“Why Syriza Will Blink”

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Anatole Kaletsky has a cognent, forcefully argued new article at the Project Syndicate website, Why Syriza Will Blink, which independently comes to the conclusion we’ve reached, that the winning strategy for the Eurozone creditors is to keep Greece in the sweatbox and use worsening economic and social conditions in Greece to crush domestic support for Syriza. Kaletsky goes further than we have, arguing that this is the course the Troika is taking, and the new coalition should have anticipated this as a likely strategy, since it’s the same one they used successfully against Cyprus two years ago.

We’ll go through Kaletsky’s case in detail. Some readers may claim that the European lenders won’t let Greece default, since it would force them to recognize losses on Greek debt. One channel is that losses on credit extended to Greek banks through the ECB would be allocated back to national central banks, and that in turn would require taxpayers to recapitalize those central banks (Germany certainly takes that view) which in turn means having to have taxpayers fund those shortfalls.

However, it’s not clear that this is the third rail issue it once was. First, the ECB is in the midst of QE. Each national central bank is required to buy a certain number of bonds. One argument made by financial experts about the design of QE was that some countries would find it hard to buy their allocation. Operationally, the countries could issue bonds and have the ECB buy them. This in theory does not solve the problem that this borrowing would put some countries over their Maastrict treaty annual deficit limits, but one suspects an event like a Greek default would lead to that rule being suspended.

Second, the IMF has also been priming national governments to expect to recognize losses on their loans to Greece. Remember that the IMF has threatened that it won’t release its portion of the €7.2 billion in bailout funds to Greece unless the Eurozone lenders write down their loans to Greece, a commitment they made in 2012 but then failed to implement. Syriza had assumed as part of its negotiating strategy that it can get its creditors to relent was that a Greek default would force them to realize losses on their loans, which is something the governments have been fighting to avoid for years out of fear of negative voter reaction. But if the IMF is going to force them to recognize losses regardless, having Syriza default is no longer an event horizon. One has to suspect that given that the IMF seems determined to have Greece hew to its pre-existing IMF structural reforms for larger institutional reasons (as in in it is running programs all over the world and does not want to reward defiance), one can imagine that the threat of withholding bailout funds has more to do with the IMF getting the Eurozone over its unwillingness to realize losses. In other words, the IMF was not trying to help Greece but was out to preserve the IMF’s upper hand in negotiations.

Here is Kaletsky’s reading of the bare-knuckle fight:

Since coming to power in January, the Greek government, led by Prime Minister Alexis Tsipras’s Syriza party, has believed that the threat of default – and thus of a financial crisis that might break up the euro – provides negotiating leverage…

But their calculation is based on a false premise. Tsipras and Varoufakis assume that a default would force Europe to choose between just two alternatives: expel Greece from the eurozone or offer it unconditional debt relief. But the European authorities have a third option in the event of a Greek default. Instead of forcing a “Grexit,” the EU could trap Greece inside the eurozone and starve it of money, then simply sit back and watch the Tsipras government’s domestic political support collapse.

Such a siege strategy – waiting for Greece to run out of the money it needs to maintain the normal functions of government – now looks like the EU’s most promising technique to break Greek resistance.

Kaletsky point out that this strategy appeared sound in January, when Greek was running a large primary surplus. If it defaulted then, it would still have enough funds to support normal government operations. But all that changed as Syriza’s brinksmanship has stoked an ongoing bank run, dampening the economy and reducing tax receipts. Even worse, Greek citizens used the arrival of a new regime as reason to withhold tax payments, starving the government of needed funds. As a result, the only way the government has managed to preserve a primary surplus is through budget cuts and unsustainable strategies to raise cash, like deferring payments to vendors and raiding every funds store that the government can lay its hands on.

Kaletsky continues:

With the primary surplus gone, a default would no longer permit Tsipras to fulfill Syriza’s campaign promises; on the contrary, it would imply even bigger cutbacks in wages, pensions, and public spending than the “troika” – the European Commission, the European Central Bank, and the IMF – is now demanding…the EU can now rely on the Greek government itself to punish its people by failing to pay wages and pensions and honor bank guarantees.

Tsipras and Varoufakis should have seen this coming…The Cyprus experience suggests that…the EU is likely to force Greece to stay in the euro and put it through an American-style municipal bankruptcy, like that of Detroit….

The European treaties state unequivocally that euro membership is irreversible unless a country decides to exit not just from the single currency but from the entire EU….

If Greece defaults, the EU will be legally justified and politically motivated to insist that the euro remains its only legal tender. Even if the Greek government decides to pay wages and pensions by printing its own IOUs or “new drachmas,” the European Court of Justice will rule that all domestic debts and bank deposits must be repaid in euros. That, in turn, will force a default against Greek citizens, as well as foreign creditors, because the government will be unable to honor the euro value of insured deposits in Greek banks.

So a Greek default within the euro, far from allowing Syriza to honor its election promises, would inflict even greater austerity on Greek voters than they endured under the troika program. At that point, the government’s collapse would become inevitable….As soon as Tsipras realizes that the rules of the game between Greece and Europe have changed, his capitulation will be just a matter of time.

And the beauty of this approach is that all the creditors need to do is stand pat and let the Greek government continue to flail about. Indeed, they can even claim they have been generous by allowing Greece to go beyond the end of April deadline for reaching a bailout deal agreed in the February Eurogroup memo, and by graciously “helping” Greece stay in the Eurozone in the event that the government decides to default rather than cut its losses sooner and give in. The objectives of the creditors are to make sure that the Greek government suffers for defying them, and it does not care how much the Greek people suffer to achieve that outcome (remember, they have been indifferent to the considerable pain already endured by Greek citizens).

As we said from the very outset, Greece was very unlikely to prevail unless it secured meaningful support from outside parties. The only two sources that might have had the heft to change the course of action were the US and resurgent leftist movements in periphery countries securing meaningful gains in polls so that the Eurocrats might think it wise to defuse the Syriza threat. The US quickly reversed its initial show of support for Syriza and leftist parties have steered clear of allying with new Greek government. The vultures recognize the ruling coalition’s weakness and merely need to wait for the death spiral to play out.

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  1. Jackrabbit

    We are in the endgame so we will see increasing pressure being applied to Greece. I don’t find Kaletsky’s arguments convincing.

    * Greece is not Cyprus. Greece, for example, has an economy that is about 13 times as big. The difference would be much greater if Greece weren’t suffering from Troika-imposed austerity.

    * Anyone that really wanted Euro have already moved their money. Deposits left in Greece are probably by those who are tied to the local economy (will spend it locally). Will they sue for Euro only to exchange it for Drachma? And those lawsuits would take time to prosecute.

    * Lack of a primary surplus is probably a temporary phenomena as Greece struggles to make payments to the Troika. That has probably come to an end. Greece will default or the 7.2 billion Euro that is being withheld will be used to make the payments until they do.

    * Greece was just asked to join the BRICS bank. That is mostly symbolic but may signal that they Greece is likely to be able to benefit from BRICS financing.

    * Greece didn’t get support from the left in Europe because they chose a path that was less populist and more technocratic. One reason that they did so may have been because Greece felt that rallying the left would increase Troika resistance and led to a quick Grexit.


    Note: I was dismayed and disappointed at the conclusion of the first round of negotiating in last February. Partnering’ with the “Institutions” (renamed Troika) was a cowardly political maneuver and allowing the Troika to withhold bailout funds (7.2 billion Euro) would weaken Greece to the point where a TINA sellout seemed inevitable. But to their credit, Syriza/Greece has not cooperated with Troika demands for a reform package that would guaranty debt peonage for Greece. HOP back for more on my thoughts on Greece.

    H O P

    1. Yves Smith Post author

      I’m at a loss to see readers continue to engage in wishful thinking.

      1. Germany, which is a key player, has made clear it is now indifferent to a Grexit. Recall that Schauble said Greece might consider having a referendum. Various ECB directors have also said they’d prefer that Greece not exit the Eurozone but they could handle if it did.

      2. Merkel cares about her legacy which is keeping the EU and Eurozone together, at least on her watch.

      3. If the Eurocrats believe they can handle a Grexit, a vastly more disruptive event, they can handle a mere Greek default. Moreover, the key players, particularly the IMF and all the periphery states that have inflicted austerity on their populations and cannot afford to let Greek get away with defying the Troika, have institutional imperatives that they see as important enough that they are willing to risk some economic wobbles.

      4. Greece is all of 1.2% of the GDP of the EU and 1.6% of the Eurozone. It’s no where near as consequential as you suggest.

      5. The BRICS banks hasn’t funded a single project and won’t be doing so any time remotely soon enough to make any difference as far as Greece’s credit crunch is concerned. And the worse its economy gets, the less it is an attractive target for investment. The BRICS bank is not a charity.

      6. Greece barely got to a primary surplus and its economy is contracting per the latest GDP report. And as Yanis Varoufakis explained, even when it was nominally growing recently, that growth was due to the size of the GDP deflator. Greece’s economy was still contracting in nominal terms but deflation meant it was registering a bounce off the bottom in real terms. Deflation encourages consumers to defer spending, and so is a dampner on growth. The government has cut spending by over 11%, a massive reduction, in order to pay its various bills. That’s a remarkable level of expense cuts and is sure to accelerate the economic contraction. People are also leaving Greece to find jobs in the rest of Europe, and a contracting population is also a big negative for growth. Finally, Greece’s trade deficit got worse in April, and that will also hurt the economy and thus tax receipts.

      8. As we stressed back in January, Syriza was never a radical party, despite its name. It was always largely bourgeois and chose to appeal to moderate voters (frustrated Pasok party members). Only 1/3 of the representatives are hard line left, which is enough to constrain Tsipras by threatening to bolt the coalition and deny him the votes he needs to pass legislation

      9. Podemos saw its poll ratings across several polls fall from 28% to 20%. Podemos also did much less well than forecast in regional elections in April. As a result, it has moderated its positions to try to reach centrist voters. The idea that the left in other countries stayed away from Syriza for being too moderate is, quite frankly, delusional.

      1. vlade

        wishful thinking, for better or worse, is a basic human property. We all engage in it now and then (although I will say that it looks to me that you’re aware of it, and do try very hard to avoid it – except for meta wishful thinking wishing for people to stop wishful thinking ;) ).

