Greece Authorizes €750 Million Payment to IMF Despite Failing to Get Concession Sought [Updated]

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Today, Greece blinked. Despite leaks that suggested the government had decided to take a tougher line with the Eurogroup and was prepared to make a voluntary default on its €750 million payment to the IMF due tomorrow, Greek officials relented and told the central bank to send the funds onward. However, as we discuss at the end of the post, based on a tweet after we launched our post, that Greece might have gotten some eyewash.

We had indicated in our post earlier today that Greece may have made a tactical error, in that by saying that it had enough funds available, it was making clear that any failure to pay was elective. The reason is that the ruling coalition is getting close to the point of not having sufficient cash to meet salary and pension payments.

And even if Greece manages to make its end of May pension and salary payments in full, it’s hard to see how the government gets through June, when it has €1.5 billion coming due to the IMF with the first payment, €300 million, falling on June 5. If forced to resort to paying its citizens in funny money, it runs the dual risk of deepening the contraction and denting domestic support. However, Greece, like the Eurozone, has made an art form of pulling rabbits out of hats.

Nothing seems to have changed today, save exposing that the bluster in the Greek media and to friendly foreign reporters like Ambrose Evans-Pritchard, was not matched by action. Perhaps that reflects a pattern that we’ve seen before, that the messaging to the ruling coalition’s domestic audience is far more aggressive than what the government is prepared to do in practice. We’ve seen more than once how Greek negotiators, including Tsipras, will raise issues with creditors, then take a conciliatory line, but later make more defiant statements at home, seemingly walking back the position he taken with counterparties.

According to the Financial Times report:

Greece failed to get the statement from the Eurogroup that it wanted, to allow the ECB to give it more room to borrow. Since it is to the negotiating advantage pthe creditors is to keep Greece in the sweatbox, it seemed unlikely that they’d relent. That is how things played out today:

Some members of the governing hard-left Syriza party had pushed ministers to withhold the payment until eurozone finance ministers meeting in Brussels agreed to endorse progress made by bailout negotiatorsin recent days.

Athens has lobbied furiously for such a statement, which officials believe would allow the European Central Bank to lift the ceiling on its issuance of short-term debt, which would provide more breathing room for the cash-strapped government…

Ministers had only a perfunctory debate over the Greek programme, and issued a statement that was far more lukewarm than Athens had hoped — welcoming the improved atmosphere in the talks but warning that “more time and effort are needed to bridge the gaps”.

Such language is not expected to give the ECB the leeway it would need to lift its restrictions on Athens’ ability to sell treasury bills, which are almost exclusively purchased by Greek banks.

If this account is correct, this explains the veering back and forth in stories out of Greece regarding the government’s plans. As we’ve pointed out, the ruling coalition is boxed in by Syriza’s left wing, which holds 1/3 of Syriza’s seats and is thus able to bring down the government. But that also means that leaks about government plans or even statements by officials (since Greece’s ministers have a habit of not singing from the same hymnal) need to be calibrated, and that’s well nigh impossible if the story is based on anonymous sources. Tsipras himself is a moderate, as is Varoufakis, and by all accounts Tsipras is still very much in charge of final decisions.

Despite a flurry of negotiations over the weekend, the two sides are still at odds:

According to officials briefed on the talks, differences between Athens and its bailout monitors remain on nearly every major issue. The government is particularly digging in its heels over state pensions and collective bargaining rights.

The meeting proper was short, as expected, and took only about an hour. That means that the creditors did not table an ultimatum, as Kathimerini said they would. Was that just an idle rumor, or a contingency plan if Greece threatened default?

Germany is now talking up a referendum. This appears to be a “calling Greece’s euro exit bluff” gesture. Greek polls show the public approving of the government’s defiance (although with much smaller majorities than in February) but being firmly opposed to a Grexit, which is the card the government needed to be able to play to have any hope of negotiating effectively. From the Telegraph:

The German government has raised the prospect of an in-out referendum to decide Greece’s fate in the single currency, in a sign that Europe’s largest creditor has begun to make contingency plans for a Greek exit from the euro.

