr. G

                  if the choice is between their wealth or party affiliation…then Syriza will go. Self interest drives national policy….not dogma and theory. Intentional or unintentional, if Greece exits…Syriza goes to prison or worse. They know this. They aren’t fools.

              2. Sibiriak

                Yves Smith: I fully anticipate Syriza will fold.


                When? You’ve been predicting that for quite a while now

                1. Yves Smith

                  They have been folding by:

                  1. Not imposing capital controls

                  2. Not having a Plan B

                  3. Not selling the public on a Grexit (not that I think that idea is in Greece’s best interest, but that is the alternative to folding) and in fact, repeatedly telling the Greek public that they want to stay in the Eurozone

                  4. Putting pensions and local government funds at risk by appropriating them to pay the IMF.

                  They are pretending to not have given as much ground as they already have.

                  1. Sibiriak

                    Thanks for the clarification.
                    I thought “folding” meant agreeing to the Troika’s terms; accepting the old program of “structural reforms” etc. without any major concessions by the Troika.

                    1. Sibiriak

                      I thought “folding” meant Syriza capitulating in the current negotiations–thereby avoiding default and Grexit.

                      The Guardian: “Ministers lambasted Greek finance minister Yanis Varoufakis for not reaching an agreement with creditors two months after the eurozone extended Greece’s loan programme until the end of June.”

                      Not reaching an agreement and heading toward default wasn’t what I considered “folding”. But I guess refusing to capitulate on structural reform and defaulting can be considered a kind of “folding”. Folding up the tent, perhaps.

                    2. Yves Smith

                      As mentioned above, Syriza is boxed in. Even if Tsipras and Varoufakis secretly wanted to cut a deal on the structural reforms, the hard left wing of the party would bolt from the coalition which would lead the current government to fall.

                2. Ben Johannson

                  They’ve only been in power three months. Unless you’re trying to time your own deposit flight what difference does it make whether one says they folded last week or will do so tomorrow? They’ve retreated on all fronts during the negotiation process; it isn’t like Tsipras will announce a Capitulation Day. He’ll quietly give in and use the state media apparatus to brainwash voters into thinking it a victory. Like every other lousy, self-interested politician.

          3. Edna M.

            Varoufakis is a self-described Europeanist. The last people who would want to leave the euro are Varoufakis and Tsipras. It seems as if we have two different ideologis that continue to keep the Greek economy in the death spiral– the austerians and the euro-worshipers (for lack of a better term). Varoufakis has said that a return to the drachma would be a return to Neolithic times. When you have leaders on the left and right saying the same thing, the people become convinced it is true. From he very beginning of the Greek crisis I wondered where the diversity of opinion regarding the euro was in Greek politics. (There is the Communist party of course but I won’t go into how their beliefs actually support the system so mycomment won’t be too long.)

            1. financial matters

              I agree about Varoufakis but maybe not so much with Tsipras. Greece seems to have a long history of development of various lines of communist and Marxist thought which is strongly supported in student activities and grass roots organizations. There are also more conservative groups such as the one they are united with who are pro labor.

              I think this ‘radical left’ part of the party resonates well with Tsipras. These ideas are resonating better in the mainstream now that the full effects of neoliberalism are seen.

              There are well-trained economists in Syriza who are well versed in a Grexit such as Lapavitsas. Rather than being strictly ideological they have a heterodox viewpoint and want real conditions to improve for the working class which is the 99%.

            2. Calgacus

              Varoufakis is equivocal, even though nobody seems to notice when he does not say irrational, slavish things about the need for fealty to the Euro and GIANT CATASTROPHE DISASTER without the Eurocrats’ benevolent despotism [not].. A few years ago, he put the probability of Grexit under a Syriza government as >50%, and said that if Merkel and austerity didn’t change, we would be waving them goodbye. And just this year he said that “we are ready for an austere existence [meaning Grexit], which is something different from austerity”. If he can just keep to these words from his thoughtful heart, rather than his muddled, emotional head, I’m still happy with Syriza.

          4. Mr. G

            Agree with Yves. Grexit is a Grexident. The only difference between those two words is whether someone stands up in Europe and takes accountability for it. A deal *will* be done. The alternatives are too ominous and unknown. Surely we’ve learned from Lehmann. Yes, some things are too big to fail.

    2. ErnstThalmann

      Well, you certainly got the second part right. When reading at first, I thought his last name might be Schacht and not Richter. Funny how one gets these impressions.

  2. Gerard Pierce

    The fact that stocks and bonds throughout the world are leaping to new highs does not say very much about Greece, or the Euro, or the US dollar. It’s mostly a reflection of oil prices and the lack of any safe investment that provides an ‘acceptable’ return.

    It’s also an example of follow the leader where most investors have no idea who they are following or why they are following them.

    You will know that they have all completely lost their minds when someone successfully mounts a Pump and Dump on the drachma.

    1. digi_owl

      Bingo. If “QE” has shown anything, it is that the stock market is by now wholly disconnected from the real economy. If some entity with “deep pockets” declare that it will be buying, the prices will go up no matter what.

      1. OpenThePodBayDoorsHAL

        I think it shows we have replaced central banks with highly-leveraged hedge funds that can only buy, not sell, and that can “never” get a margin call. Just look at the Fed’s name for QE: Large-Scale Asset Purchase (LSAP). The BOJ is on track to own 100% of Japanese equity ETF floats by 2017. As one commenter wrote in the FT: “Thank you for your explanation of QE, I know understand what it is. My problem now is I no longer understand what money is”.

    2. MyLessThanPrimeBeef

      My view is more pessimistic…I believe in two parallel universal societies – the Money Street World and the Non-Money Street World.

      In the Money Street World, what matters is not so much about investing safely but whether the fiat money spigot is on or off.

  3. Cassiodorus

    “Negotiate in earnest”? What does that mean? Presumably at some point the ECB is going to force Greece into a “Grexit,” in the manner previously described by Yves Smith here at this blog. The Greek people may at that point decide to blame SYRIZA (remember, it’s an acronym) for this outcome, and push them out of power. Who else would they elect, and where is the “negotiation” in all of this?

    Perhaps Greece now has the appearance of a wounded gazelle, the lions not yet finished, the hyenas in the background, and the buzzards flying overhead. Again, where is the “negotiation” in all of this?

    1. wbgonne

      Negotiate in earnest means abandon the “radicals” and submit to permanent debt-slavery.

      1. James Levy

        Ding-ding! Thank you. Always remember: when an American is talking about foreigners and uses the word negotiate, what they really mean is capitulate–the two are synonyms in the American foreign policy lexicon.