        1. Yves Smith Post author

          I can understand wishful thinking as far as your personal situation is concerned, and relative to that of people who are close to you. It’s a necessary coping mechanism for most people and also does make you more pleasant to be around :-)

          I have more trouble understanding it when people are looking at situations that are removed from them. As sad as it is to watch what is happening to Greece, it is nevertheless very instructive as a raw exercise of power, and how the officialdom is taking care to move deliberately so as to not look like they are the ones that pushed Greece to the brink. Being clinical about situations like Greece helps in having an idea of how those tactics might be applied closer to home, and how we can learn from Greece’s mistakes.

          1. vlade

            In my experience, people (and I include myself there) engage in WT when they have some emotional investment. The bigger the investment, more WT we engage in, and we’re willing to think magically as opposed to rationally.

            I absolutely agree on the need for the clinical thinking, and my deep belief is that the human race progressed most when it was able to combine deep (positive) emotions with clinical thinking (where I’d put Lincoln, Tom Paine etc. – although all of them had lapses).

            As I wrote before, I see you trying this very very hard, so “Respect!” :)

            Of course, it also regressed the most when it was able to do negative emotions with clinical thinking, and I do wonder whether this has anything to do with the problems left is facing (as I suspect there is some aversion to clinical thinking in not a small part of left).

      2. Jackrabbit

        Its not wishful thinking nor am I cheering on the Greeks. I think they caused the problem for themselves by being too accepting of a corrupt system that brought them to ruin. That is a lesson that the people of other countries should take to heart. Maybe Syriza does us all a favor if capitulating to the Troika leads to corrupt Greek leaders hanging from lampposts.

        – I have no dog in this fight. Whatsoever. No Greek family. No Greek friends that will be affected. No membership or other ties to any organizations that are helping for hoping for Greece to prevail. Nada.

        – I have previously recognized that Greece’s strategy is unique and has little to offer others suffering from austerity due to:

        1) uniquely Greek circumstances (patronage and corruption, reparations it claims are owed from WWII);

        2) the desperateness of its situation unlike others, it has reached terminal velocity in its austerity-induced fall such that it either throws off austerity or is a basket case for years to come.

        3) The strategy itself is a technocratic ‘game theory’-inspired game of chicken that seeks to embarrass and hold the Troika hostage. It does little to build solidarity on the European left. (There are many reasons for this: “Radical Left” parties like Syriza and Podemos both have moved to the center to win votes and building such solidarity is time-consuming and uncertain.)


        Still, with that said, Troika talk of their determination is to be expected; as is an effort to break Greece’s determination. Greece failed to deliver an acceptable reform plan by the end of April and had to pay the IMF with funds borrowed from an IMF escrow account. So Greece is holding firm to its strategy as it nears Default. And that, no doubt, infuriates neolibs everywhere.

        1. Jackrabbit

          And I don’t like care much for Varofakis. I have been critical of his QE+transfers plan for Europe. Seems to me that this is just transplanting a failed US solution. Hard for me to reconcile that with his claimed Marxism.

          QE is useful in specific circumstances but IMO it is impossible to use it responsibly in a crony capitalist environment. Social drinking at a cocktail party – OK; frat house drinking – bad news.

          1. Jackrabbit

            Syriza does have an anti-oligarch/anti-corruption agenda though as Yanis mentions in his description of the Greek Recovery Strategy:

            The barriers to growth in the past were an unholy alliance among oligarchic interests and political parties, scandalous procurement, clientelism, the permanently broken media, overly accommodating banks, weak tax authorities, and a weighed-down, fearful judiciary. Only the bright light of democratic transparency can remove such impediments; our government is determined to help it shine through.

            We can only hope that Syriza will stand up to Greek oligarchs if they can successful stand up to the Troika.

            1. Yves Smith Post author

              The oligarchs have already moved their financial assets out of the country. Whatever real economy wealth they have (as in buildings) have already taken hits in value. Tracking ownership of, seizing and selling real property is time consuming and costly.

              In other word, “cracking down on oligarchs” is much easier said than done, particularly in an economy where much of it is in cash and normal people don’t believe in paying taxes. For instance, it’s routine to pay doctors in cash and everyone knows they are enabling tax evasion by the doctors. This isn’t just the super rich, it’s all across society.

              Even cleaning up tax collection is a multi-year project, and with Syriza’s popularity declining, the rich and well off who are still exposed are effectively betting they can wait this regime out.

              Many of your other premises and arguments in support of Syriza are out of line with known facts. Varoufakis has loudly and clearly repudiated the use of game theory in a negotiation like this. The reparations issue is separate and apart from these talks. It’s not on the table and if Greek chooses to pursue it (and they have every reason to), it will take years to resolve, far too long to have any impact on the outcome.

              1. Nathanael

                Game theory calls for the loud and public repudiation of the use of game theory (look it up, it’s one of the first results in the field), so that means nothing. Just FYI.

        2. John Jones

          Its not wishful thinking nor am I cheering on the Greeks. I think they caused the problem for themselves by being too accepting of a corrupt system that brought them to ruin. That is a lesson that the people of other countries should take to heart. Maybe Syriza does us all a favor if capitulating to the Troika leads to corrupt Greek leaders hanging from lampposts.

          1) uniquely Greek circumstances (patronage and corruption, reparations it claims are owed from WWII);


          Can you expand on this? What corrupt system do you mean that brought them to ruin?
          And how are patronage and corruption uniquely Greek circumstances?

          1. Jackrabbit

            I think the corrupt system was the political system. Patronage and corruption are not unique to Greece but they are considered to be worse in Greece than most other EU countries.

            1. John Jones

              What was corrupt about the political system that you do not see in other countries?

              Considered by who though? It is certainly convenient by media and countries to blame it on corruption and patronage and never focus on the rules of the E.U and Euro and there effect on a weaker nation belonging to them. I don’t see how corruption and patronage bought them to ruin? There are plenty of far more corrupt countries that are not in financial ruin.

      3. Santi

        Given the reactions I have seen from “analysts” in press, twitter and blogs to the finding that the primary surplus of Greece was much greater than expected, I don’t think it is unsustainable as you and the author seem to do. Bruegel’s analysis today points to the fact that income is normalizing month after month, in spite of the heavy apocalyptic campaigning. I’d love to see how realistic expenses previsions were, as they were done by the old ND government (I guess). I still think Varoufakis and Tsipras have much better information than we, and I trust their assessment and evaluation more than the analysts, specially since data I collect leans more and more on Varoyfakis’ side as time passes.

        I agree with you in that a default without grexit is what I’d expect currently, except that ways will be found to swap those bonds and delay payments, so no real default will occur and Greece will kept dragging along without the investment plan. I think that Varoufakis will start expanding using TANs as soon as the current MoU is closed, working inside the Euro much like Correa did with dollar.

        But I think this will be very bad for all of the EU if default or grexit happens. The consequences of a default/grexit are not something to be assessed in terms of accounting, but in terms of political evaluation, and it will be devastating in a couple of years, which is roughly the time that the Greeks will take to start showing good results. First, contractionary policies will be continued, once that the problematic Greeks are not a problem anymore; second, any country will feel that, should the need arise, they will be dumped out of the house; third, countries like Hungary or Croatia, in theory bound to get into the Euro, will never even think of it… and fourth, tell the British to trust Europe after something like this.

        As for Podemos: Greece is two years in advance of Spain in terms of suffering, politicization and social destruction, I don’t think we (Spanish) have much support possible beyond individual solidarity. Podemos is a party with 2 years of life, 5 MEPs and 15 Andalusian ones. Until 2015’s end, at the best, any support they would give Syriza would be basically moral only, practically useless. Also, the results in Andalusia was almost exactly as the last polls said (at least in the error bars) in terms of vote percentage, but, like in the UK, the electoral system played heavily against them. As usually it is designed for the incumbents. Also, extended expectation led to a lot of us, me included, to predict better results than what the polls announced…

        1. Yves Smith Post author

          It does not appear you’ve read sites that have done actual analysis, like Bruegel (see here), and that you are also rejecting information that does not support your optimistic view about Syriza.

          Government spending is recorded on a cash in, cash out basis. The evidence is very strong that the government has achieved it primary surplus ONLY via deep spending cuts, many of which are not sustainable. An 11% cut in spending will hit the weak economy even harder, leading to lower tax revenues.

          More importnat, the government has deferred many expenditures. Putting them off does not make them go away, In fact, it makes the goverment’s future budgetary position MUCH worse, since it will have keep making its current level of expenditures, and then spend more to catch up on its overdue bills.

          For instance, see this report in ekathimerini:

          According to data released on Thursday by the Finance Ministry, the primary budget surplus beat its target for the first quarter of 2015 thanks to the postponement of state payments to third parties and increased revenues from the Public Investments Program. However, besides the problem with tax revenues, there is now a major issue with the freeze in payments to state suppliers, which is generating suffocating conditions in the real economy and the market.

          The first-quarter primary budget surplus came to 1.7 billion euros, against a target for just 119 million. However this surplus was entirely due to the 1.5-billion-euro reduction in expenditure. According to sources, the state had spent just 43 million euros by the end of March on paying expired debts to its suppliers. Suppliers had received some 500 million euros from the state in the first quarter of 2014.

          Now as Bruegel points out, the budget situation improved in April on the tax side, which is a big step in the right direction.

          Nevertheless, your defense of the current spending would be as if you said, “I’m saving” when in fact your “saving” was achieved solely by not paying the last three month’s electrical bills and some of your credit cards. The idea that you have “saved” or in Greece’s case, are in a viable, sustainable budgetary condition is an illusion. Until Syriza has managed to catch up on its deferred spending you can’t say that the government can keep going without external support.

          1. Santi

            Today I was talking with a friend from Montenegro, and she told me that Montenegro uses the Euro since before it existed, one could say… Actually they switched from Yugoslavian dinar to DM during the hyperinflation in the nineties, and when the DM switched to the Euro they had to fly all of their cash reserves to Germany, where they exchanged them for Euros and flew them back to pay their salaries, etc. They don’t even mint fake coins, like they do in Ecuador, 100% true Euro for Montenegro. They say that the European authorities object to their use… but I guess that if Greece defaults to a couple hundred billion Euros, a small extra noncompliance would not do.

