Consent of the Governed, Tsipras Style (Updated)

We described in detail how the referendum scheduled in Greece for next Sunday, July 5, is a cynical exercise in democracy theater. The Greek people are being asked to vote on a (draft) proposal by Greece’s lenders to unlock €7.2 billion in funds, the last portion of the so-called “second bailout” agreed by the Greek government in 2012. Tsipras knew at the time he announced the referendum that the proposal expired on June 30; that was the known-well-in-advance final date for the bailout terms to be agreed if each and every one of the 18 Eurozone countries agreed. We said it was a no-brainer that they would not agree; in Germany as with some of the other countries, it would require parliamentary approval to accommodate Greece’s too-late request, and there was no reason for any of them to cut Greece slack when the government has plenty of opportunity to schedule the vote in time, so it actually would inform the government’s actions.

Instead, Tsipras has already taken the decision to miss the €1.6 billion IMF payment due June 30 and the €3.5 billion ECB payment that falls on July 20, while falsely telling Greek citizens that they have a say in this momentous choice.

As we warned for months, the ECB has been keeping the Greek banking system afloat only by stretching its own rules to the breaking point. They only needed political cover to end or curtail the backstop, which would put the Greek banking system in a death spiral. We discuss the implications in an accompanying post.

Moreover, the question being put to voters is incomprehensible to most and misleading on multiple levels. Here is a translation of the ballot:

Greek people are hereby asked to decide whether they accept a draft agreement document submitted by the European Commission, the European Central Bank and the International Monetary Fund, at the Eurogroup meeting held on on June 25 and which consists of two documents:

The first document is called Reforms for the Completion of the Current Program and Beyond and the second document is called Preliminary Debt Sustainability Analysis.

– Those citizens who reject the institutions’ proposal vote Not Approved / NO

– Those citizens who accept the institutions’ proposal vote Approved / YES.

Naked Capitalism readers are far more finance and economics savvy than most Anglophone country voters, and Anglophone countries, by virtue of being overfinancialized, likely have a higher proportion of the country that has a passing familiarity with economic and budgetary terminology than the average person in Greece. How much sense does that question make to you? As you can tell, it places the burden on you the voter to read and digest the underlying documents in order to make sense of them. (In addition, the mere use of Oxi, for no, had deep resonance. As Paul Mason points out: ” Oxi is a big act of resistance in Greece going back to the Italian occupation. Ne [‘yes’] is not such a powerful word”).

And the focus on the proposal proper obscures the broader ramifications of a yes or no vote. It simply reinforced the fact that polls have failed to give good guidance on public sentiment because they’ve generally focused on only one leg of the choice facing Greece. Do we continue to accept the pain of continued implementation of austerity, the hated so-called memorandum? Asked in isolation, the answer is a no-brainer: of course not. But the ballot does not even allude to the fact that a no vote means default and the events that snowball from that, as in the bank holiday and probable liquidation of Greek banks. As Bloomberg notes:

“Usually in democracies, it’s the technocrats and the politicians who take care of the details, while voters are asked about broader issues and principles,” said Philip Shaw, the chief economist in London at asset manager Investec. “This is a transfer of responsibility from parliament to the voters….

‘‘People will vote based on whether they want the harsh measures or not, they may not realize that they’re actually voting on whether to stay in the euro,” said Erato Spyropoulou, who waited in line at a National Bank of Greece AG cash machine in Athens to withdraw money on Saturday morning. “I don’t want the harsh measures either. I’m in debt, but I don’t want to leave Europe.””

But even that interpretation is unduly charitable. It assumes that Greek voters really were voting on the creditors’ proposal, no matter how over their head it is to assess it. But with the proposal a dead letter, what Tsipras is seeking to achieve is after-the-fact ratification for committing Greece to default and probable Grexit (the only parties that might now be able to prevent a Grexit are the lenders, and I would not bet on them being creative enough, motivated enough, or able to obtain sufficient cooperation of the Greek government to prevent it).

From the perspective of Greek citizens, the vote is an exercise in deconstruction. It has whatever meaning they choose to attribute to it. It is certainly not about the memorandum. It may serve as a de facto snap election. I’m not an expert on Greek government procedure, but it’s hard to see how Tsipras and Syriza remain in power if Greek voters see the bank holiday as ushering in a future that could be even worse than austerity. Some have already come to that point of view. From the Telegraph:

“If we default and go back to using the drachma it will be like going back to the wartime era,” added Ms [Evi] Costas. “Only this time round, the drachma will be like some useless Third World currency with no value.”….

In the meantime, those waiting at the ATMs pass the time debating how they will vote in Sunday’s referendum, not that it offers much of a choice either way. Even those who favour leaving the Eurozone seem to fear that Greece may end up like Afghanistan, or at the very least, neighbouring Albania.

As we wrote over the weekend:

So the only conceivable excuse for waiting this long is for Tsipras to attempt to save himself. If he were to reject the bailout, the decision is unquestionably his and that of his allies. That it precisely the sort of decision that government leaders are expected to make. Or he could just as well accept the bailout, recognizing that as bad as things are, that the country would be plunged into an even deeper economic sinkhole, putting the survival of even more citizens at risk. It would take forming a new coalition with To Potami and New Democracy, and that would mean that his and Syriza’s position would become far more tenuous and he would be fiercely denounced by many if mot most Syriza MPs.

Thus the referendum ruse looks to be about trying to spare Tsipras and Syriza the worst consequences of his having underestimated the creditors and not preparing for worst-case scenarios, which is another responsibility of leadership that he and his party have neglected.

And Greek citizens are beginning to see what the cost Tsipras’ and Syriza’s failure to own up to the responsibilities of leadership only after passing what appears to be an event horizon.

Update 11:30 AM: We had said in our earlier post on the surprise referendum announcement that it was an exercise in deconstruction, since a vote on a proposal that has expired has no impact on the default decision, since that is already baked in.

The Guardian reports that European officials are teaming up to tell Greek voters what the vote mean in the absence of a clear purpose. From the live blog:

Europe turns its guns on Tsipras

Two may be a coincidence, three is a trend, and four looks rather like a plan.

The eurozone’s three largest economies have all come out today and told Greece exactly what they believe Sunday’s referendum is about, and it’s not simply about choosing the old reform offer.

Matteo Renzi warning that Greece is voting to choose between the euro and the drachma makes a hat-trick.

France went first – with Francois Hollande appearing outside the Elysse Palace to declare:

It is democracy, it is the right of the Greek people to decide what they want for their future. What is at stake is whether or not Greeks want to stay in the eurozone (or) take the risk of leaving,”

And then came Germany — although Angela Merkel left it to her coalition partner, Sigmar Gabriel, to deliver the news:

This looks an awful lot like an effort to shift blame to Greek voters if they vote no, the ECB pulls the ripcord on the Greek banking system on July 20 when the ECB default occurs, and thing go from bad to disastrously worse. It may also be sowing the ground for a scenario we’ve discussed: an EU suspension, if a government armed with a “no” tries getting more aggressive.

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  1. vlade

    Greeks are caught between ideology and incompentence. Not a place to be a best times, and this late in the game it’s deadly.

    1. I.D.

      Yves: why do you not entertain the possibility that Tsipras was until the last minute kept under the impression that he could get a deal he could live with, but that creditor nations did not negotiate in good faith and were only willing to accept a deal that destroys Tsipras politically?

      Once Tsipras realized that the deal ‘keeps changing’ for the worse and he ran out of time, he only had two options: either to capitulate and give up everything he stands for, or to throw the book at the creditor nations.

      Yes, the referendum is conditional, but it’s only a sham if creditor nations force a premature default.

      In reality creditor nations could make the democratic referendum meaningful if they wanted to: by agreeing to the minor delay of the 1.5b € IMF repayment due tomorrow. If there’s a default it’s because creditor nations allowed it to happen. If the payment is delayed by just 6 days, the referendum becomes fully meaningful.

      The cost of a delay to creditor nations is very small: once the referendum is over it’s over, it’s not like Tsipras can call for another referendum in any credible way.

      The cost of forcing a default right now is potentially immense.

      1. Yves Smith Post author

        Look, the creditors are kneecap breakers, but you only help them by making inaccurate statements. It’s incumbent on critics of powerful interests to have their facts right, and you are 100% wrong.

        This is not “forcing a premature default’. I don’t know why this is so hard for readers to understand… The bailout expires June 30. The money goes poof. An IMF and ECB “default” is baked in with no deal as of June 30.

        1. I.D.

          Yes, that is true in the literal sense, but I think you have to consider the following facts:

          – The ‘bailout’ is not a bailout in reality: not a single € of these “loans” will touch the Greek economy (!). Given that Greece is at or near a primary budget surplus, the money offered here is just a proxy payment to creditor nation banks. Whether the title says ‘bailout’ or ‘pink fantasies of Sue’ is immaterial: they are transfer payments to (non-Greek) European banks, kicking the can down the road for paper debts, only a fraction of which debt ever touched the Greek economy, and only did so in the distant past.

          – What this is really about is not new money to the Greek economy, but old fashioned blackmail whether to crash the Greek economy by sabotaging its payment system or not. The money itself does not help Greece, as they will not see any of it.

          – Even if the referendum is for an offer that technically the creditor nations (voluntarily) are taking off the table on June 30, that’s not a date cast into stone, it’s a date that only depends on the creditor nations. If they wanted the referendum to have any meaning they could make it so, very easily. Tsipras alone cannot make it so.

          – By calling a referendum Tsipras highlights the hypocrisy and deceit of the creditor nations: if the ‘yes’ vote wins, Tsipras has no option but to accept the deal or resign. If the ‘no’ vote wins we are where we are today: default. So if the goal of the creditor nations was indeed to avoid a default, they’d agree to the referendum. By not agreeing to it, by pretending that the clock runs out (which they have the power to stop), they are exposing their real goal: that what they want is Greece agreeing to these transfer payments while implementing neoliberal austerity policy – so that they serve as an example to the much bigger fish in the tank: Portugal, Spain and Italy.

          Is the call for the referendum dishonest? Yes to a certain degree, but much less so than the position of the creditor nations IMHO, and even if the referendum turns out to be meaningless, it serves an important role in exposing the real goals of the creditor nations.

          1. Yves Smith Post author

            Huh? I hate to sound harsh, since I infer you are new here, but you need to have a decent grasp of the situation before making a comment. Spreading disinformation, whether by design or not, is not on. We try to have as open a comments section as possible but we expect everyone to have done enough homework to make informed contributions.

            First, the lenders here are official lenders, as in governments. The banks were all taken out in previous bailouts. They have nothing to do with the current lending program.

            Second, you are also missing what these negotiations are about. The bailout fight was Greece rejecting the implementation of the toughest part of the structural reforms that were part of the last bailout. This round of lending was the last piece coming out the so-called “second bailout”. These negotiations were supposed to be followed immediately by the “third bailout” which would give Greece debt relief, but not of the type Varoufakis wanted (his proposals did have merit, like GDP-linked payments) but further reductions of interest rates and extensions of maturities. Those do give real economic relief. It’s not phony, although it is less sexy than a principal reduction. Colleagues who are close to key players on the Greek side kept insisting from March even through June, “There will be a deal. The creditors can/will lower interest rates and extend maturities” (and then they’d cite some tidbit from the German press that they said confirmed their view).

            Greece insisted the debt relief talks happen now, which the creditors had clearly nixed back in February.

          2. Clive

            But the clock has run out ! This is basic loan accounting and loss regonition, which while we may decry it as being tools of the merciless big financier neoliberal (insert label of your choice here) oppressors is merely an accounting and lender debt management convention.

            If the IMF is defaulted on, the IMF needs to authorise any rescheduling from the countries which provide its working capital. It has some slack, but not that much.

            The IMF has no “money” of its own. The governments (such as the UK, the U.S. and so on) have to explain to their parliaments / congresses etc. why they are committing funding to the IMF for that purpose. It is a tough sell. Tough, but not impossible. However, SYRIZA didn’t even begin to make coherent and plausible case. Of course that would have taken time to do — and you can argue that was time SYRIZA simply did not have. But rather then play the hand they were dealt, they tried to tear up the cards and complain about the way other players held all the aces.

            It was not enough for SYRIZA to keep banging on about how they had a better understanding of the economics of the situation (they probably did) without also understanding the politics (where they gave every indication of being completely clueless).

          3. Yves Smith Post author

            The message is clear from Europe that the bailout dies at midnight on June 30 at midnight. From the Financial Times’ live blog:

            At a press conference, Chancellor Angela Merkel’s spokesman indicated that the government was sticking to the decision made by the eurogroup finance ministers on Saturday – ruling out any further extension of the current aid package beyond Tuesday.

            Steffen Seibert said Ms Merkel was “ready to speak to Greek premier Tsipras whenever he wants” but following the referendum decision, the situation was now “in a different phase”.

            His message was that having decided on the referendum, the Greek government was on its own.

            Martin Jäger, the finance ministry spokesman, said much the same. “The current programme runs out tomorrow, the 30th of June at midnight…the resources [available under this programme] expire tomorrow at midnight.”

        2. Nell

          It seems to be a very confused situation. Junker has just said that a Yes vote in the referendum is a vote to stay in the Euro and Tspiras is saying a No vote is a vote against austerity. Neither leader seems to be paying any attention to the fact that there is no referendum choice for voters since Greece will be in default and the bailout program will have expired.

