Did the Media (and Greece) Miss a Meaningful Concession by the Creditors?

Greece and its lenders appear to be on an inexorable path to a Greek default unless Greece capitulates in the next few days. In a move meant to tell Greece that the onus was on them to offer more concessions, the IMF negotiating team left for Washington, as other senior European officials, such as Bundesbank chief Jens Weidmann and European Council president Donald Tusk issued warnings.

The gap between the two sides on the structural reform hot topics of pension and labor market reforms has seemed for some time too large to possibly be surmounted. Moreover, even though the creditors have clearly rejected debt renegotiation as part of the bailout, making it clear that they planned to address that only after a reform package was settled, Greece has continued to try to get it on the table, including it in its 47 page document submitted a week ago Monday, as well as providing a memo along with its response to the five-page document provided by the creditors last week.

This week, the media reported that European commission president Jean-Claude Juncker and Eurogroup chief Jeroen Dijsselbloem made an additional offer the week prior that Tsipras rejected, that of extending the bailout till March 2016 if the Greek government agreed now to certain structural reforms (press accounts varied as to how much Greece would have o concede to get the additional time; it was also not clear if this was a trial balloon or formally authorized).

Recall that after Tsipras received the creditor offer and met with Juncker and Dijsselbloem on Wednesday, he’s said he’d send a response by Thursday that would serve as a basis for another meeting to continue negotiations with Juncker on Friday. Tsipras instead cancelled the Friday meeting (and in keeping did not send a document) and went to Athens to give a speech to Parliament on Friday evening, in which he rejected the creditor offer with considerable vehemence.

I looked at both the Greek and creditor proposals last week and am embedding them below. The press did not discuss them much beyond flagging key points where the two sides remained at odds, for instance, on the remaining gap on the level of primary surplus and on the still large difference on pensions and labor market reforms; one of the more detailed accounts, at Bruegel, noted: “Pension reform: remains a red line for both sides….Labour market reforms: are probably the most red among the red lines at the moment.”

Consider this item on the first page of the creditor missive. It’s item 2, which one would think means the creditors wanted to make it prominent:

Screen shot 2015-06-12 at 5.44.11 AM

The creditors are proposing a social safety net and a minimum guaranteed income program, plus the hiring of 50,000 people for social works. Now a lot of pixels have been spilled on the Greece/creditor negotiations, far too many for me to stay on top of them all. Nevertheless I don’t recall seeing anyone take note of this section.

There’s no corresponding item in the Greek proposals, nothing even close. The Greek proposal, on pages 13-18, discusses “social security issues”. That’s what the media and the creditors have been calling pensions. The difference in nomenclature reflects how pensions have come to serve as an umbrella safety net in Greece. While other European economies have other forms of social welfare, like unemployment insurance, in Greece, pensions are the mainstay of social support. As the Economist pointed out in 2010 on Greek pensions:

Finally, as in many Mediterranean countries, all social spending was skewed towards pensions, essentially for vote-winning purposes. Things like unemployment benefits are pretty miserly in Greece, the real money has always gone to pensions, which have been used as a “substitute” for other welfare policies.

Now in fact there are enough underage people on pensions in Greece to make Germans see red. As reader IsabelPS pointed out, quoting Greek Reporter:

On Greek pensions, from December 2014 and the previous Labor Minister:

“In the public sector, 7.91% of pensioners retire between the ages of 26 and 50, 23.64% between 51 and 55, and 43.53% between 56 and 61. In IKA, 4.44% of pensioners retire between the ages of 26 and 50, 12.83% retire between 51 and 55, and 58.61% retire between 56 and 61. Meanwhile, in the so-called healthy funds, 91.6% of people retire before the national retirement age limit,” Vroutsis said.

So the seemingly high Greek pensions are due in part to an aged population, in part due to the fact that some of the spending on people under normal retirement age might fall under disability or unemployment insurance in countries with a more robust set of programs.

With that understanding, read the creditor offer that we flagged again:

Screen shot 2015-06-12 at 5.44.11 AM

I paarse the long second sentence, the one that begins, “They commit to launch a comprehensive Social Welfare Review” as saying: “You will get savings from current programs like family and disability benefits to round up 1/2% of GDP to fund a targeted welfare program that will include a Guaranteed Minimum Income scheme.” So far that does not sound all that interesting, since it is taking an bunch of current programs and using them to fund a bigger, simpler, and hopefully more equitable program. Not terrible, but it seems hardly important enough to feature in a short, high level document.

But this bit suggests there could be more to it: “which will serve as the basis for a redesign”. That seems to leave the door open for it to be funded more generously. Now mind you, the creditors have taken the view on part of the pension negotiations that Greece could preserve some of the benefits if they found a way to fund them. And regardless of what you make of that sentence, the social works program to hire 50,000 is above and beyond that.

Now this is all seems moot now, but was this a creditor attempt to find a path out of the Greece/lender impasse on pensions? As we’ve stressed, the pensions issue is such a hot button politically in creditor countries, due to the perception that they are generous. That means it’s impossible to get the needed Parliamentary approvals to unless they are reduced, particularly given what were seen as early retirement abuses. Were the creditors trying to give Syriza a channel for telling voters that the cuts in pensions would be offset by spending in new programs?

As we’ve said, the bigger problem was that the ruling coalition conceded on a key point early, that of maintaining primary surpluses, which are tantamount to austerity and agreeing to the painful target of 3.5% of GDP starting in 2018. Thus having conceded the point, they need to make the numbers at least appear to work. So even if that language was means as a channel to provide for programs to make up for what was lost on the pension side, Greece would still need to find a way to fund it within the stringent primary surplus targets.

A colleague with close contacts on the Greek side confirms that it’s worth questioning whether this idea was explored. But we seem to be well past that point, with both sides locked into a lose-lose strategy. But Greece is just about certain to suffer much more serious damage.

creditor May 2015 proposal

Greede May reform proposal

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  1. John Jones

    Αυτά είναι παραμύθια των συστημικών παπαγάλων. Η ηλικία συνταξιοδότησης στην Ελλάδα βρίσκεται στον ευρωπαϊκό μ.ο. Οι μόνοι που συνταξιοδοτούνται κάτω των 50 ετών είναι οι ένστολοι. Τα επίσημα στοιχεία τού υπουργείου λένε ότι κάτω των 50 ετών οι συνταξιούχοι γήρατος είναι 18,5 χιλ.

    A Greek reader can translate this better.
    But it essential says.

    These are tales of systemic parrots. The retirement age in Greece is the European average of The only people who retire under 50 are uniformed. The official data of the Ministry say that less than 50 years of old-age pensioners is 18.5 thousand.

    I would believe the Greek commenter in the article more than the article than Vroutsis the previous Labor Minister who was a member of the protectorate and lied to make excuses to push austerity measures.

    Meanwhile, in the so-called healthy funds, 91.6% of people retire before the national retirement age limit,” Vroutsis said.

    I cant believe that article is even been used. This is laughable.

    1. Yves Smith Post author

      Link? You’ve provided a quote with no source. This is a random assertion without any backup whatsoever.

      The New York Times says that average age of retirees was 61:

      As a consequence of decades of bargains struck between strong unions and weak governments, Greece has promised early retirement to about 700,000 employees, or 14 percent of its work force, giving it an average retirement age of 61, one of the lowest in Europe.


      You need to have a LOT of retirees under 65 to drive the average retirement age down that low.

      And the same report was in etkathimerini, and indicated the report was made to Parliament:

      Three in every four pensioners in Greece have managed to secure early retirement, inflicting a major blow to the sustainability of the country’s pension system.

      Data presented on Wednesday by Labor Minister Yiannis Vroutsis showed that about 75 percent of public sector and IKA pensioners have taken early retirement, benefiting from various legal provisions that allow them to stop working before the age of 61 years.

      “In the public sector 7.91 percent of pensioners retire between the ages of 26 and 50, 23.64 percent between 51 and 55, and 43.53 percent between 56 and 61,” Vroutsis told a parliamentary committee.

      “In the Social Security Foundation (IKA), 4.44 of pensioners retire between the ages of 26 and 50, 12.83 percent retire between 51 and 55, and 58.61 percent retire between 56 and 61. In the so-called healthy funds, 91.6 percent of people retire before the national age of retirement,” added Vroutsis.

      Responding to pressing questions by deputies in Parliament, Vroutsis said that the special regulations mentioned above would not be abolished on his watch. “We will not force families to reverse the plans they have made,” the minister said.


      1. John Jones

        I have replied but it didn’t go through.

        The quote is from a commenter at the bottom in the article you posted. If he is wrong his wrong and then I am wrong. But I don’t trust anything someone like Vroutsis would say. Or any of those papers.

        This is from the OECD if you haven’t seen it. You will understand it better than me. Is what Vroutsis says the same as what the OECD says?


        Greece is at about page 262.

        But none of this explains that Greeks contribute a lot of there wages to pensions percentage wise. Have many axillary pensions to contribute to. And still work after retirement or are supported by family. The pension in Greece is used by many to support the whole family and many families supplement their family members pensions with their wages. There is no such thing as a luxurious or better pension in Greece. Despite what is written anywhere. People in Greece don’t retire and that’s it. They have to do something to earn money or they don’t eat don’t get medicines and don’t pay rent and utilities. The pension is not enough compared to the cost of living.

        1. Lambert Strether

          “If the commenter is wrong, then I am wrong.” May I suggest that the next time you dump material into NC’s comment thread, you make some minimal effort to determine whether it is true or false? Similarly, if you don’t trust Vroutis, you might make some effort to share with readers why you don’t, so they can filter information for themselves. Finally, in regards to “Is what Vroutis says the same as what the OECD says?” Don’t assign work to Yves. She has enough to do. You do the work, and you share the results.

        2. Yves Smith Post author

          Per Lambert’s remark, our Policies clearly state that giving assignments is a major no-no. And other sites have similar policies.

        3. IsabelPS

          But isn’t this precisely the point of this post? That “the institutions” are suggesting that it would be more efficient and fair, across the Greek society, if pensions were to take the role they are supposed to have, to support people past their working age, instead of standing in place of a global social safety net?

          1. Yves Smith Post author

            They may have been suggesting that. It looks that way but you’d need to discuss further (or suggest clarification of the language) since part of it is ambiguous. If so, that indicates some appreciation of why Greek pensions are so high as a % of GDP.

        4. Andrea

          I can’t argue about the no. of pensioners and their age (I would want a lot of hyper detailed numbers) but from my informal knowledge of Greece (from a lot of ppl who work, have worked, there) I bet if you add up on the one hand ‘Pensions’ and on the other ‘all other social spending’ – which, in a country like Switz. includes:

          … unemployment, partial unemployment, paid furloughs, paid unworked hours; disability benefits, which can include paying a family member to take care of the other (typically, X paid a small but sufficient in the situation salary to care for Y who has Alzheimers), disability aid (paid medical aid for ‘handicapping conditions’ which can include dentistry and plastic surgery, paid aid to assuage, such as taxi rides and computers for the blind), gvmt. contributions to health insurance (those who can’t pay are helped), scholarships for poor students, a stipend for adults who ‘re-train’ or ‘up their working skills’ (typically, a computer course, a new language, for free), and on and on, to end with social aid (3% of the pop. is on social aid, the end of the road thing, of some kind), which pays to keep poor families alive.

          —> You would find ‘all other social aid’ in Greece to be extremely low as compared to ‘pensions’ in any other European country (incl. Spain and Portugal.)

          Now comparing Switz. with Greece is perhaps ridiculous, but my point is that the ‘aid’ in Greece is churned through ‘pensions’ and that this is an outcome not only of political structure, clientelism or whatever, but of the society.

          Family solidarity is high; most/many small biz, and they account for a large part of G. production, are familial; re-distribution is informal, in a family scheme; submission of the ‘young’ to the elders is considered ‘normal’; it is usual, also, for the elders to be obligated to take care of others and to be considered ‘wiser’ and so on. The unit that makes the decisions is more often familial / larger circuit, family ties to others, etc. So churning social aid into pensions makes sense of a kind.

          In contrast to Switzerland, where aid is targetted to the individual (fixing his teeth, paying his studies, so that he can become an entrepreneur, a bus-driver, or a good watchmaker), built on a Protestant ethic of individualism, personal hard work and achievement. (I have exagerated the cultural traits for the sake of making my point.)

          1. Pancho

            I can only agree with that. Replacing a social security system that is exclusively based upon pensions shared within families by a more individualist approach as seen in Northern European countries would be a huge undertaking and an open heart surgery.

            If a society wants to take this direction at all, for it’s certain to undermine solidarity, government can take a few small steps now and then, and balance out the side-effects. But it will still remain a major project for at least a whole decade and certainly not the type of project that would help reconstruct the Greek economy on a short term.

          2. IsabelPS

            Interesting point.

            I remember reading that Southern European countries tend to have a social security skewed towards pensioners, for voting reasons (they are the most consistent voting group). (Actually, I don’t remember if it was “Southern European countries” or “Southern European young democracies” which is not quite, quite the same). What I do know is that in all studies that I have seen about the effects of the crisis in Portugal, older people seemed to have been better protected from increased poverty: the group whose poverty or risk of poverty increased more was children and young people. And that in spite of all anedoctal (in the sense of not statistical) reports of older parents pensions supporting the brunt of the unemployment, loss of home, etc, of their children and grandchildren.
            Also, I suppose that in Greece, like in Portugal, there is a backlog of pensions for which there was no contribution, as the system is fairly young. But I don’t know if that matters for this argument.