            This is how I guess Greece will stay, no matter what happens. Though, as I say, solutions will be found sooner than later. If Greece is about 1.6% of the EZ GDP, a full default plus ELA would impact ~3% of the EZ GDP, which is very significant. And the internal devaluation would keep impacting other countries (say Spanish or Italian tourism, agriculture or industry). But, as I said, the main problem is not so much economic but politic: what would you politically feel, as a US citizen, if Detroit food stamps would no longer be paid?

            It looks like Weidmann has promised to do whatever it takes to expel Greece from the Euro, but I don’t think he’ll succeed.

            1. MaroonBulldog

              A government that can’t keep going without external support is not a sovereign government; not de facto, anyway; nothing just said above rebuts the point that right now, the Greek government is not likely in a financial position to keep going without external support.

              1. Yves Smith Post author

                I must also note Santi is again arguing in bad faith, which he has done repeatedly on these posts, in this case shifting the ground of his argument.

                And the idea that a default = the loss of Greece to Eurozone GDP is a bizarre argument. Is the Eurozone in some sort of international beauty contest on the size of official GDP? Greece will still continue to do business as before, albeit under even more strained circumstances. The real impact of a default is not known, in part because that depends in a big way on the policy responses of the official institutions.

                1. Santi

                  I was not shifting the argument, I was just commenting on how could Greece survive using the euro after a default. This was anecdotal, I just knew about a neighbour of Greece that uses the euro “unofficially”.
                  Re: my point, I think you did not understand it. If Greece GDP is 1.6% of the Eurozone, and Greek’s debt is 180% Greek GDP, then the debt is 2.88% of the Eurozone GDP, I just added some peanuts (0.12% EZ GDP) for the outstanding ELA, and estimated that a full default would mean calling for ~3% Eurozome GDP losses. This is about the same as a link you posted recently (and I sent) estimated. So it is not the loss of Greece, it is using the size of the Greek GDP to estimate the (creditor) losses. Which are significant: a 3% GDP impact in a year is a major shock.

                  Still, I think this impact would be dwarfed by the political impact. And I don’t think this will happen. BTW, a very recent leak published by Peter Doyle outlines the IMF point of view here and here. I don’t think this is new information, just stresses “the institutions” point of view.

                  1. Yves Smith Post author

                    The debt has already been substantially reduced in economic value via having interest rates lowered, interest payments deferred, and principal extended. It’s now worth about 70% of GDP in current value terms. The real problem Greece has is not the debt level, which would be manageable if the economy weren’t in a depression. It’s that it is in a depression and austerity policies are making matters worse, so the debt burden also gets worse as the economy continues to contract. It’s a vicious circle.

                    A default does not mean a loss of the full value of the debt. It means yet another restructuring. But the reason this is politically charged is that interest rate deferrals and maturity extensions don’t lead to loss recognition by the national governments, while a principal reduction would. That is why Greece having asked early on for a principal reduction was so politically charged.

                    I read the leaked memo (thanks for sending it) and I don’t see how this changes the picture, but it does clarify some important matters, as well as the state of play. It says, as has been reported in the press, that there has been more work, that the Greece has made some concessions on VAT, but (contrary to what Tsipras said in an interview we linked to this morning) that they still disagree on the fiscal surplus target as well as on the structural reform issues described before, the pensions and labor market reforms (and the IMF added the rehiring of staff by the government as a new point of disagreement). The memo also notes that the Greek negotiatiors don’t have leeway to negotiate and that IMF is still not getting information it needs to move forward on some issues. These process issues, frankly, make the Greek side look like it is not competent or is still fighting some aspects of the negotiation process when they by all accounts need to come to a deal.

                    Moreover, the one comment about having the reforms not be consistent with sustainability, which is a big admission, makes the recent IMF insistence on further debt reduction more clear. The IMF still wants the reforms. And Greece is not willing to give them. The Eurogroup member states that hold debt to Greece (most but not all) don’t want to recognize losses (as in they could give Greece a break on by extending maturities even further, but they won’t allow for a reduction in the face amount of the debt) and before the negotiations started, pretty much all informed commentators thought this was going to happen. So there is room to bargain on that issue.

                    But as I said (in a long note in Links when I posted on the Peter Spiegel leak that the IMF in Riga had said that the Eurozone members needed to reduce the debt, as they had promised the IMF they would do as part of that restructuring but never did), that this position is not as Greece friendly at this point in time as it seems. While this does wind up saying what Varoufakis and now Tsipras have been saying, that all the terms (debt and reforms) should be negotiated as a package, it’s impossible for that to happen at this late date before Greece runs out of money. The “shape of the table” was set in the Eurogroup memo in February: negotiations on structural reforms first, then negotiations on debt once the structural reforms are agreed. And the IMF staff memo seems to back down from the position that the IMF was reported to take in Riga, where the European program leader allegedly made stronger remarks. There is no way they can agree among the Eurogroup members to change the process now (they don’t even have meeting time, and that assumed it’s even on the agenda) before June, when Greece will almost certainly not be able to make all its payments. Greece might still somehow scrape by by making most of its domestic payments in IOUs, but I can’t think that will go over well with the public, and it would almost certainly hurt the economy.

                    Now if Greece does default on the IMF, it’s not like defaulting on a private creditor, where all sorts of things happen immediately. IIRC, it’s a month before the IMF sends a memo to its board, and certain events start happening after that. So if Greece defaults on the IMF, that might allow the IMF to assert more control over the negotiations, since it has some wriggle room as to what triggers it pulls next. So the IMF might try harder to push for integrated negotiations, particularly since the default will mean a debt restructuring regardless. But the IMF’s body language so far, and I don’t see anything in the memo that contradicts that, is that it wants structural reforms and writeoffs. The Eurogroup member states want structural reforms (not having Greece cut pensions is a problematic for them for bad reasons, Greece is seen as having generous pensions, so it’s not politically acceptable for Greece to keep those perceived-as-lavish pensions and get a bailout) and will restructure debt only up to a point (no principal writedowns and you can only get so far in reducing economic value without lowering principal amounts). And you have the further issue that the IMF may get reined in. Remember that all those Eurogroup member states have seats on the IMF board.

                    So the result still looks like Greece winds up in the sweatbox, not by design, but due to a negotiation plan being set in place and the creditor side having inflexible positions.

                    1. Santi

                      Paul Mason comment on the leak (which looks his scoop) is around the lines that the IMF won’t accept austerity without debt relief, as austerity contracts the economy and thus, reduces the viability of the debt recovery (which goes against the IMF mandate). So, either Europe accepts growth oriented reforms or reduces the debt burden accordingly… or the IMF exits the deal. This look a Greek friendly interpretation of the data. The PR battle seems to be at its highest…

              2. Calgacus

                But that is not the situation Greece is in, although most commentary and analysis obscures this.

                Actually the financing is going from Greece to the rest of Europe since Greece is now running a primary budget surplus. That means that the government is collecting enough revenue to finance its spending, excluding interest payments. It is the size of the interest payments, which go primarily from Greece to the European Union, European Central Bank, and I.M.F. that is at issue. Greece is not asking for additional money from the rest of Europe. In the event that Greece leaves the euro the payments on its debt will almost certainly stop altogether, so the question is how much financing the rest of Europe gets from Greece, not how much financing Greece gets from Europe.

                What Does “Keep a Lid on Spending” Mean to the NYT and the Troika?

                So however the budget or current account surpluses may have changed a bit in the past months, there is no serious case that Greece “can’t keep going without external support”. Greece is well positioned to go it alone; the clearly most likely outcome of leaving the Eurozone would be a robust recovery in a few months.

                Such groundless, servile beliefs and illogical patterns of reasoning, like confusing autonomy with autarky, like thinking it is about debt payment instead of humiliation, like the idee fixe that Grexit must be a catastrophe rather than a blessing, are the biggest problems Greece and the rest of Europe have – bigger than the Euro.

                The Eurocrats, the IMF’s etc main power is convincing people they have (magical) power. And then these well-read thugs convince nations to amputate a pound of their own flesh and personally deliver it to them, keeping their own hands clean of blood to escape Portia’s judgment.

                1. Goldcap

                  I know this thread is old, but I just read this and find it hard to believe that someone would posit “a robust recovery in a few months” after Grexit.

                  Decapitalized banks don’t magically reinflate with new currency, since it’s doutbtful that anyone would trust the Drachma, certainly initially… inflation may creep in… Tax revenues will continue to elude… Foreign investment would take years to prime… then there would be the legal battles with foreign creditors, perhaps even EU sanctions… In the meantime, private savings devalue, leading to even MORE captial flight, or a total loss of private wealth, take your pick. Meaning GDP is tanked, unemployment massive… The government is then assaulted during the next election, and maybe the next party tries to undo the mess… and the cycle begins again.

                  I mean… whoa. Magical Thinking indeed.

                2. Yves Smith Post author

                  All the evidence is that Greece is no longer running a primary budget surplus. No one knows for certain, but Bruegel, which has writers who have been Troika critics (as in it’s not a Troika follower and tries to position itself as dispassionate), parses the budget figures as saying that the primary surplus is being achieved by non-sustainable means, which is tantamount to saying that Greece does not or shortly will not have a primary surplus due to the impact of the bank run on the economy and the need to catch up on the deferred payments. The IMF is more definitive and says Greece is running a primary deficit. The IMF has some access to better data, but also complains that the government is withholding data. In addition, Greece has a history of producing less than reliable economic and budgetary data (this in not uncommon in emerging economies, although Greece is more often put in the advanced economy camp).

                  Greece separately clearly and desperately needs the bailout money or it will default on the IMF next month. And Greece clearly committed to paying the IMF. Varoufakis reaffirmed that in February.

      4. Nathanael

        Frankly I think you’re delusional on point 9. It’s quite clear that the left has been staying away from the “left-wing” parties precisely because they’re aren’t left-wing enough. Yes, including Podemos.