Speaking ahead of a meeting of eurozone finance ministers in Brussels, Germany’s Wolfgang Schaeuble said a plebiscite on Greece’s euro membership could prove to be “helpful” for the debt-stricken country and its creditors.

“If the Greek government thinks it must hold a referendum, then let it hold a referendum,” said Mr Schaeuble.

“That might even be a helpful measure for the Greek people to decide whether it is ready to accept what is necessary, or whether it wants something different.”…

The president of the European parliament, German Martin Schulz chimed in with the tacit endorsement, saying a referendum was a “possibility” but ultimately it would be up to the Greek government to decide.

Varoufakis rejected the idea of a referendum.

Greece remains in the sweatbox and the clock is still ticking. Greece needs to have the bailout deal concluded by the end of June. That means finalizing language and obtaining needed Parliamentary approvals. Its economy continues to suffer, reflected in a worsening trade deficit in April. While some observers have pegged the drop-dead date as end of May, we saw with the Eurogroup negotiations in February how the Eurocrats were able to work much closer to hard deadlines (and the bailout expiration date apparently is a hard deadline). So the actual limit for these talks reaching a resolution is probably early to mid June, which is still perilously little time given where things stand now.

Moreover we have the complicating fact that Greece has €3 billion in payments to the ECB coming due immediately thereafter, in July and August. The assumption of the officialdom back in February was that Greece would conclude the €7.2 bailout negotiations first, and the negotiations over the ECB debt would be part of larger restructuring negotiation (note that while European officials are extremely loathe to write down principal amounts, since that amounts to loss recognition and would be politically charged and would arguably necessitate charging taxpayers to make of the losses, reducing the value of the debt in real terms by extending maturities and lowering interest rates further isn’t a third rail issue. However, that does not buy Greece much as long as super low inflation/deflation continues.

Operationally, the creditors have not been willing to engage in the bigger restructuring talks till the bailout negotiations were completed. With those coming so close on the heels of the bailout talks (assuming the two sides find a way to agree), it’s hard to see how they get done.

Greece may also assume that defaulting on the ECB would be less damaging than defaulting on the IMF. We clearly won’t find out (as in we can’t run parallel experiments and compare results), but given that the ECB is the real power player, I’m not sure how “less bad” an ECB default would be if things were to come to that.

So Greece remains very much in play. Greece decided not to make a showdown today, but it may not have the luxury of choice come June.

Update. After our post launched, Yannis Koutsomitis published this tweet:

This would seem to be a major concession, but this is an unconfirmed report, and we’ve had earlier instances of tweets by credible sources not pan out. Given that Koutsomitis is widely read, I’d expect MSM reporters to seek to ferret this out. If this account is accurate (as opposed to a leak by someone who wants to burnish the government’s image, particularly in the light of news reports in Greece yesterday that the government was going to hang toughh, we should see confirmation in the next day or so.

But even if this report pans out, this isn’t as big a break as this would seem to be on the surface. First, this is likely to be a one-time sop, as in Greece was allowed to tap a special reserve. Despite the IMF’s recent hard line, the IMF is now also in hot water with the EU member states for its efforts to shift blame to them for the failure of the IMF program in Greece (recall that well after the April 24 Eurogroup meeting in Riga, the Wall Street Journal reported that the head of the IMF program team had said the Eurogroup member states would need to write down debt before it would release any bailout funds). I’m told the IMF came under a lot of pressure, so if this rumor proves to be true, it may be part of an effort to placate the Eurogroup (as in this could well have been at least as much about keeping peace within the Troika as their joint strategy versus Greece).