        1. susan the other

          Early this morning I read the headline “The Great Default” and I clicked on it thinking it was about how the entire world might be defaulting at once. Maybe an end to all the irrational economic rationalizations. Just start over world. Unfortunately, I misread the headline, it was really “The Greek Default.” But those little mental glitches can be very inspiring because all morning now I have been thinking, well, why not do a global default? Just go on financial life support and good will until the dust settles. Which is almost where we are today, minus the good will.

          1. JTMcPhee

            As you know, sto, it’s called a “Jubilee,” and there’s good reasons why intelligent people over at least the last 4 or 5 thousand years have done a big reset when the money street rentiers have ascended to the heights of futility and self indulgent folly. Since that seems to be the only “market correction” that gives ordinary people any relief. Individual bankruptcy doesn’t do it. I think the physiological analog is the reaction a lot of us have to a nasty enterobacterial infection: sweat, sh_t, and puke until we’re rid of it, give our immune systems and homeostatic mechanisms a chance to reset, recoup.

      2. Cassiodorus

        Even the permanent debt-slavery option (given, of course, that Tsipiras and Varoufakis have fully signed on to this option) may be in doubt. As I asked in a previous post: why is the probability of a forced Grexit set so low?

        To reword my question above: any sort of dialogue or talk or negotiation would presume that the Greek government would be allowed to “say something back” to those who basically expect Greece to pay up without question. Is such a presumption warranted?

    2. Yves Smith

      No, if I were the ECB, I expect the odds to greatly favor Greece folding. However, the ECB must be prepared for a Grexit and has stated that it is. We think the long-term impact is far more destabilizing than the officialdom believes, since it will pave the way for other exits.

      1. Richard

        Their stating that they are prepared for a Grexit strains credulity. And which of their actions would you point to as evidence that they are seriously willing to take this step? Given SYRIZA’s near-total intransigence, I think the Troika would already have pulled the plug if they really believed they could. You say that you think “the long-term impact is far more destabilizing than the officialdom believes.” My assumption is rather that they are not complete idiots, whatever they may “state” to the contrary. To me, their actions suggest that their design is simply to get SYRIZA replaced with a government that will allow the looting of Greece to resume.

        1. Gerard Pierce


          I think your comment is the most accurate description I have seen in weeks. If they could, they would have already taken action. If SYRIZA can hang in just a little longer, the group that was once known as “the Troika” will have to come up with some kind of fake deal that lets Greece off the hook while cleverly pretending something else is happening.

          Maybe they can come up with a plan where Greece wins the lottery.

          Let’s hear it for the Powerball Economy!

          1. MyLessThanPrimeBeef

            It’s either Yanis the Cunctator or they are in the Leader’s Bunker waiting for Steiner’s Army.

          2. Cassiodorus

            Maybe they’re afraid — a little bit. Wait until the default occurs. Then we’ll find out.

        2. Mr. G

          Or maybe it’s a difference in time horizons. Greece and Syriza looking at long term future. Rest of Europe looking how to make things better now, and postpone hard, big decisions till later. In some ways isn’t Greece all of Europe’s future if they don’t resolve this currency union? Sooner or later all me,bears will have “debt issues”. What happens when it’s Italy’s turn at bat?

        3. Yves Smith

          No, the evidence is that think they are prepared. The ECB would not be threatening the Greeks with making the collateral rules for Greek banks more stringent, which would allow them to deny the Greek banks support they need without formally yanking the ELA. It’s a more elegant means to the same end. That threat is sure to worsen the bank run and making the bank run worse is the last thing the ECB would want to do if it were worried.

          Mr Market agrees. All the ECB cares about is the bond marker reaction and periphery spreads are behaving well. Nothing like 2012.

          Look at the global markets. Stocks are hitting record highs. And this after reports of how badly the talks went on Friday.

          1. Richard

            To me, the difference in yields vs. 2012 doesn’t suggest the absence of contagion, merely the reduced likelihood of illiquidity and disorderly exits. And that seems more reasonable, given what the ECB is doing. In the meantime, buy while the buying is good. I mean, what else do you suggest that portfolio managers buy instead? In general, I feel as though using current bond yields as evidence in support of some underlying thesis is an exercise in confirmation bias. (And I’m doing it, too.)

  4. Mario Medjeral

    There are two ways to survive in this system: The mercantilist way by exporting and holding wages down (Germany/China) or the ‘exceptionalist’ way which is creating permanently chaos in the world to ensure a continuous inflow of foreign savings to keep the bankrupt shop going.
    Who is the extorsionist here? Greece?

    1. MyLessThanPrimeBeef

      Don’t know exactly who the extortionist, but Greece is being asked to be the contortionist here.

  5. Marko

    The deteriorating poll numbers for Syriza must warm the hearts of the Troika technocrats. By continuing to inflict pain on the people of Greece , they hope to discourage the electorates in Spain and elsewhere from entertaining any populist notions , especially lefty populist notions. What they’re doing to Greece is analogous to what the U.S. is attempting to do with sanctions on Venezuela , and what they tried to do with Cuba for the last 50 years.

    Any leftist parties – or parties of any stripe attempting to represent the average stiff – face almost insurmountable obstacles , it seems. The oligarchs are just too firmly entrenched throughout the Western world , and they close ranks whenever there’s a threat , however insignificant.

    If Syriza achieves even a fraction of their goals , it will be a major accomplishment. They’re up against an army of ruthless , corrupt pricks.

    On this side of the pond , we can soon look forward to being force-fed TPA , then TPP , then TPIP , in spite of widespread opposition to the lot of them. That , along with a few more tax cuts for the rich , will give us a good sense of the helplessness the people of Greece must feel.

    1. Veri

      Well, the plutocrats have had a long time to mold public opinion. That, and while Greece uses a zero-sum game, plutocrats use mass psychology – which is winning. The plutocrats know the public’s psychology better and foster their perceptions. Not that Syriza pays any attention to the psychology. That’s the problem with Ivory Tower types. They tend to miss many things outside their narrow discipline.

    2. wbgonne

      From what I’ve observed, Syriza never had a strategy. They merely flailed about and made speeches while the debt-masters humiliated them. No wonder their poll numbers have plummeted.

      1. James Levy

        I think their strategy was real: 1) to sway international opinion by talking bravely and showing their opponents to be bullies; 2) making serious, intelligent, fact-based arguments to their creditors that austerity was a lousy way to get their money back and that extracting surplus from a growing economy was a lot better strategy than bilking a contracting one. What they too quickly discovered was that the global response to both strategies was “who gives a shit.” The idea of predatory lending, that German banks lent Greece all that money because they knew it would all flow back to Germany with interest in the form of purchases of German goods and services plus debt repayments, seems to bounce off the minds of most people. The average person thinks “you borrowed it, you pay it back.” So strategy #1 was stillborn. As for strategy #2, we are all taught that economic and foreign policy players operate as rational actors. Every model they teach you in grad school stresses the utility maximization angle. This is one of the Big Lies of all time. The Troika are interested in power and authority. They demand they be respected and obeyed. Money is just a counter in this game. The arguments made by SYRIZA were seen as impudent, not logical. The rules had been set and Greece was seen as obstreperous and defiant by not accepting those rules as a precondition for possible “concessions.” Any alleviation of the pain of austerity had to be seen as a gift of the Troika, not a victory for right-thinking Greeks or the triumph of good sense over nonsense.