        The dynamics is funny, because people consistently claim that they have left a party for being too “left-wing”, but when you ask them what they mean in terms of policy, they turn out to mean that the party is too right-wing. This has been going on for over 40 years in most of the Western World. I haven’t quite figured out why, but it seems to be some form of Big Lie operation by the right-wingers.

        Also, if you’re right on point 2, then Merkel is actually out of her mind, because her current policies are heading towards fascism in Europe, which will lead to a guaranteed Eurozone breakup. Her legacy will be the next general European war and that’s about the worst legacy anyone can have.

        1. Yves Smith Post author

          Huh? Podemos’ popularity has fallen from 28% to about 20%, it did less well in the regional elections than expected, and it is now moving to the center. You may not like that and attribute that to Podemos’ not being leftist enough, but its leadership disagrees with your view and is trying to become more, not less, moderate in its messaging.

    2. Nathanael

      So why does the Troika want to elect Golden Dawn? Because that’s what they’re doing. Have the powerful people in Germany in France failed to learn *anything* from the 1930s?

      Syriza can, at any time whatsoever, tell the Troika to go to hell. This is actually their only viable option; the question is really whether they will do it, or whether Golden Dawn will form the next government.

      1. Yves Smith Post author

        They are already telling the Troika to go to hell. That was what rehiring 4000 people without having reforms agreed to amounted to. The February Eurogroup memo had the Greek government agree not to make any unilateral moves (meaning take steps that have an adverse budgetary impact) and the Greek government broke that agreement.

        All that has done is make the creditors less happy. The IMF added the hiring to its list of issues where they and the Greek government are at loggerheads. That means, in code. that they expect Greece to concede if they are to get any bailout dough.

        In other words, the acts of defiance are not intimidating the creditors. They are still on their inertial path.

  2. Steve H.

    “You heard it here first.”

    Google Ngrams has the first instance of this phrase listed from 1950.

  3. Northeaster

    Having lived in Greece during the November 17 era, I’m not sure pols & bankers are thinking of all the outcomes. Back then, a relatively small group would just kill or blow you up, I think when cornered, we’ll see something like them rise again. The Greek People are a very proud bunch, abet corrupt as hell (nothing got done without a bribe of some sort), but just a few can cause complete havoc for these pols/bankers in Greece.

    1. Nathanael

      “Having lived in Greece during the November 17 era, I’m not sure pols & bankers are thinking of all the outcomes. ”

      Yep. I have been lucky enough to live through a peaceful period in a peaceful region, but I’ve spent a lot of time studying history.

      Nobody (in power) expected World War I, although in retrospect the pattern was obvious. I’m seeing a lot of the old pre-WWI insanity among people in power today. The leadup to WWI involved collapsing empires, wars in the Balkans, and incompetent elites who (to varying degrees) refused to democratize or reform their economic systems…

      Everything in geopolitics today is *screaming* pre-WWI to me. Nobody in power is making the moves necessary to prevent it. (Not even in China any more.) The only big exception is South America, which seems to follow its own dynamics.

  4. Eurozone fracturing

    Right. The argument is that the ‘sweatbox’ would not provoke an eventual exit. We’re supposed to believe that Syriza are thinking wishfully here? I think its more likely that Kaletsky and his Eurozone buddies are engaged in wishful thinking (the ECJ is going to intervene? are they going to send in the ECJ army? hahaha!). They certainly hope that Syriza will cave (and they have some allies on the left for some strange reason). But it is far more likely that the strategy of the Eurozone, if it can be called that, will fail and will trigger a situation that will soon slip out of everyone’s control.

    It is also obvious to anyone watching that the ‘strategy’ of the Eurozone officials is actually no such thing. This is widely known in political circles but journalists like Kaletsky are buying into the idea of a ‘united front’ in Europe. The reality is that there are factions vying for power within Europe. Merkel is desperately trying to hold the whole circus together but she has created her own ‘Tea Party Frankenstein’ in the form of the Spanish, Portugese and Finnish governments. Not to mention the likes of Slovenia. These governments don’t really care what happens in the long-run in Europe and they are just pushing as aggressively as possible to isolate Greece.

    The media don’t recognize this because they are getting their talking points from officials engaged in post hoc justifications of their ‘strategy’. The above article is buying into this narrative. But the reality on the ground is that the Eurozone establishment has completely fractured and the level of infighting and lack of control has not been seen in Europe since the interwar years. I would suggest actually talking to people familiar with the politics behind the scenes rather than trusting Pravda-like journalists and buying into the Eurozone establishment’s party line. The information is out there. Dig.

    1. Yves Smith Post author

      I find it amusing that you provide no support for your claim regarding Europeans being divided means that European officials are divided on the the subject of the negotiations with Greece. This is an logical leap and a big one.

      In fact, the evidence is that what support Syriza had among foreign governments has receded. Michel Sapin, who was working to try to intercede against Germany and the other hardliners (Spain, Latvia, Slovenia, Finland, and Italy, to name a few) has switched to telling Greece it needs to make a deal. Merkel has interceded only when thing looked like they were really about to go off the rails. I have contacts in Europe who are politically well placed. Their reading is that Merkel does not want to be seen as having presided over a breakup. But a default in place, particularly if the politicians can depict themselves as having bent over backwards to have been accommodating (by extending the negotiating runway) is viable.

      It is also amusing to see you depict Kaletsky as some sort of Eurozone crony. Did you miss that he is chairman of INET, and that Soros has been a vocal critic of Eurozone, particularly German, policies? INET’s connections are on the left side, from orthodox left to heterodox (as in outsider) left. And you also forget that within Syriza, the MPs that have been urging a Grexit came to the conclusion much earlier on, based on the February Eurogroup negotiations, that the creditors were not going to cut Greece any slack. So it’s peculiar to see you dismiss a realpolitik reading that the Syriza hard left would endorse as some sort of PR exercise.

      I don’t disagree that Europe is fracturing longer term, but that is due to Germany refusing to change its economic model, to insisting on running large trade surpluses, and being unwilling to finance its trade partners or to move to a stronger federal structure that will provide for more fiscal spending. But that overview has NOTHING TO DO with the Kalestsky analysis of the Greek negotiations. In fact, when politicians are dealing with a political order under stress, the tendency is to try harder to short up the bad status quo. That is what the austerity strategy has been about. Thus crushing Greece is seen as less of a risk to the current order than allowing it to defy the creditor regime and implement the growth policies it wants.

      The creditors are showing their confidence in their position by taking openly offensive moves like telling Greece to change its negotiating team (which Greece largely did) and by tweaking Greece by saying. “Gee maybe you should have a referendum” when Tsipras was earlier tying to use the idea of a referendum as a threat (as in the voters might show support for a default or a Grexit). The creditors are telling Greece they aren’t afraid of Greece opinion or unilateral moves. And as we stated in the post, a default in the Eurozone works for Merkel too, and there are lots of reports in the German press of officials working on that scenario (as in how to ameliorate any downside that would result).

      You also forget that the politicians have already demonstrated that they are willing to inflict substantial costs, in terms of high unemployment, low growth, and deflation, on the EU in order to preserve the status quo. Now that the ECB has more tools in place, and Greece’s drama is not leading to financial contagion as it did in 2012, they believe that if Greece defaults, the financial fallout will be limited (mind you, I don’t agree, but what matters here is what they think).

      By contrast, letting Greece defy the Troika is a threat to all the governments in the countries that imposed austerity. Moreover, in their economic belief system, letting Syriza implement its policies will produce an economic train wreck. Now I clearly think the orthodox view is insane, but its adherents like Schauble really do believe that Greece needs to take more medicine, and the program was just starting to work when the new government threw all that progress away by scaring citizens into a bank run.

      The IMF and the ECB are on the same page, and as we’ve discussed, the ECB is the real power player here. But the ECB as an unelected body is not going to make an aggressive move. They need to have their hands clean, which means having political cover. Moreover, it takes only one Eurogroup no vote to prevent the distribution of funds to Greece. Please tell me where the divisions in the Eurogroup are. Name a country that supports the Greek position.

      What you are missing is that the Eurocrats and politicians recognize that a Greek default has costs. But they see allowing Greece to defy them as even more costly. And Greece may capitulate rather than default.

      1. EZ fracturing

        Not pushing this. Talk to your contacts dealing with this. Stop relying on media sources.

        And if you continue relying on FT commentators take a hard look at their sources and be critical. You’ll soon see that their articles crumble on their vague sourcing.

        EU politics looks VERY different from where those of us involved are standing than the people in the FT. Plug in.

        1. Lambert Strether

          I can’t speak for Yves, but it would seem reasonable to me that she does talk to her contacts; now that I think of it, she often mentions them.

          And I’ve got to say, complaining about sources used without a proffer of better ones verges on concern trolling. How about adding some actual value to the comments section by suggesting some? Alternatively, try my contact form.

        2. Yves Smith Post author

          This is an ad hominem attack. You fail to offer a single argument against Kalestsky’s analysis. The onus is on you to make a case with supporting evidence.

          And Kaletesky is not an FT commentor.

          1. EZ fracturing

            Keep saying it. We know what you represent on the left. And we know that you will likely be wrong. So either keep spouting the party line – as most serious people on the left know that you’re doing – or change your tune. No big deal to me.

            1. Lambert Strether

              Now you’re in full-fledged concern troll mode. Asked to put up or shut up on sourcing, you won’t put up. Fortunately, you’re not Machiavellian, or you’d supply poor sources, representing them as excellent. Good luck, whoever “we” may be.

              1. EZ fracturing

                Yves, I again appeal. Try not to filter opinions through your policemen.

                But if you choose that path I don’t think its a big loss to the European left. But it may be a long-term loss to NC, which is a great outlet.

                It’s up to you. Think. Discuss. Don’t fall down the idiot trap easily. You’re better than that.

                1. Yves Smith Post author

                  You have yet to offer a single cogent substantive objection to anything written here. If all you can do is keep up the same broken-record pearl clutching, you got nuthin’.

                  I hate to remind you, because this sounds like American chest-beating, which I dislike, that I was early and accurate in my reading of what the February Eurogroup memo meant (as in it clearly reaffirmed the existing structural reform package) and that the two sides had no overlap in their bargaining position, which meant they would not come to a deal, which has also proven to be true.