      2. Cugel

        I’m sure your sources are correct Yves, but consider this. Pension “reform” now as a prerequisite to obtaining current debt financing. Social welfare “redesign” maybe later, after some study in concert with the World Bank. And the significant concession you point to is some ambiguity about whether the money available for social welfare under this new proposal, if it ever got approved, might somehow be more money than the amount by which pensions are being cut now?

        Is that seriously your argument? Because it sounds exactly like the sort of bait and switch B.S. (medicare cuts now to be replaced by some kind of vague and inadequate Trade Adjustment Assistance in the future) by which Obama and Pelosi are trying to get the TPP approved.

        All that the creditors would have to do is insist on a 1 for 1 exchange between pension “reform” and any increase in social security spending, i.e. that such spending be “paid for”.

        Given the inability of the parties to agree on the primary surplus, haggling about this detail is spitting in the wind. And no, “close to agreement” on primary surplus figures for 2015, when they’re talking about billions of Euros is not “close.” The level of blather might not be as high, because primary surplus figures are such abstractions to the public, while pensions have been cast in lurid colors, but if you’ve been in any kind of settlement negotiations involving big money, you really can’t just split the difference, because small percentages of difference amount to a large amount of money.

        1. Yves Smith Post author

          I am afraid you are operating from incorrect premises.

          We’ve said for years that austerity does not work and that Germany is following contradictory policies that are guaranteed to break the Eurozone if they do not relent.

          But the Greeks are dealing with parties who have vastly more power than they do. Greece continues to act as if this is a negotiation between equals, or at least between parties with a less stark power imbalance.

          My posture, from the very outset of the negotiations, has been to analyze the negotiation dynamics. That is both to help anticipate whether a deal will get done and what it would look like, and also as an object lesson for students of power.

          Thus while Syriza’s stated goals are estimable and clearly more sensible than those of the creditors, they’ve given undue weight to their belief in the merits of their case in how they’ve approached this situation.

            1. Yves Smith Post author

              No, Greece is immediately in an even worse position. It loses access to much, perhaps all of its trade finance. Exporters to Greece will make only small shipments and demand immediate or even advance payment. The reduction in imports and uncertainty over when they will appear will be another economic blow.

              Greece already is expected to run out of dough by the end of the month and will need to pay pensioners and employees in scrip. That will hurt the already lousy economy. Worries about being in Greece when if/when it imposes capital controls will scare tourists away during the peak season (which BTW is also critical for tax collections). All of the above puts more strain on the already barely functioning hospital system and further reduces pharmaceutical imports.

              By contrast, a default in the Eurozone will cause some market upset, but a default is not a Grexit.

              Greece will go into the creditor sweatbox. I doubt the current government lasts as much as six months.

              1. Nathanael

                I don’t think you’ve properly analyzed Greece’s trade balance, because everything you wrote in this comment is nonsense.

                I’m not giving you an assignment. I’m just saying I have analyzed this and you’re wrong. You should stop talking about things which you haven’t researched.

                1. Yves Smith Post author

                  With all due respect, it is you who appears not to have looked at any data. Tourism is a large part of the Greek export mix. Greece’s primary surplus before Syriza came in was due to the pickup in VAT receipts in summer months and the month before and after due to tourist spending. Greece ran either at close to breakeven on budget or a deficit the rest of the year.

                  Two of Greece’s other large export sectors are agricultural goods and refined petroleum products. Greece does not have oil fields. It imports and refines oil, then re-exports it. That means the loss of trade finance and tightening of payments terms by suppliers would interfere with production here.

                  Pharmaceuticals are an example of imports which may not be as large in dollar terms but are essential. In one of the past Greek crises (I forget whether 2010 or 2012), a special program was set up by the creditors to make sure that insulin supplies continued to come to Greece. There was a high risk they’d not come in in adequate volumes (meaning diabetics would die) and the Greek government succeeded in making enough noise about it to get the creditors to deal with the issue. But notice that there are pharmaceuticals where loss of supply has such a clear-cut risk of death (think inhalers for people with chronic pulmonary problems or anti-stroke medications) where interruption of supply over time would almost certainly lead to more deaths.

              2. Nathanael

                — There is no such thing as “the creditor sweatbox”. This is merely an insane fiction of your own devising.
                — Tourists routinely flock to countries which have recently devalued their currencies, as will happen with a Grexit.
                — Greece’s imports are not important to its economy, with the unfortunate exception of gasoline (which deserves its own analysis). The constant trade deficit will evaporate, but that’s probably a good thing.
                — Greece is a major exporter of locally-produced agricultural goods, and exports will promptly be boosted.

                1. Yves Smith Post author

                  It is not of my own invention. Another writer has independently come to a similar forecast:

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

                  Read more at http://www.project-syndicate.org/commentary/syriza-eu-default-negotiation-by-anatole-kaletsky-2015-05#BXiEzTZXOqt6eeBy.99


                  1. Robert Consoli

                    …and then what?

                    Everything will be fine as soon as Syriza leaves the government?

              3. Cugel

                Yves, you convinced me back in January that you were right about the dire consequences of default for the Greeks. It will be hell and the rest of the Austerity-mongers among the EU Group will make sure they suffer as much as possible for discourager les autres.

                My point all along has been to remind people why we are here with a Syriza government in the first place – because PASOK and New Democracy along with all other “accomodationist parties” lost almost all political support. It is simply impossible to force starvation down their throats without imposing an open military dictatorship and ruling by executive decree – what I have been calling the “Heinrich Bruning” model – since we all know what happened after the Bruning government collapsed.

                The things you point to as a possible “opportunity” for agreement are not real because the creditors would simply insist, as they always have, on a 1 for 1 exchange between any expansion of social security payments and pension cuts.

                EU spokesmen re-iterated that yesterday in saying that if the Greeks objected to the proposed “structural reforms” they would have to identify other “savings” of equal value – i.e. no stimulus would be permitted. And a stimulus is exactly what you have been arguing was the “opportunity” that was missed.

                As for the governmnt collapsing, the Greek people will continue to lose confidence in Syriza for their failure to obtain relief from crushing poverty, but the fact remains that NO OTHER PARTY has any credility as a potential governing entity.

                That is why I have emphasized the example of 1930’s Germany. The attempt to cobble together a “coalition” government to ram more austerity down the throats of the Greeks will default either to Nazism, Communism or an outright South-American style military dictatorship. There are no alternatives. Anybody young enough or with any kind of transportable skills will flee and Greek refugees will swarm over Europe like North African ones do today.

            1. Yves Smith Post author

              Agreed that that was what they wanted but Greece signed a memo with the Eurogroup in February agreeing to negotiate structural reforms separately (as in first) to get the “bailout” money, the 7.2 billion euros at issue. So they conceded on that plan months ago yet curiously making statements as if it were operative.

    2. Lambert Strether

      I haven’t seen a first comment on a post be so off-point for a long time, and unfortunately that set the tone for much of the thread, as first comments often do.

      The question this article raises is stated clearly in the headline. Let me repeat it:

      Did the Media (and Greece) Miss a Meaningful Concession by the Creditors?

      Based on the documentation — not “article” provided — the answer looks to be Yes. We’ve got, for pity’s sake, the creditors putting a “guaranteed annual income” (!) on the table; see the screen dump.

      1) This is amazing enough, and even more amazing, the media missed it entirely (so you read it here first at Naked Capitalism).

      2) To me, an offer like that is an invitation to continue negotiation. (I say that to avoid the whole discourse about the evilness of the troika, power imbalances, and all that, which true as they are, are not germane to the question of negotiation, and certainly Syriza has been telling the Greek people negotiation has been going, so who am I to disagree?) And yet Tsipras flew home and gave his speech. Did he read the memo? Did he read it and not think it was worth discussing? Did he read it and not respond as a matter of strategy? Who knows?)

      To me, I’m just gobsmacked that the words “guaranteed annual income” and the words “50,000 person social work scheme” appeared in an offer from the creditors. And call me crazy, but it seems to me that consideration might have been given to making the question posed in the headline, as well as the substance of the documents reproduced and attached, the focus of discussion, rather than off-point unsourced random comments given a halo of authenticity through the use of the Greek alphabet. Just saying.

      NOTE It could be “offer” is the wrong word, but I’m not a negotation maven.

      1. Nathanael

        It’s definitely news that this was proposed. The real question is who’s proposing it and is it a proposal with serious backing (the creditors are not unified).

        1. Nathanael

          …by the way, the existence of the proposal shows that *some* of the creditors realize that they are holding no cards at all.

          Greece has all the cards. I don’t think most of Greece realizes this.

          — The one thing which is impossible is Greece remaining in the same currency with Germany. As all reputable trade economists including Krugman have said, this cannot happen without recurring direct transfers from Germany to Greece, which have been rejected not only by the German government but also by the German electorate (so the government’s hands are tied, and so are those of future governments). This doesn’t give Germany any cards; no freedom of action there. Germany actually should want to finance Greece’s purchase of German exports… but Germany’s populace is happy to destroy its own export markets, so it won’t happen.
          — As a result, the Greek people’s desire to stay in the euro is impossible. So nobody holds any cards with respect to this. Grexit is *guaranteed*.

          When you realize that we’re merely looking at the timing of Grexit and the terms of Grexit, you realize that Greece holds all the cards and the creditors have nothing, nothing, nothing. I suspect some of the creditors are starting to notice. A sensible reaction would be to try to make offers which will avoid a total Greek rejection of the EU, rather than offers which will solidify hostilities for a generation…

          1. Pancho

            On a short term, it’s exactly as you describe it.
            On a medium term that could change. Politically, Germany has become the European powerhouse only because of the liberal-conservative and Blairite governments all over Europe backing the German position to seek patronage.

            The tide might however slowly turn with:
            – Podemos in Spain teaming up with the PSOE (general elections in December 2015)
            – The Portuguese Socialists gaining traction and slowly turning their backs against austerity (general elections in October 2015)
            – Hollande’s opportunist PS in France losing out against Front National and more nationalist Republicans
            – National conservatives in non-Euro heavyweight Poland and other Eastern European countries further gaining traction and turning towards the U.S.
            – Britain threatening to break away from the E.U.
            – plus SNP, Sinn Fein, AKEL, HDP
            – did I miss something?

            Unsure what Renzi stabilizing his power in Italy could mean, but Central and Southern Italy would need more development funds. Also unsure about the increasing rifts within the German coalition, with the NSA spying scandal and TTIP looming and the Social Democrats being unhappy with the electoral consequences of their current junior role.
            Then the economic crisis in Ukraine will require large-scale financial solidarity to avoid a full-scale humanitarian catastrophe over there.
            Finally, the U.S. won’t accept the Eurozone ejecting Greece without finally taking Turkey in, which for the notorious German taxpayers would be an even larger hit.

            In the end this all could mean that the German Austerity rule has peaked and will steadily decline in the coming months, even without another full-scale outbreak of the financial crisis. If that should happen, the building of a new, vastly more solidary Europe (and Eurozone), becomes possible.
            For the Greek government, every month gained in the negotiations is a month won, except for the economic fallout which Greece however seems ready to bear.

            1. Robert Consoli

              You’re right. Yves (bless all her works) keeps talking about how Spain and Portugal are particularly hostile to Greece’s attempts to avoid austerity but that’s, at best, a half truth. It’s the governments of those countries that are hostile, not the Spaniards or Portuguese who actually have to live under austerity.

  2. Erwin Gordon

    I guess it hasn’t registered to Yves that even with further reforms that Greece is going to default. Rather than make brain dead proposals to the EU, wouldn’t Greece be better off accepting that it cannot pay its debts, defaulting and focusing on putting itself back on economically sound footing (part of which would involve pension, labor and other reforms as well as ensuring that the government is only able to spend money that it actually has in government receipts?

    1. Pancho

      Nothing brain dead there.
      Watch the first battle in the European struggle against austerity. This is simply not a one-off negotiation about a Greek turn-around. While an “honorable compromise” is what the Greek public would prefer, a possible default is absolutely backed by Syriza’s mandate to push the conflict with the creditors further without giving in. Being thrown out of the Euro might be a consequence, but will recoil on the creditors. The Greek government has fully done its homework and can cope with all that.
      Now that Schäuble has been sidelined, it’s up to the rest of the Eurozone.

  3. Pancho

    Still can’t see the negotiations as being locked into a lose-lose strategy.

    Contrary to public perception, the Greek government has done quite a good job under the most adverse circumstances. And only those of you who live in Europe, and particularly in Germany, will know what a massive propaganda war the pro-austerity governments have waged against the Greek government. Still the latter has succeeded in slowly but stubbornly pushing its arguments into public perception. And while a majority might still disagree with them, the seeds for a widescale change of thinking have been sown.

    Increasingly raising its leverage in the negotiations, the Greek government has managed to elicit at least some retreats by the creditors’ side with more to come at a later point. Whatever the two sides will agree upon, won’t ever be final – with Varoufakis et al. on board, there agreement’s exegesis will remain creative. And if the creditors complain about the text being bent all to much, the next round of negotiations will follow.