        In short, in a world run by amoral narcissists obsessed with establishing and policing hierarchies, you either conform or you are crushed. If you are really big, like China or Russia, you can try to skirt the system and carve out your own niche. If you are utterly unimportant and off the radar like Iceland, you can fiddle around. But Greece was, as a Euro member, neither too small nor too obscure to get away with anything, nor big enough to go it alone. Thus, she will be crushed or forced to conform.

        1. MaroonBulldog

          “As for strategy #2, we are all taught that economic and foreign policy players operate as rational actors. Every model they teach you in grad school stresses the utility maximization angle. This is one of the Big Lies of all time. ”

          Anyone who has studied history of any large country at the undergraduate level can compile a list of “economic and policy players” who acted like homicidal maniacs (because that’s what they were), but whose actions could be characterized as “rational” and “utility maximization” (for a psychopathic sociopath)–until the rational utility maximizer went a step too far.

          The purpose of the grad school (of which you speak) appears to be to reindoctrinate the open minds of the young who were emptied of all previous indoctrinations while they were undergraduates.

        2. Yves Smith


          See my comment above. Not all of Syriza’s arguments were well informed. Varoufakis may seem persuasive, but many of his remarks which would sound credible to Americans would have a nails on the chalkboard sound to Eurocrats, policy wonks, political journalists, and politically savvy laypeople. Specifically:

          1. One of Greece’s fundamental claims was that as a “sovereign nation,” the opinion of the Greek electorate had to be respected. But all the Eurozone treaties go on at great length about how the states that join accept and acknowledge that they are giving up much of their national sovereignity. Thus the Syriza line sounds at best abjectly ignorant.

          2. Varoufakis repeatedly took the position that Greece was going to sit down with its creditors and work out a new set of arrangements. That also sounded remarkably uninformed. You can’t go around tearing up covenants on existing debt agreements, which sadly is what the IMF structural reforms amount to. He could have made a broadly similar point but framed it as needed to renegotiate the structural reforms in a major way, since Greece had done a better job than any other member state in implementing reforms, yet had had the worst fall in GDP.

          In other words, you seem to accept that because Varoufakis is articulate that he has made his case well. I submit that he has not, and his remarks that reflect a lack of knowledge of the debt arrangements and EU/Eurozone governing rules would strike his key audiences as ignorant and presumptuous.

          1. Tsigantes

            Actually EuroZone nation states have only given up 75% of their financial sovereignty.
            The EU states have agreed to converge on certain standards and issues – without sacrificing sovereignty. All issues of importance require unanimous votes.

            The outstanding importance of sovereignty is exactly why SYRIZA is facing a brick wall. If SYRIZA should succeed then what about Podemos, Front National, Sinn Fein, UKIP, Orban etc. etc? There would be real change in the EU. This is 100% about survival of the status quo.

          2. James Levy

            It seems to me you arguing style over substance. Austerity is a shitty way of growing economies so they can service debts. It’s that simple. Any child knows if you shrink a pie there is less of it to go around. Varoufakis made that argument but it didn’t matter because the men and women he was dealing with care about power much more than they care about money. They want their pound of flesh, not a reasonable plan for getting paid back and keeping the Greek economy viable at the same time. I think you give the Eurocrats too much credit as being interesting in solving the crisis, or even getting their money. What they wanted was obedience and servility, and I fear they will get it. I think all this talk of money obscures the deeper issues.

          3. generic

            No to your first point. While technically correct, the loss of sovereignty is not something that gets brought up in polite conversation. I can guarantee you that no politician from the political center could ever use this as an argument. That’s why they fall back to the almost petulant “rules have to be obeyed”.

          4. norm de plume

            ‘ lack of knowledge of the debt arrangements and EU/Eurozone governing rules would strike his key audiences as ignorant and presumptuous’

            He knows the rules, and if assuming that nations have the right to save themselves from eternal penury is presumptuous we may as well give up on the idea of representative government altogether. Anyway, who are these ‘key audiences’? Are they ‘Eurocrats, policy wonks, political journalists, and politically savvy laypeople’? Who cares what they think? We KNOW what they think. He looks as if he’s talking to them, perhaps he genuinely is, but surely he is (or at least should be) talking past them to the great unwashed, in his own country in particular but to all of us in general. He has bent over backwards to ensure that he and Syria cannot be accused of failing to try to compromise. To me that effort has gone far enough, maybe too far, and its time now to oppose and accuse, and prepare for what comes next after default and possible Grexit.

            Rules are made to be broken, or modified in light of experience, particularly those that privilege some parties over others and fail utterly to achieve the promised outcomes, and in fact now stand in the way of those outcomes – i.e., enough growth to allow debt repayment AND a decent living for citizens. Your point 1 sails close to accepting the logic of the Eurocrats, that supranational agreements trump national sovereignty. No matter what they may say they simply cannot dissolve elective democracy; for one thing the set of human beings that agreed to them (many now dead) may not now represent the will of the citizenry concerned.

            As for pt 2, we have come to a pretty pass when a clear statement of the need for a re-negotiation which is palpably obvious to all but those self-interested ‘key audiences’ above can be viewed as ‘uninformed’. He could have reframed it perhaps but seriously, how much good would that have done, given who he is dealing with? You seem to be saying he should have been even more accommodating; it seems to me that he is now close to being justly accused of not being feisty enough. What a tightrope the poor man must walk.

            In the end it boils down to what James said – the goal is not the amount of shekels, but obedience and control (the first for you, the second for us) – and what you say – that it is the potential for revolt in other nations that is really animating this drama. It is a showdown and if this domino falls and Greece manages to re-establish the over-riding legitimacy of elective national democratic governance (over supra-national agreements and the increasingly finance-capital oriented forces behind them) then Spain, Italy, France etc may follow.

            And that would spoil, and possibly even end the European party (and maybe, just maybe begin the process of releasing us from the chokehold of the 1%). It might be argued that this outcome may prove dangerous but surely it’s now clear that the potential for depression and war in a ‘united’ Europe is too significant to ignore.

      2. Dan Allen

        Why not wait until negotiations are finished to make that determination? Because Varoufakis is absolutely correct that more austerity is just going to create additional pressure toward a Grexit. I have no doubt he really believes that.