                  Given that I was early to make outlier calls which proved to be correct, what is your basis for hectoring me? All I can fathom is you don’t like haring Syriza criticized. As I told Rosario below, this site has never been about tribalims and cheerleading. Daily Kos is over there.

                  We clearly said from the outset that Syriza was in a weak position and was just about certain not to prevail unless it marshaled outside support. My Washington DC sources say Syriza was initially dismissive of soliciting help from the Administration. It may have sought support from other leftist parties in Europe, but those allies have provided little to no visible support. And even worse, as we have detailed, Syriza has played its weak hand badly.

                  1. Nathanael

                    Syriza remains in a strong position structurally, but as I said back then, it’s not clear that *Syriza* realizes that. In fact, they probably don’t.

                    A bit like Obama really.

                  2. EZ fracturing

                    Cognitive biasitis.

                    Symptoms: when a person criticizes media sources when they disagree with what they are saying but agree when they either confirm their biases or fill in gaps in their knowledge vaguely in line with their biases.

                    Prognosis: especially bad if victim has contacts who might provide a different viewpoint that they refuse to sourced. May result in irrelevance in certain geographic locations.

                    1. Yves Smith Post author


                      You have now resorted, as you did earlier, to ad hominem attacks as opposed to any substantive response. That strongly suggests you have none. I have to remind you that we have clearly stated comments policies, and your persistent reliance on ad hominem argumentation is a violation.

                      You have ALSO failed to provide any evidence that this site’s use of information provided by MSM and other sources has led to inaccurate predictions.

                      Like it or not, it is the Troika that has Greece’s fate in its hands. That makes it not just logical but in fact necessary to look closely at what can be inferred about the various actors’ positions, both from their statements (which can be tracked and decoded) and more important, their actions. You won’t get that from Greek sources, particularly since the Greek government has a MUCH bigger need to keep confidence in its strategy up at home than the Eurocrats do, particularly the real power players, the IMF and the ECB.

                      Thus your assumption, that Greek friendly sources are more relevant and more reliable, is subject to question. You also charge, incorrectly that I am not checking Greek friendly sources. I am and have found them to be even more biased than the MSM sources, which is saying a lot.

                      Finally, your opening thesis, that the stresses among the EZ players would work to the advantage of Greece, is simply not panning out. The Greek government will no doubt be proven right in the fullness of time on its critique of the Eurozone and the need for deep reforms, but being intellectually correct is not relevant to the interests of and perceived constraints on the main players.

                2. Alan

                  First of all, I think most of the criticism on Yve’s coverage is unfair. I was one of the first to criticize Yves’ assessment of the February deal as jumping the gun too early, but she has been vindicated. The only valid criticism I see is on the point of occasionally looking as taking too seriously media reports with unnamed sources that all too often have an axe to grind, especially German media reports – which only signify what the German establishment wants people to think and not their actual calculations or overall game. But even this criticism is a bit unfair since we all come here exactly because when all is said and done, NC does manage to cut through the bs and present a deeper understanding on many issues, even though of course nobody can be always right.

                  Secondly, I think readers would be very interested on some high-level views from the inside which you insist you have. Telling people to simply dig is not very helpful, give some pointers. For what it’s worth, I have been personally digging for a long time but I still cannot see clearly through the fog, especially in regards to the internal EZ fracturing reaching the levels you describe. If you can help, then please help.

                  Thirdly, my personal digging has only uncovered serious fracturing between the EZ leadership and the IMF, not so much within the EZ. Here is the latest example with a new leak as reported by Paul Mason:


                  So, if you do have inside information on internal EZ rifts of the importance, level and intensity that you describe, please share it. Try to be constructive. I for one would definitely appreciate it very much.

    2. Older & Wiser

      Yves Smith + Eurozone Fracturing

      How about some clinical thinking of yours regarding

      …”…The European treaties state unequivocally that euro membership is irreversible unless a country decides to exit not just from the single currency but from the entire EU…”…(sic)

      1. Yves Smith Post author

        It’s in the treaties. I’ve seen the language quoted directly in legal analyses regarded as the best work on this topic so far.

        The statement is accurate as written. What is your point, exactly?

      2. Older & Wiser

        Simple point, really.
        The above might be in the treaties, sorta (?)
        But have you ever accepted it ?

        I don’t recall any of your possible ‘grexit’ options ever being anywhere close to the above conclusion.
        As a matter of fact I’m convinced that you didn’t think that to be possible.
        Do correct me if I’m wrong… but please be thorough.

        1. Yves Smith Post author

          Even Greece accepts that a Grexit would mean an exit of the EU. Now the processes for all of this are not defined and would have to be worked out. Varoufakis has stated that one of his reasons for rejecting a Grexit as an option is that Greece would lose EU agricultural subsidies. That has nothing to do with being a member of the Eurozone, it comes about by no longer being in the EU.

          I’m not sure why you are belaboring this point. The treaty language is the treaty language. The exit of the Eurozone is the economically damaging event as far as both Greece and the officialdom are concerned. Greece does not want to exit the Eurozone, and the only way that might come about is if the ECB forces it by cutting off the ELA, which would require Greece to nationalize its banks, impose capital controls, and print drachma.

          Yes, there is a history of the authorities fudging and breaking their own rules when it proves convenient. But the inconvenience to them is in a Grexit. If Greece were to exit (and neither side wants that, at least as of now), the incentives for the creditors are strong to make sure that Greece suffers as much as possible to discourage any other Eurozone member from following (memo to Italy and French voters who might be considering supporting Eurozone exit advocate Marine Le Pen). So their incentives would be to use the treaty language to force an EU exit, arguing that by exiting the Eurozone, Greece has effectively asked to exit the EU (the only mechanism for exiting the EU is that a member has to ask to leave, and if the two sides can’t agree, the exit becomes effective regardless two years later). It would be consistent with making Greece suffer and scaring observers into staying put in the Eurozone to use the treaty language to push Greece out of the EU.

          1. Tsigantes

            You are right to emphasize that the rules have been regularly broken by the powerful in the EU. But I am not so sure that the EU [read NATO / US] would permit Greece’s exit from the Eurozone for other reasons, not economic (a disciplinary sideshow). That is, the matter of EEZ, the Greek – thus European – marine frontier. This issue goes back to Yalta, but historically much longer, since it was the principle use of Greece to Britain since before 1821.

            Without Greece the EU EEZ would withdraw to Italy and control of the Mediterranean is lost.

            Although Turkey is a NATO member, it has become an unreliable partner due to NATO’s New Middle East policy which foresees donating Turkey’s eastern provinces (1/3 of the country) to the new Kurdistan.

          2. John Jones

            Varoufakis has stated that one of his reasons for rejecting a Grexit as an option is that Greece would lose EU agricultural subsidies.

            I find this to be one of the most worst reasons for been against an exit. What good are those peanut subsidies when the rules of the E.U and Euro take more money from your country. When trade deficits rob your country while destroying your own domestic businesses and flooding agricultural products from the European core into your country further destroying your own agricultural sector.

  5. docG

    Syriza has already blinked. Time after time they have blinked. Time after time they have “agreed” to all sorts of things, only to later declare their apparent capitulation ambiguous and misleading. I agree with Yves in that we see no evidence of some sort of grand strategy on their part, so I see no reason to give them any sort of credit for clever negotiating. As negotiators they have been pretty awful and it’s clear they are just bumbling their way forward rather pathetically.

    Nevertheless, Syriza’s history of blinking agreement and then deciding afterward to return to its original position, or something close, should send a vital message to the “institutions.” I.e., no matter how they blink or when they blink, nothing they “agree” to can be trusted. So if they go so far as to agree totally to ALL demands, and thereby get their precious (actually worthless) “bailout” they will be sure to return to form afterward and proceed as before, refusing as always to institute certain “reforms” (and for the best of reasons, actually) regardless.

    The Euro leadership should understand that very well by now, and given the clear unreliability of the Syriza leadership the rational course would be to just cut Greece off completely and let it default or whatever it would like, with NO bailout money, which would just be yet another loan never to be repaid. But the rational course has NOT been the course of the Eurozone for years now. If it were then they’d have made their minds up months ago to ditch Greece as a hopeless case, and good riddance. However, both parties are caught in a trap and neither can survive anymore through rational means. So I’ll stand by my original position: Greece will get its bailout regardless, Europe will continue to extend and pretend until the bitter end, which may come sooner than anyone thinks.

  6. djrichard

    So Germany and the Troika doesn’t want to finance Greece’s spending on German/European goods. Darn, where are those Greeks going to get the money from to buy German/European goods?

    Maybe lure some of those goods manufacturers to Greece through tax incentives? I have the sense though that the Ireland model is being frowned upon.

    Guess they’ll have to compete in the labor market (i.e. reduce wages). In which case, kiss goodbye being able to buy goods of any significance, much less German/European ones. But maybe the idea isn’t for Greeks to buy anything. Maybe the idea is for Greeks to be the cheap labor force for Germany and rest of Europe.

    1. Yves Smith Post author

      Oh, I don’t disagree that the German position is insane and is destroying the Eurozone. But collective insanity is what is driving these negotiations.

      1. Nathanael

        All right; we’re all agreed on this. The big issue, then, is the psychology of the insane Germans. This has caused two world wars already. It’s important to understand it and to figure out how to *defuse* it.

        Is the correct move a preemptive invasion of Germany to preemptively dismantle the Eurozone? Honestly, at this point it might be. Got a better idea? There’s got to be a better idea.

  7. Oregoncharles

    Isn’t that a dangerous strategy, given that an even-more radical left is waiting in the wings? All it would take is a re-arrangement, Syriza’s left joining the other radical-left parties. If things get bad enough, Grexit and total default becomes an attractive option, especially given that it’s always better in the long run to be your own master – the reason Scotland will be independent quite soon. A radical-left Greece would leave NATO and ally itself with Russia, a catastrophic foreign policy development.

    How far are they willing to push things, just for an obviously false ideology?