    The Greek public doesn’t want its government to give in. Even more, it gave Syriza mandate to launch a vanguard attack on the status quo, aiming at a mid-term change of the European political course rather than a mere short-term improvement of the Greek situation. And as far as I can see, Syriza has embarked on that challenge and sticks to it.
    So unless defeated on a full scale, the struggle will continue until it has been finally won. That’s why the creditors’ waged a loud war on the Greek government rather than agreeing on a decent (and silent) compromise.

    In the medium term, Syriza’s chances remain high, as with anti-austerity movements consolidating all over Europe, it will find more and more allies against neoliberalism – mainly left-wing, but to a certain amount also from the populist and christian-conservative right. In a few years we will see that Schäuble is “over”.

    1. Yves Smith Post author

      What has Greece has done to deliver on its campaign promises? There are plenty of things they’ve they said they’d do, like go after the oligarchs, help alleviate the humanitarian crisis, and fix the tax system. Suicides are up, the economy is worse, unemployment is up. There are things that Syriza can be doing to address these issues that don’t take money. The reports I’ve read say that Syriza has done perilously little in the way of the business of governing, of delivering services to the people. Only a few ministers are involved in the negotiations, so that isn’t an excuse for not getting around to addressing pressing issues within their budget constraints. Golden Dawn was actually feeding people. What is Syriza doing on the ground? See this from Ed Conway six days ago:

      Greece is facing a depression worse than anything ever recorded in a developed economy. The total income generated by the country and its people has fallen by a quarter. Rather than expressing itself through a fall in the exchange rate, as might happen in the UK, the whole brunt of deflation has had to be absorbed by the people here.

      That’s what fixed exchange rate systems do to you. And why unemployment is still so high, why wages have collapsed, and why the government has had to impose so many cuts.

      It is hard to get a sense of the scale until you look deep into the numbers. Consider the budget for hospitals across the country. In the first four months of last year, they received funding of €670m. In the first four months of this year they received €43m. That’s right: a 94% cut, which makes any austerity you’ve seen elsewhere around the world look piddling.

      There’s further evidence to be found if you head north out of Athens, up on that road to Lamia. The further you get into the countryside, the more of them you see: great, unfinished roads and bridges. A few years ago central government provided the Lamia area with €65m a year to get these roads built. Last year that had fallen to €12m. So far this year they have received essentially nothing.

      Except it’s worse than that, because every region of the country has been ordered by Athens to send back any spare cash to the central bank, all to help them try to repay their loans. So the workers on those roads simply aren’t paid. Right now the companies are finishing a few bridges before they are washed away in the winter, leaving the unasphalted roads as they are and hoping the government will eventually be able to pay their bills.

      I’ve been in developing countries facing fiscal and capital market crises. But I’ve never been in a developed economy like this as it literally runs out of money. I’ve never been to a hospital where the director says he is essentially having to treat patients with no money, where people are not able to get treatments because they, and the hospital, can’t afford them.

      It is an unsettling experience — made more so by the fact that even those in authority seem next-to-clueless about what is really happening. Usually when you’re covering economics or politics you assume that someone, somewhere knows what’s going on and has a plan. Here, with the best will in the world, I simply don’t think there is one.


      And from a June 3 report:

      Since Syriza came into power almost six months ago, they have done almost literally nothing in terms of domestic economic policymaking. Of course this includes the big things: no major reforms; no crackdowns on corruption; no overhauls of taxes; no changes to the pensions or benefits system. But it also goes for the small, essential stuff as well: the transport ministry is no longer signing off new heavy goods driving licences; all investment cash to the regions has been stopped; some parts of the public sector have become so starved of cash that they cannot run: there have been no ferries to Ai Stratis — a small island in the northern Aegean — for the past month and a half.

      Almost all policy decisions, major and minor, have been put off — the excuse being that nothing can be done until a deal is reached with the Europeans. This would be fine in a political system with a strong, impartial, efficient civil service like Britain. In Greece, where much of the civil service is politically-appointed and many apparently routine non-political decisions need to get ministerial approval, it is a disaster.


      Syriza’s support has dropped to below where it was at the time of the elections. The latest polls shows a majority of Greeks now favor making a deal with the creditors: “About 54.8% is fearful of a default and about 50.2% believe that the Greek government should accept the agreement proposal of the creditors.”


      It’s easy to urge on the Greeks when you aren’t bearing the cost. And if you think the picture above is ugly, it gets an order of magnitude worse upon a default or Grexit. The public has been led to think the government might win when the creditors are demanding large concessions. What happens when they find the cost of defiance was vastly higher when they were led to believe? Tsipras’ poll ratings are falling as Greeks are starting to realize what the downside looks like from their already desperate situation.

      1. Pancho

        I’m not urging on the Greeks. I’m paying all my respect to the Greek public which has already found out that the cost of defiance is much higher than it thought it to be, yet keeps backing the government on pushing for a mid-term yet full scale victory against the creditors (see the May 2015 Public Issue Political Barometer). And remember the Greek government didn’t have any propaganda apparatus at its will, but had to cope with broad opposition and obstruction from most Greek media.

        As for the domestic issues, the government has taken quite some meaningful steps in all areas. While their own government apparatus remained slow, cumbersome and big time aligned with the old PASOK and ND parties; parliament, the cabinet, government taskforces and parliamentary committees are nonstop at work:

        The new government has gone after the first few oligarchs and corrupt ex-politicians. They have helped alleviating the humanitarian crisis, giving poor debtors a break and reconnecting them to the electricity grid. They have created a more supportive atmosphere towards the various citizen’s action groups and food banks, and are currently providing the homeless with mobile sanitary equipment and basic medical services. They also fought some battles with the large-time fascist police apparatus ending their often brutal law-and-order course.
        Furthermore, they went on to tackle the humanitarian crisis on the islands where much more Syrian refugees have debarked than ever, bringing tens of thousands in to the mainland and providing them with food and shelter.

        At the same time, government has revisited the large scale privatization plans and sorted out what to follow, what to modify, and what to abandon. They investigated the war reparation claims. Yesterday, they successfully reestablished the ERT state broadcasting service (paid by a monthly 3€ levy). They have also rehired the 500 laid-off cleaning ladies and delegated them to more meaningful workplaces. All of these are symbolically incredibly important steps. And while the situation on the street has only gradually improved, finally hope has returned, so I would be very surprised if suicide rates wouldn’t drop sharply in 2015.
        From what I can see, these are quite impressive achievements for a five months government period without any money to spend.

        What they mostly haven’t done yet is the more expensive economic measures, including social security and pensions. But note, this area is exactly what is heavily disputed in the “negotiations”. Any measures taken before crunchtime would reduce their leverage in the “negotiations” or would go too far alienating the creditors. So obviously this large policy area is bound to remain on hold for now.
        Also, all fiscal decisions were taken in regard to raising money now in order to pay back some debts, basically to buy time for the “negotiations”, the chicken game with the creditors.
        Certainly, it didn’t stop the economy from further declining, but in the end that isn’t possible without big time expansionary measures.

        So even if those comments you cited may be right in that roadworks remain abandoned and pensions have not been “reformed” (or axed), this isn’t very enlightening about the country’s situation and the new government’s track record. Syriza has done whatever it could while wrestling with the creditors, and has been quite successful in sounding the bell for the era to come.

        1. Gio Bruno

          Thanks for your perspective / insight, Pancho. And thanks for putting it in English (for us mono-linguists). My guess is english is probably a 3rd or 4th language for you; you’ve done a remarkably good job of writing clearly. Wish I could understand German or Greek and get a better feel for the events transpiring in Europe. (Getting accurate accounts of events in the english media can be a challenge.)

          1. generic


            Taken from this article by a Syrizia supporter that is probably one of the only English language attempts at writing a positive “what has Syrizia done for us?” summery. It does have a few sourced claims like:

          2. dbk




            Sorry, they’re all in Greek, but Yves has told us she has many Greek informants who can translate the gist.

            The three links concern:
            1) legal actions initiated against oligarch-owned media (nearly all are oligarch-owned)
            2) the enormously complex and time-consuming process of identifying individuals with 200,000 euros or more deposited abroad which have not been declared
            3) initial recovery on the first 5,000 individuals so identified (3 billion euros), with another 24,000 under current investigation

            1. Lambert Strether

              Awesome. We like evidence (though if one wishes to be really obsessive, one checks provenance, hard to for a non-native speaker). On “initial recovery” (point 3), does that really mean swelling Greek coffers by €3 billion in cash? Interesting if true, also awesome. Or is it a projection of future collections?

              1. dbk

                From the article on recovery of assets from foreign bank deposits:

                Έστειλα 5.000 υποθέσεις φοροδιαφυγής στα δικαστήρια, από τις οποίες το κράτος θα πρέπει να ανακτήσει 3 δισ. ευρώ ενώ βρίσκονται σε αναμονή άλλες 24.000.

                I’ve forwarded 5,000 cases of tax invasion to the courts, from which the (Greek) state must (i.e. is anticipated/logically expects) to recover 3 billion euros; another 24,000 such cases are currently awaiting (adjudication).

                Quote from Panagiotis Nikoloudis, newly-appointed Minister of Transparency and Anti-Corruption.

                More on his background
                (this one’s in English!)

      2. Oldeguy

        Very informative comment; I had no idea things were already that bad. In a way, it helps to explain Greek intransigentness over pensions- if your Society appears to be collapsing around your ears the impulse is to hang on for dear life to anything that is “guaranteed” .
        My guess is that support for the current Greek government will vanish instantaneously the first time the pension checks are either late or short.
        How close are they to that ?

      3. trent

        “It’s easy to urge on the Greeks when you aren’t bearing the cost.” That’s just it, the costs will come here. They already are for some, the lowest on the totem pole probably have a similar existence to the overall Greek population. When i read your comments yves, i think you still believe this is all salvageable. Why would we want to salvage the current system? It appears to me the system is cannibalistic, and instead of feeding on the rest of the world as we have for the past 50 so years, the only source of energy left is within our own borders. That is what i see when i look at our governments actions the last 15 or 20 years.

        1. trent

          “What is happening in Greece is clearly about more than just money. How can they blithely give Ukraine a pass and a free lunch, and Greece the Iron Heel? “

        2. Yves Smith Post author

          You seem to think that my describing that Greece is certain to lose is pumping for them to lose.

          Do you also think that doctors that tell a patient that he has Stage 4 cancer (5 year survival odds under 20%) is out to see him die? You are confusing analysis with advocacy.

          1. Nathanael

            Lose? What do you mean, lose? Lose *what*? You can’t lose something which is already lost….

            I don’t think you understand the situation properly.

            Grexit is guaranteed by the laws of trade economics. “Making a deal with the creditors” just means more austerity, more suffering, and a swift backlash and Grexit at the next elections.

            Have you not figured this out yet? It’s simply a question of how long the extend-and-pretend is going to go on. The longer it goes on, the worse the situation for Greece is. “Rip the bandaid off” is the best option, although it has to be “sold” politically.

            The only way in which Grexit could be avoided is a complete policy reversal on the part of Germany, and I don’t see a scenario where that happens.

      4. Nathanael

        Maybe Syriza hasn’t properly noticed the risk of Golden Dawn on the horizon.

        Remember, *Grexit is guaranteed*. Germany has guaranteed it. This was set up long ago when Germany set up the Eurozone “golden handcuffs” and guaranteed when they recommitted to the “golden handcuffs”. (The golden handcuffs are a disaster for Germany as well, as they destroy its export markets, but they don’t seem to realize this. This is why I don’t consider this to be any power in the hands of Germany; they have shot themselves in the foot, and that isn’t power.)

        There is therefore zero cost to “defiance”.

        There is, however, a large and real cost to extend-and-pretend, pretending that Greece and Germany can stay in the same currency union without fiscal transfers. If Syriza keeps up extend-and-pretend too long, then Golden Dawn or someone else wins.

        “Making a deal with the creditors” accomplishes nothing, it just means that at the next election an even more radical party is elected to remove Greece from the Eurozone.

      5. Tsigantes

        I wonder why Ed Conway is being bruited here as an expert.

        “Since Syriza came into power almost six months ago, they have done almost literally nothing in terms of domestic economic policymaking…Almost all policy decisions, major and minor, have been put off — the excuse being that nothing can be done until a deal is reached with the Europeans.”

        He seems unaware that the Creditors made negotiations conditional on Greece not undertaking any “unilateral” legislation, i.e. enacting national laws in the national parliament. Syriza has done so anyway, first of all the humanitarian aid supported unanimously by all parties. Other decisions have been made through adjusting existing policies.

        1. Yves Smith Post author

          Ed Conway is on the ground and has also spent a lot of time in countries under financial stress similar to what Greece is facing. He thus has relevant reporting experience. Moreover, he is also ex the Telegraph which is Euro-skeptic, as in much more inclined to criticize the Eurocrats than most of the business (see his former colleague at the Telegraph, Ambrose Evans-Pritchard, as another example).

    1. hunkerdown

      Reuters citing Bild: “It said a debt haircut for Greece was also being discussed, adding that government officials were in close contact with the European Central Bank on that.”

      Wasn’t *that* a creditor red-line?