Second, as an astute leftist source points out, this move would be consistent with keeping Greece in the sweatbox, meaning maintaining pressure on the government and the public in the hope that either the government will make significant concessions or will fall in popularity and be replaces with a more compliant coalition. Keep in mind what happened. Greece wanted the Eurogroup to make a statement that would allow the ECB to lift its limits on borrowing. If Greece got that type of breathing room, that money is fungible. It could go to paying pensions and salaries, or to hiring more people, as well as to paying outstanding obligations coming due.

By contrast, if the money was round-tripped to the IMF, this does not provide any relief to Greece as it is under increasing strain to pay its bills at home. It’s the sort of borrowing (and the use of the escrow is borrowing, which raises the question of how the IMF would account for it) of using your credit card to pay your mortgage, the very sort of think Yanis Varoufakis decried when he first took office. In other words, the officialdom is willing to finesse strategies, if it can find covert ones that won’t upset voters in the many countries who are dead set against giving Greece any breaks, to keep Greece current on its obligations, as long as Greece is still negotiating. But as we said, the longer negotiations go, the more economic stress in Greece grows, and the more domestic creditors the government has to delay paying, including eventually government workers and pensioners. That is almost certain to hurt the ruling coalition’s popularity, particularly given that civil servants are a big part of Syriza’s base.

Another report from a reader of the German press was that the head of the Eurogroup, Jeoren Dijsselbloem, said that Greece could get its bailout funds paid in tranches. This might sound like a concession, but Dijsselbloem made a similar offer months ago. So at least at first blush, this looks like window dressing.

As one reader said, central banks have all sorts of funny hidden pockets. Greece may be able to empty some more before this drama is over. But even this sort of relief has a limited runway.

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  1. George Phillies

    The important question on the referendum is what the questions are.

    Question 0) Shall we remain in the Eurozone so that the Euro remains a legal currency in Greece?

    Question 1) Shall the Greek Government maintain current pensions?

    Question 2) or Shall workers’ contracts be settled by Greeks under Greek law? Or should contracts be dictated by the Troika?

    Question 3) Shall we retain ownership of the Parthenon and other public facilities*? Or should we sell those public facilities to foreigners?

    Question 4) If the Greek government runs short of money, should the Greek Government first pay what it owes Greek citizens, and let others wait in line? Or should we first pay the Troika, and let Greek citizens wait in line? (In any case, with every intent of paying off all debts eventually.)

    Question 5) Should the Greek Government pay its foreign debts by giving the foreigners claims against the German war crimes debts?

    Question 6) If a Greek bank goes broke, should the government ensure that the claims against it are paid, small claimants in full first?

    These are such fair, impartial questions to be asked of the Greek people.

    *In American, this is the “Statue of Liberty Ploy”.

    1. Yves Smith Post author

      Um, Varoufakis said there would be no referendum. And if Greece is anything like most national governments, it takes a minimum of a few weeks to get a referendum authorized and scheduled. That’s too late given the negotiating timetable. That is also why I read the Schauble remark as being awfully close to a taunt.

      1. RBHoughton

        Nevertheless, we do have this inconvenient assertion of democracy. It appears to be the troika’s position that once a government is elected, its electorate is irrelevant until the next time. The troika deals with governments, governments enforce agreements on citizens.

        I don’t like that one bit. If it does get to a referendum its essential that the people get to know as well as may be what are the predicatble effects of ‘in or out.’ It should be apparent that government services will be halved, hospitals and post offices closed, pensions reduced and the Greek people obliged suddenly to live more independent lives.

        The Troika may like to hold out that example to others but it will not do the Union any good at all. Are they not supposed to help each other? Isn’t that what Unions are about?