          1. Susan the other

            I was thinking that too. This “phase” will be expired, according to Merkel. Interesting way of putting it. And Holland’s plea, and even Renzi. Juncker told the Greeks it was nuts to “commit suicide because they are afraid of death.” Which has undertones of “trust the EU, we wont let you down that bad.” So the EU are all in full PR mode to stop a No vote.

            1. OpenThePodBayDoorsHAL

              Tsipras has failed to sell what a New Drachma could be. He could say they can (attempt) to peg it to the euro. He could say it will free us to pay higher interest on bank deposits. He could say it will give us our freedom back. Instead it’s a choice between the known and a scary unknown.
              And he could boil down the question to easily-consumed soundbites. “Banks extended too much credit and now have bad loans. The only remaining question are who is responsible, and who will pay. The Eurozone wants Mrs. Kalikanakis on a pension to pay; we think she has already paid enough. We think billionaire bankers, whose job it was to underwrite these loans in the first place, must now share in the consequences of their bad decisions”.
              Hell, put me in, coach, I’ll make the speech.

              1. Yves Smith Post author

                The Greek government reacted violently and denied the idea that a no vote was for a Grexit. They say they do not want to leave the Eurozone.

      2. Nathan Tankus

        “Yves: why do you not entertain the possibility that Tsipras was until the last minute kept under the impression that he could get a deal he could live with, but that creditor nations did not negotiate in good faith and were only willing to accept a deal that destroys Tsipras politically?”

        Because this statement has no basis in fact whatsoever. What happened in the past week that would especially tell Tsipras that the Troika aren’t negotiating in good faith that is any different from anything that happened any other week in the past six months? If he felt the Troika weren’t negotiating in good faith and decided a referendum was in order there is no reason not to do this referendum months ago, let alone a week ago.

        Further, he didn’t actually know how the negotiations were going because he wasn’t in contact with his negotiators when he made the decision. They found out on Twitter. You can say that he knew the general tenor of the negotiations and recent events, but that leads back to the point above.

      3. GRP

        The idea behind causing an immediate default could be to let Greeks know the cost of default before they choose it.

        Otherwise, it might be to assess the market reaction before deciding how much to concede. Despite all the statements made so far, it is still possible for the creditors to approve an extension of the bailout until after the Greek referendum.

        1. Yves Smith Post author

          This is really a desperate argument. The situation is path dependent. Greek voters do not have a time machine so they can go back to a pre-default situation and get a redo. A default puts irreversible events in motion.

          Your statement is logically equivalent to saying, “Let’s cut the voters’s hands off so they can have know what means to have no hands before they vote on having their hands cut off.” You can’t go back to the pre-cutting off of the hands any more than you can re-create the pre-default state.

          I am at a loss to understand why readers are so desperate to defend Tsipras. Yes, the creditors are horrible, but that does not make him a good guy by default.

          1. Joe Emersberger

            Junker is now begging the Greek people to vote “yes” and saying the lenders never proposed to cut pensions – and were on the cusp off giving Greece debt relief. If you believe Junker, it would appear Syriza are the ones pushing the lenders for an unconditional surrender!


            How would you advise Greeks to vote, or would you advise boycotting the “sham”?

            You re coflating uncertainties about the future, technical aspects of the negotiations with eth crystal clear choice being put to Greek voters: NO = support Syriza. Yes: Junker and his pals.

            1. juliania

              Thank you, Joe. I noticed that also. I think your interpretation is correct. I don’t think it is possible for a non-economist to understand all the ramifications of financial law, but ethics trumps law in my book. Obama was very fond of saying the shysters were operating legally, thanks to the crummy laws that made it so. At some point you have to say enough is enough.

              I apologize for not understanding – back in the days of shorting stuff and making millions one of the Charlie Rose heroes said something that stuck with me:

              Nobody understands it. They made it this complicated on purpose so we wouldn’t.

          2. EoinW

            Devil’s Advocate? Maybe we suffer from the 21st century virus known as “wishful thinking”? Perhaps we are closet manicheans and must see the world as made up of good guys and bad guys? Maybe it’s social conditioning, seeing that people view elections like some sporting event to cheer on one side or the other, we’re doing the same thing here?

            Or it could simply be intellectual gymnastics. The flaws of the Syriza/Tsipras position have been made crystal clear at NC. Some of us must like the challenge of taking up this lost cause and defending it. Yet I read an impressive piece by Michael Hudson on the weekend so we’re keeping good company.

            I’d guess one of two things: 1) Tsipras has looked at his pair of 4’s and decided to bluff the Trioka – hoping a mini market meltdown means the creditors will be more than happy to reoffer the same deal later. 2) Tsipras’ intention has always been Euro exit and the process has been to have everyone believe he’s being forced to take Greece out of the EU. After all, this is a guy who admires Che. That’s as eccentrically middle class as I am!

          3. GRP

            Yves, I meant the creditors , not Tsipras, were forcing the default to teach Greeks its cost before the vote, otherwise they could have easily extended the programme by a week, especially since they are campaigning for a certain outcome.

            Greece has no good options and defaulting and staying in default are the best of the bad options available to Greece. Whether Tsipras deliberately led to the scenario, I can’t say, but if he did, he has my support (which doesn’t mean a whole lot since I am not a Greek).

    2. which is worse - bankers or terrorists

      Yves, I would be interested to see a post on how a sudden stop/collapse in the payments system would when as applied to Greece, and how events would transpire over the upcoming week.

      It seems that this would pretty much tell you how the vote will go.

      I’m still betting on a “YES” vote on Sunday, which means Tsipras will have to call elections, create a grand coalition with ND and moderate elements of Syriza, and remain PM. I think that has pretty much been the plan all along. Just because Syriza is recommending a NO vote does not necessarily means that is what is really wanted by Tsipras.

      1. ambrit

        What we need to know is what finally made Tsipras give up on negotiations. Fatigue, the final “shut up” insult, Varifakis threat to split the coalition, secret diplomacy from a third party, all are possible factors. Perhaps this is a “Gotterdamerung” moment for Greece. (The Syriza cabinet can all line up on the Akropolis steps and sing “Kill the Rabbit” in Greek.) Seeing how fundamental a change in Syriza public diplomacy this is, what could the Greeks do to induce maximum collateral pain in the rest of the Eurozone?

        1. which is worse - bankers or terrorists

          “what could the Greeks do to induce maximum collateral pain in the rest of the Eurozone?”

          I’m thinking Tsipras tabling a draft proposal for Greece to leave NATO might do the trick.

          1. gemini33

            The Guardian’s economics editor had a heck of a column yesterday, calling a Grexit a possible “Sarajevo moment” for the Eurozone. I think the fact that he uses WW1, considering all the other things he could have compared it to, is curious. Maybe it was because people are marking Sunday, June 28, as the day things started blowing up and that’s exactly 101 years since the assassination of the archduke. Maybe it’s not that significant and I’m just overly focused on the world war that’s brewing right now. But it’s definitely a curious choice. Here’s a excerpt but it’s a short column and one I think worth reading in full.

            Greece crisis could be a Sarajevo moment for the eurozone
            Make no mistake, the decision by Alexis Tsipras to hold a referendum on the bailout terms being demanded of his country has the potential to be a Sarajevo moment. The crisis is not just about whether there is soon to be a bank run in Greece, although there is certainly the threat of one. It is not just about whether the creditors overplayed their hand in the negotiations, although they did. It is about the future of the euro itself.

          2. bh2

            “I’m thinking Tsipras tabling a draft proposal for Greece to leave NATO might do the trick.”

            Exactly. It is beyond comprehension that preening eurocrats actually believe Greece has no other alternative but to remain a financial slave of the western powers on whatever terms its governments may demand.

            Indeed, it seems the Greeks are being pressured to choose any other alternative offering significant pain relief.

            Consequences of the original sin of western governments are now emerging. That original sin was “taking out the banks” by governments eager to save the balance sheets of their bankster paymasters who had greedily ignored their most fundamental obligations of due diligence and then vastly over-lent.

            Why did they do that? Because they knew they would be bailed out of the disaster they were, themselves, creating. And they were right. The principle western governments are servile boot-licks to the banking class. And grateful for rewards of privilege and comfort that loyalty earns them. They don’t even try to hide it anymore.

            It is therefore something of a marvel that Yves would basically support the entirely anti-democratic thesis that ordinary people just aren’t well enough advised to intelligently vote their best interests — that only skilled technocrats (like herself, for instance) can most wisely decide what’s good for other people. A truly amazing vanity.

            However, “the people” eventually figure out they are being royally and systematically screwed over and tend to react accordingly — and not necessarily proportionately. As Mr. Obama has repeatedly pointed out, “elections have consequences.”

            That is quite true. It’s also why bureacrats hate the uncertainty which democracy produces and therefore exercise every means possible to structure operations of government to thwart democratic action. This is true in every country, of every government, regardless of ideology. And is a particularly notable feature of EU governance.

            Eventually, however, that dog simply won’t hunt when the pain level rises to an intolerable level, at which time any technocrat trying to justify to ordinary peole why their systematic screwing over must nevertheless continue may be kicked to the curb as road kill. (And that’s precisely why the present Greek government will — must — encourage a “no” vote.)

            Should the eurocrats blindly blunder into a loss of Greece from the western block, they will inevitably complain later: “who could have possibly seen that coming?”

            Answer: anyone who was paying attention.

      2. gemini33

        If the Troika wants Greece to remain in the Eurozone and Syriza out of the government (which a number of credible people claim), then making another 1 week extension, allowing the referendum to go forward with a deal still on the table, scaring the heck out of the Greek people w/ a taste of default and campaigning heavily for a Yes vote is their easiest path to getting another compliant technocrat in office (like the one they engineered in 2011 when a previous Greek PM wanted to do a bailout referendum).

        Juncker, the US Treasury, and others seem to be acting like the referendum will not be meaningless.

        And the IMF has bent, well outright broken their own rules before. See: Ukraine bailout.

        On the other hand, if what the Troika really wants is Greece out of the Eurozone, a sacrifice on the altar of the Euro, then Tsipras has just given them an easy way to do that too. Yves is confident that the troika is serious about deadlines and she knows more than I do. The markets don’t seem very happy though and that can tend to change minds.

        Historically, when it comes to deals with Greece, nothing seems to be cast in stone. There always seems to be a way to change a deal, extend a deadline, etc. Granted, after years of vigorous campaigning to cast the “PIIGS” states as the villains, EU, Eurozone and IMF member states don’t seem very willing to agree to changes. But there’s one big one that is certainly signalling a willingness to keep negotiating, and that’s us, the US.

        BTW, Paul Krugman’s column today is interesting. I stopped reading him a few years ago except occasionally so I don’t know what his position has been lately but he’s not very sympathetic to the Eurozone today. He says he has gone back and reviewed the IMF numbers and it strikes him that Greece’s situation was not that dire when all of this started, but it’s now a catastrophe. He blames “Europe” and the “euro straitjacket” and says their system is “fundamentally unworkable” (not a surprise to anyone here as the fundamental flaws have been recognized and discussed here for years.

  2. 4D

    Yves, you’ve come down really hard on the negotiating tactics of Tsipras and Varoufakis, but I’m wondering if they haven’t pulled a masterstroke by dragging the negotiations out while milking the ELA to the tune of EUR90 billion.

    Maybe I’m giving them too much credit, but think about this possible silver lining, even if it is an inadvertent contingency.

    Greeks have had months, years to “short” Greece at the expense of other Euro nations/ the ECB via the ELA as they stashed away what, more than EUR100 billion? Probably much more, in preparation for the time the Troika pulled the plug.

    Default, Grexit and the introduction of the Drachma have been sold as a disaster scenario, with people fretting over how the country will survive without new foreign investment to keep it going.

    But that’s a decent amount of cash for when the post-default dust settles and the Drachma is 30-50 percent lower than the euro, or wherever, and those euros start flowing back into the restructured, lower debt, Greek economy, mostly because many will have no option but to repatriate. I’m not saying it will flood back, but it will when the price and circumstances are right.

    Has there ever been a sovereign default where the people had such easy access to hard currency for so long before? I don’t think so.

    Lars Christensen is more upbeat:

    “However, Grexit will also remove the monetary straitjacket, which has had caused an enormous amount of economic hardship in Greece since 2008. The removal of this straitjacket will cause a significant easing of Greek monetary conditions, which in my view very likely will cause a sharp rise in nominal GDP in Greece in the coming years. The graph below shows the development in Argentine M2 and nominal GDP on the back of the Argentine devaluation in 2002.

    1. MyLessThanPrimeBeef

      Let’s see – it’s a monetary straitjacket that Grexit will remove.

      And this monetary straitjacket (causing an enormous amount of economic hardship) has been operational during the months when billions of euros have been stashed away. Is the money worth the suffering, suicides, deaths and lack of medical care during those months while he put to use his game theory expertise.

      We will see what sort of collateral Greek banks have been pledging. Creditors will claim ownership of those upon default. Those billions are not really gifts. Beware of bankers bearing gifts, as the saying goes. Who knows, maybe they own their parliament building now?