    2. docg

      Oh good. Another “deadline.” I’m seriously thinking of collecting them and pasting them in my scrapbook. (Only I don’t have a scrapbook :-( )

      I’ll say it again: if Greece holds firm they will get their (worthless) bailout. It won’t be called that though. The Eumenides will come up with a handy euphemism, so their capitulation won’t be obvious. But no one will be fooled, sorry guys.

      Europe has a lot to lose, Greece has nothing to lose (because either way they are screwed). Do the math.

      1. Nathanael

        Wow. It looks like the Germans may actually agree to major fiscal transfers to Greece. I really didn’t see a plausible scenario where that would happen.

        This is indeed the basic fact: “Europe has a lot to lose, Greece has nothing to lose (because either way they are screwed). ” Negotiation theory tells you who holds the cards in that situation.

        1. Pancho

          Indeed, the unthinkable might happen.

          Just watched conservative hardliner Wolfgang Bosbach and “social democratic” EP president Martin Schulz on Germany’s notorious No. 1 talkshow “Günther Jauch”.
          After repeating his notorious “I’m fed up with the Greek government”, Greece’s faux friend Schulz backed Tsipras against his party’s left-wing only to reaffirm he would (and will) do anything to keep Greece in the Eurozone.
          And Bosbach said he expects a majority in the Bundestag to approve handing out the Second Memorandum’s last tranche even without substantial commitments from the Greek side. He just added, he personally wouldn’t just vote with “No” but would also seek personal consequences. (Might he be leaving Merkel’s CDU party to finally join the right-wing nationalist AfD party? We have a saying in Germany that one shouldn’t stop a traveler…)

          So all the lamenting and swearing at the Greek government intransigence might be a clear sign that an intermediate agreement will be struck this week. And that it won’t include all too much prerequisites beyond what the Greek side offered in their last proposal. Halleluja!

  4. ChrisFromGeorgia

    Without meaningful debt relief, Greece is never going to make it as a functioning member of the Eurozone.

    I don’t claim to be any kind of expert like Yves on these negotiations but I’ve never read or heard of the Troika making a single concession on debt reduction.

    I guess what I’m trying to say is that a concession on pensions alone, even if true, doesn’t really move the needle much. Greece is toast without acknowledgement by the creditors that they’ve thrown good money after bad and like any creditor in a distressed scenario, they’re going to have to take a haircut.

    1. DanB

      “…Greece is toast without acknowledgement by the creditors that they’ve thrown good money after bad…”. Almost all of these so-called loans are laundered through Greece and given to creditor banks, not into the Greek economy.

      1. ChrisFromGeorgia

        Right, we passed the “charade” stage a long time ago. Any further bailouts serve mainly to transfer money from the left hand to the right hand of the creditors.

        1. Lambert Strether

          Of course it is. And equally “of course,” the fact that all the debt is a result of German banks dumping their Big Shitpile of bad debt onto European countries in 2010, a fact that has conveniently gone into the memory hole, from where Syriza has not retrieved it, despite all the fulminating against neoliberalism.

      2. Gio Bruno

        “Almost all of these so-called loans are laundered through Greece and given to creditor banks, not into the Greek economy.”

        And recognize that many of the banks (German D-Bank) have received funds from the US Federal Reserve (Trillion$). So the risky private loans these banks made are now your (public) responsibility. The banking system is now nothing more than a legalized skimming operation.

    2. Jackrabbit

      From Greek Reporter today:

      Also, according to government sources, Tsipras said that Greece will not sign a deal that would not include a clearly-stated commitment on the part of lenders to restructure the Greek debt.

      AFAICT, from the beginning Syriza has sought a comprehensive agreement that ends austerity and the bailout farce. The focus on structural reforms was forced by the Troika. Creditors naturally want to talk about how a borrower will pay instead of why the debt needs to be reduced/restructured.

      Troika-friendly media depicit Greece’s noncooperation as incompetence instead of a negotiating ploy in response to the Troika’s intransigence. The media’s mischaracterization has led to loads of cognitive dissonance as Syriza holds firm in their defiance. Those who accept the media spin can’t imagine why the Greeks haven’t already cut a deal.

      H O P

      1. Yves Smith Post author

        You can read the agreement the Greek government signed with Eurogroup in February. It clearly states they have to submit reforms in order to get bailout funds. Debt negotiations were never part of that deal.

        You can read the text of that agreement and our analysis here:


        Trying to retrade an agreement you have made is dealing in bad faith. It’s toxic to negotiations.

        1. Pancho

          Yves, you would be right if these were ordinary negotiations. But again, they aren’t.
          Watch the first E.U. government using its electoral power in order to change Europe to the better, rather than pampering its electorate in order to stay in power. Watch the first steps of an ongoing struggle against the neoliberal agenda that won’t be settled until the full defeat of one or the other side.

          Jackrabbit is completely right in that the Greek government’s seemingly awkward negotiating strategy doesn’t mean they were inexperienced or incompetent or whatever. There has been quite some debate on whether Hans-Werner Sinn from German think tank IFO got the Eurozone’s TARGET mechanism right or not. But what he got right in hailing (or warning against) “Varoufakis’s Great Game” is that almost every step taken by Tsipras and Varoufakis makes a lot of sense in prolonging the “negotiations” in a war of attritition that would slowly push the Schäuble gang together with its ugly propaganda war into the abyss.
          Only imagine an agreement would have been made at the climax of the Austerians’ propaganda war. It would have been a major defeat for the anti-Austerity movement. Two months later, it isn’t anymore.

          Don’t you (other guys) always think of the economy only. Coming from all spectres of neo- and postmarxian paradigms, Syriza have mastered Gramsci, Poulantzas, Laclau & Mouffe, and game theory. And they’re successfully making use of it.
          So when it comes to breaking a hegemony, it’s not all about economy: rather it’s the psychology, stupid! ;-)

          1. Lambert Strether

            My disagreements with this comment can be best expressed in the form of a table:

            Lambert Pancho
            … the Greek government owes a duty of care to its people…. Watch the first E.U. government using its electoral power in order to change Europe to the better, rather than pampering its electorate in order to stay in power.
            These guys would throw me and my family under the bus to prove a theoretical point about the evils of neoliberalism. Watch the first steps of an ongoing struggle against the neoliberal agenda that won’t be settleduntil the full defeat of one or the other side.
            … left — I won’t say armchair,so let me just say — theoreticians (folk or academic) … Coming from all spectres of neo-and postmarxian paradigms, Syriza have mastered Gramsci, Poulantzas, Laclau & Mouffe, and game theory.
            [I]f that is the case that Tsipras is making — short term pain for long term gain to escape neoliberal hegemony — then why isn’t he making it? The simplest explanation I can find is that he doesn’t believe it; the fact that Tsipras supports a primary surplus is an obvious supporting fact here. So when it comes to breaking a hegemony, it’s not all about economy: rather it’s the psychology,stupid!

            If any voters take Pancho seriously, no left wing government is ever going to be elected in Europe, ever again, and for the record, I think that’s bad. I think the Greek government has a duty of care to its people, and (as a corollary) that needs to enter into the negotiating strategy; if capitulation is the best deal for the Greek people, do it, and live to fight another day. Pancho doesn’t. Pancho believes that the Greek people are there to be used for higher and better purposes — different purposes, I grant, from the purposes that neo-liberals think are higher and better, but there to be used, they are. Wrong, wrong, wrong, wrong, wrong.

            1. Santi

              I agree with you, Lambert, and this is why the difficult moment for Tsipras, Varoufakis, Lapavitsas et al. is now: they need to make calls on the relative suffering and decide…

              Capitulating is not the best deal: it leads to further suffering and shifts the moment of the stand up further away, and to a weaker Greek population.

              Finding the right negotiation mix is a difficult call. But it is obvious by now that extend and pretend, which means accepting the fake reforms and fake forecast figures, and pushing the ball forward in exchange to money to be paid back instantly, is no longer it…

            2. Pancho

              Lambert, you’re grossly mischaracterizing my comment. As I said in another comment here, it would be perfectly understandable if the Syriza government had gone for just a quick, slight relief from the creditors’ imposts, and otherwise carried on.

              Read again what I wrote there:

              > the Greek government owes a duty of care to its people.

              Sure it does, but its not us to decide what’s considered the right kind of care by towards those who are really affected by the situation. While we’re only seeing the economic collapse, possibly the humanitarian catastrophe, we’re missing the collective humiliation by the Troika and the pro-Memorandum forces.

              My point is that Syriza simply wasn’t elected to do the same reforms in just a little bit better way. A remarkable majority of the electorate still wants the government to stay strong and stick to its red lines.

              What you’re basically assuming is that the Greek people can’t be represented well by this government as the economy keeps turning down. But then you’re assuming the Greek electorate was all about the economy, as would be the case in our “armchair” societies.
              But in fact, Greek people never considered the Greek economy to be “their economy”. Over all the years, they have learned that all economic wealth would go to the banks and oligarchs and all the debt would end up being payed by themselves.

              Therefore a great many of them simply don’t prioritize a fast economic turnaround. What they do care about is a government that really makes a difference in staying strong against the oppressors creditors, and that doesn’t give in earlier than absolutely necessary.
              They don’t just want what you call “the best deal” for the Greek economy. Rather they don’t want to capitulate upon the creditors’ demands which they (correctly) consider illogical, unjust and cynical. And it’s certainly not upon us to call their tenacious approach nonsense or brush it aside the way you did.

              1. Lambert Strether

                And you can see my response to your comment. As for gross mischaracterization, I’ll just quote you again:

                Watch the first E.U. government using its electoral power in order to change Europe to the better, rather than pampering its electorate in order to stay in power.

                Please show me where Syriza explained that to the Greek people, and where they bought into it. I don’t think you can. You can’t both praise the Greek government (in my reading, that’s exactly what the whole “watch the” paragraph does) for not “pampering” the voters and say “Sure” the Greek goverment has a duty of care and, while we’re at it, claim that I’m “deciding” for the Greek people, while in fact Syriza doing the deciding, and without the informed consent of the voters, I claim, as well. That’s “wrong.”

                Adding… General polls on support won’t do it. Show me backing for that not “pampering” as part of a larger struggle against neo-liberalism.

                1. Yves Smith Post author

                  I’m also a bit puzzled as to what “EU government” means. The European Parliament has limited power and is not a party to these negotiations. The Eurogroup is the finance ministers of individual nations in the Eurozone. I must confess to not having a full grasp of the procedural issues, but for decisions of importance, it requires approval of ALL members, making it very hard to effect change. The ECB is one of the real powers in this drama and has managed to be much lower profile than the IMF, but is the real enforcer here (as in it can withdraw ELA support, and that threat lead Ireland, Cyprus, and Greece in 2012 to capitulate). Central bank independence (as in fealty to bankers) is sadly widely seen as necessary and desirable, so I don’t see the ECB becoming more accountable to citizens.

                  1. Peter Mayers

                    I don’t believe Pancho meant the government OF the EU (as a whole), but rather the (first) government IN the EU — i.e., the Syriza government in Greece (i.e., the first government to do such and so). The trouble with prepositions! (I work as a translator, so I’m used to seeing the misunderstandings that a small difference in such matters can make.)

                    On another point, I must honestly say that I find the tone of many of these exchanges in the comment threads on this website to be quite offputting. There’s a great deal that I find valuable in this website, especially given my highly limited grasp of the crucial technicalities involved. And I’ll bet a lot other people also find this site valuable for this reason. But given the nasty cuts that many commenters seem to want to administer to other commenters here, I find myself wondering if I’m wasting my time and needessly raising my blood pressure to dangerous levels. And if many others respond as I do on this point, that would be a shame, since there’s a great deal about matters of prime importance (for the left in particular) to be found on this site (including in the comment threads). So, for the sake of maximizing the reach of your admirable educative efforts, could all of those persons on this site (among both writers and commenters) who have a habit of lunging for the jugular — could you calm down a bit, thereby making it easier for those of us who want to follow figure out what’s going on to concentrate on the “sakfråga” (that’s Swedish for the real issue, the substantive matter at hand). Make it all a little easier and more pleasant, please! For those of us who are unschooled in these matters, it’s hard enough as it is to understand the details and technicalities involved.

            3. Nathanael

              For what it’s worth, Lambert, you don’t understand politics *at all*. And you are wrong, wrong, wrong, wrong, wrong, wrong.

              1. Lambert Strether

                Thanks for sharing. I had no idea it was OK for governments to use their people as guinea pigs without their informed consent, but now I understand. Good to know.

        2. Cugel

          The Greeks would have to enter into new negotiations in January of 2016 to completely abandon the surplus figures they agreed to, simply because the economy will contract further between now and then, even if they capitulated and reached an agreement now. Perhaps the negotiating atmosphere would be better, but probably the EU would insist that Greece stick to the deal they made, just as they have since 2010.

        3. ChrisFromGeorgia

          Thanks for the response. It seems that Syriza never got anywhere with their negotiation posture. Giving up on debt relief that early was fatal.

          Still that doesn’t absolve the Troika from their miscalculations. They thought Greece would recover enough to handle the debt load by now or at least muddle through like Portugal, and they thought by taking an absolute hard line they’d get Tsipras to fold. It appears that they were wrong on both counts.

          I’d consider Merkel and the IMF both to be acting in bad faith here. Their position is intractable – the losses made by creditors have to be recognized now, no matter how incompetent or devious they think Syriza is. Being closer to the Greek people Syriza has the greater responsibility to lead and act in their interest, but I think Merkel and the IMF deserve what they get if in fact this goes pear shaped on them.