  2. Russell Scott Day

    Well, Krugman did say that a nation does need control of its own currency. The EU does without the UK as running on the Euro.
    Meantime the US Dollar, due to its Wall Street Financial Engineers reliance on “Play” capitalism, and the wobbling deal with the Saudis that is the foundation of the Petrodollar faces discounts of its currency as a reserve currency.
    No matter what the Petrodollar Imperative means destruction of water aquifers. Fossil Fuel independence from the Saudis still means a fossil fuels gold rush that will continue to destroy the air and the water.
    I, as Founder of Transcendia, take seriously these challenges no matter my current status. Conceptual Art still means Art, as concepts, and it is art that is the gift of excess energy. I work always to do more than complain, and hence do offer a way out. That is the Insurodollar as a currency based on human capital as represented by Insurance. If the Western capitalists will adopt as currency, currency based on their people and the value of them as healthy, productive, educated people, it may have finite wealth, but that wealth will be worth having. It will not tolerate the Petrodollar Imperative, for destruction of the environment means real poverty.
    The people will be given Whole Life Policies when they are cheapest, at birth, and there will be some portion of the equity of those policies pooled from which to base the National bank, National Treasury, National Insurance Company currency. It is a gift I offer. I do not think going back to gold will do us much good. The Netherlands for one is well positioned, and really does lead as an evolved economy and desirable nation to be a part of.
    The Euro as pegged to the Dollar, the Petrodollar, will need to reassess that, and what have they got?
    These are my thoughts, concepts, far as currency is concerned. The Greeks do not seem to have a strong enough will to squash the corruption, nor inspire loyalty represented by national unity in the face of assaults regarding a failure of a program of austerity. The overall EU answer to financial insecurity is not there when reliance on the strength of an over taxed US in the midst of its own Civil War evidenced by former C.S.A. states intent on destroying the Union goes on.

  3. Ben Johannson

    If I didn’t know better I’d think Syriza is a conspiracy to gives Greeks false hope and string them along while implementing the policies previous governments failed to enact.

    1. Ned Ludd

      You’ve summarized the role of the left in Europe and Democrats in the U.S.

      • “Last fall, I pledged that I would not submit NAFTA to Congress until my administration addressed shortfalls in the areas of environmental protection, worker rights, and import surges. Early this morning we fulfilled that promise. Today I pledge my strongest commitment to a major effort this fall to secure NAFTA’s passage.” – William J. Clinton

      • “The Hartz IV reforms implemented by the SPD-Green Party government under Schröder and foreign minister Joschka Fischer (Greens) represented the greatest social attack in post-war Germany. Benefits were slashed for the unemployed, who were put under increased pressure to take on any job. This had direct benefits for industry, as workers were blackmailed into accepting repeated wage reductions and social cuts. The result was a huge low-wage sector that is now being used to intensify the race to the bottom in social conditions.” – WSWS

      • “The Department of Education, now under the stewardship of Labour’s David Blunkett, accepted the tuition fee and loan proposal, but not the recommendation on grants. Tuition fees would be introduced in autumn 1998, they said in an announcement three hours after publication of the Dearing report.” – The Independent

  4. Lefterakis

    When I left Greece in 1997, inflation was already 25% and my credit card (the cheapest back then), had an interest rate of 26%.
    They had the drachma but after 1981 they started just accumulating debt. Hence the inflation down the road. The funny thing is that they were also receiving free money in grants from the EU, in the billions. Something that lasted about 25 years (grants + cheap loans). So Greece received about 1.5 times its GDP in grants and cheap loans, then it bankrupted. Then, half its debt was forgiven (2-3 years ago), and it’s bankrupt again.
    About 70% of Syriza is the old PASOK party of Harvard’s ‘banana-republic socialism’ professor Mr. Andreas Papandreou, which bankrupted the country. Same people. First thing they did was to give a raise to the highest salaries in the public sector, forget the rest, then ginf government jobs for their relatives and even girlfriends.
    Give it up already. Varoufakis is a youtube economist when it comes to what he can actually do: just lecture on abstract wishes. Politics is not how you imagine the world, politics is what you can do.
    Syriza is not Scandinavian socialism. They have openly declared that they admire Venezouela. The vice chairman of the new parliament has already a portrait of Lenin in her office
    Go tell them they may be wrong… did you really buy what they were selling before the elections? You are very easy customers…

  5. Lefterakis

    I hope though that the new government will realize at some point that it keeps going to the Eurogroup for “tough negotiations”, and it ends up paying money every single time, but receiving no money at all.
    That’s not how tough negotiations are supposed to work.