      1. Nathan Tankus

        not only that, but frankly what use are physical euros if they get blocked from the Euro payments system? It will be good for essentially smuggling food and running guns or drugs but not for running orderly and official supply chains. Like it or not (and i definitely don’t like it) whether the Greeks stay in the Euro or leave the Euro they will be very reliant on Troika cooperation to finance basic imports (whether by giving them a way to turn cash into settlement balances they can send across Europe or by extending credit/allowing foreign banks to extend credit that will be used to finance imports) and continue production on any level.

        1. vlade

          When you say “blocked from Euro payments system”, what do you mean? There’s no reason why Greek companies can’t have EUR accounts (with some banks, some even located in Greece), and use SWIFT to settle. Yes, access to SEPA is much cheaper, but that’s not the same as not being able to pay EUR electronically.

          Montenegro is eurized, there’s no reason why Greece couldn’t be partially eurized too.

          Of course having access to a system doesn’t mean you actually have anything to use it with, which is likely going to be the real problem for a while at least.

          1. which is worse - bankers or terrorists

            I’ve never really understood why Greek companies couldn’t keep operating with euro-dominated bank accounts in Germany or Switizerland. I run a business in the US operating from Asia and also in Europe, keep dollar-based accounts in the US, and it all works quite well really.

            My sense is the problem will be the breakdown of the supply chain…if my business banking is still based in Greece, I will have major issues getting commercial credit, and it will be difficult for the well capitalized business to switch out supplier relationships fast enough as some supplier collapse.

            1. vlade

              Yep, that’s a problem, but that’s due to the collapse of Greek banking system (i.e. not enough money), not because they would have been cut off from EUR payments scheme (i.e. not the ability to move money, which banks will still keep).

              And my feel (third to second hand) is that all the business that even remotely could, did move their business banking to non-Greek banks..

            2. Yves Smith Post author

              Capital controls have been imposed in Greece and from other countries against Greece. If a company already moved its transaction balances outside, to foreign banks, it can use those balances for a while. Assume we are dealing with a company that buys supplies outside Greece. Say it imports rice.

              It can use its balances outside Greece to buy more rice for shipment. But what happens when that money is exhausted?

              It sells its rice in Greece. It gets payments in cash (tell me how that works if it has intermediaries, like distributors, it has to pay….again in cash. But we’ll leave that out for now). It gets Euro in cash from its customers, say restaurants and retail stores.

              It has no bank to put that money in or even if it could, there is not much of a point, since it can’t write checks or make electronic transfers to get the money to ANYONE. That is what a “payments system” does. It moves money around, via check or wire transfer (or by letting you take cash out of your ATM in a different place than where you put it in).

              So tell me how the vendor gets more rice from outside Greece once he has used up his balances at banks outside Greece (even assuming he is willing to do that)? He has to get cash to the border and get it into a non-Greek bank across the border.

              1. which is worse - bankers or terrorists

                I suppose I was thinking about, say, hotels that take reservations and payments with a website and on a server hosted somewhere in the world and deposit it into a bank account somewhere else in the world. All of those somewheres in the world could potentially not be in Greece. That bank account filled with operating revenue (say it is in Germany or Switzerland) then pays non-Greek suppliers normally and moves money inside of Greece somehow to pay local suppliers and payroll….while this is the tough part, I am in a right now country with strict capital controls right now and they sure do love it when you move money in, although the problem is moving it out.

                I just didn’t see anything specific in the request for the capital controls that indicated restrictions on operating this way. If you could have businesses operaitng from Greece in countries with healthy banking systems, who needs a Greek banking system? It would be a bit like having a national airline…for “pride” reasons I guess.

                1. Yves Smith Post author

                  The system you describe is like an international payments system, But you need a functioning domestic payments system to connect to that. No payments system means you are dealing in cash.

                  1. vlade

                    True, but when I commented on that in one of earlier Nathan’s posts, he said (I can’t quote easily now) that domestic payment system is run by Greeks. So there should be no problem there.

                    1. Nathan Tankus

                      A) I never said the domestic payment system is run by Greeks.

                      B) having a domestic payment system doesn’t mean you can connect to international payments systems. you need access to target for that.

                2. Clive

                  One of Greece’s most pressing priorities is improving tax collection. By it’s very definition, transactions processed outside of a nation are not subject to the tax regime of a nation other than that of the country being used to host the transaction.

                  The tax receipt (to Greece, in this case) would only fall due if and when the company chose to repatriate the funds / profits. This sort of tax arbitrage is — rightly — vehemently criticised when done by companies such as Amazon who (until very very recently) processed all payments made in the UK through Luxemburg and thus deprived the UK Treasury of the VAT and tax on Amazon’s profits through corporation tax that would have otherwise been received.

                  Starbucks still operates a variation on this scheme but chooses — note the word, chooses — to pay what I can only describe as a charitable gift to the UK government through a self-declared notional profit. Why would any Greek company have the incentive not to do what many other companies do and just retain the extra revenue it has in the “offshore” bank account as additional profit ? It is only shame and the court of public opinion which has forced Amazon and Starbucks into rowing back on their tax avoidance (through non domiciled banking arrangements) here in the UK, how likely would that pressure be brought to bear in Greece ? Time, as Khan said to Captain Kirk, is a luxury Greece does not have.

                  Greece does not need inventive wheezes and work arounds. It instead desperately needs something akin to normality and that means a reasonably conventional banking system.

                  It has been said here before and it is worth repeating: well-meaning good wishes and attempts to be inventively helpful via ideas which people who don’t have to live in Greece and so don’t have to put up with their downsides suggestions that should be tried out by Greece simply lull observers into a false sense of empowerment. We end up mistakenly thinking that there’s a clever solution just waiting to be implemented, if only we were clever enough to think of it. But so many clever solutions merely contain the next set of problems.

    2. Clive

      If is is a master stroke, I’d hate to see what dismal failure looked like. I don’t mean to be critical especially where obviously well intentioned comments come in from people who are clearly eager, and rightly so, to see someone, somewhere offer an alternative to oppression by neoliberal ideology and big finance.

      But first and foremost any alternative to technocratic government such as, say, PASOCK, needs to provide good governance. SYRIZA has instead offered something akin to Whacky Races. This is hindering the cause, not helping.

      1. Norb

        Exactly represents my feelings. The effort needed to battle the neoliberal machine is exhausting. Once again, all the support extended to SYRIZA leadership fails achieve positive results. Excuses for failure must end.

  3. mikel

    i rarely post on internet forums but can somebody tell me what exactly is happening or will happen here?
    we know the basics-greece is bankrupt and survives on loans given by benevolent-humanitarian bankers from imf-ecb
    so which way it will devolve?will greece actually leave EU now or it will stay in eu?

  4. Robert dudek

    I dont think Greeks are quite as ignorant as you imply. They have been living this reality for a long time and I am quite sure they are fully aware that accepting the troika’s offer equals continued austerity – they don’t need to understand the details of the proposal. They also know what we know: that saying no means likely default and continued negotiation and the possible return of the Drachma and a lot of hardship ahead. Do you really think they can’t understand this?

    From a legalistic and technical point of view, this referendum may indeed be useless, but it is symbolically crucial. It represents a fork in the road – Greece can continue down this path and remain serfs of the core Eurozone countries, or it can take a step into the unknown.

    1. Yves Smith Post author

      Huh? With all due respect, the fact that you actually are not making make sense of the proposal, when you’ve presumably been following our detail-oriented posts here, suggests the reverse. You aren’t even digesting where things stand after we laid it out.!

      You write: ” …saying no means likely default and continued negotiation.” As we wrote. a default is now inevitable. The bailout funds no longer are available after June 30. Greece will “default” (go into arrearage) with the IMF on June 30 and will default on the ECB on July 20. There is no vote on default or no default, as you incorrectly suggest. And there is therefore no more negotiation on the existing bailout terms as you seem to imply. Tsipras has already moved Greece over an event horizon and you are repeating the inaccurate meme that voters have any influence over this critical choice.

      Tsipras already pushed them into the unknown. The vote is thus no more than a poll as to whether they like it or not. If the vote is yes, Tsipras would probably have to leave office. But don’t repeat the canard that Greeks have any say in this choice. The ruling coalition made it and Tsipras’ referendum is three card monte designed to fool the rubes.

      1. Robert dudek

        A result of a yes vote would mean the end of the current government, new elections. In that event it is POSSIBLE that the troika will unilaterally extend the bailout, hoping for a more pliable Greek government.

        A no vote and it’s hard to see how grexit can be avoided, unless the troika softens its stance to where tsipras can accept.

        One thing is sure, the immediate future if Greece looks a lot different, yes versus no. Therefore it is very significant.

        Bureaucratic rules are made to be broken or bent, and there is still a lot of things that can happen. In Europe a default is only a default if the relevant parties agree it is.

        1. Yves Smith Post author

          No you really don’t get it.

          The bailout expires June 30. It’s done. It can’t be extended or renewed after that date. The only way for that to happen would be an agreement by each and every one of the 18 other members of the Eurozone, prior to June 30, to extend it prior to the expiration date.

          That means any deal for Greece is a new deal, from scratch. That is a ton harder to negotiate and will take way more time, particularly since it will involve some form of debt renegotiation/restructuring (this was always expected to happen in a separate set of negotiations, had the bailout that just imploded actually been completed). And you can be sure the creditors will still demand economic “reforms”.

          Further, 1/2 the money (€3.6 billion of the €7.2 billion) comes from the IMF. The IMF can’t lend to a country in arrears. So the IMF will not contribute to any new deal or at least not until its arrearage is paid off. That’s another complicating factor, particularly since the IMF really does not want to get one iota deeper in with Greece than it is already.

          1. which is worse - bankers or terrorists

            “The IMF can’t lend to a country in arrears”

            Just curious….haven’t they said they will lend to the Ukraine even if it defaults?

            If the Ukraine can be a special case, in theory, Greece also could be if the problems are determined to be sufficiently systemic….

            1. Clivec

              You have to ascertain to whom the arrears are due.

              The IMF define “lending into arrears” as “Fund lending to members after sovereign arrears to commercial banks had emerged, but before an agreement to restructure such debts had been reached”: IMF: IMF policy on lending into arrears to private creditors, June 1999, preface. Back

              The arrears, in the case of Ukraine were not due to the IMF but due to private holders of Ukraine sovereign debt. Which isn’t the same thing of course as being in arrears to the IMF.

              The IMF is still showing Ukraine as being current on its debt to the IMF:

              It is a symptom of how bad a mess Greece has gotten itself into that it risks joining the countries on the list of those in arrearage.

          2. vlade

            Yves, I still believe that subject to parliamentary approval, the current deal could be extended on the last conditions given by the creditors. That would take a week or two, but would be doable. There’s no physical stuff that will happen on midnight June 30, no systems get switched off that would need long and costly restart, no launch window is missed etc. etc.

            The only reason why that wouldn’t work is that EU really really wants Greece out. It’s possible, but with a Yes vote that would become obvious and have its own costs.

            So what I expect is that EU will quietly wait for a week, with ECB making some noises to stabilise markets, and if a Yes vote comes in, will pretend that they will do Greece a huge favour in ignoring the deadline (and re-voting it in a few parliaments as necessary, but should make it before July 20).

            If No vote comes in, ELA will be gone shortly after that hits headlines.

            1. Yves Smith Post author

              No, the IMF portion is gone as of the arrearage. That’s half the total.

              And once Greece goes into default, all the parameters change. The country is guaranteed to go into an economic tailspin by virtue of the bank holiday alone, which is certain to last at least till July 5 and probably longer. As I am about to discuss in a separate post assuming I can get out of dealing with these comments, everything, and I mean everything, is reset. All the primary surplus numbers need to be rethought, just for starters. And the creditors will need to restructure the debt, something which was not on the table earlier. That means they need to decide what conditions (“reforms”) to attach to that.

            1. MaroonBulldog

              Jay, here, and gemini133, next below at this time: already answered by Clivec at 7:39am, above.

              Ukraine is not in arrears “to the IMF”. IMF’s legal constraint is against lending to countries in arrears “to the IMF”.

              Their lawyers and accountants are not as demented as you may think they are.

          3. gemini33

            “The IMF can’t lend to a country in arrears.”

            The IMF also cannot lend to a country that
            – has a civil war
            – has disputed territory

            Ukraine has both and guess what? IMF lent to them. They just fudged some facts, made up some nonsense. Just like they fudged models and forecasts and other numbers on Greece.

            1. O-San

              Pasting Clivec’s comment from above:

              You have to ascertain to whom the arrears are due.

              The IMF define “lending into arrears” as “Fund lending to members after sovereign arrears to commercial banks had emerged, but before an agreement to restructure such debts had been reached”: IMF: IMF policy on lending into arrears to private creditors, June 1999, preface. Back

              The arrears, in the case of Ukraine were not due to the IMF but due to private holders of Ukraine sovereign debt. Which isn’t the same thing of course as being in arrears to the IMF.

              The IMF is still showing Ukraine as being current on its debt to the IMF:

              It is a symptom of how bad a mess Greece has gotten itself into that it risks joining the countries on the list of those in arrearage.