    1. Yves Smith Post author

      Not sure why you think moving to the left will be more viable. Syriz’s MPs themselves are centrist. Only 1/3 are radicals so the party itself won’t go this route. Moreover, the notion is to kill Syriza’s support with voters, most of whom until recently voted for centrist parties. If a leftist government inflicted worse economic conditions on them and failed at getting concessions from the creditors, why should they want to engage in an even more radical version of the same strategy? Polls consistently show deep voter opposition to a Grexit, from a minimum of over 60% to a high of near 80%, depending on the poll.

      And there is no such thing as “total default”. Look at Argentina. Default means debt restructuring, not repudiation. That’s will be even truer in Europe, given how integrated Greece is into the EU.

      1. Maju

        Someone mentioned this poll in a previous discussion in this blog: http://www.orb-international.com/perch/resources/europeanattitudesresults.pdf (page 4)

        52% of Greeks prefer national currency over the euro, the euro is nowadays only supported by 32%.

        This is one of the wrong data items that you are managing, Yves. Another one is that you seem to believe that Syriza’s popular support is rapidly eroding when in reality it is exactly the opposite: http://www.electograph.com/search/label/Greece

        Today Syriza would be reelected with a very wide majority. No other party grows in popular support except (weakly) their partner in government ANEL.

        Finally I would not agree that Syriza’s bench is “centrist” nor that bowing to EU pressure would not cause huge problems inside the party (it would break apart in weeks) but most importantly in terms of popular support. IMO Tsipras and co. would like a deal that acknowledges the rightfulness of their position and allows them to maneuver in a social-democratic manner in the EU (happy ending for all) but the EU just wants to force the collapse of the anomalous red government and try to bring back a standard regime that bows to the global banks (sad ending for Greece and European citizens in general). Neither will succeed and the clock of unavoidable default (and hence Grexit) is ticking alarmingly close to the fateful date.

        In the end Tsipras and co. are willing puppets of the Greek popular opinion: they know they have no right to exist (just as the PASOK before them) if they default on the democratic trust deposited on them by the Greek People. So either they manage to force the EU hand (hardly or rather impossible, but they try their hardest) or they have to go to sovereign default (and Grexit). Because that’s what the Greek People ultimately acknowledges as their only realistic option once the European waters have been throughly sounded for a less radical solution.

        Time will tell but there’s no much time left, so we will know within months.

        1. Yves Smith Post author

          That poll was an online poll and thus is garbage in, garbage out. No correcting of the sample to be representative.

          All polls done in Greece in recent months show consistent large majorities against a Eurozone exit.

          1. Maju

            The poll is from last year (end of 2014) and is made by WIN Gallup International.

            I will assume that you have other contradictory information but, as the commenter mentioned, one thing is supporting the permanence in the EU, which is mostly associated with the Schengen accord for free travel and similar commodities, and another very different thing to support the permanence in the Eurozone with all its unbearable neocolonial burdens. You may be confusing one for the other.

            1. Yves Smith Post author

              The Gallup poll was an online poll. Online polls are notoriously unreliable due to sample bias. The face that Gallup ran an online poll does not change that. More recent polls in Greece using more reliable methods consistently show much greater opposition to the idea of Grexit.

              Repeating what you said earlier is broken record, a bad faith form of argumentation. I’m seeing a lot of this on these threads as Syriza romanticists have trouble dealing with evidence or problems in their arguments.

              In the previous discussion in comments of this very same poll, a reader who claimed to be knowledgeable about pollsters in Europe said Gallup was weak.

            2. Calgacus

              Here is what Gallup International say, Methodology:
              “In each country a representative sample of around 1000 men and women was interviewed either face to face (31 countries; n=33862), via telephone (12 countries; n=9784) or online (22 countries; n=20356).”

              As Papicek noted a few days ago, the 2014 fieldwork was done by Alternative Research Solutions in Greece, via online interview of people from 18-64. In 2013 it was face to face, with different questions though. The question is how they selected the people, hopefully not through online site self-selection.

      2. Nathanael

        Default certainly can mean total repudiation. Please review Hitler’s Germany and Lenin’s Russia for reference.

        Are you going to contend that Golden Dawn will respect the Greek debts at all? I would expect them to repudiate the debts.

  8. susan the other

    If I were to conclude the obvious – that Germany and northern Europe (there’s no accounting for Spain) no longer want to be the “European Union” because the greater world is so full of export oportunities, then this whole thing makes a lot more sense. The future belongs to whichever Silk Road you use. Entrepreneurs will build new towns along the way. But not an alliance with other proud European nations because they are all competitors now. Like Hillary says, we’ve got to improve our competitiveness so we can survive. Finance has become equally cold. Even tho’ anybody could make a case that the “union” was fiction at best, and probably fraud, and therefore the debt incurred by Greece is just about as odious as it gets. Especially combined with Cold War politics which virtually prevented Greece from becoming a naturally developed modern nation. And etc. And Greece is learning this reality the hard way. It’s really pretty unconscionable economics.

  9. kemal erdogan

    I am also one of those who first engaged in wishful thinking that Syriza had a plan. Because I feel sorry for fellow Greek people who has nothing to do with any of the ills of the Greek state, or other Greek institutions, and wanted to see something good to happen to them. Their remarkable flip flops, saying one thing to EU another to Greeks and doing yet another, gave me the impression that they might have a plan, after all.

    But, unless bleeding oneself to death can be called a plan, it is now clear that they had no plan at all. They must have stopped all payments, introduced a parallel currency (this is not so difficult if it is electronic only, usable only with debit cards which almost everyone use) to pay all domestic obligations, and impose capital controls, including troops on the borders to check suitcase transfers. They could credibly say that they want to remain in Eurozone but will stop any payments until a “fair” agreement could be reached. They should have started collecting evidence on all the dirty dealings made behind closed doors while arresting high profile tax dodgers.

    None of that has happened. It is clear to me that they never had the will to walk the talk, essentially do what entails defying essentially neo-imperialism. I just feel sorry for the Greeks. Now they will be punished even more

    1. Cassiodorus

      It’s not really the whole of “they” that “had no plan at all.” At some point, the portion of “they” — perhaps the left faction — that actually has a plan (but not the power to force Tsipiras to make it so) must decide what it wants to do.

    2. Jackrabbit

      The plan seems to be to make the Troika responsible for a default and its consequences. Troika is thus incentivized to negotiate a restructuring.

      The message – to – the Troika is simple: we want to remain in the EZ but it’s unreasonable and unfair to expect us to pay this crushing debt. The message – from- the Troika is equallly simple: We will punch your political ticket (welcome to the Club!) by making some minor concessions but you must pay the debt.

      The inconsistency occurs because Greece says:

      1) we want to work with you as partners in revitalizing Greece,
      – BUT –
      2) we object to the debt burden and will resist your attempt to collect on it. (Oh, and by the way, Germans owe us 300 billion euro for WWII reparations.)

      I liken this contest to a game of chicken where an economy sized passenger car and a huge semi tracter-trailer are speeding toward each other. It seems to outside observers that the car must swerve or get creamed but they don’t know that the truck is hauling a container of valuable merchandise and the car’s driver is a jobless victim of austerity that just wants his family to collect on his life insurance.

        1. Jackrabbit

          I can extend the metaphor a little further.

          The trucker has not stopped or swerved because, well … no one in their right mind plays chicken with a huge truck. Now it the trucker realizes that if he were to swerve violently or slam on the breaks, there will be damage to the goods he is hauling. So he blasts his horn and flashes his lights (akin to the media) … waiting for the last moment to take action because his neolib employers will blame HIM for any damage.

          1. washunate

            Yeah, it is a fun image. But I think it’s not enough gap between the truck and car. It’s more like a train and a car. Or a train and a bicycle.

            EMU at its core is a Franco-German project. The original six members of the ECSC comprise the majority of the eurozone population today. If even Spain won’t stand with Greece, then those 7 countries are almost the entire population. What Greece does on its own is absolutely irrelevant in terms of the survival of what Berlin and Paris and Brussels want for the euro currency. Without Greece, over 300 million people would be living in the eurozone.

            The UK, a much larger country than Greece, doesn’t use the euro.


  10. juliania

    Count me as another wishful thinker, though I really appreciate the arguments against. As far as whether the populace will become rapidly disaffected with Syriza, I add a counter example to that of Cyprus – Russia. When the US and other countries tightened the noose, that government became more popular, not less.

    Admittedly the parameters and resources are far different, but people have a nasty habit of blaming the ones who inflict pain upon them rather than the government attempting to ameliorate that pain, however inadequately the latter performs.

    So long as Syriza isn’t profiting from their sufferings, people will rally to them even as hardship increases.

    1. Yves Smith Post author

      The polling does not support your view. Syriza got a BIG jump in popularity after it took its defiant line right after it came into office. It ratings have fallen from that peak by 25% or so across polls.

      Russia is not comparable. The threat of war (the US moving NATO into Urkaine) is not the same as sustained economic hardship. Moroever, Putin was far more popular in Russia before the confrontation than Syriza ever has been, by virtue of taking on the oligarchs and presiding over a big increase in material prosperity. And Putin’s poll rating have improves as the confrontation has progressed while as indicated, Syriza’s have fallen after an initial burst of optimism.

  11. Rosario

    If only this level of critique were focused on the Troika. I’ll also invert the argument, where has the left been in support of Greece? Why do they have to do all of the legwork? I’m certain Syriza has made many mistakes as a political party, maybe some of them were downright idiotic, but they made them largely alone, with only passing support and lip service on the blogosphere. No great effort was made by other European leftists to show support. Building a coalition goes both ways. If someone is stuck in a fire fight it is obtuse to assume they need to jump out of the foxhole to find reinforcements. Maybe learn from the mistakes for later (say a Podemos led congress) but it is not doing Syriza, or more importantly the Greek people, any good to get kicked when they are down.

    1. Yves Smith Post author

      I am focusing on the negotiation dynamics and the interests of both sides, which is what will determine this outcome. We’ve criticized austerity repeatedly and consistently.

      What you fail to miss is that if anything Syriza is managing to set the left back in Europe. That is why they fully deserve to be criticized. This site is not and never been Daily Kos, where we wave pom poms for “our side” even when they engage in bad policies or bad conduct.