        1. susan the other

          I get the distinct feeling that the EU is getting ready to quit the USA. The EU has an enormous problem with boat people drowning in the Mediterranean or overburdening their social services, take your pick. And Hollande was on the air criticizing Sarkozy for bombing Libya in the first place with no plan to help displaced people; so Syrian refugees are implied as well. I consider that to be an earth-shaking speech for the once timid Hollande. And then the Minsk agreement. And trade relations ripping the EU apart. And the EU continues leak info about how Greece will be given new terms “next month” well not in so many words – but clearly the EU is buying time.

          1. Tsigantes

            susan, it would be nice if the EU was getting ready to quit the USA. It would be really nice to think the EU consists of independent, principled nations. But with over 130 bases here plus 21 US nuclear bases I don’t see independence on the cards anytime soon. And the present, desperately low quality of Europe’s politicians are somehow not unrelated to this grim reality. The slippery slope downward for Europe started in earnest c. 1989 -1991 with the end of the Cold War: the re-conception of NATO coincided with the Common Market morphing into the EEC, coincided with the re-unification of Germany and coincided with the start of the ‘humanitarian’ war on Serbia. Too many coincidences.

            A visit to the eu’s EU timeline website is hair-raising.

            1. susan the other

              I’ll have a look at it. But I would say in advance that the items are selective. Do they account for the disillusionment of European people? You can’t force the EU into an alliance with the US (NATO or trade) for the long haul if Europeans are fed up. We overplayed our hand. We never had the means to include Eastern Europe into our system, a “free market” system which we faked from the beginning with loans, forgiveness, more loans, and self-defeating trade policies, followed by more loans – and then when it came to helping out the former Yugoslav nations there was very little indulgence of democratic reform and a lot of bombs. We won’t be able to help Ukraine any better. And look at Latvia. Talk about Zorba! The US has been all Zorba, no thinking, for a long time. We do not know how to run the world.

              1. Tsigantes

                The disillusion of the European people is no doubt similar to the disillusion of the American people, though maybe more widespread due to smaller populations – it is easier to have a ‘national conversation’ amongst a small group. The problem in both cases is the inability of populations to effect political outcomes: when the traditional parties of the centre have little difference between them it still takes time for new parties to grow. I hope we have that time.

                By the way, what you just described

                We never had the means to include Eastern Europe into our system, a “free market” system which we faked from the beginning with loans, forgiveness, more loans, and self-defeating trade policies, followed by more loans

                is supposed to be our line, remember? Supposedly ‘we’, the EU, made the decision to include the Warsaw Pact countries – the US had nothing to do with it, Germany needed a ‘back yard’ :) And supposedly we favoured the present arc of poverty and destabilisation stretching across the Balkans to the Black Sea instead of a united Yugoslavia. Not to mention ‘our’ pet project of ‘Greater Albania’.

        2. Yves Smith

          Huh? Did you bother reading the post?

          Public opinion is moving even more against a Grexit, and Syriza never favored it to begin with.

          We may get a Grexit because Greece defaults and the ECB decides to withdraw support of the Greek banking system, but that’s not an outcome anyone wants. Tons of Eurozone officials, even Draghi, say a Grexit is a bad outcome and they want Greece to stay in the Eurozone. But a default seems inevitable, and it is not clear what the ECB governing board will decide. A former IMF official polled three former central bankers and he got three different answers: one thought the bank support should continue regardless in the name of financial stability, one thought it would have to be removed immediately, and one thought it could continue if the two sides were still negotiating.

          1. Sibiriak

            Yves Smith: “I fully anticipate Syriza will fold.”
            Yves Smith: “But a default seems inevitable…”
            Aren’t those predictions contradictory? I.e., if Syriza is going to “fold”, wouldn’t they do so to avoid defaulting?

            (I think the odds favor a default, because Syriza doesn’t fold- on “structural reforms”–but I don’t rule out a Syriza capitulation to avoid default and potential Grexident, and I don’t rule out some sort of last-minute compromise deal including some Troika concessions.

            1. Yves Smith

              If they had wanted to defy the Eurozone, they would have defaulted VOLUNTARILY, early on. Russia did that in 1998, shocking everyone. Russia had the ability to service its debts but defaulted.

              The homeowner who sees that they probably won’t be able to keep their house defaults BEFORE they are utterly out of money if they have any sense. That way, they at least have enough to move. By scraping to pay every bit of dough they can find, they have already folded on one front, and I should have been clearer on that point. As the talks on Friday illustrate, they still seem to think the the threat of a default will lead the EU to blink on structural reforms but the EU will not give on pensions. That’s been clear for a while.

              To put it another way, defaulting in this manner is a way of capitulating while trying to escape blame (“we really tried but they were too mean!” While true, that was obvious a while back and argued for developing that Plan B that the government still appears not to have drawn up).

  6. Veri

    Declare national bankruptcy. The Greeks did it in the 1930s. Stop borrowing debt that will never be paid back. That money only goes to pay creditors, for the most part.

    1. Yves Smith

      No, the ECB told Varoufakis when he merely said that he was the finance minister of a bankrupt country, that talk like that would force them to cut the ELA, the banking system support the ECB has been providing. That would force an immediate disorderly Grexit. Greece would have to impose capital controls immediately, nationalize its banks, and go to the drachma to recapitalize them.

      We have said repeatedly that the incoming Greek government should have imposed capital controls immediately. Not doing so has made it even more vulnerable.

      1. ChrisFromGeorgia

        It seems to me that Syriza is playing a very foolish game here. There is no point negotiating with the Troika – they’re simply corrupt and will only bring more misery and ruin to the Greek people.

        What Tsipras should be doing now is going directly to his people and spelling it out in plain terms – there are two simple paths here. Path number one is to become a vassal state, in perpetual serfdom to the E.U. with no hope whatsoever. In return for their slavery, the Greeks might get an occasional crumb thrown in their direction from their masters. If that’s truly what the people of Greece want, then fine, let them have it.

        Path number two is to live with dignity as true free men and women. This means defaulting on all their external debt, recognizing the disastrous error they made in joining the E.U. If it also means they get kicked out, so be it. Print up some drachmas, live with the short term collapse but have hope for the future for the first time in a generation.

        That is what leaders do. Speak the truth and lead.

        1. djrichard

          I’m guessing Syriza is seeking a capitulation by its populace rather than selling them on the idea of exiting the euro. If Syriza sees the end game (Grexit) as inevitable, then why get in front of it and take any risk/responsibility for that end-game?

          Let the “bad guys” do their part and extinguish all hope for the euro; they certainly seem more than willing to play this part. Then Syriza can simply pick up the pieces and continue on from there.