  5. vlade

    Something just occured to me, which would be about the only reasonable explanation to the referendum.
    What if Tsipras knows that Greece has to take whatever terms creditors throw at them, but doesn’t want to be associated with it? He could just throw his hands up and resign, triggering early elections, but it may be that he sees it as easier to do with a referendum voting “Yes”.

    Because if the referendum still goes on (i.e. Greece just doesn’t cave in regardless), and it votes Yes (which I’d say now is likely, especially once people get a taste of what Grexit would really mean), it would be very hard for EU not to come back to the negotiation table – of course, dealing with someone else then Tsipras. So expect new elections shortly, and depending on the proportion of Yes few if any parties will be able to run a “we want out of EUR” platform successfully.

    1. MyLessThanPrimeBeef

      In that case, he should have been upfront from the beginning, after he had been sworn into office.

      “I will try to negotiate the best deal possible to take home for you to vote on. I don’t want to be associated with it.”

      OK, maybe not the second sentence.

    2. Yves Smith Post author

      There is no coming back to the negotiating table. The bailout expires June 30. The €7.2 billion to prevent an IMF arrearage on June 30 and an ECB default on July 20 will have gone poof. It wold take some time (not much, but finance time runs faster that political time) to form a new government. Varoufakis proposed all sorts of creative ways to find other funds to write down Greek debt, and those would be the most obvious places to look to find ways to avert the ECB default on July 20, which is more consequential than the IMF arrearage. They were non-starters due to entrenched institutional interests already. The creditors have accepted and are acting on the assumption that both “defaults” happen, so it isn’t clear that they’d be highly motivated to forestall the ECB default. And even if they were to try to move quickly, they might not be able to beat the deadline (multi-party negotiations are fraught).

      This is from a few weeks ago at Bruegel, but it still gives a flavor of how hard it is to get all the parties on the same page:

      The negotiations over next week will be further complicated by the fact that the Greek proposal includes a section on the restructuring of its debt vis-à-vis the creditors. The details of the plan have been clarified in another leaked paper, which was published by the FT this morning. Many of the restructuring elements had been hinted at or heard before, during these months of negotiations: the plan would include (i) a buyback of the debt owed to the ECB with a ESM loan; (ii) IMF partial buyback with SMP profits; (iii) additional re profiling of the Greek Loan Facility; (iv) splitting EFSF loans in two and substitute half with a perpetuity.

      None of these seems to be politically acceptable at the moment: the IMF has previously appeared to be in favour of debt relief, provided it is done on the EU side of Greek debt; the GLF and EFSF terms have already been eased substantially and the perpetuity idea looks hardly digestible in Berlin; ECB president Mario Draghi said yesterday that the ECB expects timely and full repayment of the SMP; and political support for the ECB/ESM swap idea looks elusive. Given the postponement of the IMF payments, the hard deadline becomes the redemption of debt due to the ECB in July. But for the agreement to be signed off nationally and money to be disbursed on time, a deal should be reached sooner. Time is running out, and options are starting to look scarce, even to the most resourceful Ulysses.

      1. vlade

        I would not expect going back to negotiations – but I do not believe that EU governments could ignore Greece if it keels over in an official referendum. If someone surrenders unconditionally and you keep fighting them, it’s bad PR.

        Basically, in Yes vote, EU could get whatever it wants (given how little Greeks really understand what is in the document) including Tsipras out, and Tsipras could go relatively gracefully (bowing to the will of people while still maintaining he didn’t breach his read lines).

        Yes, the referendum would have make more sense way earlier, but then it would have been much more uncertain. 5 days of “no cash” messages at ATM is likely to move quite a few Greeks to vote “Yes”.

        So the cynic in me says that the referendum is a personal attempt by Tsipras to salvage his political career, at a massive cost to Greece.

        1. vlade

          Sorry I mislead in the earlier post when I wrote “come back to the negotiation table”. But then you can come to the negotiation table to sign the unconditional surrender the other party just offered :)

  6. Ken

    The vote ensures the Greek population faces the fact they can’t have their cake (no austerity) and eat it too (keep Euro).

    1. Robert dudek

      But please remember that this is true ONLY because the Eurozone criminals/troika insist on austerity.

      1. MyLessThanPrimeBeef

        Not just that.

        But also for earlier bailing out their banks, which seems to be a global phenomenon, and for many here, for example, we don’t have a choice to leave the dollarzone.

      2. Clive

        But those are the rules of the club ! It may not be palatable. It may offend our sensibilities. But that is what membership means.

        For those of you outside the UK, we spend seemingly pretty much our entire political bandwidth endlessly discussing membership of the EU, what rules it imposes, what the benefits are, if there are indeed any benefits, whether we’d be better being in or out of the EU and so on. And the UK isn’t even a member of the eurozone which imposes for greater constraints on national sovereignty.

        Greece had a choice in joining the euro. It continues to have a choice in remaining — or not remaining — in the eurozone. Neither choice is pain-free. SYRIZA’s Great Betrayal was to pretend there was some magic sparkle pony pain-free choice. There isn’t and there never was.

        Don’t misunderstand me here. I loath the ECB and its antidemocratic empire building. The IMF isn’t far behind but I think that in this instance, it hasn’t been entirely awful. But really, to blame the ECB, the EU, Germany or whoever is like you’ve been paying to go to an S&M dominatrix and utilising their services of your own volition and then complaining later about the sore butt.

        1. Robert Dudek

          I’m curious. When the Euro was created, did Germany stand up and say to everyone something
          Along these lines: just to let you know, fellow Euro nations, this project is to serve our export needs and if push comes to shove we will crush your economies to preserve our interests. Everybody ready to sign?

          My point being, these euro nations did not think th e project was about beating the weaker economies with a stick to bail out bankers. I’m fairly certain that scenario was not discussed.

          So the end result is that the Greek people consented to something very different, and that there has not been a de facto good faith effort from the Eurozone to provide the benefits that the Euro founders implicitly promised. In effort the Eurocrats are in de facto “breech of contract”.

          1. Clive

            Perhaps not quite in those words but the UK was very wary of the euro on the grounds that it encroached on “sovereignty” a word which you can read in many different ways. But I certainly read it to include other countries, including Germany, getting to call the shots on currency exchange rates, bank reserves which means in practice lending and sovereign debt issuance.

            While the subtleties and technicalities of the underlying treaty terms may not have been completely understood by (in this case) a fairly large proportion of British people, longstanding mistrust of Germany (along too with French motivations) led to UK not joining the euro. The behaviour of the real powers behind the eurozone towards Greece demonstrate that wariness was entirely justified.

            The same information which was available to people in the UK was available to the people in Greece.

            Even now many Greeks continue to believe that membership if he euro is better than any alternative — including the SYRIZA government.

            1. Robert Dudek

              Yes, if any blame can be laid for this crisis in Greece it is their seemingly steadfast belief in the Euro project.

              It is baffling to me that such a keen thinker as Varoufakis still defends European integration. He would be right, if the EU were run by level-headed compassionate people, and not a bunch of sociopaths.

              1. Tsigantes

                Greeks don’t “believe in the euro” [not!], but they believe the alternative wiII be worse. EspeciaIIy now when there are so many in desperate need.

                Moreover the treatment of the Iast few years Ieads them to assume that EU would extend further punishment, not managed exit.

          2. Foy

            Joe Public may not have understood the implications but I reckon the technocrats in the periphery countries knew what the implications were of the sovereign rights they were giving up. It would be interesting to go back and see who knew what. But I think the periphery’s eyes glazed over and their mouths started drooling when they saw the lower Eurozone interest rates and they simply choose to ignore the risks that were in the treaty documents in front of them.

            There were people way back when saying the current Greek situation would be the end result one day for some countries in the Eurozone when a serious recession hit, MMT adherents being some of those. It seems one of the creators of the Euro, Professor Mundell, didn’t make any bones about what his objectives were…and it’s now playing out exactly as he wanted and expected. (someone posted this link the other day)


            When the Euro system is now working exactly as envisaged ie forced privatisation, lower wages, and deregulation in target country, why would they negotiate something different when it all comes to fruition and give all that up? Hardball and take no prisoners has been their intention since the day dot and it’s been confirmed ever step of the way. That is the mind of the 1%. Perhaps a better question to ask is if or when do they over play their hand… they may have already done so but they appear happy with that risk at the moment…

            1. Foy

              And the Euro does have the inherent flaw in that it cannot recycle internal trade deficits and surpluses (unlike say the USD or AUD) but that is by Professor Mundell’s design, not by chance, a feature not a bug that allows their objectives to be met… similar to when Keynes’ Bancor got rejected by the USA because they were in trade surplus and didnt want to be compelled to recycle surpluses…neither did Germany with the Euro as they were a trade surplus country…

    2. GRP

      Greeks keep the Euro simply by choosing to leave their money in the banking system. Sovereign debt default does not mean being forced to leave the euro.

      Greeks precipitate a crisis by preparing for it. Their draining the liquidity out of the Greek banking system is exactly what is giving ammunition to the ECB. If they behaved as if nothing were going to happen to their euros in the banks, nothing will happen.

      Greek banks have no exposure to long term Greek government debt and hence are unaffected by a debt default.

      1. Yves Smith Post author

        The Greek banking system is toast. If Greece is to recapitalize its banks, it will need to issue drachma That is a de facto Eurozone exit.

        The only legal analyses that exist (there are very few) all say that a Eurzone exit means an EU exit. Varoufakis’ pre-Finance Minister economic commentary says he reads the situation the same way.

        1. GRP

          Greece banks have a liquidty problem, not a solvency problem requiring recapitalisation. The liquidity problem itself is caused by the panic that was induced by the rumours that sovereign debt default means Greece exiting the euro. In other words, if Greeks didn’t try to insulate themselves from a scenario where they couldn’t access their euros in the Greek banks by turning them into cash or moving them to accounts in the banks of other countries, that very need would never have arisen. But that is water under the bridge.

          It is normally the responsibility of the Central Bank to provide unlimited liquidity to any solvent bank. But in the bizarre 3-tiered nature of the Euro the ECB has only limited responsibility to provide liquidity to any National Central Bank, making a mockery of the monetary union. Yanis Varoufakis is challenging that in the ECJ, but I doubt there will be any verdict in favour of Greece and quickly enough to solve Greece’s liquidity problems.

          So yes, Greek banking system remains illiquid meaning no cash withdrawals or transfers out of Greece, unless Tsipras has successfully negotiated with some entity which has the capability to infuse a large amount of liquidity into the Greek banking system until such time as Greeks are convined enough the rumour is not true and return the liquidity back into the Greek banking system by bringing back deposits from foreign banks and redepositing the cash into the banks. About the only entities he could probably interest into doing that are Russia and China. But even if that doesn’t happen, Greek banks can still operate with all transactions being limited to electronic and cheque transactions within Greece, transactions for which the ECB liquidity is not needed.

          Another problem Greece has, to which no solution exists with its EZ membership, is inflow/outflow gap. The excess of euro outflows over euro inflows has so far been financed by government debt to foreign entities and “bail out” loans. Since neither of these is an option any longer, any such gap will have to filled by private debt fo foreign entities and capital inflows for investment in Greece. If they too are not forthcoming, Greece will again hit the liquidity supply limit soon

          So yes, Greece will have to exit the euro, but not because of a debt default by the Greek government, but because there is no way for them run continuous trade deficits in a supposed monetary union with limited liquidity support from the Central Bank to the country’s banks.

          As for the legal way, you got it reversed. Eurozone exit is possible only with an EU exit.

  7. Swedish Lex

    Perhaps I am missing something big, but to me the referendum is not a sham. Clearly, it is pure politics. I would not be surprised if the idea is that with a no vote, Tsipras can go back to the Troika and say “the Greek people and its Government say no”. After which the Troika will have to pull the trigger.

    Democracy vs. Troika state terrorism.

    How would a fully competent Greek Government have negotiated? What would the perfect Greek game plan have looked like? What would a winning strategy have been? With the crazy Troika on the other side of the table.

    1. MyLessThanPrimeBeef

      Maybe something like this.

      Tsipras upon taking office to the creditors: I will get the best deal from you and take it back for my people to vote.

      Creditors: Why should we go along with that? You check with the people of Greece first.

      Tsipras to the Greek people: You just elected me to negotiate a deal for you that will end austerity, knowing also your desire to stay in the eurozone. I will not do a deal that does not include both objectives. But, how should I put it, um, if it’s not possible, yes, yes, I promised – perhaps implicitly – it was possible, but, but if it should not be possible, then, we are back to square one, back to before I was elected, and I am finally going to tell you something I should have said before, that you have to decide yourselves which is more dear to you.

      1. Swedish Lex

        Syriza promised the impossible; stay in euro + end austerity. To make any sense, the promise implies that the Troika would have to change philosophy (from insane to sane) and, probably, write off debt.

        Tsipras has spent the past months – more or less (in)competently – to make the Troika change its mind. The collective incompetence of the Troika by far exceeds that of Greece.

        Tsipras can now, after several monhts, say; “we did our best and this is how little we got, pretty much nil, but it is the last “offer” of the Troika, you decide”.

        People speaks.

        If yes, Tsipras may resign since he is advocating a no.

        If no, the Troika will have to kill Greece and be remembered by history as some of the worst leaders of all time. Quite an achievement.