    1. gardener1

      Yes, I think so too.

      It looks to me that in order for Greece to receive the Troika dole, first they must pay the debt interest to the Troika, who will then give Greece the money to pay state wages and pensions.

      But what if Greece took this same debt payment, and instead paid the state workers and pensions without the third party Troika deal. Wouldn’t it amount to just about the same thing?

      So they take their same money and pay it to their own people instead of the debt holders. People paid. International debt unpaid.

      This works. You pay the people and default on the international debt. I know I must be dense somehow to not see why why this isn’t the better way?

    2. Jackrabbit

      They are following a strategy in which Greece is weakened by debt payments. That is the cost of getting to a beneficial outcome.

      One can argue the merits of alternative strategies. But they chose this one and are getting closer to the showdown (Yves word) that is required for real progress.

  6. Jackrabbit

    I believe that Syriza’s strategy leads inevitably to a default and that they want a showdown with ECB/EG (not the IMF). So it seems that Greece remaining in the sweatbox is actually the intention of both sides. It’s hard to blame Greece when that is what their strategy requires: to pay as much as they can for as long as they can because they want Troika/Institutions to be responsible for any default or Grexit.

    And whey would there be a referendum? Syriza has no intention of taking Greece out of EZ so they would not put forth a referendum. If there is to be a Grexit, it would be forced upon them.

    The good thing(tm) is that this can not go on. June seems to be the end of the line – unless the $7.2 billion bailout funds are allowed to be used to make payments to ECB/EG (which would perfect the farce: Greece bailout funds never even passing through Greece). If that is so, we may have the showdown until September.

    H O P

    1. financial matters

      It seems that the showdown in Greece as well as elsewhere will be how much austerity can be borne.

      The Euro can work as well or as poorly as the drachma. The popular forces just need to triumph over the finance forces. Currency is just a tool.

    2. Jackrabbit

      I know that counseling patience appears to many to be too lenient on Syriza. One can make good arguments (and I have previously done so) that they should’ve pursued a different strategy (recognizing that every alternative has pros and cons).

      “Incompetence” and negotiating in bad faith are inherent in the strategy. The greatest danger to their strategy may well be from those that would use these weaknesses against Syriza. The metrics for successful prosecution of this strategy is not releasing the 7.2 billion Euro bailout money but maintaining their determination to bring the matter to a head by noncooperation as they move toward default.

    3. Santi

      Re: the showdown/sweatbox, Varoufakis has said as much. Paraphrasing: “For me it would be easy to sign something I am not going to comply and get the remnants of the bailout money.” This is what the previous governments all did, pretending that all was all right.

      I don’t think, though, that the Greek government wants a default. They want to renegotiate debt with a development program with expansive measures and growth-linked bonds, instead of self-defeating austerity. Basically, they want what they have repeatedly stated.

      1. Jackrabbit

        Note: I used the phrase “leads inevitably” because as Greece uses payments during negotiations the Troika/Institutions (and many outside observers) think Greece becomes more and more desperate for a deal. IMO Syriza neither wants nor fears a default – an attitude that they must have to see their strategy thru.

      2. Yves Smith Post author

        Huh? Greece crossed that Rubicon in February. Did you miss that they’ve been negotiating to get that bailout money since then? This was widely described as a kolotumba.

        You keep deliberately misrepresenting what has happened. I know you know better. This is dishonest.

  7. Mario Medjeral

    The EU was designed to satisfy two strategies: (1) Berlin’s mercantile needs and (2) Washington’s NATO expansion. Meanwhile the World has changed: (1) Germany has re-focused its strategy towards East Europe and Asia, making the EU redundant and too costly to maintain. (2) Washington is in decline and so is NATO.
    If above is right, Germany will do little to keep the EU together and Greece might be the first country to be complimented to the exit door.
    The Ukraine mess could be an US attempt to save NATO from oblivion and force Germany to stay put.