          And if it isn’t Syriza itself that is the remaining flag-bearer after it’s all said and done, so what, it will be some of the same players just under a different name/brand. So long as that brand isn’t tagged with responsibility for leading the populace astray by asking them to leave the euro, then they have the brand that the populace can move forward with.

          Edit: I think Michael Hudson is saying same thing below.

          1. Gerard Pierce

            I should probably quote Varoufakis exactly, but in his “reluctant Marxist” article, I interpreted him to be saying that he is against the collapse of the EU on the pragmatic grounds that the so-called “left” is incapable of taking over and governing in any kind of competent way. I assumed he meant the left in both Europe and the US.

            That means a deal with “the artists once known as the Troika” where they remain nominally in power, collect their eventual bloated pensions and let the good guys control the economy as best they can while trying to revitalize leftist thought.

            Might not be exactly the truth, but it’s the best interpretation I can come up with. YV’s real plan doesn’t begin until someone else gets to take over his job (with Tsiprias still in power and the economy more stable). And VY probably knows better than anyone that it may all be wishful thinking.

            1. financial matters

              I interpreted that more to mean that society needed to be prepared for a radical change. He thinks that neoliberal policies are doing a good job at that.


              “The lesson Thatcher taught me about the capacity of a long‑lasting recession to undermine progressive politics, is one that I carry with me into today’s European crisis. It is, indeed, the most important determinant of my stance in relation to the crisis. It is the reason I am happy to confess to the sin I am accused of by some of my critics on the left: the sin of choosing not to propose radical political programs that seek to exploit the crisis as an opportunity to overthrow European capitalism, to dismantle the awful eurozone, and to undermine the European Union of the cartels and the bankrupt bankers.

              Yes, I would love to put forward such a radical agenda. But, no, I am not prepared to commit the same error twice. What good did we achieve in Britain in the early 1980s by promoting an agenda of socialist change that British society scorned while falling headlong into Thatcher’s neoliberal trap? Precisely none. What good will it do today to call for a dismantling of the eurozone, of the European Union itself, when European capitalism is doing its utmost to undermine the eurozone, the European Union, indeed itself?”

              1. Gerard Pierce

                The statements you selected are more accurate than my interpretation but I did not see any indication that he thinks neoliberal policies are doing a good job.

                I also missed his point that European capitalism is already trying to undermine the Eurozone. I’m not sure what effect that belief has on his choice of actions.

                Thanks for the more accurate information.

                1. financial matters

                  Thanks, I was just referring to ‘they are doing a good job’ on radicalizing people against capitalism. That he sees these policies as what are truly undermining the Eurozone.

                  His interactions with the Troika are emphasizing these policies. He wants Greek society and Eurozone society as a whole to understand what is currently going on and to see if there might be a more humane way to operate.

        2. sunny129

          ‘Speak the truth and lead’


          By speaking TRUTH, no politician has survived against the delusion of masses! Most of them(Greece) cannot handle truth. They want the cake and eat it too!

          Meanwhile, POLITICS is a life time career for many in any parties (with few exceptions) in any country in the World. No one has been elected by speaking the truth or being honest. They don’t want to lose all the ‘perks’ for being part of governing party! This a game played all around the world!

        3. Mr. G

          Disagree…they lead by holding the mirror to Europe’s face and seeking to fix it all, for everyone. Grexit is true capitulation. It’s giving up on a greater Union, and brighter future.

  7. Demeter

    I cannot see what the point of any of this agonizing is. It’s a sadist’s holiday. Anyone who can inflict pain on another has license to do so, and the sadists are winning every round, whether they are in Germany, Belgium, the US, or elsewhere.

    I admire the guts of Russia’s Vladimir Putin, trying to act in a professional, statesmanlike, humanitarian and honorable way without getting his head handed to him…but even he is thwarted by the total lack of a Greek plan set up by Greeks that Greeks are willing to follow without giving a damn about the euro, Germany, Belgium, banksters, or NATO.

    Greece is the most failed nation on the planet right now, because it is living in chaos, when it knows better. There’s no national will to overcome its enemies, or even to acknowledge the existence of enemies. Even its underground economy is trashed. Is there no instinct of national self-preservation? Has it deteriorated to every man for himself?

    Wake me up when something changes on the ground, in Greece.

    1. Yves Smith

      Um, Greece does have competition. Even in Europe, most would peg Ukraine as worse (the corruption is spectacular and long-standing). And of course, there is Somalia. But your point is generally well taken, and similar to the one made by others: Syriza has not been willing to govern, as in focus on running the bureaucracies. That is why Golden Dawn is likely to come out a winner. Hamas displaced Fatah in Palestine because the public saw it as better at delivering services. Golden Dawn is feeding people, if limiting its efforts to Greek natives.

      1. thoughtful person

        I think you are right that Golden Dawn is likely the eventual winner of a SYRIZA collapse at the polls. The Troika seems to be fine with SYRIZA’s collapse as they are not offering much in the way of help beyond the ELA funds avoiding a disorderly Grexit. Troika does not want any Grexit as that would take Greece out of the Euro sphere… Troika seems to think they will win the waiting game as economic conditions eventually and inevitably diminish SYRIZA popularity and any replacement gov’t (as well as other debt countries in EU) will then know the score: crush population and extract as much wealth as possible for eternity…as long as GD sticks to this bottom line, Troika is fine with them.

        1. susan the other

          As per US foreign policy, any 2-bit dictator will do. Will do to advance the interests of the rich and powerful. Syriza and especially Varoufakis personally have advanced the claim that democracy should rule the day. Not dictators.

        2. Tsigantes

          Sorry, Golden Dawn will not be taking over. When SYRIZA’s resistance to troika started their poll numbers plunged to 3%. That 3% is about right if you include the voters who are slow to switch allegiances.

          The closet fascists in the country are New Democracy under Samaras. The ND party hates Samaras – they are more centrist – and want him to stand down. He refuses to stand down because he is waiting for the collapse of SYRIZA and the Premiership to land in his lap. It was his small coterie (with some declared fascists among them like Voridis) that allowed Golden Dawn to set the electoral agenda of 2012 (migrants as ‘vermin’ etc) and let them take over the streets aided and abetted by GD policemen. This came to an end with the death of Pavlos Fyssas and Washington / Israel insisting Samaras toe the line. The leadership of GD was scooped up and jailed. The streets became safer. Should SYRIZA collapse and ND take over GD might have a part to play as ‘night people’ (enforcers) but as a party , no. As long as SYRIZA doesn’t capitulate (I don’t see that happening) voters know there is not only a more realistic option to support but one with an humanitarian agenda and real skills.