      Let me again post a section of an e-mail from a left-wing economist who has been a consistent critic of Europe’s austerity policies:

      It is a mess – and it is difficult indeed to not get angry with the way the Greek government has been negotiating with its Eurozone “partners”. Let me first stress that these negotiations were never going to be easy and that – indeed – major opposition to a “Greek deal” is coming from the Baltic States and also Spain and Portugal. It is not just Germany or the ECB – Greece may have overestimated the degree of sympathy which other “crisis countries” have for the Greek cause. But in addition to this, Greece has been alienating almost every actor in this bargaining process by errors of omission or commission and has been losing not only “goodwill” (to the extent there was any) but also precious time and the “initiative”. The Syriza government is constantly running after the facts, in a prolonged state of “emergency” which cannot last politically nor socially (at some point all the cash has been used up …..).

      In other word, Syriza has been so inept they’ve lost the sympathy of many of their ideological allies in Europe. The fact that Syriza is visibly incompetent provide powerful ammunition to the opponents of the left in other countries.

      1. IsabelPS

        Syriza has been a very unexpected and welcome present to Passos Coelho and Rajoy, that will both seek reelection towards the end of the year in Portugal and Spain after 4 years of punishing austerity.

      2. Jackrabbit

        My read on the European left that complain about Greece is that Centrist-oriented parties on the left that present weak opposition to TPTB would be embarrassed by a Syriza win (as well they should be). It’s not surprising that TPTB would attempt to use this against Syriza.

        The Troika (and the Obama Administration as well) were hoping that the new Greek government would bow to the ‘political realities’. If so, they would punch their ticket with mild concessions (welcome to the club!) and the game would go on.

        Syriza is far from perfect, but as long as they steadfast in their opposing neolib austerity criticizism of them seems harsh.

      3. Nathanael

        You are incorrect about this:
        “I am focusing on the negotiation dynamics and the interests of both sides, which is what will determine this outcome.”

        No, they won’t.
        I can say this for sure.
        Given the stalemate pattern, it’s quite clear that the outcome will be determined by outside forces.

        You should spend some time looking at those outside forces.

        1. kemal erdogan

          I am also with you in that I don’t believe the negotiation dynamics would have as a large impact as Yves thinks it would have. I accept that the tactics of the negotiators might have an impact to the outcome but it would never change the outcome that actually matters for the powerful side. Indeed, leverage is the only determinant if the the sides are enemies.

    1. Yves Smith Post author

      I’m no fan of the Troika, but I’ve had Greek readers insist that Golden Dawn will never get beyond a fringe party. I hope they are right. From an April 29 story in Politico:

      Golden Dawn has seen its once rapid rise on the European political scene grind to a dramatic halt in the wake of an investigative crackdown following the murder of the anti-fascist rapper Pavlos Fyssas by a party member in Nikaia in September 2013.

      While in the run up to the 2014 European elections, the party was projected to take home more than 10 percent of the vote, the party actually lost voters (in absolute numbers) compared to its performance in 2012, when it first managed to enter the Greek parliament with 18 MPs. With most of its sitting MPs now in prison or awaiting trial, the party’s presence in the parliament is minimal.

      Almost 70 members — including the party’s leader, Nikos Michaloliakos, various deputies and various local officers — are to be put on trial, charged with forming a criminal organization. The charges include murder, aggravated assault, and possession of guns and explosives, among other offenses.


      1. Nathanael

        That’s exactly what Germans said about Hitler’s party after the Beer Hall Putsch. *Exactly*. “The Nazis will never get beyond a fringe party.” I have quotes to this effect from concentration camp survivors.

        1. Alan

          This is too melodramatic but I live in Greece and I can assure you it will never happen. Ask any Greek or foreigner living in Greece and see what they tell you.

  12. EoinW

    What’s next? Viewing Greece as the latest chapter in The Shock Doctrine have we learned anything to inform our expectations as to what happens when the next chapter is unleashed on a western country/countries? One might argue that Greece was a success for democracy as a different government was elected. Yet for those hoping democracy will empower the average citizen to change their lives for the better it has once again failed to deliver. When in history has democracy ever prevailed over fascism? Maybe Spain 40 years ago but that was only after fascism had run it’s course. Facing a rising fascist trend, democracy has always failed to stem that tide.

    What is more striking to me is the behavior of the Left. For those wanting to reform economic trends or change the political system, electing left wing political parties is not the way to go about it. Since Blair’s New Labour the Left has continually moved to the centre to get elected. Such a move simply eliminates the option of voting for left wing type change. The Left as a political movement has evolved into a force wishing to gain power for the sake of gaining power. Access to the Country Club comes through selling out principles, The NDP in Canada certainly understand this.

    Any more options? It seems it’s time for the Right to have a final crack at proving democracy can still work. I’m not holding my breath on this one either. I will point out that the Right can galvanize forces – such as nationalism – that worry the current establishment. Also, unlike the Left, the Right might do “whatever it takes” to prevail. Right wing movements might not restrain their actions in the democratic strait jacket the way the Left has.

    Now do we actually improve things through a Right wing success? I suppose that those who just want to see the current establishment dethroned, such change has a certain appeal. Looking at the current economic mess, which has been generations in the making, is improving things ever a realistic goal? Isn’t it more a case of weathering the storm and coming away with something better once the dust has settled? If so, then you’re as likely to get general agreement on the best course to take as you are to get Keynesians and Austrians to see eye to eye.

    The Left taking on the establishment has been rather predictable considering how the Left will never “soil its good reputation”. Meanwhile the establishment face no moral nor ethical restrictions. Time for the next challenger to step into the ring. Time for us to set aside our wishful thinking that the Greeks would go win this fight for us and, instead, prepare ourselves for the neo-feudal world fast becoming reality.

    1. Yves Smith Post author

      Wow, this is a misrepresentation of the Kaletsky article, big time. This was not Kaletsky RECOMMENDING a strategy. Lordie. This was his assessment of how things would play out. We’ve said before that both the IMF and ECB were being hardline and that the ECB has the tools to crush Greece if it gets cover from the politicians. Many members of the Eurogroup are also bloodyminded. The sweatebox approach is a way for them to pressure Greece into concessions while having the appearance of having clean hands, which is very important to the creditors. So the blog author is in “shoot the messenger” mode.

      1. Jackrabbit

        Kaletsky isn’t recommending a strategy but it sure feels like he is warning away potential supporters. And that helps the Troika take a harder line. His article comes at a time when Schauble is daring Greece to hold a referendum on Grexit and Weidmann is complaining to the ECB about backdoor funding via ELA.

        I don’t buy Kaletsky’s argument (as I wrote in the first comment). Much of what he says is true on its face but the analysis lacks depth. The core of his argument revolves around the inability to remain in the EZ if there is a default. But Greece would not face an immediate Grexit unless it is forced to Grexit by the Troika. That’s because: 1) Greece is NOT Cyprus, and 2) everyone that didn’t need deposits for local use has already moved their money so Greece doesn’t face a big extra liability upon default. Thus, it strikes me as yet another article hyping the power imbalance between Greece and Troika.

        Of course the Troika will say they are prepared for a Grexit – but we don’t know to what extent that is really true. Even if it is 100% true on its face, there are likely to be knock-on effects that they fear. The US Treasury didn’t think a Lehman failure would rock the markets the way it. And then there are political ramifications with Grexit as well as financial.

        On additional note: A Greek ‘win’ should satisfy both the principled left and the principled right. It reduces the suffering and ensures that there is accountability – creditors will think twice before lending to corrupt regimes.

        H O P

  13. Tsigantes

    This is part of the PR for intimidation purposes, the art of framing. A PR campaign is won when most people buy the framing of an issue (whether right or wrong framing).

    One reason the Kaletsky framing is so wrong is that yesterday or the day before, the Greek primary surplus for the 1st quarter + April came in at 2+ Bil. euros vs. 1+ Bil. euros for the same period last year (in other words roughly 100% better).

    This is attributed towards a better tax collection, settling old debts w/ government etc.

    So the very foundation of the Kaletsky theory is wrong and screams loudly of the ND+PASOK ‘Syriza Parenthesis’ theory (that Syriza will only govern a short period of time and then fall).

    If you exclude interest on debt payments, Greece has more than enough to cover herself + tourism revenues are on the way.

    If nothing else the Anatoli thesis shows EU/Berlin’s foaming at the mouth that the trap they laid for Greece during the winter traditional trapping season is about to expire. Without paying interest on loans Greece could hold out for ever.

  14. Tsigantes

    The good news via NERIT this morning is that though SYRIZA approval has dropped, it’s still about 53%. Not everyone is buying the hype.

    Of the 47% remaining c. 23% is opposition (ND+PASOK+Potami) and the rest are parties that would never support the opposition (KKE, GD), undecideds, and parties that want a more extreme position i.e. pro-Drachma, out of EU and NATO.

    1. Nathanael

      Good. 53% approval is enormous.

      ND/Pasok/Potami are dead parties walking, though they haven’t noticed it yet. The other parties are the ones to watch going forward; they haven’t gelled. They could gel very, very suddenly.

    2. Yves Smith Post author

      Other polls show 52% not satisfied:

      The poll, carried out by ALCO for the Proto Thema Sunday newspaper, found 52 percent were not satisfied with the government’s performance since its Jan. 25 election win, compared to 39 percent who were. If creditors don’t accept Greece’s proposals, 50 percent want the government to compromise and 36 percent want a rupture.

      The ratings showed a significant drop in popularity for the government, a coalition between the radical left Syriza party and the small nationalist Independent Greeks. In a February poll by Metron Analysis, 68 percent of respondents had said they were satisfied with the government’s handling of the negotiations, compared to 23 percent who objected.


      And the last poll I saw asking Greeks which party they preferred (as of May 5-6)had Syriza at 36% which was the level it was at at the time of the elections. However, it showed approval for leaving the EZ at much higher levels than most other polls. I wish I could see the survey instruments, since this suggests strongly disparate wording in the matter of a Grexit across polls. Poll results are often highly sensitive to how a question is framed.


  15. washunate

    Agree with the general commentary. Kaletsky’s premise doesn’t make sense, though. Will is future tense – the proper tense is past.