    2. Canigou

      Those who criticize Tsipras for delaying a referendum probably would have criticized him just as much (and with more reason) if he had scheduled a referendum months ago. The argument then would have been that he is jumping the gun and harming the ongoing negotiations, and that a referendum would put be a bad faith ploy to stall, and to pressure the EU.

      And for those who criticize the wording of Tsipras’s referendum, how do you believe the referendum should be worded? (assuming there is to be a referendum)

      1. Yves Smith Post author

        This is simply not true.

        Both Wolfgang Schabule and European Parliament president Martin Schultz recommended a referendum on May 11:

        Moreover, Tsipras repeatedly said he might hold a referendum, as an apparent threat. I have never seen an indication that any European official ever discouraged him, and I’ve been follow this story intently throughout the negotiations. The onus is on you to provide evidence to support your claim.

    3. Yves Smith Post author


      Tsipras has pulled the trigger. The bailout expires June 30. There is nothing to negotiate as of July 5.

      Tsipras has made an arrearage at the IMF and a default at the ECB inevitable (well, there is very low odds possibility that a yes vote leads to a change in government and the creditors are both kindly enough and move quickly enough to cobble together a deal to avert an ECB default. Given that they’ve accepted a default (that was what the scrambling about ring-fencing over the last couple of days has been about), it’s not clear that they’d feel any sense of urgency about forestalling a loss they’ve recognized, particularly if some other party had to make it up, or it would just be optics (the ECB dipping into one pocket to put funds in another).

      1. Swedish Lex

        Personally, I believe that it is the Troika that has pulled the trigger or, if you prefer, has sucked Greece dry on blood over several years.

        I would be surprised if history will not crush the Troika for Greece, but also for letting the European integration over the past 60 years disintegrate.

        1. Yves Smith Post author

          The failure of the project was inevitable given that Germany wants the impossible: continuing to run large trade surpluses, not being willing to finance its trade partners, and refusing to move towards a more federal structure (with more federal spending, which could help finance trade deficit economies), since the latter would weaken German influence.

          The fact that it is seven years after the crisis and Greece is hanging in the breeze and the Eurozone has a central bank but no Eurozone deposit guarantees are symptoms of how screwed up this project is. It was left on too many important variables in a half-pregnant position. Greece has had the vast misfortune to be the canary in the coal mine.

    4. Newtownian

      Dear Yves,

      Like Swedish Lex, I’m still a bit puzzled why you are focusing on the flaws in Syriza compared to the Troika, past Greek government regimes, banking sharks and whole crazy pre 2008 bubble economy which also seems to have led (inevitably) to the present impass.

      True Syriza seems to be acting now in bad faith and I understand in theory why default is inevitable (though in 2008 the US and EU seemed to tear up their moral hazard rule book when their whole systems were threatened which does suggest politicians can change the game rules if they so desire….and quickly).

      But the Troika seems to always have been always also acting in bad faith (or are just simply incompetent) given their past predictions of rapid Greek recovery following a short sharp shock and failure to really resolve the problems. You’ve noted this in the past but for some reason it seems currently absent?

      My personal memories are that some years back when it looked Greece might default all parties (Syriza included) just kicked the can down the road. So the present impasse arising from the Troika’s logic always seemed to be inevitable if not the exact timing. Were they simply stalling for time to shore up their own risks? Which is now done – or so they think?

      Rather than me rant on it would be good if you (or someone else) might address the counter arguments e.g. such as those that Steve Keen has just put up which go to the referendum thing which does seem to frame the economists v. democracy problem.

      I’m not I emphasize trying to take sides here but just trying to understand the pros and cons of the crisis better – if only because it seems like it could trigger or contribute to a second and worse 2008 in the near future due for example to the Euro strengthening leading to further austerity or turmoil as 200 billion in Greek debt semi-evaporates and this destabilised the rest of the PIIGS who I understood were running pretty close to the bone too.

      1. Spring Texan

        Me too, Yves is seeming in a very harsh mode to people in a pretty impossible situation. Moreover the wording of the referendum doesn’t seem any less understandable than other things I have voted in on my state constitution, and her harshness about that makes me not trust her as much as usual in her general harshness on this matter.

        1. Clive

          No. The wording on a referendum question is vitally important and clarity is essential. Consider the way in which the UK’s forthcoming EU “in-or-out” referendum question wording has been the subject of intense debate and scrutiny

          Every word of the 11 word question has been poured over by both sides of the debate. And that question is way, way shorter and easier to understand than the one presented to Greek voters.

          1. fosforos

            The Greek people, following everything in the press at least as thoroughly as ANYONE here, understand the referendum question perfectly clearly: they gave us an ultimatum (they called it the “last offer,” which is the literal definition of an ultimatum) with a deadline, and we now will vote on whether or not to accept it. If the Greeks do the courageous thing and vote no, the “rules” of the Eurozone and its parliaments will make no difference (as the truism goes, “rules are made to be broken”). Any government in an emergency can call its parliament back into session at a moment’s notice anywhere in the world, and no European country (except France, whose parliament is currently in session) is too big for all its MPs to get back to the capital in a couple of hours! One can dispute whether or not Syriza should be criticized for excessive forbearance. But now that they’ve done the “right” (ie., left) thing they’re entitled to full backing from anyone who understands the criminality of the Eurocracy.

            1. MaroonBulldog

              Except there must be an offer on the table in order for there to an acceptance of it, and has Yves has repeatedly made clear above, there will be no offer outstanding by July 5, so a “Yes” vote cannot operate as an acceptance because there will no longer be an offer to accept. The party that make as offer gets to control how long the other side has to accept it; the Greeks knew this when they requested an extension of time to accommodate a referendum, and they quickly also knew that request was rejected.

              A “Yes” vote can operate as an offer from Greece for the Troika to accept or reject, if you will, but by July 5, such an offer will make no sense, because the world will change on June 30 at midnight, and the offer will not address the facts that exist in the world after that event. The Troika then can reject an offer of the very same terms that the Troika itself previously offered, without embarrassment, and with no better reason than to say, “That was then, this is now.”

              You can try your case in the court of world public opinion all you want. It won’t embarrass the Troika or Greece’s 18 Euro partners. They will not be moved by appeals to compassion or natural justice. They are shameless.

              This really does amount to a referendum concerning what to do ten days ago. It’s political theater-of-the-absurd.

              1. Kalori

                and has Yves has repeatedly made clear above, there will be no offer outstanding by July 5, so a “Yes” vote cannot operate as an acceptance because there will no longer be an offer to accept. …the Greeks knew this when they requested an extension of time to accommodate a referendum, and they quickly also knew that request was rejected.

                You do realize that the request for time to accommodate a referendum was rejected precisely in order to try and stop Syriza calling the referendum. In addition, the last offer/ultimatum/take it or leave deal was “offered” at this very late stage also in order to leave no room for Syriza to hold a referendum on it – so who exactly is being disingenuous. “Sign the deal and break every value you were voted in on to uphold” – the media frenzy will do the rest to destroy Syriza. Headlines: “Syriza breaks every value they were elected on, signs on for more austerity – Troika wins” would be plastered across the world.

                In an exceptionally rare display of openness not found in these high stakes politics, Yannis Varoufakis has blogged exactly why they rejected the deal and called the referendum:


                I share some of Newtownians sentiment above. As a long term reader of this blog, I find it curious and a little disconcerting that Yves, usually weighing all sides of the debate is now coming down hard on Syriza solely based on the “There is no deal to hold a referendum on come June 30 so it is sham/disingenuous of them” while not giving voice either to the concerns raised by Yannis in his exceptional blog post, or the obvious concerns I have just presented regarding the timing of the ultimatum and the rejection of the extension in order to try and rule out a referendum for Greeks and deny them the “ability to be able to vote in the most important decisions that affect their lives.” (see link).

    5. tegnost

      speculating here but they could have called the vote last week when yves was pointing out deadlines would be missed, they could have had the vote on the 29th say, and forced the negotiations to conclude on the 30th…but no that wouldn’t work because 18 country approval so probably 2 weeks ago was drop dead day, i recall it being clearly pointed out here, and sadly this was tspiris’ last chance to see democracy in action, let the voters decide, wash his hands and go to the negotiating table with the result. Now it seems we’re lost in contract law

      1. Newtownian

        True, but that would have also been extremely provocative to the Troika and just as much a matter of brinkmanship than they are currently being accused of. The timing in this seems crucial but I cant see any clear timing in fact in the last 6 months.

        Another reason for the last minute delay would have been for the Syriza to gain knowledge as they were not a party of mates like the older ones were, and hence did not know their opposition personally or who they were negotiating with or what subtle messages and innuendos were in play. This is simply a result of them being newcomers on the block.

        And of course there are undercurrents and as yet unknown or at best speculative agendas (like that Stiglitz mentioned this morning in the Guardian that this is in effect an attempt to crush traditional democracy). Also a delay in precipitating the crisis will have given Greeks more time to prepare for the endgame of this match.

        Also they needed to see the books to fully understand Greece’s mess and logic of their different very limited options.

        Finally they are a grab bag coalition where a lot of different groups need consulting.

        Now Syriza know as much as they will ever know and have apparently decided Europe will not budge from its extreme position. So they may as well play the democracy card in what appears as much to be about politics even though its cast in a sham cloak of economic responsibility.

        I used to think UKIP were idiots and the EU was an unexceptionable good idea. I still think this in principle but not in its current relationship format and even the former twits arent completely misguided.

        But some good things will come out of this:
        – The bail out moneys if they keep going to the creditor banks will have to do this transparently and so the true process will be evident.
        – The forces governing economics/finance today are antidemocratic and at the least technocratic authoritarian which is a useful piece of knowledge /prism with which to view these guys.

    6. Nathan Tankus

      Would you call it democracy if next week we had a vote in the United States on whether the United States should enter World War 2? That is what this vote amounts to. the deal they’re supposed to be voting on expires today. An entire new deal would have to be negotiated- if there would be a negotiation. but in the mean time the banking system has all but shut down with the only use of target being inflows to settle tourist cash withdrawals. They don’t have months to sit around with the banking system off. This is an emotionally charged referendum where the people are supposed to make a decision that’s already been made. its cynical political cover for Tsipras of the worst kind.

  8. Fool

    Hey, looking for a bank sponsor (or really, really rich person) for underwriting a currency swap for synthetic drachma’s. Who’s in?

    1. which is worse - bankers or terrorists

      Drachmas will be pretty cheap, so I think my best friend’s 8 year old as some piggy bank money to fund it…

  9. pascal

    if my greek family is not mistaken, OXI means no, and NE means yes, which allows for a minor correction of this post :)

      1. pascal

        she s a bit overburdened by silly comment on our sides ;) I promised I ll never post anymore without quotes. tx all for the good work again !

      2. Lambert Strether

        Yes, I need to fall on my sword about that. In fact, it was sourced, but I didn’t source the source. We’re a very small crew! And this is why we like an active comment section, with people who can catch (very occasional) errors in fact.

  10. Ruben

    The question posed is fair. Tendentious would have been something like “Save Greece from the Troika’s shackles, Yes/Oxi”. You are over-estimating the complexity of the issues and under-estimating the intelligence of Greek voters. It is pretty clear to most voters, like the man in the ATM queue quoted in your post, know or guess to a good degree of approximation what the consequences and repercussions of a Yes/Oxi are, most likely better that you, since they have much more on-the-ground info and much more at stake.

    You should really re-consider your borderline vitriolic stance on Syriza’s motivations and strategy.

    1. Yves Smith Post author

      As terrible as the creditors are, Tsipras is handing them an opportunity to drive the neoliberal project in a more authoritarian direction than they never could have engineered themselves. He’s setting what is left of the European left back by at least ten years.

      Even if the Eurocrats are also badly damaged by this encounter, voters will be even more leery of electing leftist governments, to the advantage of pro-Eurozone/EU hardliners that we’ve informally called the ultras, and the anti-Eurozone right wing like the Front National. That is why I am so hard on him. He is doing damage on a broader basis than you are willing to recognize.

      1. wbgonne

        I have been very critical of how Tsipras and Syriza have handled themselves, albeit perhaps for different reasons than you. However, if this truly is the break-point (which yet remains to be seen), then the ramifications for the Eurpoean Left and the global neoliberal project will be determined by how Greece and the Greek people respond to default and Grexit. Triggering those events, or permitting them to occur, are not necessarily catastrophic for the Left or victories for neoliberalism. In fact, the opposite is just as likely. More to the point, the European Left’s biggest problem is that neoliberalism, like a cancer, has hijacked its globalism host, but the European Left remains blind to that critical fact. Just as the American Left continues to cast its lot — and waste itself — by futilely begging the Democratic Party for help, and just as the American Left will founder until it liberates itself from the Democratic Party, the European Left will flail until it rejects the neoliberal new world order. IMO, the neoliberal economy is a house of cards and Greek defiance, however inelegant and belated, may still show the emperor to have no clothes. And that is probably a necessary precondition for radical change at this historical moment.

        1. Spring Texan

          Just a word of admiration for your statement that “neoliberalism, like a cancer, has hijacked its globalism host”. Yes, the EU managed to appeal to all the right motives and then enforce all the wrong things. It’s been an absolute disaster and the left was totally suckered.

          1. wbgonne

            Thanks. It’s as if the European Left lives in a time-warp, where The Internationale still stands for worker solidarity, rather than the neoliberal cabal it has become.