          1. Lambert Strether

            Personally, I think the only people with a handle on the situation are the Left Platform in Syriza (too time-pressed to find the link in Jacobin; I will on request), probably because they have old-line leftie contacts who know a war when they see one. But although they can veto what Tsipras does, they aren’t running the show because they don’t have the votes. And it’s not clear they have an answer either.

            1. Sibiriak

              Lambert Strether: … I think the only people with a handle on the situation are the Left Platform in Syriza

              But the Left Platform openly calls for default and a program of low budget surpluses
 (still “austerity”!), freezing cuts to wages and pensions, debt restructuring, and a new plan for public investment–all of which, while not guaranteeing it, certainly makes Grexit an extreme likelihood–precisely the outcome which we are repeatedly told in these pages will be an utter disaster for Greece.

              1. Lambert Strether

                I said I thought they had “a handle on the situation,” meaning I think they have always been more clear about the power relations. I didn’t say I liked their proposals. On Grexit, we’ve taken our cues from Yanis, who argues it’s a disaster because of the loss of EU agricultural subsidies (and perhaps for other reasons that don’t come to mind). The Greek people aren’t in favor of it either.

                1. Nathanael

                  They not only have a handle on the situation, their proposals are actually *correct*. Bluntly speaking. They need some more political finesse…

                  1. Lambert Strether

                    No, they aren’t. Greece needs deficit spending. Unfortunately, they can’t get that with the Euro. Also unfortunately, not only is the cost of regaining sovereignty in their own country extraordinarily high, Syriza has not, to my knowledge, prepared the country for it, and it’s not even clear they have the operational capacity to achieve it.

                    So the moment of tragic recognition, that there are no good options, has yet to come.

            2. dbk

              Here’s Lapavitsas’ latest (Jacobin)

              Actually, there’s something very strange about Syriza’s blocs. The ruling block (Tsipras, Varoufakis etc.) are not in fact the party’s true (inner) power bloc, which is most prominently represented by Lapavitsas given his professional status.

              1. Pancho

                Costas Lapavitsas at the “party’s true (inner) power bloc”? How did you come to that conclusion?

                He is a well respected academic figure, and as Greece’s most vocal proponent of a negotiated Grexit, he succeeded in attracting quite some attention. But apart from being an MP on Syriza’s ticket, he’s about as much in Syriza’s core circle as Yanis is.

                The Left Platform’s heavyweights are Lafazanis, Stratoulis and Chountis, with parlamentary speaker Zoi Konstantopoulou representing the hardliners within Tsipras’ majority faction.

                1. dbk

                  Indeed this is true. I was specifically referring, however, to his professional status as an economist within the left bloc.

            3. Tsigantes

              Maybe it’s time to consider Left Platform/Group 58 as part of Syriza’s strategy.
              Not take things so literally. This is a life & death matter for Greece….all stops are out.

  5. Stephen

    Apologies if this link appears elsewhere on the site. I couldn’t find it, and it seems relevant to all current discussions about the Greek crisis providing a nice potted history of the stages since 2010 and a somewhat, to my mind, whimsical rationale for the IMF to get out and bring the true culprits to heel.
    I’m firmly, now, of the opinion that default is inevitable, and most likely, in the long run, desirable and morally justified. But then I’m not Greek nor do I have to live there, so it’s easy for me to say.


  6. Lambert Strether

    I can only drop in for a few seconds, because Water Cooler, but let me make two points:

    1) On a quick scan, nobody has anything to say about the thesis expressed in the headline. Therefore, I assume everybody agrees with it.

    2) Unlike left — I won’t say armchair, so let me just say — theoreticians (folk or academic) the Greek government owes a duty of care to its people.

    So yes, it damn well is a negotiation, and not least because the ruling faction in Syriza presented it to the Greek people as just that. People on the left would do well to consider how this discourse sounds outside their particular bubble, because to me, and I would bet to most voters, it sounds a lot like “These guys would throw me and my family under the bus to prove a theoretical point about the evils of neoliberalism.” And if that is the case that Tsipras is making — short term pain for long term gain to escape neoliberal hegemony — then why isn’t he making it? The simplest explanation I can find is that he doesn’t believe it; the fact that Tsipras supports a primary surplus is an obvious supporting fact here.

    1. Gareth

      This one sentence from a Bloomberg story puts things in an interesting, although unintentional perspective:

      “A poll this week shows 50.2 percent of Greeks want the government to accept the creditors’ proposals to prevent the country’s bankruptcy. Only 37.4 percent want Tsipras to keep up his resistance.”

      37.4% — isn’t that pretty much the percentage of the vote that elected Syriza in the first place?


    2. Pancho

      > the Greek government owes a duty of care to its people.
      Sure it does, but its not us to decide what’s considered the right kind of care by those who are really affected by the situation. While we’re only seeing the economic collapse, possibly the humanitarian catastrophe, we’re missing the collective humiliation by the Troika and the pro-Memorandum forces.

      If in May, after everybody had the chance to perfectly understand the consequences, 43% of the electorate say the government should “definitely not retreat”, with additional 15% saying it should “rather not retreat,” this makes it perfectly clear that a public majority still wants the government to stay strong. There’s probably no more politically interested (and literate) public than the Greeks, and as far as I can see (and hear from my friends) they fully understand that this is another type of insurrection against a humiliating serfdom they are not willing to take anymore.

      Sure we’re not entitled to encourage them playing the European vanguard, but we should understand that a large share of the Greek public is seeking moral (and finally outright) victory rather than a halfway acceptable compromise. Saturated and leaning back into our *armchairs*, we’re just no more used to that kind of determination.

      Two more short points:
      – RE the headline: Yes, that seems to be yet another nice concession the Greek side obtained. The creditors seem to go creative, maybe in covering their eventual surrender on many (if not most) issues without losing their face.
      – in the Eurozone, without an own currency, primary surplus isn’t a question of faith, but of necessity, if a poor country doesn’t want to be susceptible to blackmail. So if Tsipras says: No more deficits, he basically means: never again a Troika. The Europe-wide struggle against the no-deficit-paradigm is yet to wage – in fact it would be the next phase of the struggle against austerity – but not before Greece has a few more allies in European governments.

        1. David

          Thanks for the link.

          How do your Greek friends think this should be resolved?

          Should the Troika chop a few zeros off the debt and everybody just move on?

          Do your Greek friends see the debt as legitimate, i.e. should be repaid?

          Do your Greek friends think the humanitarian problems will go away if the debt is reduced?


          1. Pancho

            As far as I can see, only few people see the public debt accumulated since 2010 as being just or legitimate. While some are ready to give in and accept it, others refuse bowing down. At the same time, a majority can live with kicking the can further in order to renegotiate the debt at a later point.
            Most of them however understand that it won’t be easier to negotiate once a deal has been struck. Just like the government, they understand that the price of a default won’t ever be as low as it is today. Right now, people feel like they already lost so much that they simply don’t dare even losing a bit more now, if that allows them (and the country) to start afresh. So at least currently, a default won’t severely harm the government’s domestic reputation.

            Regarding the humanitarian problems, these will improve either way.
            If an agreement can be reached with the lenders, they will be solved in a more “Global North way”. If on the other hand Greece ends up being thrown out of the Euro, the problems will be solved more along the lines of an “Emerging Nations way”, i.e. replacing unaffordable import technology by lower, but domestic technology, combined with a laxer handling of foreign patent issues, and a slightly more labor-intense, solidarity-based approach. Institutions for that are in place, plans in the drawers and can be rolled out within a short time.
            So Greece is well prepared, and in either scenario the majority of low and middle class people definitely won’t suffer more than they already do – possibly in terms of GDP per capita, but certainly not in terms of quality of living.

            Now most people fear isolation and therefore prefer the Eurozone, but if the alternative is an Eastern Mediterranean economic zone within the BRICS framework approach, they will not just be fine with that, but will see it as a fascinating and promising new perspective for Greece and the whole region.
            Both Tsipras and Kotzias have gone at great lengths to make this scenario possible, see for example the meeting with the presidents of Cyprus and Egypt. Certainly, the meeting with al-Sisi hasn’t been exactly popular. And neither would be meetings with the Israeli government or even the Syrian regime. But with a slightly lowered profile they could happen soon.
            The new Northern Cypriot president opens yet another axis of cooperation, and the waiting AKEL in the South would be even warmer embraced. And the vastly strengthened HDP, Greece now even has a strong and warmly embraced ally in both Turkey and Rojava.

            So the alternatives are there, and in the end, it’s the creditors’ decision whether they want Greece to remain in the Eurozone (and act accordingly) or whether they let Greece go. Indeed the result of excellent work by the new government, and as well a comfortable position for Tsipras to negotiate a good compromise.

            1. Lambert Strether

              “If on the other hand Greece ends up being thrown out of the Euro, the problems will be solved more along the lines of an “Emerging Nations way”, i.e. replacing unaffordable import technology by lower, but domestic technology, combined with a laxer handling of foreign patent issues, and a slightly more labor-intense, solidarity-based approach. Institutions for that are in place, plans in the drawers and can be rolled out within a short time.”

              I have heard this case made elsewhere, and I would like to believe that a “solidarity-based approach” would work, based on emergent Greek networks. I’m not seeing any evidence of it. Do you have any evidence? Organizations to point to? Efforts? It’s one thing to fight a gold mine or occupy a square. It’s another thing to run an entire economy. People come and make pronouncements all the time, but “words are wind,” as they say on Game of Thrones. And presumably a solution to how Greece purchases oil is in the drawer as well.

              NOTE Adding, this would mesh nicely with a Jobs Guarantee, but only if Greece is sovereign in its own currency, that is, if it leaves the Euro, not merely defaults.

        2. john c. halasz

          Thanks for that. Assuming the polling is accurate, always a big if, and not largely out-of-date, it looks clear that the Greek government’s main red-lines are their public’s read-lines.

          1. Lambert Strether

            A question like “Some argue the government should retreat and compromise….” Well, it’s hard to argue for retreat, particularly in a strongly nationalistic country. In the US, that question would surely skew toward “no retreat.”

            Here’s more analysis from the same source. Headline: “Yes to negotiation, no to retreat, no to elections.” Making it — to bring this back to the point of the post — all the more remarkable that indeed that Tsipras (as all the commenters by their silence agree) missed a huge opportunity to negotiate.

            1. Peter Mayers

              “[A]ll the commenters by their silence agree”? Are you quite sure you want to say this? Are you being literal, or instead perhaps a bit hyperbolic? Is this a theory of implied consent you’re working with here? Sounds a bit too Hobbesian for me to swallow all that readily (if you mean it literally, that is).

          2. Lambert Strether

            More on the polling (and speaking to Pancho’s point on the Greek populace having been fully informed) from Bill Mitchell, who the Greeks should really call if in case of Grexit:

            The point is obvious:

            1. Syriza was elected to stop austerity and it defined some sort of ‘red line’ beyond which it was unacceptable to cross. So there is a resonance of that in the opinion polls. The Greeks will tolerate cuts but not in certain areas.

            2. Unless it leaves the Eurozone, it has to strike a deal with the Troika (however it is named these days). Without the credible threat of exit, all the bargaining power is in the hands of the creditors. They appear more concerned with enforcing the austerity dogma than the possibility that the Greeks will not be able to meet their debt repayments.

            After all, the ECB, which holds a significant portion of Greek’s public debt knows (but would not admit it) that it can just write the debt off without impeding its own operations. That is the capacity of the currency issuer.

            3. Syriza doesn’t have a credible threat because it has failed to educate the people of the costs and benefits of exit against on-going austerity. The logic of its electoral success was that it could march to Brussels and tell the elites that austerity was over and everyone would shake hands and that would be it.

            The logic of the Eurozone, however, the antithesis of fiscal activism, unless the activism is of the austerity bent. If they concede to Greece that austerity is damaging and there is an alternative, then the game is up for them.

            The whole structure and rules of the monetary union would be seen to have failed. So there is no way there will be significant concessions from the Troika.

            4. So the Greek people want to remain in the Euro but don’t want the austerity to continue – two incommensurate positions.

            It’s that incommensurability that makes me question whether Greeks do indeed “fully understand,” through no fault of their own, but because Syriza hasn’t made the case.

            Mitchell goes on to make policy recommendations which Grexit advocates should read.

              1. Lambert Strether

                Well, maybe that’s why you’re getting poor policies from the Left Platform, eh? (Even if Costas isn’t in it.) The Jobs Guarantee would mesh quite neatly not only with the networks Pancho alludes to, but with the employment needs of the Greek people. The Jobs Guarantee (a policy advocated by many MMTers) also puts baseline wages and working conditions under democratic control. So I think MMTers, at least, have quite a bit to say about modern capitalism. (I don’t hear anybody advocating for collective ownership of the means of production, although I may have missed it, so I assume everybody, including Syriza, is operating in a capitalist framework, at least in the “short term”).

                1. Sibiriak

                  Lambert Strether: Well, maybe that’s why you’re getting poor policies from the Left Platform, eh?

                  I’m not so sure that the poverty of the Left Platform program has been sufficiently established. What I’d really like to see is a detailed, point by point rebuttal to Lapavitsas’ arguments, rather than simply brief references to Varoufakis’ opposed views.