  8. madisolation

    The fact that Russia has invited Greece to join the BRICS bank might change how Greece deals with the Eurogroup.

  9. Santi

    I read the fact of Greece’s tapping funds from the IMF holding account (not up to date in the web), recently confirmed by Reuters, as the will of the Greek government to secure funds for salaries and pensions first. Had they used their current reserves to pay the IMF, instead, they would have problems paying salaries and pensions by month’s end (which, by the way, is VERY contractionary and would cause panic). Now, unless the agreement is reached, they will continue at least paying salaries and pensions.

    I think that what I find coherent and you don’t in terms of negotiation strategy is that Greece is behaving as good faith negotiator (as a dove, you could say). Exposes the truth without ceasing claiming for his rights. And they will continue like this until something reasonable can be approved or presented in a referendum. What Varoufakis mentioned as “big compromises”, I guess, refers to upping to a 2% primary balance, which it way too much, and maybe some cessions on VAT. I don’t think they will bite the labor deregulation or pension reductions they are being asked, if they do, as Costas Lapavitsas says in the second video segment, ‘there would be “vicious debate” within his party (…) and the Greek people would need to have a vote on it.’

    1. Tsigantes

      Thanks Santi, you are right. as ever.

      “Greece is behaving as good faith negotiator (as a dove, you could say). Exposes the truth without ceasing claiming for his rights. And they will continue like this until something reasonable can be approved or presented in a referendum.”

    2. Yves Smith Post author

      Greece will presumably be required to top up the deposits it has tapped at some point. This is not the IMF letting Greece round-trip IMF funds. This is more like someone having a bank account with a special clause that lets you run below your minimum balance occasionally

      Varoufakis has said that the government has enough money to get through the next two weeks. My understanding is that pension and wage payments are at month end. IF you take the two weeks as being precise, it sounds unclear as to whether the government can make those payments in full. Remember the government also has ongoing T-bill maturities it needs to roll, and it can’t very well with the ECB funding restrictions in place.

      In fact the Reuters story suggests Greece WON”T be able to make wage and salary payment unless it gets a “special deal” as in gets permission to tap the other account, its deposit for its regular payments:

      Made a day early, the payment calmed immediate fears of a Greek default, but Finance Minister Yanis Varoufakis said on Monday the liquidity situation was “terribly urgent” and a deal to release further funds was needed in the next couple of weeks.

      That IMF table is really helpful. Good sleuthing.

      1. Jackrabbit

        My understanding is that they have a month to repay the escrow account.

        They can pay the civil servants and then default on their next payment (to ECB/EG, I would presume) – unless the 7.2 billion euro that has been withheld is released to make payments.

        1. Yves Smith Post author

          They have 1.5 billion of payments due to the IMF in June, and Varoufakis said the government has only two weeks of money. And even if they somehow make it to July, defaulting on the ECB gives them the perfect excuse to cut the ELA and crush their banking system. Why Varoufakis thinks defaulting on the ECB is less bad than defaulting on the IMF is beyond me.

    3. Jackrabbit

      Greece is behaving as good faith negotiator

      This is stretching the truth. Although Syriza has been clear about its ‘red lines’, the fact is that Greece has committed to paying its obligations but is refusing to agree to a plan that would satisfy that commitment. This agreeable noncooperation falls somewhat short of “good faith negotiating”.

  10. Barry Fay

    One thing would be nice: if commenters would re-read their comments before posting. All the typos and misuse of words is annoying (e.g. “bite” labor-deregualtion; “complimented” to the exit door, etc.). Thanks

    1. gardener1

      Thank goodness one of my words wasn’t in there. I am so grateful not to be singled out for posting erratic gibberish.

      How many times have I been typing along at [near] lightening speed here, had my pinkie finger hit ‘enter before the brain was fully engaged with the finger, and had some crappy half-baked post put up for all the world to see. And no possibility to edit for corrections. Argh.