    Since coming to power in January, the Greek government, led by Prime Minister Alexis Tsipras’s Syriza party, has believed that the threat of default – and thus of a financial crisis that might break up the euro – provides negotiating leverage…

    That’s completely backwards. The government adamantly avoided threatening default. Varoufakis in particular was quite vocal that his goal is to figure out how to pay the debts, not how to renounce them. He went so far as to say some ridiculous things about cash logistics of reintroducing the drachma and proposing new kinds of bonds Greece could issue and so forth.

    Now that of course leaves some wiggle room for publicly lying about what is secretly going on behind the scenes, but that would be a very different kind of story about the government’s strategy. The much more likely story is that Tsipras tasked Varoufakis with selling a different vision for Europe, and Varoufakis was completely unprepared to actually communicate such a vision. It has reminded me of the sensationalism when Varoufakis was talking about computer game economics a couple years ago. He seemed more interested in hearing himself speak than in making a point. That tends to work better in the Anglo-American academic world than in the Franco-German political one.

    Even now, Syriza can’t answer the most basic of questions. Are they asking for charity or making the case for investment? The top two officials at the ECB aren’t even from Germany or France. They’re from Italy and Portugal.

    1. Nathanael

      I can’t explain the Italian position, but the Portuguese government is digging in its heels because it knows it’s completely wrong about everything economic and is unwilling to admit it. They’re in a very very unstable position.

  16. Tsigantes

    One thing that has characterised the crisis is the use of young, provincial, low level nonentities with mediocre educational attainments from minor universities, a seemingly endless scandals of plagiarized PHDs/inaccurate Cvs and relatively little work experience – certainly not enough to justify the responsibilities they have been given. They are put in jobs of high visibility. Tools rather than players. Djiesselbloem is one such. The Finnish one he replaced from a few years ago is another. (Um…Olly Rehn).

    An important thing (an absence rather than presence – Europeans themselves seem unaware, because it is a convenient absence for the PTB) is how LITTLE the countries of Europe know about what is really happening in other EU countries outside of Germany, France, UK. It is simply not reported in the news. There is in fact almost no news, let alone analysis, unless you are prepared to google ‘Finland’, say, and acquaint oneself with the full range of their press through google translate and without an informed guide. This is further exacerbated by the multiple language barriers. However, since most europeans speak English, the anglo-american press predominates, serving up Atlanticist views.

    Because of this it is very easy to slip nonentities into apparently important public roles (let them do the work) while the powers behind can assume distance and apparently distant roles, uttering simplistic & delphic soundbites. A la Merkel, Schauble, Lagarde, Draghi etc, etc. There has not been even one speech of depth & mature analysis from any of these characters, a la Bobby Kennedy or (dare I say it) Lavrov/Putin, in which the crisis is explained clearly & responsibly to the peoples of Europe. This applies to all power players of the Eurozone crisis, compared to which Cameron (out of the main loop) absurdly appears closer, more accessible and accountable to his UK populace than the others.

    Instead this role of political accountability & ‘leadership’ has been handed over to the mostly English language MSM, where English and American journalists have set out to create a narrative, not the same thing. Trolling and propaganda in the EU has become massive, endemic.

    In fact the nation states of the EuroZone and EU are showing extremely serious political cracks vis a vis the so-called ‘Atlantic consensus’ (the discreet Europeanisation of Washington Consensus). Specifically: the EZ financial situation on one hand, along with TTiP/TISA; and sanctions / warmongering / against Russia on the other and the position of NATO in Europe. Despite the apparent monolithic appearance of Eurogroup (19 voices speak as one) – who are commonly believed, rightly or wrongly, to be handpicked or vetted by Schauble. Hungary, Czech Republic, Poland (where Operation Dragoon or whatever it was called backfired massively), Sweden, Finland, Austria. The political balance is shifting in Portugal, Spain, Italy, Ireland. France too is in a type of political shambles and Merkel in Germany is under fire, not only from the AFD party, and Alternativen & unions, but from the SPD. These discussions are found outside the anglo-American english language press, the smaller the language group the more explicit.

    One consequence of this is that today, as in 1938 – despite the internet & ‘instant news’ revolution – European countries can say of, say, Czechoslavakia, that it is “a distant, faraway country of which we know little”. Whereas in 1938 that was absurd and inexcusable, it has become more or less correct today.

    In the 70s and 80s English and French papers would regularly publish serious in-depth feature reports (4-6 broadsheet pages) on other European countries and news straight from the news wires, without re-framing . Today this has completely disappeared. Nowadays our substitute (apart from blog)s is US military & oil consultancy Stratfor, i.e. a weird substitute. Weird because they describe countries & relations between them as if they are in another galaxy, not as the country next door of which it is normal to be informed. And we are NOT informed! Tiring too for the European reader because the framing of a foreign and untrustworthy ‘partner’ has to be constantly and knowledgeably discounted in terms of information.

    1. Santi

      The knowledge of other countries outside is also typically mediated by cartoon-like experiences for tourists. Disneyworld downtowns, emptied and filled with hotels, hostels and pseudo-native bars and restaurants; residents are no longer living there, but come and go like extras in a movie. This goes on and on, till they end up believing the topics told of us…

  17. Jim

    Syriza is in a position somewhat similar to that of some of the occupants of the twin towers at 9/11. Jump out the window or be burned to death.

  18. Older & Wiser

    Yeah, sorta, kinda…

    Still, in your analogy you are missing (strangely enough) that

    (1) the Twin Towers (Greece) are still intact, within the EZ and still with the euro as currency. No plane impact (yet). So Syriza isn’t doing anything of what you are suggesting (yet). So let’s just give’em a chance to do their job.

    (2) the planes that would bring Greece down (out of the EZ) are the rest of Europe, meaning that if Greece goes down they go down with Greece.

    (3) The pilots of such planes are the BB-axis Eurocrats, and the plane passengers (the people of Europe) may pull a mob attack on the cockpit (remember United Airlines flight 93 flying over Pennsylvania?) bringing the plane down without it ever coming close the pilot’s intended target (Greece)

    (4) If possibility (3) took place, Europe would go down and Greece would remain intact and without paying back a single cent of what it was borrowed.

    That’d be fun, don’t you think ?

    So… as Yogi Berra would have said: it ain’t over till it’s over.

  19. Calgacus

    Many here have been arguing with many of Naked Capitalism’s positions on Greece. On some issues, all are agreed that only a minority come to the conclusions I or some “romantics” or optimists do – for example the economic issue that leaving the EZ, forced or not, would be a clear benefit to Greece. Or the issue of whether leaving the EZ automatically entails leaving the EU – more on that later, that it is in any treaty text is imho a dubious, strained interpretation (correspondingly, the minority status of the view that one can leave the EZ & not the EU is less clear.)

    But on one other group of issues – if anything more important ones – I do not think our generous hosts here understand how eccentric, how very extreme, how far off the spectrum – indeed damaging to its own repute imho – the positions that NC has been espousing is, and how uncontroversial the “romantic” view is. And since these positions have not been supported by any citations I have seen, I don’t know where they are coming from, who convinced them of these extraordinary ideas or a more exact meaning for them.
    The view of the basics of international law and EU law that I and other “romantics” that emphasize that Greece is still a sovereign state – have been giving is as far as I know, universal, unanimous and unequivocal outside this blog. I have cited how experts opposed on other issues, like Jens Dammann and Phoebus Athanassiou share it and I have quoted an ECJ European Court of Justice opinion supporting it, stating how fundamental international law binds the EU and its members. (How could it not? – mostly, it consists of rights – e.g. to make war – that the EU members could not cede by treaty to the EU, because they no longer had them to cede to anyone!)

    On the other hand, the ideas that states left international law behind when they joined the EU, that leaving the EU can legally be compared to the secession of the Confederacy in the US Civil War, that the most fundamental international law like the UN Charter and UN arms like the Security Council are not at a higher level than the EU treaties, institutions, courts etc are — outlandish, amazing, even horrifying.
    Here, for instance is one quote – from many possible ones from the Treaty on European Union – that express the standard view, of respect for fundamental international law:

    Article 3 Section 5: In its relations with the wider world, the Union shall uphold and promote its values and interests and contribute to the protection of its citizens. It shall contribute to peace, security, the sustainable development of the Earth, solidarity and mutual respect among peoples, free and fair trade, eradication of poverty and the protection of human rights, in particular the rights of the child, as well as to the strict observance and the development of international law, including respect for the principles of the United Nations Charter.

    Consolidated version of the Treaty on European Union Title I: Common Provisions

    1. Yves Smith Post author

      Article 3 refers to relations with the OUTSIDE world. It is not inconsistent with member states having diminished sovereignity but the EU courts and other institutions adhering to international laws in their external dealings. Even the German Constitutional Court, in its ruling on QE, referred its decision to the European Constitutional Court. And BTW we do have QE.

    2. Calgacus

      The first sentence of article 3 section 5 refers to outside relations. The whole treaty is concerned with restrictions on sovereignty and its exercise, as usual. But nothing in the treaty implies the essential extinction of sovereignty – the position I maintain is insupportable, and which no source or authority supports. Many other parts of the treaties and the references in 3.5 and elsewhere to respect for international law and the UN Charter are completely inconsistent with this extinction of member states’ sovereignty.
      The UN Charter is more or less accepted – and was more or less designed – as the Constitution of modern international law, and the UN’s organs acting within their competence are essentially higher than the EU’s. See article 53 for instance – the EU is considered as a UN Charter article 33, 52, 53 etc “regional arrangement or agency” (usually called “regional organization” (RO) nowadays). Though many who say “Greece is still a sovereign state” may not be experts on international & EU law, they are within, agree with the spectrum of legal discourse in a way that Naked Capitalism’s positions up to now have not.

  20. dbk

    Just noticed that Costas Lapavitsas, MP for Naousa (http://en.wikipedia.org/wiki) will be interviewed by two Greek journalists who work for thepressproject.gr + Paul Mason of Channel4 news tomorrow night (NYC time: 2-4.30 pm). There will be immediate follow-up by YV with Nikos Hadjinikolaou on Star at 4.30 pm (NYC time). The first interview is advertised for both Greek and English.

    Lapavitsas represents the left block of SYRIZA and the “other” take on what Greece should do. You can get an idea of his thinking from this piece in jacobinmagazine.com:
    and this interview:

    Questions (English welcome) may be sent to:

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