                  1. financial matters

                    Bill Mitchell doesn’t see the fact that Lapavitsas is not an ‘MMTer’ as being that significant. The heterodox camp is a broad camp.

                    As Pancho has pointed out Syriza has incorporated a blend of neo and postmarxian thought. My shorthand for all this heterodox thought is that they want to take practical steps to improve the lot of labor against the strong neoliberal forces that have been in place more recently.

                    There are various ways of getting there but they want to put people to work at good wages and have good social safety nets and improve inequality.

                2. Pancho

                  Totally agree with you here. That’s why Levy scholar Rania Antonopoulos was appointed Alternate Minister for Combatting Unemployment. Her nationwide Job Guarantee plans will be rolled out as soon as the government got clearance (and enough liquidity).

                  Note that Costas Lapavitsas is an outsider even within the Left Platform, kind of a lonely wolf without all too much traction within Syriza. Unrepetantly advocating a Grexit, he certainly played an important role in dismissing all those horror scenarios ranked around a Grexit, as well as in warning against all too much optimism regarding the Eurozone’s flexibility.

                  His point on MMT isn’t completely mute either. MMT indeed doesn’t offer all to much relevant policy to Eurozone governments without currency sovereignty. AFAIK, MMT scholars have admitted that weakness before (does someone find a source saying so?).
                  So MMT-based policies within the Eurozone will depend on carving out more concessions from the rest of the Eurozone unless European policymakers can be convinced of fully embracing MMT.
                  Now while euro-pessimist Lapavitsas doesn’t see that ever happen, across the ocean, Bernie might make a difference though if he keeps empowering deficit owls like Steph Kelton. So time will tell.

                  1. Lambert Strether

                    “[C]urrency sovereignty” is absolutely a prerequisite for MMT because the State needs discretion over deficit spending, which Greece does not have. I am more in “In case of Grexit, break glass” mode, here. So we will see how Antonopoulos’ program goes. The left platform commitment to deficit targets, however, is absolutely harmful and destructive. We struggle with that here. (Sanders can’t really “empower” Kelton, because she can’t write legislation or regulations. However, it’s a good thing that she is in the position she is in, and it may yield benefits down the road in terms of combating elite zombie ideas.)

            1. Pancho

              Syriza […] has failed to educate the people of the costs and benefits of exit against on-going austerity. The logic of its electoral success was that it could march to Brussels and tell the elites that austerity was over and everyone would shake hands and that would be it.

              True, but that’s been almost half a year ago. Since then, two thirds of the (mostly oligarch-run) Greek media (including the conservative Kathimerini and the liberal To Vima, to name two papers with an English language edition) has been ceaselessly pushing all the risks and consequences of a Grexit into the Greek public. Until reestablishing the ERT network and besides the Avgi newspaper, the Syriza government barely had a mouthpiece in mainstream media at all. So at least since February, the Greek public has been made perfectly aware of the whole range of possible consequences.
              Still, most of them didn’t change their minds and keep supporting an uncomprimising negotiation stance.

              Lately, even the possibly most respected pro-business liberal journalist and talkmaster Nikos Chatzinikolaou, who initially didn’t support the Syriza government, has approached the government’s course harshly dismissing the creditors’ last proposals:

              “The measures they propose show that either they have not understood how much damage their failed memorandums have caused Greece the previous years, or they caused it on purpose, based on a premeditated plan.”

              So, no. People clearly still don’t want the government to bow down. In the contrary, more and more of them are convinced that the creditors’ proposals would lock the country (and themselves) into a deadly downwards spiral.
              The government bowing down would simply result in a new round of even more violent riots, and in even more young people leaving the country.
              We must understand that with a youth unemployment of more than 50%, young Greeks are simply not ready to wait any time longer. They are not willing to “capitulate and live to fight another day.” They want the decision to happen now.

              1. Yves Smith Post author

                The latest polls are moving against Syriza, including holding the red lines, as a mere default looms which is vastly less traumatic than a Grexit.

                Actually, most Greeks may be ready for Tsipras to bow to the creditors’ demands, according to a Marc poll of 1,001 people conducted this week for Alpha TV. In the survey, 50.2 percent of respondents said Greece should accept the creditors’ plan compared with 37.4 percent who said the prime minister should stand firm.


                1. Pancho

                  The latest polls aren’t moving against Syriza at all. Party preference hasn’t changed a bit since April, with Syriza still polling way above the January election results. See this opinion polls timeline (on Wikipedia). Also note that the Marc figures include undecided voters.

                  And the other question in that Marc poll actually referred to a totally different scenario and was worded more like:

                  “If the European partners credibly insisted on a proposal being the final (Take it or leave) one, do you think the government:
                  – should accept the agreement -> 50.2%
                  – seek a rift with the creditors -> 37.4%”

                  Source: Detailed data and charts (in Greek)
                  Now that’s a totally different question than what was purported by Bloomberg. And this specific situation won’t ever happen unless the creditors end up being indifferent towards an agreement vs. default.

        1. Santi

          My answer to this would be “no”. I read it as “we’ll help you to raise taxes and cut to the bone in some places and, with what you manage to extract and cut you can do your damned ‘social’ and ‘humanitarian’ stuff.” i.e., I read it as a trap.

          1. Lambert Strether

            Well, all negotiations are traps of one sort or another. But I don’t think purity of motive is at issue here.

            What you’re saying is that when two entirely new proposals emerge, one for a guaranteed annual income, and the other for a 50,000 jobs program — I mean, who was writing this memo? Bernie Sanders? — there’s no reason to explore it. Right? (And if ending austerity is the issue, then Tsipras should never have agreed to maintain the primary surplus, and if debt relief is the issue, then Tsipras should never have signed off on the original agreement, so “we want these things that are different” won’t wash.)

      1. Lambert Strether

        “Sure it does, but its not us to decide what’s considered the right kind of care by those who are really affected by the situation.”

        0) With “Sure,” you contradict what you said above; see table. Make up your mind.

        1) I don’t think anybody ever said anything about deciding. While I have great respect for people on the ground (and seek out data from such sources constantly, as Water Cooler shows), what you’re really saying is that critical thinking skills can’t be applied across national boundaries. That’s absurd. One can evaluate, critique, and above all, learn from the experience of others. To follow your logic to its ultimate conclusion, NC shouldn’t post on Greece at all. Yes?

        2) The rest of Europe, and most certainly the left in America, is most definitely “really affected by the situation.” If Syriza butchers this, do you really think the rest of the left, world-wide, won’t be affected?

        3) And if you think scooping the financial press is sitting in an “*armchair*”, then… I don’t think you know very much about armchairs.

        4) On the polling, “after everybody had the chance to perfectly understand the consequences.” Maybe. The Greek people, so far as I can tell, think that Tsipras is negotiating, because he’s told them so. On the other hand, we are told here that the putative negotiations are nothing but a clever game of chicken. Which is true?

        1. Sanctuary

          2) The rest of Europe, and most certainly the left in America, is most definitely “really affected by the situation.” If Syriza butchers this, do you really think the rest of the left, world-wide, won’t be affected?

          No, I don’t. Because if Syriza “butchers” this as you say, that entails at the very least default. Countries around the world will be too busy dealing with the financial chaos resulting from that default, with both sides of the political spectrum pointing to what they believe are the causes according to their own political beliefs, reinforcing those beliefs. However, I think it would be net negative for neoliberal/conservative views because it refreshes the public’s mind that financial shenanigans are causing major financial turmoil again and reminding people that banksters still haven’t gone to jail. This, all while an historic country will have collapsed because of said shenanigans. That will just reawaken the public’s suspicion that nothing was fixed.

          1. Yves Smith Post author

            Default is not going to produce financial chaos. Countries default all the time. Look at Russia in 1998, for instance, and this was after a series of financial crises in 1997 in Asia, so the bond markets were already fragile. There was market volatility and some big losers, but no chaos.

            A Grexit is much riskier but Greece won’t Grexit unless the ECB forces it and the ECB therefore won’t force it unless they are very sure they can contain the damage. Now they could do that and be VERY wrong, but the odds are very much against this scenario.

            If Greece really does default, the Greek ruling coalition will be out in less than six months with its reputation badly tarnished. The population will suffer considerably (even worse than now, as difficult as that is to imagine) and the European press will be guaranteed to publicize that heavily. That’s how the left takes a big hit from this outcome.

            1. Pancho

              I disagree with the assumption that the population would subjectively suffer worse than it did in late 2014. In terms of GDP per capita, yes. But not so much in terms of quality of living and certainly not in terms of despair vs. hope.

              Following a default, European and to a certain amount Greek opinion-makers would certainly try to topple the government, possibly leading to Pasok and Potami being taken in, but without Syriza breaking apart.
              And certainly the European media would try to portrait Syriza as a bugaboo, and would succeed with this narrative for a month or two. But in the end this narrative’s credibility would be bound to the Greek public ousting their government which IMHO won’t happen.
              Soon, another narrative would establish, that one of a Greek public that dared to go all-in, unfortunately lost a battle, but rolls up its sleeves to start afresh while keeping course. A short interruption, but not at all a big hit for the European left.

              1. Yves Smith Post author

                A default looks almost certain as to today, so we can revisit this topic in six months. And support for maintaining the red lines fell in as polls as of the end of May, and is likely to fall even further as a default becomes more imminent. Many of the people who votes Syriza in were old Pasok voters, and their depth of commitment isn’t looking as solid as you suggest.

              2. Lambert Strether

                On “hope,” a lot of people got conned with that by Obama in 2008. I know that I shouldn’t project US politics onto other countries, but it still gives me a very bad feeling.

    3. Nathanael

      Well, here’s the thing.

      Even if you know that a negotiation is doomed to fail because the other side is deranged and intransigent (Germany’s insistence on golden handcuffs for the EU), you have to give it a good-faith effort anyway. So Syriza is giving it a good-faith effort.

      They *never* had a good-faith negotiating partner, because Germany is run by hard-money lunatics.

      And you’re being offensively stupid, Lambert, because you’re imagining a solution which doesn’t involve Grexit and doesn’t involve Germany changing its behavior. There isn’t one.

      Or perhaps you haven’t noticed that the short-term pain is *inevitable* given Germany’s behavior. Given that, it’s a choice between
      (a) short-term pain, long-term gain
      (b) short-term pain, long-term pain
      Syriza should certainly choose option (a) over option (b).

  7. john c. halasz

    The Eurogroup proposal sounds like the standard neo-liberal means-testing of benefits in order to really reduce them. And right now pension cuts, (which, given the unemployment rate, especially for youth, are often the only support for families), amount simply to a further recessionary reduction of domestic demand.

  8. docg

    Good catch, Yves. Actually a great catch. This sounds like a very reasonable compromise, actually too reasonable to be for real. My guess is that it was never actually endorsed by the “institutions.” However, there is always a chance it might have been lost in all the confusion. In which case there remains a tiny hope it could be revived.

    Truly we live in “interesting times.”

    1. Lambert Strether

      Your comment leaves me free to say: It’s a friggin’ scoop, and it’s an indictment of the FT and the entire financial press because they did not take the simple expedient of actually reading the documents.

  9. Fair Economist

    Very good catch and from a macroeconomic view a safety net could make up for a big loss on pensions. It does seem like somebody making an honest offer. Now, whether it’s politically sustainable for Syriza to yield on pensions is another matter and there’s still the matter of absolutely intolerable 3.5% surpluses – although I suppose Syriza could take this deal with the intent to welsh on the surpluses in a year or two.

    1. Lambert Strether

      It doesn’t even matter if it’s honest. I mean, we’re dealing with the EU and bankers. The issue is: Was there sufficient reason for Tsipras to keep negotiating (if indeed he is negotiating) rather than p*** all over Juncker and fly home from Brussels and give a speech? I think the documents give the prima facie answer, which is Yes.

  10. Jim Haygood

    ‘Tsipras rejected the creditor offer with considerable vehemence.’

    Looks like Tsipras has decided to go down with guns blazing, like outlaw country singer Randy Howard:

    Howard had been charged with fourth-offense DUI, possession of drug paraphernalia, possession of a firearm while intoxicated and driving on a revoked license.

    On Tuesday night, bounty hunter Jackie Shell showed up at Howard’s home to take him into custody, DeVine said. Howard opened fire, Shell shot back and Howard was killed.

    “He said he wasn’t going back to jail. That’s what he told me,” [Howard’s friend Terry] Dotson said.


    They tried to make Tsipras go to IMF rehab but he said, ‘No, no, no.’ Meanwhile, a stranger than fiction NYT headline today reads, Former IMF Chief Acquitted of Pimping.

    Outlaws versus pimps, comrades. Somebody gonna be carried out dead.

  11. nothing but the truth

    oh thank goodness, Greece retirement situation isn’t as out of control as the Tri State area’s.

  12. Adriatic

    Going through the creditor proposal’s VAT rates the tax on medicine, books and theaters will be 6%. For basic food, energy, water, hotels..11%. On everything else such as processed food, or seafood a whooping 23%.
    Is it me, or are this taxes extra-ordinarily high for any working person, let alone unemployed Greeks?

    1. financial matters

      A VAT tax would not seem to do anything useful in a deflationary environment except as a punitive measure by the controller of the purse strings.

    2. Alphonse Elric

      That’s the Greek proposal. The creditors’ proposal is even worse: 11% for food, medicine, hotels, and 23% for everything else.