      The moments in life one cannot take back.

      Forgive us Barry, for the misbehaving pinkie finger and the giant tempting ‘enter’ key. ;-)

      1. John Zelnicker

        gardener1 – However, you should have checked the spelling or definition of one of the words in your comment: lightening, as I am sure that is not the word you meant to use.

        Also, there is a 4 minute window in which you can edit your comment.

  11. gardener1

    This just came out on The Market Ticker:

    2015-05-12 07:51
    “Greece had a 750 million Euro payment due to the IMF today. They “made” it by writing a check to the IMF funded by “SDR” funds held at….. the IMF!

    Participating nations deposit money in the IMF’s SDR fund to be aggregated so the IMF can make loans. What Greece effectively did was “take back” their IMF SDR deposit in order to pay the IMF.

    If you take from this that they took $20 out of one pocket and put it in the other, and by doing so claimed to have “paid” the $20, you’re right. Yes, we’re into the realm of the insane my friends….
    In order to view Market Ticker, ad-block must be disabled.

    1. Yves Smith Post author

      Thanks but Market Ticker does not cite sources. It’s not a press outlet, meaning it does not do fact checking, It’s likely relying on the Koutsomitis tweet. However, Santi did provide a link to Reuters. This isn’t Greece using IMF money. This is Greece using its own IMF deposits. It’s sort of like if your bank required you to keep a $1000 minimum balance, getting permission to temporarily to keep only $10 at the bank. The Reuters story says the reserve is intended to be an emergency reserve, which also means Greece is expected to top it back up at some future point. The Reuters story finally says that the government used €100 million of government funds. The German press is reporting that Varoufakis has said the government has enough money to get through the next two weeks, which presumably means the month end salary and pension payments.

    1. Yves Smith Post author

      Defaulting on the ECB would give the ECB the perfect excuse to cut the ELA, which would force Greece into an immediate, defacto Grexit to recapitalize its banks. I’m not sure why Varoufakis has acted as if he has a better bargaining position with the ECB than with the IMF.

      1. Jackrabbit

        I don’t think they are ‘bargaining’ in that they no longer view themselves as supplicants. I think they see the huge unpayable debt as a problem for the Troika/Institutions – not Greece. That doesn’t mean that they want to default, just that they are sticking to a position in which a restructuring is necessary.

  12. Brooklin Bridge

    The people are at a huge disadvantage when it comes to making informed choices such as which political party represents true change.
    1) The choice of representation is very limited
    2) People are in a constant scared mode
    3) The facts are kept from the public
    4) (related to 3) Propaganda is 360 degrees by 24 by 7

    The results are tragic. Even when the public manages to steel it’s nerve and vote beyond perceived safety for what seems to represent real change and therefore real risk, it turns out to be not enough and too late, making it that much harder next time to penetrate the smog of 3 and 4 and call on even more courage to deal with 1 and 2.

    And given all that, when it’s almost impossible to know if and to what degree Syriza is Vichy left, simply incompetent, or being savaged by the Troika, how is the public in Greece to be expected to make cool objective choices about default and Grexit on polls never mind elusive referendums that seem from afar so necessary as to beg for taking place but which never actually transpire?

  13. Ben Around

    When will Syriza grow up enough to know Greece is truly on its own? Whether Athens comprehends it or not, the creditors do not want what is in Greece’s interest. They want to rip it apart like a lion does a gazelle.

    They need to default. They need to issue drachmas. They need to issue arms to the populace to forestall the likely coup. They need to build alliances under an independent foreign policy.

    Each will cause problems. But together they will keep the Greeks the masters of their own fate. Everything else is playing for time that won’t change anything.