          Meanwhile we are into month 4 of a trap set for SYRIZA by the Troika / EU and ND / PASOK. The previous coalition refused to sign off on the Troika demands in Sept/Oct. 2014, knowing it would be political suicide. Meanwhile SYRIZA was No. 1 in the polls. The plot was hatched to bring forward the elections by 3-4 months – [elections would normally be underway now, in April] – so as to let SYRIZA inherit a poisoned chalice – and fail. Whereupon ND will take over again in June, but they can blame SYRIZA for having to accept the new conditions. Or the EU will award them with some ‘softening’ of demands. Anyway that is the plan, arcane as it may seem to you.

          Meanwhile, 45% supporting SYRIZA is higher than the poll numbers at the election. This is a solid core, delivering a majority if elections were called today. The other voters have reverted to their traditional parties for now.

      2. sid_finster

        Never been to Somalia, but Ukraine makes Greece look like Norway and makes many dub-saharan African countries look good by comparison.

    2. Tsigantes

      If Greece is a failed nation, speaking from the ground here, may we all be so lucky. We are broke and living on tenterhooks but no chaos – where did you get that from?

  8. JTMcPhee

    Seems pretty clear that nation- state is a failed category. Isnt that what TPP-TTIP, etc.and the whole Vast Global Network-centric Interoperable Battlespace Grand Strategy are all about? Those sadists have done a bang up job of breaking national boundaries, corrupting and flattening public institutions, and creating an overpowering attractant in “profit with impunity” that draws all the worst of us to participate in a huge Death Pact that does little besides satisfy and gratify the pleasure urges of its architects, enablers and marginal sycophants.

    Game Over for decency, comity, empathy, and that idiots’ myth, Freedom’n’Democracy ™? Don’t get Obama pissed at you, or some other warlord Generalissimo, or wherever you are you get a warhead (high explosive or fiscalmonetary or “destabilize-and-overthrow”) right in the middle of your forehead…

    1. ChrisFromGeorgia

      I see that point. You can make a pretty good case that America is a early stage failed state similar to Greece.

      Failed in the sense that the feedback loop from the governed to the government has been broken and replaced with a corporate hegemony that takes whatever it wants to continue to grow.

      Democracy in the US in 2015 is kind of like the British Monarchy – there for show only. Occasionally they trot out some symbolic gesture like having an election with two alleged candidates, both of whom represent the same corporate interests and differ only in style. The fact that we can’t get a decent challenge to Hillary or Shrub the lesser speaks volumes.

      1. MaroonBulldog

        There are differences between Greece and the U.S.A. Greece looks like a failing nation state. The U.S.A. is an early-stage failing empire. It was organized as an empire. Alexander Hamilton saw to that. The Republican party created the imperial presidency in the second half of the 19th century, and there was no stopping the march to empire after that. But now it has grown beyond the bounds of imperial manageability–it is too big to continue to cohere, it tries to operate on a world scale, but the world is beyond its grasp.

          1. JTMcPhee

            Establishing the conditions and rhetoric to ensure that business interests rule, and money is a principal, unprincipled lever that defeats comity handily.

            Sorry if you are a Hamilton fan. They were all, we are finally learning, just a bunch o rich white slave owners wanting to continue the hegemony of wealth over the puny lives of those that do actual useful work. The work of killing Injuns and converting a continent and lands beyond the sea to money equivalents and rentable ownership, behind a screen of faux electoral legitimacy.

  9. Michael Hudson

    To me, the situation’s resolution seems obvious.
    Given that Syriza knows that the Greeks fear leaving the euro (as we all would be frightened of the unknown and anarchy), they avoid blame by NOT paying the IMF/ECB, and leaving it up to Merkel etc. as to whether to kick them out or not.
    That way, they can say that they’re living up to their pledge to pay pensions and public salaries, but that what is occurring is a neoliberal class war against social reform.
    If the Greek people believe that they are attacked financially from without, they may support Syriza, as the Russians are supporting Putin, and as Cubans supported Castro during the blockade.
    So the political key lies in how the financial situation is framed.
    I see a “default” in the works, and everything else will follow from the Eurozone response — which may help Syriza.

    1. susan the other

      The things unsaid are interesting. US interest in Greece: as a NATO outpost, Greece is indispensable; and as a finger in the derivative dike probably also indispensable. Those two topics are verboten.

    2. Yves Smith

      You are likely correct that this is what Syriza has decided is its best strategy, but its poll numbers are falling as it continues to purse this path. The voters were never asked “do you prefer keeping your pensions if it means leaving the Eurozone?” Given that the pensions would now be denominated in drachma (even independent of all the other huge costs of exiting the Eurozone) the answer appears to be no.

      One of Syriza’s assumptions seems to have been that the Troika would not be willing to have Greece default. They’ve repeatedly, almost proudly, said they don’t have a Plan B. They are now finding that the Troika is not backing down.

      1. Christer Kamb

        who´s pollnumber are then increasing? Golden Dawns? I think it is natural that the numbers decrease when no real results are coming. But maybe it´s a reaction against government per se when real living-conditioning keep on worsening. Greeks feel they will be out in the cold when leaving the euro without understanding the longterm implication of being part of a failed monetary-system.

      2. vteodorescu

        what are these huge costs of leaving the EZ? printing own currency and stocking up the banks/cash machines with it I think it would cost around 500 million euro, if I recall correctly an estimate seen on the interwebs.

        Additionally yes there will be devaluation, but internally devaluation is not that visible, and it would take maybe 1-1 1/2 years for higher import energy prices to penetrate through, and hopefully by then the economy would be on a recovery path.

        Additional to this, what else?

  10. George Phillies

    In my opinion, the Greek government has worked out that total debt repudiation and leaving the Eurozone are independent events. They may very well do the former and not the latter. The Eurozone has no mechanism for ejecting them.

    1. Yves Smith

      Yes it does. The ECB can cut off the ELA which will lead to an immediate banking system collapse unless Greece imposes capital controls, and issues drachma to recapitalize its banks. It will not be a legal Grexit (there is no mechanism for that right now) but a de facto Grexit.

    2. Mr. G

      Varoufakis always stated this from the beginning. He realized default didn’t necessarily mean Grexit. But Yves is right. If ECB deems Greek banks insolvent then they can cut the line. This pushes Greece to Drachma under classical approach. But this is where I’ve raised question before……couldn’t The Cb of Greece begin producing its own euros as a branch,of the ECB? Effectively acting like a 2nd central bank within the currency union.

      1. Christer Kamb

        ELA is defacto a printing press of euros by a national cb. Greek banks used this facility buying government bonds earlier. Today ELA is also used for i.e ordinary commercial liquidity-needs(capital flight). Loans can´t be rehypothecated though. ECB demands every newly printed euro as collateral. And of highest quality for which greek banks are in shortness. The ELA is a temporary facility. So was the xtra low interest-rates by the CB back in the 09´s :)

  11. Jackrabbit

    Is the Greek public really so united? Doesn’t most of the hardship fall on the less fortunate?