  13. susan the other

    Even as late as last nite on MHz (Deutsche Welle i think) there was a clip of Juncker saying seriously that “we need to get this cow off the ice.” As if it were crucial? Gotta get her outa there before she slips thru. I can see why Greece is paralyzed about pensions. Here, it goes unspoken – but, we have QE’d the stock market to all time highs to protect pension funds (imo). So it’s a serious problem that Greece (a tiny country with an almost autarkic economy) probably cannot survive – if pensions are cut too much. And labor. We have crushed labor here since 1980. Greece maintained labor’s share of the economy until the GFC. So compromising either, and certainly both, labor and pensions are a death sentence to Greece’s economy which already stands at 25% unemployment. Greece’s debts should be forgiven by all the bond vultures.

  14. Adriatic

    I was looking at VAT rates in other countries and Greece’s seems to be at a high percentage point, but not extra-ordinary. I still believe that for a country that is experiencing humanitarian crises it should be much lower. One more thing i noticed in the proposal is the long list of companies that the creditors demand to be privatized. This looks like shock therapy for EU members. Maybe an experiment for how to proceed with the rest.

    1. Nathanael

      Demands for “privatization” should be understood as demands for looting. As such they should be flatly rejected under all circumstances; they are not a valid or reasonable thing to include in any negotiations ever.

  15. hemeantwell

    Yves said

    so the seemingly high Greek pensions are due in part to an aged population, in part due to the fact that some of the spending on people under normal retirement age might fall under disability or unemployment insurance in countries with a more robust set of programs.

    I’ve seen anecdotal reporting in this vein, e.g. a Times article referring to a woman who was facing the loss of her job choosing to take retirement. If people are using retirement as unemployment support, shouldn’t we be looking at pre-crisis stats as a better measure of “abuse”? (sorry if this was mentioned about, I didn’t see it as I skimmed.)

  16. Frenchguy

    Actually, 3.5% of GDP of primary surplus is really lenient from the creditors’ point of view. Beligum went close to 5% recently, as did Italy (I think in the 90s, ok). And as a target, it’s quite standard (see: http://ftalphaville.ft.com/2015/06/12/2131811/guest-post-do-imf-set-primary-surplus-targets-for-the-ez-periphery-pass-the-smell-test/ ).

    Furthermore, those are medium targets, made to be missed. If 2% is achieved, I think everyone will already be very happy. Finally, don’t forget that Greece is a net beneficiary of EU funds. I don’t have the precise estimate but it seems to be between 1.3% and 2.3% of GDP and probably the higher number is correct (http://money-go-round.eu/Country.aspx?id=EL or the more dated https://en.wikipedia.org/wiki/Budget_of_the_European_Union). Those funds are a direct transfer from the core countries (+ France and Italy) to Greece. If you take them into account, Germany is actually not demanding much more than a primary balance at 0.

    Feel free to correct me but from the creditors’ point of view, you can’t really be more generous than that and I don’t see them going much lower…

    Ps: as for what the post was actually about (http://www.imf.org/external/np/tr/2015/tr061115.htm): “what I want to say is that for social reasons, basic pensions that are targeted to the most vulnerable groups are being protected. And with the planned rollout of the national safety net, that will further ensure that protection.” Seems the IMF was on board with the Juncker plan.

    1. Yves Smith Post author

      The 1990s were a very different time than now.

      1. You had a background of much higher global/European growth

      2. Olivier Blanchard of the IMF has admitted austerity does not work (but no one on the program side got the memo). And the Reinhart/Rogoff paper on 90% of debt to GDP being a bright white line has also been discredited. Thus even neoclassical economists are willing to concede that lower fiscal targets are reasonable. Even austerity ayatollah Wolfgang Schauble said a reduction from a target of 4.5% was warranted, But again, the IMF program team seems stuck on old formulas.

      3. I confess not clicking through your links now (thanks for supplying them) but IIRC 1% of so of GDP goes to agricultural subsidies. So they are necessary to maintain the vaunted competitiveness, plus they don’t translate at all directly into tax receipts.

      So I do agree the creditors see this as reasonable as a starting point even though it is objectively punitive, and Greece gave a lot of ground by so quickly and eagerly committing to maintaining primary surpluses. This is another area where Greece failed to make a good case. Many commentators were discussing a compromise of 2% as fair.

      1. IsabelPS

        This is the second time I link to Varoufakis’ blog in tempore non suspecto) as an explanation for the easiness with which Greece committed to prmary surpluses and those comments never show up. Is it something against the site’s policies?

        1. Yves Smith Post author

          No, we haven’t done anything of that kind and we see no comment by you pending anywhere in our backstage, so I am at a loss to see what happened. We do have all sorts of weird Skynet-type behavior from our modification system, as in in moderating posts that break no mod rules. But yours didn’t show up anywhere at all. Apologies.

            1. IsabelPS

              This is really weird! As the Spaniards say, yo no creo en brujas, pero que las hay las hay…
              4th time (I think):
              Varoufakis in April 2014:
              “When Yannis Stournaras was telling me, just after Greece’s entry into the eurozone, of his ‘white hole in the pension funds’ trick, he was (I recall) brimming with pride. (Just like the current government is, without a care in the world that the primary surplus reported is a mirage caused by creative New Greek Statistics.) For my part, I admit I congratulated him – back then. My thinking then was that the Maastricht criteria (in my estimation) lacked any serious macroeconomic rationale and, therefore, if Eurostat, and the rest of Europe, were happy to turn a blind eye to Greek Statistics (as they were doing not only vis-à-vis Greece but also vis-à-vis Italy, even Germany), so be it.”
              For me, this could explain why Greece accepted a primary surplus so easily. If it makes “the institutions” happy, why not? If it is a mirage, it doesn’t matter if it is 1%, 2% or 3%. Besides, voters won’t pay much attention to it, as opposed to pensions and salaries.

              1. Lambert Strether

                IsabelPS: I found and approved the comment.

                One thing to remember: Multiple posts of the same or very similar content train Skynet to think you are a spammer, because spammers do just that. So, on the first try, the algorithm guessed (wrongly) that the comment was spam. But by the fifth try, it was sure!

                1. IsabelPS

                  Skynet is too clever by half: I tried to phrase my comment differently but it still realized I was saying the same thing :-)

  17. john c. halasz


    Your “Bulgarian” friend:

    “Tsipras held two hours of talks with European Commission President Jean-Claude Juncker, but neither side reported any breakthrough. “Come in the torture room,” Juncker told Tsipras at the start of their meeting.”

  18. ira

    The latest from Lapavitsas,

    There is no basis for the idea that there are serious differences between the creditors that can be utilized to the advantage of the Greek side. The European elite is well-mannered and speaks politely, but it includes nobody who could be called a friend. When it’s crunch time, the polite negotiators become hard, intransigent, and cynical. This is the way empires have been built in the past….

    There is not going to be a proposal from the lenders that does not entail a high political cost for Syriza and its leadership, because the party endangers the status quo in Europe. The lenders want to demonstrate that Syriza has been defeated.

    There is not going to be a proposal from the lenders that will enable Syriza to implement the Thessaloniki Program. Τhe terrain on which the lenders are gradually drawing Syriza is more and remote from its pre-electoral positions….

    If an agreement is signed on the terms imposed by the lenders, Greece will essentially return to the regime of the memoranda, meaning that there will be no systematic development, unemployment will remain high, inequality will increase, the country will age, and Greece will be transformed into an insignificant pariah on the international scene. If such an agreement is signed, time will work against Syriza. There will be no leeway for an “internal break” from corruption and intrigue and no possibility of social change. It will spell disaster both for the country and for the Left….

    Τhere is little room for maneuver in continued negotiations. The protracted absence of liquidity and funding that has been engineered by the lenders has led the economy into recession. Τhe state is suspending payments and cannot function properly…

    The strategy of radical change in Greece within the framework of the European Union has run its course. This is the most basic and the most important message that has been conveyed by the steamroller tactics of the lenders.

    If Syriza really wants to change society, to avert national ruin, to put the economy back on a developmental track, to secure a new dynamic position for Greece in the international scheme of things, there must be an examination of alternative ways forward.


    1. Lambert Strether

      I went from that link to the previous Lapavitsas link at “alternative ways forward” (also in Jacobin) and what Lapavitsas says is that Greece needs Keynsianism, which they can’t get under austerity. In fact, they can’t get it under the Euro, so implicitly, that’s Lapavitsas’s recommendation. I could wish they read Bill Mitchell on MMT, instead of Keynes….

  19. Sanctuary

    I just don’t believe it was a real offer to Greece. To paraphrase Jackrabbit, I believe it (guaranteed minimum income) was a trick to get Greece to show how it was going to pay creditors and then once that was accomplished, it would have disappeared from the final draft and then the creditors would pressure Greece to just sign it because “time ran out”. After all, that’s what they did in February.

    1. Lambert Strether

      The answer I have above applies to this comment as well. What kind of answer is “It’s a trick?” Any negotiator risks being tricked. Pancho gives polling data that says the Greeks want continued negotiation. Here’s an opportunity to do that. And a missed opportunity, at that. Why?

      1. Sanctuary

        I don’t understand your point. What was there about the guaranteed minimum income and 50,000 jobs to negotiate? It was an unstated, non-emphasized offer buried in an overwhelmingly austere proposal. As someone posted earlier, it was to be funded from the Greeks own austerity efforts. So, once again, Greece has to somehow show how it can meet unattainable/impossible goals and then run a social welfare scheme out of a fantasy austerity program? How is that credible? The entire section is only an exhortation to “review” and “take measures” “gradually”. The crisis is NOW. The initial review is to be done by October, but austerity measures will take effect immediately. The roll out will be “gradual” after January 2016, but the severe austerity is immediate. How is that different from any other game the Troika has played at every stage of these negotiations? They always make empty promises, then move the goal posts after the next austerity program takes effect. Remember the debt relief they promised in 2012? What happened to that? Why should Greece believe this would have been any different?

        I think it is easy to say they should have gone down this path, but our view of this is from a far distance from their day to day dealings with the Troika. In a negotiation, you get a sense of who you are dealing with after a while and you intuitively know what is worth pursuing and what is not. I think their experience is informing their decisions on pursuing aspects they think are truly negotiable.

        1. Yves Smith Post author


          The creditor proposal was all of five pages. The part we cited was the second paragraph on the first page. It was given a very prominent position in a short document.

          Moreover, it is Negotiation 101 to read every proposal provided by the other side thoroughly and parse the language very carefully. That usually requires multiple readings and may require conferring with experts. Failure to do so by a professional hired to act as a negotiator would be malpractice.

          This was the first offer from the creditors, and agreed via a political process, as in Tsipras had gotten what he wanted by driving the negotiations to a political level.

          And please don’t try arguing that Greece rejected this offer. After the speech to Parliament, Tsipras called Juncker to resume talks and was rebuffed. Tsipras was told that Greece needed to negotiate from this document. The Greeks are indeed negotiating from it and sent in two short counteroffers this week.

          As I said in the post, it’s still not clear what the creditors intended. But it was negligent not to have explored it.

          To put it another way, to suggest that Syriza was so inattentive as to not have noticed a new set of elements being introduced into the negotiations is tantamount to accusing them of incompetence.

          1. Oldeguy

            OK, how about this as an explanation of what happened ?
            Tsipras read the document, realized that it outlined the structure of what was mostly likely to be the final outcome of this impasse but also realized that given both his Party’s and broader electorate’s “Red Lines”, to negotiate on its basis would simply make him appear to be a “sell out ” collaborator with the Bad Guys- the current political climate in Greece is not amenable to this capitulation.
            By not pursuing this avenue, and allowing the crisis to go to the point of default, and possibly beyond, two outcomes are possible:
            1) The Troika chickens out at the last moment and caves to avoid risk. Bloodly unlikely but still possible.
            2 ) Default is allowed to happen, a god awful situation becomes so rapidly more god awful that public sentiment shifts to “peace at any price” and the political will to accept the “Reforms” allows Tsipras to
            actually do what he knows today that he must eventually do.

          2. Sanctuary

            You know I finally realized what this “offer” reminded me of and maybe it will make more sense to you why I don’t think this was real. Remember the Kent Conrad co-ops when they were cobbling together Obamacare? Remember the reasoning? “Oh, we can’t let you have a public option that would work, so we’ll let you have these co-op things. Even though we know from experience they can’t work, you get to spin your wheels trying to make it work for the next 2 decades while we consolidate everything else in favor of the existing system.” This was NOT a real offer. It was and is a honeytrap. It’s designed to get the Greeks to figure out how to cut 1/2% GDP out of their existing pensions. It’s funny how that is exactly 1/2 of the primary surplus they’re supposed to run for this year when no one even thinks running a 1% primary surplus this year is possible. I know how this would go. Just like the “debt relief” they promised. The Greeks would spin their wheels trying to figure out how to make the guaranteed income work from their existing pensions, then when crunch time comes and the final draft appears, the guaranteed income provision disappears but the cuts remain and Greece is demanded to sign the document to prevent default. They only just pulled that same trick in February.

            1. Jackrabbit

              Yes. Yves asked if it was a meaningful concession. That seems highly doubtful.

              Much more likely that it is a sparkle pony that is meant to provide Tsipras with an excuse for caving in to Troika demands.