            Corporatists of World, Unite!

            And they have.

        2. Lambert Strether

          “IMO, the neoliberal economy is a house of cards and Greek defiance, however inelegant and belated, may still show the emperor to have no clothes.”

          Could be. But so far as I can tell, that’s not what’s on the ballot. Whatever the advantages from the standpoint of left realpolitik, Greek voters aren’t required to adhere to it.

          1. wbgonne

            I was responding to Yves’ predicted ramifications for the European Left. What’s on the ballot is the trigger for those ramifications. No one is suggesting the Greek people are acting from deep Leftist impulses. They are reacting to eternal debt-slavery.

      2. stefanos

        Then your own interest is distinct from that of Greeks.

        Tsipras’s decision to resist is because he is Greek; it’s not his motivation to fight for the European left (whatever that means). Or else, he wouldn’t be in agreement with ANEL.

        If the European left ends up stronger after this, that’d be great; if not, then so be it.

        On the other hand, even if a majority of the Greek people end up voting YES, they’d still feel it as a moral compromise.

        Kudos to Swedish Lex for his deep understanding of the greek collective psyche.

    2. Lambert Strether

      Again, this is an awfully strange conception of how democracy works, and specifically how democracies make decisions in moments of crisis:

      most voters, like the man in the ATM queue quoted in your post, know or guess to a good degree of approximation

      First, it would sure be nice to have some evidence for your views; we provided it, you don’t. There seems to be an awful lot of handwaving about what the Greek people understand and don’t understand. Are you really saying that the two documents referred to in the ballot are even available to Greek voters?

      Second, if this were any other situation, holding an election where the government has not done everything in its power to make the question clear on the ballot, but the voters “know or guess to a good degree of approximation” would be seen for the ludicrous butchery of process that it is.

      We think that the Greek people are owed a clear question and full information about what they’re really voting on. You think a “good approximation” is OK. Who really has the interests of the Greek people at heart, here?

  11. GRP

    Tsipras was elected on a platform to negotiate less austerity within the Eurozone. He didn’t believe he succeeded. If he rejected the offer outright, he would be taking a decision to default and Greece faces the consequences. If he accepted it he would be violating his election promises. So he chose the only course open to him, let the people make the choice. Tsipras could have called a referendum earlier if the creditors made a final offer with no more room for negotiation earlier. However, the creditors kept claiming there is room for negotiation so he had no choice but to continue to negotiate until he believed there was no longer any time or room for negotiation before 30th June.

    True, it is very unlikely most common people understand the consequences of the vote. But that is where the experts come in. They can offer their advice on the likely consequences. People will weigh the advice offered and make the choice depending on whose advice they trust.

    The creditors proposed an extension of the bailout programme and on Friday before Tsipras announced the referendum, they must have had a plan to fulfill all the necessary steps should the Greek parliament vote to accept the offer, including vote in EZ parliaments that need to ratify it, by Tuesday 30th June. So they needed no extra planning to extend the bailout programme by whatever time was needed to accommodate the referendum in Greece. The decision by the creditors not to do it was an act of hubris, something that Tsipras has been fighting ever since his election.

    The vote is not about remaining in the euro or not, it only about accepting the deal and continuing to service the loans with new loans or rejecting the deal and defaulting. A sovereign debt default does not mean exiting the euro.

    The liquidity problems caused are a self-fulfilling prophesy caused by the dishonest nature of the euro-system itself and have no relation to any sovereign debt default. If Greeks didn’t start draining liquidity out of the Greek banking system, they wouldn’t notice that the government defaulted on its debts.

  12. 4D

    Wow, who would have thought having EUR 100 billion in private hands in a supposedly free banking system would have absolutely no value at all? Think you might have lost some perspective?

    If you’re really implying they’ll have to resort to imposing a total siege on Greece to extract revenge in the event of default then the Euro-project is even more stuffed than is already obvious.

    1. Nathan Tankus

      No worries I realized by the context that this was in response to me.

      who said anything about total siege? Target has already been closed RIGHT THIS MOMENT. This isn’t theory or monetary operations treatises by central bank practitioners, its fact. If someone in Athens wants to turn 50000 dollars in euro banknotes into an asset they can send electronically to a supplier, they have to physically travel outside of greece and deposit it into a bank or they have to pay someone to smuggle the money out and make the payment on their behalf (and lets not forget the real risk of anyone you pay to do this just walking away with the cash). This is incredibly costly and disruptive. Let alone the fact that those with cash aren’t always the ones that directly need to pay for food imports. To really finance imports with this pool of cash (let alone exports) on a nation wide level you’d need to convince average greeks to hand over their physical cash (good luck) and smuggle it out en mas and find a bank willing to accept a deposit (which is not a requirement of banks in other areas). You may think banks have been willing to launder money for real undesirables but do you really think there is a bank out there who wants to get into something as politically charged as Greek government cash when Target has been cut off? let alone the possiblity that many euronotes list the country of origin and a concentration of greek notes would raise suspicion.

      1. none

        There was something on slashdot yesterday saying Greek assets might start going into bitcoins. I haven’t checked what the bitcoin market has been doing but it would be interesting to know.

        1. Lambert Strether

          The bitcoin thing is, once again, an issue of organizational capacity. CNNMoney:

          There’s a single bitcoin ATM in all of Greece — at a bookstore in Athens. And the most common method — buying them in an online marketplace — requires sending a wire transfer from a bank. But banks in Greece are closed.

  13. 4D

    Grr, this was in reply to Nathan Tankus above. My work browser won’t reply in chain it seems.

  14. Alexandra Kyriacou

    Oh my God! You are so far off. “Ne” actually means YES. It is NOT another form of the negative. You really need to check something as basic as that before writing your blogs. It casts into doubt how many other things you have gotten wrong in your reporting.

    1. Yves Smith Post author

      As I indicated (and Lambert will confirm if need be when he is back on the grid, to show I am not shoving blame on him), he did a final read of the post and put that bit in after I had scheduled it to launch. His confusion resulted in the way Paul Mason wrote about Oxi versus Ne, which was sufficiently ambiguous so as to lead a non-speaker to assume that Oxi was a stronger form of Ne. I’ve put the exact section in myself, since I read the Paul Mason article and strongly suspect that’s where he got it from.

      This is a blog run by all of 1.3 people. We have typos way too often. Even though this was a mistake, it was hardly substantive. Indeed, the general point was accurate, even if Lambert muffed what “Ne” means” Oxi is a powerful version of “no”, apparently more forceful in a political context than “No” is in other languages.

      1. alex morfesis

        Oxi is the only word for no

        the BIG no (megalo oxi) is a mythical statement that came from the mouth of that other great Ithakan, Metaxas(sorry kefalonians, he was born in Ithaki)…he actually told the insolent Italian
        who woke him up at his private home…

        “Alors, c’est la guerre”

        but OXI is easier to put on a poster…

        October 28 is celebrated as a day almost as important as independance day

        It basically is equal to the 101st saying “NUTS” to the germans…

        although one has to agree with you…you can scream “nuts” all you want, but no one is invading anything except the servers holding those ones and zeros which describe your access to legal tender…saying one does not want to play by the rules set up by Mephistopheles is not going get you ringside seats for the fight…there is no way schauble goes to athens to secure a deal, and at this point, Syriza is playing the bad hand in the only way it seems to think it can…it might have been smarter to agree subject to the referendum and pass the legislation…and just say, sure we agree, just want to double check with the little people to make sure they are on board…

      2. dejavuagain

        “oxi” is pronounced “ohi” and should be written in english text as “ohi” so as to exercise safe Greek.

  15. blowncue

    Well, this is an interesting way to close out a fiscal year. I don’t see any last minute deal-too much incentive for both sides to go risk on. If I am EU, I’m walking away feeling emasculated from Greek negotiating tactics and thinking it would be easier to work with remaining finance ministers and attempt containment of contagion than set the stage for more negotiations with more debtors.

  16. 4D

    Nathan, it’s not about the banknotes, that’s a small portion of the money that’s gone.

    I’m simply pointing out that potentially, in the future, a good chunk of all that money can flow back to support Greece if there’s an alternate, devalued currency. A silver lining as I said.

    I worked in a bank in South Africa for many years, I know how payment systems work and I saw first hand the two-tier financial rand and all the things people used to get up to dodging it.

    That was to keep foreign money flowing out, except at a steep discount, but in Greece’s case a lot of that has happened already, not so say more won’t, but again, anybody who could afford to get money out probably has because they’ve had bloody months to do it.

    However, a Grexit is negotiated, and short of a eurowide witch hunt, that money has escaped the net and remains a hard (not necessarily physical) currency asset of many Greeks which they can be exchanged for drachmas. It may raise the eyebrow of upstanding European citizens, but where there’s a will there’s a way, something you would learn if you spent anytime in Africa, or such places where USD banknotes or prized.

    1. Yves Smith Post author

      Believe it or not, South Africa is way ahead of Greece on the payment systems front. The use of chip cards to pay workers, which was common in SA as of 1997, isn’t done in Greece. Greece is a very heavily cash based economy, at least in part due to the very high degree of tax evasion (doctors are paid in cash, for instance). So your frame of reference is going to mislead you.

  17. El Guapo

    It seems quite obvious that Tsipras and co have been, this entire time, operating under the demented notion that they would be able to negotiate better terms from their “partners”. They have now, finally, realized what was obvious to everyone else from the outset: that the Greek people are going to be made to eat shit with no compromise. So this vote is a last minute stunt to try and mitigate the domestic political consequences. In the end Syriza are a bunch of incompetents and the Troika are a bunch of psycopaths.

  18. Ben

    i believe it has nothing to do with money and all about nationalism from the start.
    I hope not and will be presently surprised if its not.
    Machiavelli would love how this will play out

  19. -jswift

    There is a lot of discussion of “the rules” of the bailout, the ECB etc. here, but we’ve seen many times that when powerful interests are at play, the rules are bent or broken, loopholes appear out of nowhere, and so on. Its easy enough to just look back to the reactions of the US fed/treasury in Sept. 2008, but its also clear in the European context, as debt limits have constantly been relaxed, and fines forgotten, both on France and Germany, in the past. In fact the rules Yves refers to are rules of a sub-game but not rules of the big game, and the main point of Syriza is that they want said powerful interests to agree to a change in rules. So they’re playing at a different level; they go along with the written rules to some extent, but on the main questions they challenge them in a context governed by unwritten rules — rules of nature if you like.

    Of course the problem for Syriza is that they don’t have enough power to make new rules themselves, as would France and Germany, so like everyone, they play by whatever rules they like. To the extent that Europe plays by shutting their eyes to basic flaws of their political-economics exposed in its application in Greece, Greece chooses to shut their eyes to German irritation with their reinterpreting the way to play.

    Of course the bailout was purposely structured in a way that made it very hard to modify, notably with the IMF and 18 parliaments having veto power, but this is just part of their game-playing strategy, it makes it look less likely that they can change course, but if necessary it could be done, with a few powerful enough players backing. In fact I think that Europe is more fluid than the US in this respect.

    Up till the referendum was announced i think both sides were playing a lot on psychology; there was a huge amount of spin placed on negotiating stances, and a lot of confusion and backtracking on just what had been offered or suggested (this reminds me of famous trial lawyers winning their cases not on the law, but by playing to public perception and the jury). I use the language of “games” here, but I don’t believe game-theory is so relevant. One principle from economic game-theory does seem to be relevant though, namely the fact that to play, you have to reveal hidden information, about what you’re willing to sacrifice, true intentions and so on. But here I think that the EU side has not come very far, because Greece is a side-game for them, with Spain or Italy waiting in the wings for a next round.

    The referendum has brought forward a more historical context to the discussion. Markets will expose a bit more about various actor’s attitudes now. The ECB’s QE will only serve to mask a bit these reactions, but they will have to come out eventually; ring fencing is just a delaying tactic.

  20. supermundane

    What would be the purpose of the Eurogroup addressing the Greek people directly, declaring that the agreement rejected by the Greek negotiators wasn’t the final agreement; a claim that the Greek government rejects?

    Information from the European Commission on the latest draft proposals in the context of negotiations with Greece.

    I’m not trying to raise the ire of anyone but I do wonder, is this the Eurogroup merely seeking to apportion blame (It wasn’t us. We didn’t create this calamity) or is the Eurogroup leaving a small window open for the Greek authorities (unlikely to be the Syriza coalition, which would undoubtedly satisfy the Troika) to return to the table if the Greek people vote ‘Yes’? I understand what Yves has written on the subject but what is the sense, if at all is this overture by Juncker? Clearly this is an attempt to influence a yes vote but to what ends if they’re not offering the Greek people a way ‘back from the brink’? If so, is Juncker speaking for all parties of the Troika in this instance?

    1. supermundane

      The link was from the European Commission. I was unable to edit the post to present it clearly as other posts had been made.

      1. Lambert Strether

        I fixed it. You needed to add the close tag (that’s why the orange all the way to the end — waiting for the close tag). Like so:

        <a href=””>Some text</a>

        The best way to think about HTML markup (the little tags with the angle brackets) is IMNSHO the old rule: “If you opened it, close it.”