    Has Greece made any progress in reforming their tax system?

    It seems to me that the former governing elite is most to blame. Why are those who sell out the people always allowed to escape all responsibility? In that regard, the Troika seems to be a convenient (foreign) punching bag.

    H O P

    1. Jackrabbit

      How can a country be brought to ruin and there is no investigations for abuse of power, misuse of office, etc? Admittedly, I am not following Greece as closely as some others, but I haven’t heard of such investigations.

      And despite Yanis’ saying that that they are bankrupt and that the farce can not continue, Greece has thus far done everything they can to make payments and play along with the farce (renaming the Troika to “the Institutions”, for example). I have to wonder about the recent seizing of funds from the states. Is that also to make payments? Why continue to make payments if default is certain at some point in the not-too-distant future?

      We’ll know that the Greek government is serious when we see tax seizures and perp walks. Until then, this Greek tragedy is just a soap opera. Pass the popcorn.

      1. Jackrabbit

        It seems to me that continued payments, which everyone seems to agree only forestall the inevitable, only weaken Greece and make them more dependent. The more that it goes on, the more the case is made that it MUST go on.

      2. different clue

        In general answer to the de-localized general meaning of your question: how can a nation be brought to ruin with no hearings, no etc.? The answer is: very easily.

        A major city in America was brought to ruin during and after Katrina during Operation Drown NOLA. And Obama and Reid later conspired to make Lieberman the head of the Senate Homeland Security Committee ( or whatever that committee was called). That committee was the relevant Senate committee for holding hearings about “what went wrong” during Katrina. Lieberman was made Chairman of that committee in order to prevent such hearings from ever being held. And they never were. And it has hardly been discussed anywhere.

        There. See how easy it is to do? To prevent hearings?

  12. sd

    This is probably a naive question. Is it possible that not having capital controls benefits the ordinary people of Greece? I’m just thinking about the Cyprus bail in and how money was taken from depositors. Capital controls are hardly a secret mechanism. Varoufakis is an intelligent man. Is it possible a deliberate choice has been made not to impose them at this late stage?

    1. Tsigantes

      Your suspicion is correct.
      Remember – it is the start of the tourist season – our number one economic sector.

      Not imposing capital controls allows Greek society to function normally and without unnecessary crisis beforetime, or ever, with any luck. It demonstrates good faith and confidence in finding a solution with Troika. Whereas imposing capital controls would mean a national emergency, evoking the shock of Cyprus: dragged out over 3 months the government would have fallen by now.

      Much more to the point, there is NO money in Greek banks apart from the small amounts businesses are willing to leave there for 2 weeks of functioning. The rich moved their money abroad between 2009-14. The very rich never kept it here. The middle class have taken out what they can as a hedge and will put it back once the dust has settled with a good exchange if it is drachma. The poor don’t have bank accounts. So imposing capital controls is a non-starter: (1) shutting the stable door after the horse has bolted and (2) exactly what the ECB wanted the government to do with its first unfriendly move back in February and which SYRIZA quietly and quite rightly rightly refused to do.

      1. sd

        That was what I thought. I’ve been confused by the frequent criticism of Syriza for not imposing capital controls which just seemed like a very late to the game tactic.

        Iceland imposed capital controls almost immediately, although too late to stop the 1% who had already moved their ill gotten gains much like Enron’s leadership in the weeks just prior to its collapse.

      2. generic

        I agree with the above. The ECB could kill Greece’s banks anytime, capital controls or not. Meanwhile imposing them would lead to a direct hit on both Syrizia’s standing and the rest of the Greek economy. And apart from the economic merits the political calculus was always prohibitive. You wouldn’t be close to forming a ruling coalition with Syrizia’s results in most European countries and everything that looked like a deliberate move towards exit would have been borderline suicidal.
        Don’t use revolutionary tactics if you have no revolutionary strategy and don’t impose capital controls if you are not willing to leave the Euro zone.

        So is there still hope that they have a plan? Possibly. Looking back Varoufakis really seems to incarnate the government’s position. All the major concessions already were implied right at the beginning: Delay on election pledges to “build trust”, continuing cooperation with the institutions embodying the troika, the IMF gets its money, no fundamental stop to all privatizations. I distinctly remember him stating that Greeks first of all want dignity. And remember: they first wanted a six month extension, meaning they thought Greece could survive an undead state for that length of time.

        So what part of this gives grounds for hope? Really only two things: The Greek proposals still contain the infrastructure for an alternative payment structure and Varoufakis has said from the beginning that they want be able to pay the ECB. Incidentally to point two, the ECB gets even more vitriol than Germany. So what is the plan? Squeeze blood from stone to remove the IMF from the picture, then take on the ECB.
        Maybe they’ll end up doing something radical after all.

      3. MyLessThanPrimeBeef

        “The very rich never kept it there.”

        That’s true of many countries, communist or capitalist, in the world…a world in permanent chaos.

        And you start to think, it’s not a bug. It’s a feature of the system.

    2. Mr. G

      There’s no capital to control. The bank run is over. Most Greek money has moved to non-Greek banks. Imposition of controls would do little at this point.

  13. Adam Eran

    I’m not sure there’s anything but a messy future for the Greeks no matter what.

    Check out what happened in Vietnam…and they won a war!

    1. Yves Smith

      The Vietnamese also have remarkable resolve. It took them 1000 years to expel the Chinese.

      Daniel Ellsberg, who most people don’t realize at the time was considered a top, arguably the top, expert on Vietnam, said he had never seen POW interviews like those of captured North Vietnamese. Unlike everyone else, they could not be coerced.

      1. MyLessThanPrimeBeef

        They even defeated the Mongols…without the divine wind (Kamikaze).

        Not many nations can make that claim.

      2. EmilianoZ

        Sure, they might be tough. But what the article shows is that as tough as they are they’re no match for Neoliberalism. Maybe they cant be coerced by force. Still Neoliberalism has reduced them to slaves and shadows. They won the war, neoliberalism won the peace.

        Nobody, nothing can resist Neoliberalism. Neoliberalism is the most potent force in the universe. Neoliberalism wont be stopped until it obliterates life on earth.

        1. MyLessThanPrimeBeef

          From Dao De Jing:

          Nothing under heaven is softer or more yielding than water; but when it attacks things hard and resistant there is not one of them that can prevail.

          Don’t under-estimate the soft power of Yin.

          Thus, The Qin dynasty was able to unite China with the ruthless Legalism, but it was the Han dynasty who ruled with more success under the softer Confucianism.