              1. Yves Smith Post author

                Per a mew article by Jamie Galbraith (in which he clearly has NOT read the creditor docs or Greece’s offer, since he’s got several inaccurate statements in it, for instance, he says the creditors want pension cuts this year when the offer clearly says 2016-2017, but he is a close advisors to Varoufakis and thus is a de facto spokesperson for the government), Galbraith says the Greek government said they’d need an unemployment insurance program. The creditors proposed a minimum annual income scheme instead.

                BTW contrary to what Galbraith says, Greece’s ask for unemployment insurance is nowhere in their 47 page document. Proof of their alleged incompetence? The creditors kept saying they sent stuff in bits and pieces, making it impossible to keep track of where things stood. The absence of an important deal point in their official “ask” is consistent with my thesis, that that 47 page document was cobbled together quickly (as opposed to pre-existing) since if it’s not in the document, it’s not considered to be in the deal (I doubt in this kind of negotiation an omission like that would be used as an excuse to treat that point as conceded by Greece, but in a private negotiation, it would be).

    1. Pancho

      Thanks John. Mark Weisbrot indeed nails it:

      Take partner-in-chief German Chancellor Angela Merkel: If there’s one thing she doesn’t want to be remembered as, it’s the politician who destroyed the eurozone. […]

      Everybody knows that if Greece leaves the euro and needs to borrow hard currency for its balance of payments, it will get some from Russia and maybe even China. […]

      Once we take all these interests into account and where they converge, the strategy of Greece’s European partners is pretty clear: It’s all about regime change. […] The unannounced objective is to undermine political support for the Syriza government until it falls and get a new regime that is preferable to the European partners and the U.S. This is the only strategy that makes sense, from their point of view. They will try to give Greece enough oxygen to avoid default and exit, which they really don’t want, but not enough for an economic recovery, which they also don’t want. […]

      So we see the ugliest of scenarios playing out: The people primarily responsible for Greece’s deep and prolonged depression and high unemployment are pushing policies that would extend the crisis and worsen its impact on those who have suffered the most — not to mention subvert the will of the electorate.

      So far, the government is hanging in there, with the latest polls showing Tsipras’ approval rating at 66 percent. It’s impressive that so many Greeks still understand who is responsible for the crisis, in spite of the balance of media prejudice against the government. It’s vitally important, because Greece’s adversaries are counting on being able to deceive them.

      That’s why I characterized these negotiations as being a farce from the very beginning. I’m not saying though that the farce won’t ever morph into a real negotiation. That may happen if Syriza’s keeps consolidating its position while watching the creditors’ position deteriorate and finally collapse.

      1. Yves Smith Post author

        Huh? The latest polls for Syriza v. other parties all show Syriza’s approval in the 35% to 37% range. It’s been that way for well over a month. There was one outlier that IIRC showed 45%. None show anything dimly approaching the figure that Weisbrot tossed out.

        1. Pancho

          Weisbrot is correct. He refers to Tsipras’ personal approval, not to party preference.

          The mid-May Public Issue Political Barometer gives:
          – 63% preference over Samaras (vs. 20% Samaras; 14% none)
          – 77% with a positive opinion about Tsipras (vs. 22% with a negative opinion)
          – 48.5% voting intention for Syriza
          Now choose one. All of them are signs of an extraordinarily high (and once again even rising) popularity.

          1. Lambert Strether

            Correct for some definition of correct. “[T]he government is hanging in there, with the latest polls showing Tsipras’ approval rating at 66 percent.” The government’s approval is one thing; Tsipras’s personal approval is another. Weisbrot conflates the two.

  20. dbk

    It isn’t entirely clear even after several readings what the “GMI” meant to suggest , and given that no figures are hinted at, it may have well been intended as a poverty-level guarantee, say 300 euros a month.

    Here’s a summary of the pension system benefits (sketchy, but gives some idea) in 2014:

    One interesting point I have almost never seen raised is that in the two rounds of “enhanced austerity”, pensions have already been slashed between 40% and 50% across the board. The public service’s “lump sum” payout upon retirement is also anticipated to be only a fraction of its nominal value, or of the contributions a typical civil servant makes over the course of 35 years; in fact, friends of mine are receiving (if they receive them at all; the average wait is 2+ years and rising, for obvious reasons) substantially less than they paid in over the course of 35 years. (I note that contributions were heavy, and taxation at source for all civil servants).

    Another thing I have rarely seen discussed in detail is the cost of living in Greece in comparison to other EU countries: here’s a mid-2014 chart:

    Athens is currently ~ as expensive to live in as Berlin, and more expensive than such well-known Western European cities as Dresden, Madrid, and Barcelona. I do not understand how people will live on 40% (or less) of their anticipated salaries/pensions when the cost of living has remained at Western European levels and shows no sign of going down. The possible exception is housing sales, but the real estate market is dead anyway, since no one can afford to buy a flat. Rents for a family of four (2 bedrooms, kitchen, living room, 1 bathroom) run between 300 and 600 euros, which is about the amount that the first two rounds of austerity have cut the average working wage to. New teachers (high school) make about 7000 last I checked;university professors at associate rank make about 12,000
    Retired full professors with 35 years of service make about 1200 a month (minus substantial obligatory contributions).

    It is understandably terribly difficult to design a comprehensive social welfare system for a foreign country on the fly – and as we have learned from Yves’ many posts, when one is dealing with money and creditors, everything has to be done yesterday. There simply is no time to initiate the sort of changes the Troika demands, and my impression from an enormous amount of reading over the past five months is that the technocrats have technocratic skills galore, but have not comprehended Greek society except in generalizations and stereotypes (which is common and understandable, but counter-productive for both creditors and debtors).

    Here’s one example of how complex such outside-imposed cultural interventions are: I note that there is enormous hostility to Greek women who take early retirement (with vastly reduced benefits, of course; less than half). Why would the Greeks do such a strange thing, foreigners wonder. The answer is that Greek women who are mothers (remembering that Greece has a very serious demographic deficit – the birth rate I saw most recently was 1.2 per woman) were given the opportunity to buy out their contributions, with 1 year of work credited to the first child, and 3 to each succeeding child. This was an effort to encourage childbearing. But why was this necessary? The reason is that Greece has no universal creche/nursery/preschool system; thus, women are forced out the workplace until their infants are old enough to go to “pre-K” (if they are lucky enough to get a place in one). Infants under 2 are not accepted anywhere. Thus, this system was an indirect acknowledgement that the social infrastructure de facto forced working women who bore children to stop work and stay at home for anywhere between one and seven years, depending on the number of children (1-3).

    Is Greece alone in granting early retirement to the military? My father, a WWII veteran, went on to serve 20 years in the United States Army Reserve as an NCO (Sergeant Major), and retired with full benefits. Greece has a rather skeletal standing army composed of career officers; its soldiers are conscripts (obligatory military service for all Greek males, ranging between 9 and 19 months currently); soldiers are paid pocket money to buy a coffee out when they’re on leave, or buy toothpaste and other necessities. Families must pay all associated costs with obligatory military service by their sons, and I know families who are unable even to purchase the minimum uniforms/gear.

    As for one of the most popular floating memes: “those lazy, tax-dodging, ouzo-drinking” wastrels. This seems so incongruent with the lives of Greeks I lived with daily for 40 years, or those of Greeks forced to leave the country in absence of work (it is estimated that 200,000 have now left and will remain permanently abroad). My husband worked 12-15 hours a day, 7 days a week, for 35 years, and so did his coworkers and colleagues – and he is desperately trying to obtain another job abroad, because we cannot survive on his pension. We both anticipate we will have to work until we are 80, if we live that long. My son, who was forced to leave together with nearly his entire cohort of classmates, works 60 hours a week (6 days) and considers this eminently reasonable.

    One final note: the program reference above, viz. to put 50,000 people to work, was not the Troika’s. This proposal came from Levy Institute researcher Rania Antonopoulos, now “Under-Minister for Combating Unemployment”. The funding mechanism, however, is the Troika’s.

    I have benefited more than I can say from Yves’ countless posts, and agree that the analysis (of the negotiating strategies or rather, lack thereof) has been invaluable. Perhaps Italy, or Spain, or Portugal will be able to avail themselves of them in future. Alas, all the analysis – the finest possible analysis – in the world will not alleviate the destruction of an entire people. Yet another Greek tragedy in an endless series of conquerors/occupiers – the Romans, the Byzantines, the Ottomans, England/France (after 1821), the Germans (WWII 1941-1944), and now this latest incarnation. Let us hope that Lazard is working closely with the government’s economists in strategising the default, since as Yves has constantly reminded us, “strategy is key”.

    1. Oldeguy

      Please understand that the questions I am about to ask are sincere- not sarcastic.
      1) Is it the Greek Position that the Problem is the Debt itself and not Structural Deficiencies in the Greek Economy so therefore: Cancellation = Cure ?
      2 ) Does the Greek Position acknowledge ANY of the indebtedness as being legitimate and worthy of repayment ?
      3 ) If all or a large portion of the Debt were removed, would Greece be a prosperous, self supporting country on a par with the Northern part of the EU and, if not, why not ?
      4 ) Should Greece be in the Eurozone ?

    2. Oldeguy

      Please understand that the questions I am about to ask are sincere- not sarcastic.
      1) Is it the Greek Position that the Problem is the Debt itself and not Structural Deficiencies in the Greek Economy so therefore: Cancellation = Cure ?
      2 ) Does the Greek Position acknowledge ANY of the indebtedness as being legitimate and worthy of repayment ?
      3 ) If all or a large portion of the Debt were removed, would Greece be a prosperous, self supporting country on a par with the Northern part of the EU and, if not, why not ?
      4 ) Should Greece be in the Eurozone ?

      1. dbk

        My (personal) responses to each of your 4 questions:

        1) The debt is obviously a crushingly severe problem, but the impossible-to-bridge issues involve what the Troika refer to as “structural reforms”. The Greek government does not define “structural reforms” in the neoliberal austerian sense, but rather in (modified) Keynesian terms, with the objective of building a just and sustainable state. The Troika’s “structural reforms”, if implemented, would lead in the opposite direction.

        2) On the legitimacy or not of the debt (now 180% of GDP). A major Parliamentary Committee has been convened to conduct painstaking and detailed analysis of all the debt. The Parliament (Government) has retained Eric Touissant as adviser to the Committee. Here’s a link: http://www.thepressproject.net/article/75514/Parliamentary-audit-committee-on-public-debt-starts-work

        3) No. Greece will never be a “mini-Germany”. Greece, due to repeated wars in the 19th / 20th century never developed a genuine heavy industrial production base. Its strengths lie in entirely different sectors such as high-end (luxury) food production and future energy source exploitation in the Eastern Aegean (enormous natural gas reserves), in alternative energy sources (one of these remains as yet practically untapped – geothermal), and in practicing the profession they have engaged in since the Aegean Bronze Age (again, for geopolitical reasons), viz. merchants.

        4) That is the $64,000 (add as many zeros as you like) question. Greece is the easternmost country of Western Europe, and the westernmost country of the Eastern Mediterranean. It identifies itself intellectually with the West, but history and geography dictated that it was in many ways an Eastern state. Its economic infrastructure remains profoundly indebted to ~5 centuries of Ottoman occupation and the total razing of the country in World War II by the Germans. I am inclined to classify it as an emerging, as opposed to developed, economy (again, for historical reasons extending back at least 5 centuries). The degree to which it is beneficial for an emerging economy to be a member of a bloc of super-developed economies is way above my pay grade.

        1. Nathanael

          (4) To follow up on the question “The degree to which it is beneficial for an emerging economy to be a member of a bloc of super-developed economies is way above my pay grade…” it isn’t above my pay grade.

          Paul Krugman has answered this definitively, and trade is actually his area of *professional expertise*.

          If an emerging economy is a member of a bloc of super-developed economies there are three cases:
          (1) a different currency. Mostly good economically, though it can lead to export of skilled labor and export of high-value manufacturing (leading to a “low wage work” specialization).
          (2) same currency WITH fiscal transfers. Mostly good economically, though it can lead to export of skilled labor and export of high-value manufacturing (leading to a “low wage work” specialization).
          (3) same currency WITHOUT fiscal transfers (Eurozone). Unmitigated disaster guaranteed to fall apart.

          So, Greece should not be in the Eurozone. Unless the Eurozone develops a “federal budget” which transfers money from Germany to Greece in large quantities on a regular basis, which seems unlikely.

  21. John Jones

    To Yves and Lambert

    Sorry this is late. I just wanted to apologize for my posting on your article:

    Did the Media (and Greece) Miss a Meaningful Concession by the Creditors?

    I am sorry for my posts and for ruining the article and taking the comments off course. It wasn’t my intention. I am simply frustrated by having to defend Greeks and Greece all the time from negative and racist media ,comments and people and trying to do it with my lack of education. So I got frustrated and lashed out at a perceived negative and not full picture on pensions by Vroutsis been used.

    My link to the OECD on pensions was also not meant to be extra work for you. I simply don’t have the education to understand it that well. So I just thought you would find it useful if you had not already seen it because you were asking for information about Greek pensions in a previous article. And I thought that you would be able to understand it better than me because of your education.

    I am sincerely sorry again. I hope you see this and accept my apology.

Comments are closed.