  21. Nastavnik

    (sorry in advance, english is my 3rd language, and it is possible here or there I used an inappropriate term. I tried to be as precise and clear as possible, which explains the length of the post — not sure I managed though…)

    Hello Yves, newcomer here, I’ve been reading your analysis for the past few weeks, and I thank you for the work: it is refreshing to read something more in depth and thought out than what one can get in French TV/mainstream journals.
    While I agree with most of it, I do not understand the harder stance you seem to have taken vis-à-vis the Greek government recently. Specially regarding the issues of negotiation strategies and referendum.

    I mean, they might have been inappropriate (Greek officials’ demeanor), but that is not supposed to be a factor. Or is it? If the critic on the greek government is “they are a bunch of amateurs”, maybe this could explain that. But by the same token, that critic seems to make the assumption that the people facing them, are statesmen. And their reaction is , “oh how impolite they are”? That doesn’t impress me as the best attitude. And I’ve seen a lot of comments on that subject in the media. Letting that irritation (that may be justified, I don’t know, have never met Varoufakis…) be a party in the decision process seems very irresponsible and lacking a bit of gravitas or even common sense (in a Marie Antoinette’s way). It would not be the first time that ministers belonging to an elite (or seeing themselves as such) can’t bear the idea (even if perhaps unconscientiously) that these “people” be equals amidst them (specially the economics professor who wants to show them why their approach is flawed). So what if his critic of the past five years is sound? He does not belong here !

    On the subject of the default. Yes the due date to the IMF is tomorrow. That is for sure over and done with. Indeed, no doubt they will default. The question I think it rises, is why the different attitude on the part of the IMF towards Greece (usual protocol IIRC is that it only becomes “truly” official sometime after, when the board is notified. And that hasn’t been a problem for Ukraine either).
    On the European side, I think things are even more in a grey area. When was the last time EU played by its own rules in a strict fashion, and not interpreting them and stretching them in a fashion that could make them fit any situation they need? After all, it seems to me no country in the Eurozone respect the Maastricht treaty conditions anymore (public debt below the 60% of GDP mark), and most didn’t when euro was introduced. What I mean to say is this: they can do most of what they elect to do, and call it something else, in order to keep the appearance of “institutional legality”. So they could have waited,, especially the ECB, a few days. I think the fact they chose not too, does say something about their agenda, or at least should raise some questions.

    The same is true on the subject of the referendum question itself. I am not arguing on the way it was handled/announced, but on its substance. The attitude of the eurogroup seems to be that the proposed deal “expires” on june the 30th. That makes no sense. It only expires if they want it too. This is a purely political decision on their part. Greece will be in default with the IMF, but that has no bearing on the European demands (proposition is a bit too neutral considering how the talks seem to be going), unless the eurogroup decide to link both issues. If there is a yes in Greece, and the government (whatever it may be) is willing to sign that former deal, what reason would the eurogroup have to refuse or renege on it except out of spite? And if that is their attitude, then I think they carry most of the responsibility with what will follow up (I think they already do anyway). Because as I see the problem, if it was acceptable then, it still can be a week later (since they were planning for the next years, not the next couple of days).

    And, as a side note, I still do not see how this leads to grexit, except if Greece demands it (I think the absurd rules of the EU still require unanimity for any major change). Although I admit, I think there is no issue for them within the euro, in the present functioning frame of the EU, and their only hope is indeed to get back control of the monetary policy. The economic measures that are demanded by Europe are eerily reminiscent what I saw in south America for 20 years. It did not work there. It did not work for Greece for the past five years. Even the IMF and the world bank admitted it didn’t work back then. Anyone can see it has not been working for Greece for the past years. Why should they take the responsibility of accepting that? It does not work, and will only postpone the situation for 5 months. So, the referendum (beyond all the political face-saving and/or responsibility shifting issues) is justified in my view: they think that economic plan is rubbish (which it is), and will say so to the people, and the people will then decide if they accept that, and the government will then abide by that decision. I don’t think that qualifies as a sham. A sham is, for me, what happened in France: a referendum on the Lisbon treaty, a No result, and while clearly the commission and other European partners were looking the other way, the government forced a new vote on parliament this time going against the referendum result, to ratify the treaty. Back then there was no reaction on how “now the deal is off the table”. I know it is not the same, what I mean to say, is they have a choice to make, and the fact that they remain so rigid does say something either on their agenda, or on their myopic vision of the economy (if it is not of their pure incompetence).

    In the end my interrogation is , since Europe has been known to be so flexible when it wants, what’s the point of the rigidity it shows this time ? It has been flexible to the point of ignoring referendum votes, and making people vote again because the first answer wasn’t the one expected. In both cases, it waited a bit, and then moved on as if nothing happened.

    On the economic situation, how treating this as a liquidity problem and not a solvency problem will ever help find a solution? That must raise the question of why they adopt that approach. Putting aside the (very real possibility) that they do not understand anything about economics (beyond the neo-lib mantra), if they are competent, they know what is going on. Then why choose not to address that? I think that is the crux of the issue. I can only remember Brazilian debt crisis in the early 80’s (I was a child back then, but I did study it since). There too it was a solvency not liquidity problem that could not be acknowledged (citybank for instance was overly exposed to a default). And in the end, the kicking of the can for the next 20 years was hugely destructive to the economy and society. Wouldn’t it have been better to accept what was going on in the first place, eventually support most exposed banks, and face the music and dance ? Than this pathetic situation that was created and lasted 20 years ?! And brazil had a least a partial control over monetary policy (although all it meant is that central bank had its base interest rate at over 15% for a very long time (in real terms, and I mean years). Greece does not even have that.
    In the end, if you see your doctor mistaking your illness for years and years, it is only reasonable that at some time you resist it. Most European countries seem to have a religious approach to the problem (they are lazy, they don’t pay, they are sinners and need to repent) that is hardly appropriate, and is wrong anyways, as the greek are none of the above. I know of no people as a whole who is. Nor have I ever found a case were speaking in such broad and despising terms has ever helped (or even been true).

    Well, apparently is more of a reaction than a question, but indeed my feeling was you were being harder on the greeks than on the eurogroup hypocrisy. Then what about those issues above? And what matters most, the a correct analysis of a given problem (of great depression proportions for the greeks) or wearing a necktie in meetings and speaking in half-truths with the sole purpose of protecting the other European banks (and I mean since 2010).

    One last time: these are political matters. With we were dealing with physics, then there are absolutes: if a satellite gets below a certain speed in its orbit, it will fall down at a given moment, a very precise one, and nothing can be done about it. Same for boiling water. Here however we talk about politics and economics, and neither has ever deserved the title of science (in the most strict sense, although most economists crave for that recognition). Therefore thigs are flexible, and in the end, the power “de jure” is with the political institutions. They can do almost whatever they want, if they decide to do so. As Germany proved when integrating the RDA and exchanging its “marks” for deutschmarks, on a 1 for 1 basis (that exchange rate only existed in the fancy imaginary realm of the politicians that made the choice. Where were then the economic rules that are so rigid now?).

    That makes for a long first post…

  22. GRP

    Wonder if Tsipras still has an ace up his sleeve. If Tsipras in his talks with Vladimir Vladimirovich Putin in Russia got an offer of helping Greece with its liquidity problems, by moving Russian euro currency holdings in other EZ banks to Greek banks after the default has occurred.

    If true, and the amounts are large enough, this would immediately end Greek banks’ liquidity problems even if the ECB rolls back the ELA. Once Greeks understand the country is in sovereign default, but not only are their deposits safe, but no capital controls in effect, they will move their holdings back into the Greek banking system.

    Unlike ordinary Greeks, Russia can be expected to understand the euro system and realise their deposits in Greek banks are safe even if the Greek government is in a sovereign default.

  23. samhill

    Either way let’s hope for a big spread on the vote. Seems to me 49/51 either way on such a big issue will only add to the strife.

  24. Unorthodoxmarxist

    Syriza’s pickle is both a product of the EU and its own design. Syriza itself is a coalition of factions, the largest of which is a Eurocommunist grouping to which Tsipras belongs. The problem with this is that Eurocommunists believed, just like traditional social democrats before them, that radical change could occur through following the proper procedures in bourgeois rule-of-law and by winning parliamentary elections alone. Tsipras’ illusion was thus that he could deliver on what was a very modest – not revolutionary – platform of anti-austerity measures to a Greek public that wanted the benefits of European Union membership without the problems involved with the eurozone, and to implement a left-social democratic style recovery.

    This was always a complete fantasy and Syriza’s own Left Platform, made up of more traditional Marxists and historical materialists, pointed this out. Of course a Syriza preaching revolution or at least the likelihood of Grexit was unlikely to win a parliamentary majority during the winter elections, but at least it would have told the truth. The Syriza majority was elected to end the suffering while maintaining Greece in the straitjacket that caused the suffering. This was impossible, and more honest radicals pointed to Lenin’s position at Brest-Litovsk in 1917: be honest about the need to capitulate to the Germans in order to gain breathing room, or accept the consequences and be honest immediately with the working class you supposedly represent. Syriza’s inability to do so will cause tremendous harm to burgeoning political class consciousness and mobilization in Greece, though it may further radicalize the left in other countries who see no deal may be made with Germany and the Troika.

    Really a painful Grexit or austerity were always the only options, but Tsipras either pretended they weren’t or lied about it. If Syriza falls it may be time for the Left Platform to take over the party, or split and build its own, which would be a positive development. It would be nice, though tragic for the Greek people, if Syriza births a truly revolutionary mass party whose goal is radical system change and democratic control over the economy – the first true European radical socialist/communist party in many years.

    On the other side I have seen many puzzled by the Greeks who don’t like the austerity measures implemented by the Troika but don’t want to leave the EU. It’s simple: there is a huge petty-bourgeois group inside every EU country, especially Greece, that enjoys the ability to travel and work freely across Europe due to European membership. Plus there is the ideological project of a united Europe that many subscribe to and believe the EU represents. If the Greeks were presented with a way to remain within the EU but leave the eurozone – and this is not an option – I would bet this would prove a popular alternative. It isn’t one though, so the potential benefits of being in the EU club still outweigh ejection and return to the outside looking in on the EU project. It’s a sad poison pill that the neoliberal builders of the European Union had to know they were injecting in order to get the pro-capitalist, pro-banker policies and support from broad segments of the middle class.

    1. Tsigantes

      If the Greeks were presented with a way to remain within the EU but leave the eurozone – and this is not an option –

      There is no question of Greece Ieaving the EU.
      Greece wiII remain inside the EU even if she functionaIIy “exits” the eurozone by means of ECB quarantine.

      The EU has no intention of pushing Greece out of EU and aIso no power to execute it.
      There is an exit cIause in the treaties but this can only be activated by the member state wishing to Ieave and the process takes 2 years.

      There is no exit cIause from the eurozone so technicaIIy this is not at stake either.

      1. Yves Smith Post author

        Greece can be suspended from the EU, which means they are stuck with the obligations but not the benefits which is arguably worse than leaving, so there are other possibilities.

  25. gemini33

    The argument that Tsipras’ referendum is an absolutely self-serving act of a politician and nothing more? Isn’t it possible that Tsipras motive is more about preventing the Troika from engineering another technocratic coup as they did in 2011, the last time a Greek PM tried to hold a referendum on an EU bailout? Yves slams Tsipras for launching a “democracy theater” referendum when really he has “pre-decided” important things. But if Troika succeeds in ousting Syriza and a technocrat installed again, then there’s absolutely NO doubt the Greek people will get no say. Right? What am I missing here?

    The creditors’ aim is clear: to force Greeks to their knees. A week without access to a bank account and the prospect of Grexit may spur them to vote Yes in the referendum. Tsipras says that he would then sign up to the creditors’ demands. But the creditors insist that they could not trust the government to implement the terms of the agreement. Their real agenda, then, is forcing a change of government.

    The creditors have form. In November 2011, when the elected prime minister of Greece, a moderate social democrat, proposed a referendum on the EU-IMF loan program, eurozone authorities orchestrated his replacement by a more pliable, unelected technocrat. Whatever you think of Syriza and their leftist politics, another coup would be an affront to democracy.

    Long time reader here, very infrequent commenter except in spurts, but the analysis re: Syriza and the referendum here has me absolutely baffled, seems so hostile and out of character, it brought me out of my mostly lurking status,

    The weirdest thing is the sheer anger about the referendum and the statements about how the Greek people can’t possibly understand what they’re voting on. For Pete’s sake the whole world is talking about their situation and there’s no shortage of analysis, discussion, information. Plus they’ll be bombarded with even more information and propaganda in the coming week from “both sides”.

    For the record, I remain open to the analysis and opinions here and have really a ton of respect for the owner and writers for years now. I’m just baffled on the treatment of this issue at this point in time.

    1. Lambert Strether

      I’ll address one point. You write:

      the statements about how the Greek people can’t possibly understand what they’re voting on

      First, there’s reporting that says some Greek don’t, from two source. You disagree, which is fine, but I’m not sure why mere assertion outweighs even a feather’s weight of reporting. Let’s not mistake our own outrage for evidence, mkay?