          And a real Mafioso quotes Shakespeare while the pretender relies on brutal force.

          1. Gerard Pierce

            A minor quibble — The version of Confucianism promoted by the Han Dynasty had been carefully revised to support authority and status. The original Confucianism (to the extent that anyone actually knows what Confucius said) was a lot closer to a philosophy of “don’t worry, be happy”.

  14. Min

    Richter: “Greece is playing game theory and is trying to elevate its extortion racket to a fine art, instead of trying to work out a deal that the taxpayers of those donor countries can live with.”

    Is there a deal that the taxpayers of donor countries can live with? How happy would people in Silicon Valley be about bailing out Mississippi via their Federal taxes? (They could look at things that way. From one point of view, Mississippi has been a drain on the Federal gov’t and, hence, California taxpayers for decades, with no end in sight.) As long as Germans and other Europeans regard themselves as throwing money away down a Greek hole, what deal could they possibly find even minimally acceptable?

    Richter: “Time to stop playing games and start talking in earnest.”

    Talking in earnest is not a strategy, nor a plan, nor a proposal. Richter does not appear to have any practical idea for the Greek gov’t. How could he, given the way he frames the situation?

    1. sd

      Um. Yeah. California and a bunch of other states bail out Mississippi every single year. Year after year after year.
      Maybe it’s time the state paid its own way so that California could use the money for its own citizens for a change. Put the money into education and health care and get them back on track. Pay for state of the art rail transport. Deal with the energy and water issues. And so much more. Instead, California pays for Mississippis subsidy give aways to Nissan, Walmart and Toyota.

      1. djrichard

        Actually, this would be the win/win to make things work in Europe. People of Greece buy goods from Germany and the euros from that percolate up to German elite who eventually have nothing better to do with the euros beyond buying eurobonds from central authorities. And the euros collected from that are then diverted back into the Greek population through fiscal spending by the central authorities. And it’s not like the German elite lose out; they get to add to their asset base and collect interest off the Eurobonds in perpetuity as those bonds are rolled into perpetually (unless they get monetized by the ECB practicing QE :-p). Hard to shed a tear for the elites in Germany (or California).

        But Europe has no centralized eurobonds and no centralized fiscal spending mechanism. So instead they get creative on financing Greece’s state-level debt and seek austerity as their quid pro quo.

      2. ambrit

        Living in Mississippi, indeed, the South in general, has shown Phyl and I what a real can of worms the American Empire really is. As long as the top predator elites want to continue the illusion of one big happy continental family, which is how we see Europe at the present time as well, these wealth transfers are a required feature. Every society I have read about that institutionalized massive inequality has eventually either split up roughly along the zones of difference, or undergone wrenching, often violent rearrangements of wealth and power. Basically, the ‘wealthy’ states of America subsidized the weaker states to preserve the overall union. Europe will have to come to the same resolve, or settle for a smaller European Union. (The history of the American Articles of Confederation are informative on this issue.)

  15. RBHoughton

    That seems quite one-sided to me. China is investing in the Piraeus. Russia is proposing a pipeline and other economic support. The Greek people may not trust their banks or government, who does, but there is some upside on their prospects. Its not just helpless submission to the troika that Wolf Street seems to assume.

    I admit to a lifelong preference for the underdog. I would rather live in a world of myriad little people than a few impersonal blocks of mega-power. That’s my choice and I suspect there are a good many others like me. If I was Greek I would expect commerce to be open to me – I would expect to be able to take my fishing boat to the Levant or wherever and trade. Our command economy stops such aspiration to independence. Very sad.

    1. Yves Smith

      Russia has denied that it is going to advance funds to Greece. Any money from a Russian deal (which BTW has not been agreed to) will be too little, too late.

      Russia will get all the bennies it wants from Greece cheaper after the likely train wreck. In fact, if I were Russia, I’d be sort of annoyed with Greece talking up (and often exaggerating) the degree of Russian interest to try to goad the West to ride into the rescue.

      1. Christer Kamb

        Of course no one(private non-speculant) will lend Greece money outside the EMU until Greece exit and devalue 50%. But I guess the americans can offer pressures to avoid a new pipeline-hub or at least enhance the pressure on EU(Troika) to give in. Certainly this must be the greek stance. Nevertheless it is a kind of game-changer on the (geo-)political level.

        The EMU was/is a monstrosity and the cost should be equally shared within the 19 nations. Every economist know that cases like Greece always demands a external currency-devalutation first but also by internal reforms. Why don´t we instead discuss what´s important and demand the same? Why are most people deluded and think that Greece(or other economically realtively “weaker” states) can succeed long term in a fixed currency-regim, overindebted or not? It is absolutely impossible without fiscal transfers(budget) and non-markets mechanisms in a project like EMU. Stop pretending for god sake. Greece have been borrowing on german terms, as other EMU members(and from german banks!) with german approval. Now when the bill must be settled the germans don´t approve any longer.

  16. Fintan Dunne

    I suppose it IS called Naked Capitalism.
    Wolf Richter just proved that.
    Such a promising site.
    Ah well. Goodbye folks

    1. Yves Smith

      Shooting the messenger is not a way to be well informed. If you want to read stories that cater to your prejudices and do not challenge your thinking, you should not read this site.

  17. Christer Kamb

    The greatest problem or dilemma for Syriza´s(and Greece) survival-strategy is their mandate, not their capability. Greek people historically lacks confidence in their government(oligarky) and the economy incl their currency Drachma(constantly devalued). So if Syriza´s electorate on one hand demands an economy liberated from the depression and by the other hand want to stay in the euro, it becomes a sure thing that real bargaining-options for the new government are severely restrained to say the least. How to adress the greek people with the truth(possibility of leaving the euro against their will etc) and at the same time not reveal their negotiation-strategy against the Troika? Indeed the Troika knows the equilibrium of the game so far. But how much are at stake at the end? I guess the Troika will give in little by little until it is to late, meaning a Greek default will come. Still a default is only a continuing of the same negotiations(majority of greek-debts are owned by public entities). The biggest problem when you continue kicking the can down the road is when the real economic waterfall in Europe/World kicks in again. If the Greek situation(i.e) is not solved before it will be a “relatively small problem” considering a coming Great Depression in not only Europe.

    1. Christer Kamb

      Forgott to say that Syriza´s pipeline-play is a master-card lifting “the Greek-affair” above the Troika-level.

  18. cnchal

    But now, stocks and bonds around the world are soaring to new highs. To heck with Greece. Embarrassingly, only Greek markets are crashing.

    The Greek markets are the “contra”rian investors dream. I expect all those sharpies will start buying it any second now, to get ahead of the crowd.

    Great comments, all the way down.

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