  14. plschwartz

    The general discussion on Greece recently has several strange usages of terms and unbacked assumptions.
    1. Syriza is bargaining in good faith. When they came to power they already had repudiated agreements made by previous governments. Is this good faith.
    Recently Greek Parliament passed a repudiation of past agreements on cutting government spending. This is all but unnoticed.
    2.. Everybody has their eyes on the 7.2B euro. Much has been made of this. But meanwhile ECB via ELA has been passing along funds amounting to billions of euros.
    3. Since the Greeks pushed out the Troika I know of no independent accounting of Greek funds on hand. They certainly did not seem to push the municipalities to deposit their funds in Central Bank. So its asking the fox how many chickens their are.
    It is a shame that MSM reporting on Greece iss no better then its reporting on US events.

    1. Santi

      re: 1) All your points are clearly stated in Syriza electoral program (opposing those very measures) that they were elected to enforce. Call it firmness, but no bad faith in doing what they were elected to do, and promised they’d do if elected well in advance. I’d call bad faith keeping belief in the confidence fairy or austerity in spite of the experimental data against it.
      re: 2) Outstanding ELA from Greece is still less than half the amount it mounted to during the crisis in 2012, yet there were no such hysteria about it back then that I can remember. Which, BTW, probably means that we need to suffer a lot still about this issue :)
      re: 3) Reporting about the issue is very bad, I agree, but this is because MSM is fully rotten when not just inept, and the rest (twitter, blogs, internet) depends on a network of reputations difficult to build, maintain and manage, just to distinguish intoxication from information…

      1. Yves Smith Post author

        You ignore the point that 1. Syriza has taken contradictory positions repeatedly on what it will do and 2. Syriza has repudiated some of its promises. They have not been consistent. In fact, unreliability seems to be core to their approach.

        That chart is not accurate. It appears to combine the ELA with Eurosystem support. Peak use of the ELA in 2012 was 124 billion euros, not the 250 billion euros shown ( and here: And see here: “In December 2014, there was E56bn in normal financing and just E1bn of ELA.”

        So previously, the ELA indeed was for emergency use. The fact that the ELA was at a trivial 1 billion euro level a mere six months ago shows the banking system was not hopelessly dependent on it.

        The ELA is for solvent domestic lenders facing temporary liquidity problems. Banks pledge acceptable quality debt securities as collateral for central bank loans. The ECB determines the acceptability criteria.

        The Greek banks are clearly deeply insolvent and also are short of collateral to pledge. Many ECB directors have made clear they are deeply uncomfortable with Greece’s use of the ELA. The banks were restructured in 2012. That plus the sharp contraction of the Greek economy means they are likely smaller in 2012 than now, so simple comparisons are meaningless.

        I have warned you about presenting inaccurate information and you have done it yet again. I’m not keen on having a commentor repeatedly mislead readers. This is increasingly not looking like mistakes but willful distortions to try to defend Syriza.

    2. Yves Smith Post author

      The ELA funds do not go to the government. We’ve reported consistently on the ELA issue, including specifically and in detail that quite a few ECB directors have made it clear that they are deeply uncomfortable with the ELA increases and are also not happy with Greece generally. It is very clear that they would love to lower the boom on Greece but as an unelected body feel they can’t do that as long as the politicians are still negotiating. They need political cover before they can quit supporting the Greek banks.

  15. vteodorescu

    As much as I like his style, it looks like Varoufakis might be a big part of the problem, and not the way everybody thinks. It took a while to dawn on me, but he is a crusader. And in his crusade to make the infidel eurocrats see the true light of the EIB bonds faith, he seems to be prepared to sacrifice the people of Greece.

    Maybe in the absence of his economic expertise clout, Syriza and Tsipras might have crystallized into one opinion or other, either 1. default or 2. take the money along with the austerity hairshirt.

    This influence of Varoufakis would explain the red lines defiance at the same time as making payments, probably the worst path between the two alternatives, as Yves has pointed out many times, but it would make sense if someone in the Greek camp still had the big EuroDream close to his heart. I wish the Greek people good luck. When elephants fight, the grass gets trampled.

    1. Mario Medjeral

      In a World where Ukraine does get fresh money from the IMF and Greece not, you cannot blame Varoufakis.

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