      Second, the ballot is objectively unclear. The Telegraph (and recall the Telegraph has been consistently close to Syriza throughout:

      This is the question that will be put to Greeks in the referendum on Sunday. It has supposedly been translated into English:

      Quote Should the plan of agreement be accepted, which was submitted by the European Commission, the European Central Bank, and the International Monetary Fund in the Eurogroup of 25.06.2015 and comprises of two parts, which constitute their unified proposal? The first document is entitled ‘Reforms for the completion of the current program and beyond’ and the second ‘Preliminary debt sustainability analysis’.”

      No, we’re not sure either.

      By way of comparison, the question in the Scottish independence referendum in September was: “Should Scotland be an independent country?”

      Please explain to me why the Greek people do not deserve a referendum question as clear.

      A second example from Canada:

      Canada actually introduced an act of parliament to avoid exactly these kinds of questions being put to the public. After two long and convoluted referendum ballots on Quebec independence in 1980 and 1995, the “Clarity Act” stipulated that an independence referendum must be essentially: “Do you want independence, yes or no?”

      Please explain to me why the Greek people do not deserve a referendum question as clear as Canadians do.

      Finally, this is a weird operational definition of how democracy works:

      For Pete’s sake the whole world is talking about their situation and there’s no shortage of analysis, discussion, information. Plus they’ll be bombarded with even more information and propaganda in the coming week from “both sides”.

      So, it’s OK to produce a ballot that, by world standards, is totally unclear, because “the whole world is talking about their situation”? Apply that to any other situation, and you’ll see how ludicrous a statement that is.

      The Greek government owes a duty of care to its people. In the referendum, that duty should be expressed with a clear question, with any background information clearly explained. This ballot does neither.

  26. supermundane

    Isn’t it possible that Tsipras motive is more about preventing the Troika from engineering another technocratic coup as they did in 2011, the last time a Greek PM tried to hold a referendum on an EU bailout?

    You could be on to something there. The timing of the visit by key figures in New Democracy and To Potami to Brussels, just prior to Tsipras’ declaration of a referendum is curious.

  27. Demon Cat

    It looks like some parties are still calling for a solution which makes Greece stay with the euro

    Are the creditors actually in panic mode now?

  28. Argosy Jones

    The referendum may never happen. This is just Brinkmanship by Tsipras to get a better deal tomorrow, which will be followed by another confrontation in 6 months.

  29. Edward Qubain

    What I don’t understand in all of this is why Greeks are so determined to remain in the EU. What does Greece get out of this relationship? It seems to me Greece would have an easier time without this constraint.

    1. Yves Smith Post author

      The EU and Eurozone were designed to be roach motels. The Eurozone is irrevocable by treaty. You can in theory leave the EU by asking, and if they can’t negotiate a way out with you, it becomes effective in 24 months regardless. But if you leave the EU, presumably you leave the Eurozone too if you were a Eurozone member. In practice, it is very difficult to leave except at extremely high cost, which Greece may be about to demonstrate.

      1. John Yard

        Whatever you think about the Greeks , one thing is clear to the entire European population : they have gone to the people concerning a critical national issue, and have bound themselves in advance to the results.
        When all the he said/she said details are forgotten , this will be remembered.
        No matter what the EC Commission does, it cannot erase this from popular memory.
        This is not the last referendum .
        This is a real political achievement.

  30. Steve H.

    To this point, ‘June 30’ appears here fourteen times, twelve times in the comments.

    You are more patient than I would likely be.

  31. IsabelPS

    Is Stiglitz gone insane? Or anything goes?
    “In January, Greece’s citizens voted for a government committed to ending austerity. If the government were simply fulfilling its campaign promises, it would already have rejected the proposal. But it wanted to give Greeks a chance to weigh in on this issue, so critical for their country’s future wellbeing.”–stiglitz-2015-06#Y7lMJpDRxcKXr6wF.99

    1. Lambert Strether

      It would seem that if this were true, the Greeks would have been given that chance before one of the alternatives they were voting on will have expired by the time of the vote, and the decision would not have been announced at 1AM and tweeted to the negotiating team in Brussels. It would also seem reasonable for a clear question to have been posed.

  32. TheCatSaid

    The “YES” interests in the referendum are apparently well organized and have sprung into action, including representatives of major municipalities and other heavyweights:

    An initiative is gaining speed to establish a national committee to explain to citizens the catastrophic consequences of Greece’s exit from the euro zone and its return to the drachma. According to sources, eminent persons involved in the local governments, universities, research organizations and the creative community have been in intensive talks, aiming to reveal over the coming days and in all possible ways the need to keep Greece in the centre of Europe, and the fact that any other development would constitute an unprecedented national disaster.

    According to the same sources, Athens and Thessaloniki mayors George Kaminis and Yiannis Boutaris will play the main role in this initiative that will involve about 50 people. A 5-member coordinating committee will be formed and receive informal legal status under the law on referendums ( 4023/11) to enable the initiative to participate in TV broadcasts and any other election activities in the form of a representative of civil society. Many governors and mayors will actively support the initiative too, as made clear from yesterday’s statements by President of the Union of Greek Municipalities George Patoulis, who noted, “European Greece will win with the support of all local authorities.”

    and on the NO side a demonstration in Athens tonight is in preparation:

    1. Susan the other

      Sounds a bit like the Scottish referendum. Right up until the week before the vote the UK was pretending the Scots could leave if they wanted to – it was no big deal. And when it looked like they might actually succeed, the “opposition” suddenly woke up and campaigned like mad to defeat it.

  33. thom

    Whaddaya got against democracy, Yves? ESPECIALLY after the EuroTrash bullied and blackmailed Greece into NOT HAVING THE REFERENDUM SEVERAL YEARS AGO in the NATION which (cough, cough, cough) INVENTED DEMOCRACY???!!!

    It is disappointing, Yves, given the “I Support Occupy” (NOT!) banner corner ear, to see you join the EuroTrashTroika in bullying Greece and trashing Tsirpas. Perhaps you should be more offended at the *** NEGOTIATION THEATRE *** by the actors of the EuroTrashTroika who managed to change the fascist dictated terms to Greece NOT ONE, ahem, IOTA of *** authentic*** value — handing Tsirpas what

    **** PAUL KRUGMAN NO LESS *****

    said was a “reverse Corleone — an offer Tsirpas and Greece


    So why do you support the European banks and speculators WHO ARE THE REAL RECIPIENTS OF ***ANY*** GREECE BAILOUT as opposed to GREECE ITSELF???!!!

    WHY should the European banks and speculators get BAILED OUT OUT OF ANYTHING? BAILING OUT BANKS AND SPECULATORS IS *********** NOT ********** AUTHENTIC ADAM SMITH CAPITALISM! And it ain’t Occupy either.


    Reading this is like waking up in the morning and finding Castro in the refrigerator.

    Read more on the more and more common fascist capitalist state negotiating tactic in the so-called “Western Democracies” — more like Western Soviet Totalitarianisms or Western Napoleonic Democracies or Deutchland Uber Alles at last ? — at The Baffler:

    “The Meme Hustler: Tim O’Reilly’s crazy talk” by Evgenby Morozov in The Baffler No 22, 2013.–X7ra1ZaR87uJUhEz8yOqrxYLG7WQH7siF_AXwAFW-3hell7tD2jad8xWzCZkMVoB4wJHMh8i9ScN-mRT0I-OFby-o-g&_hsmi=19657898

    And maybe take in a Chris Hedges column or two at TruthDig or John Michael Greer at The Archruid Report?

    Sorry for the hysterics but you are coming TOTALLY out of RIGHT WING FIELD on this.

    1. Yves Smith Post author

      I gather you don’t like democracy despite your claims otherwise. And we are not tribal here and do not feel compelled to adhere to loyalty tests.

      We explained why what Tsipras is doing is a sham and he’s already made the decision which counts, which is to default. If he really cared about democracy, he would have scheduled the vote prior to the payment due date. I don’t understand why you find this so difficult to grasp.

  34. Susan the other

    Since I’m suffering from heat stupor I’m going to make this comment. The standard definition of money is in error (today’s posts). Love this analysis, but how would it apply to all the turmoil caused by debt in a world that stopped growing suddenly and without warning? If money isn’t value (clearly it is not intrinsically valuable) and if it is only demand (or the byproduct of demand) then how does causing a depression and then crushing a debtor, killing all demand in that country, serve the ability of the lenders to recoup their store of demand? Worthlessness that goes around comes around. Not only will killing the Greeks kill the EU and the EZ politically; it will undermine all big finance (as we know it) forever. And that will probably be a good thing. Because sovereign finance has a keener sense of demand than international finance (which seems to have no sense of it at all).

  35. ST

    Reuters confirms that Greece will default on the IMF payment tomorrow:

    About Tsipras negotiating in bad faith: why does it matter at this point? Was the opposing side – the troika – negotiating in good faith at any point? I’d say no, they were not.

    In final analysis Greece and the Eurozone is a political problem. On that front, I believe that Tsipras won.

    Today, we witnessed crocodile tears shed by Junker and Merkel about their unconditional love for Greece and the Greek people. Of course, and only after having been raked over the coals, over the weekend, by the Obama Administration about the handling of the Greek problem, and, only after Merkel being forced – also by the Obama Administration – to commit to a discussion about debt reduction. NYT yesterday was very explicit about the constructive suggestions made by the Obama Administration with respect to debt reduction.

    The media is now all over itself pointing the finger of blame at Merkel.

    So, who won the political fight?

    The worst Tsipras will be remembered for is negotiating in bad faith with the Banksters. If Greece votes “No” next Sunday, Tsipras will claim victory. He might not even be that far off.

    Merkel will be remembered for blowing up the Euro and the Eurozone community due to her austerian instransigence.

  36. Heliopause

    Not sure where to begin with this bizarre post, so here goes.

    “the referendum scheduled in Greece for next Sunday, July 5, is a cynical exercise in democracy theater.”

    Yet, oddly, the Institutional players all seem to be taking a keen interest in it.
    Why would they be interested in the outcome of cheap political theater? Why not just say, “this is meaningless political theater”?

    “the question being put to voters is incomprehensible to most and misleading on multiple levels.”

    I live in Washington State where we have a citizen initiative process. The ballot wording above is at least as comprehensible to me as anything I’ve ever seen on our state ballots, so I don’t know what your problem is. Or maybe your problem is…

    “Anglophone countries, by virtue of being overfinancialized, likely have a higher proportion of the country that has a passing familiarity with economic and budgetary terminology than the average person in Greece.”

    Now that’s a strange claim. Any evidence for it? As for the ballot wording not containing detailed explications of all the issues involved, well, yeah, that’s how it works. For that matter, no election ballot anywhere, whatever its purpose, contains that kind of information, for obvious reasons, so the observation is trivial.

    “But even that interpretation is unduly charitable. It assumes that Greek voters really were voting on the creditors’ proposal, no matter how over their head it is to assess it…From the perspective of Greek citizens, the vote is an exercise in deconstruction. It has whatever meaning they choose to attribute to it.”

    Sorry, I have no idea what all this means. The Greek people are rubes, yet performing academic critical analysis, or self-affirmation, or something.

    1. Yves Smith Post author

      Decontruction means that something means what you think it means. You can do deconstruction without knowing you are doing deconstruction, just like rappers often use iambic pentameter without knowing or caring that that’s how a poet would scan their lines.

      Have you been abroad much? The US has a ton more business and finance coverage than you find in countries that are not market dominated. We have more financing taking place in trading markets than anywhere else. Greece is a high end third world county on pretty much all metrics.

  37. Chimpanzoo

    What if the referendum goes ahead and YES wins it. Tsipras calls new elections. When will they happen and what on earth goes on in the meantime? And then what if SYRIZA wins that election?

  38. Danny

    Troika: Syriza, schmeeza, bring on Golden Dawn.

    More seriously, i can see this essentially leading to the dissolution of the Eurozone and perhaps the EU. Not today, but the next time a member state runs into financial difficultly, which doesn’t seem far fetched at the moment if the bond markets freak out and take out another country or two on the periphery.

  39. Donald

    The outrage here seems more like a temper tantrum– you complain about the wording of a referendum while also pointing out that it is just political theater.

    The villains here are the Eurocrats. There has never been in history an ideal set of leftist politicians with pure motives and competence who fought for their people, but by all means continue to focus your fury on the lesser villains and whine about how they have set the left back by ten years. At times like these if you focus all of your anger on the incompetent left than what good are you? I could read that in the NYT. Nearly everyone in the mainstream will be focusing on the incompetence of Syriza and siding with the bankers. Meanwhile Krugman seems to understand what you don’t–a lot of people out there don’t realize the viciousness of the Eurocrats and it needs to be said agai and again who the real villains are.

    Frankly, I think this is personal frustration– you imagine you could have done better. I doubt it.

    1. Yves Smith Post author

      No, I have no interest in political office. I’d rather have a root canal.

      Tsipras has misled his people and is going to deliver the neoliberalis a victory they could never have engineered on their own. Have you missed that all these months Podemos in Spain has avoided saying anything about Syriza? If they thought they were doing a good job, they’d invite comparisons. And where have the demonstrations been showing solidarity?

      Syriza is going to set what is left of the left in Europe by at least five, maybe ten years. That is why I am upset with them. I guaranteed by December at the very outside their fans in the US will be at best trying to make excuses for what will have happened to Syriza. See this for some perspective form someone who has lived in Greece:

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