Greece Asks for Last Minute Deal Before Bailout Expires

So much for that referendum! Just kidding!

I don’t see how this can get possibly get done, but the Eurozone has made and art form of extend and pretend, so if anyone could possibly pull it off, this bunch could. Letter embedded at the end of the post.

They are also applying for a third bailout. The Greeks recognize they can’t go it alone. And I don’t see how the government has any credibility after its full-bore effort to secure a “no” vote on the referendum. From the Wall Street Journal:

Greece on Tuesday asked for a new bailout amid a last-minute diplomatic push to seal some kind of agreement before the country’s current rescue deal expires and it defaults on a payment to the International Monetary Fund.

The Greek government submitted a proposal for a two-year agreement with the eurozone bailout fund in order to cover its financing needs and restructure its debt, according to a statement issued by Prime Minister Alexis Tsipras’s office.

Eurozone finance ministers will discuss the Greek request in a conference call Tuesday night, said Jeroen Dijsselbloem, the Dutch finance minister who presides over these talks.

There are big questions over whether the eurozone would consider Greece’s request. While European officials have said that a new aid program would be possible, it would require Mr. Tsipras to accept the policy overhauls and budget cuts he has so far rejected. Many officials also don’t trust Mr. Tsipras and his government to implement these measures.

Note the British understatement:


Print Friendly, PDF & Email


  1. MyLessThanPrimeBeef

    Will any new (proposed) agreement, not to his liking, have to be decided with yet another referendum?

      1. thomas barton jd


      2. Diego Méndez

        I guess they must be putting workers’ free voting hours into the calculation. It’s not the printed paper, but, you know, food for the people attending voting tables, unworked time for public-sector workers, policing, etc. Most of that cost won’t mean an additional cost to the public budget (the expenses would have existed anyway), but FAZ likes to… you know, manipulate. You have monthly referendums in Switzerland, so it is a viable strategy; I would say the cost of not doing them is much higher.

        1. Lambert Strether

          Does anybody know how the Greek polling places are organized? I’ve seen comments that some people would have to travel, which could be hard with the ATM cash limits. (Not in Athens, of course — Syriza’s base — but the countryside and the islands.

          * * *

          “I would say the cost of not doing them is much higher.” I think you’re equivocating between cost in money and societal cost.

          If something costs $1000, and I only have $100, it doesn’t matter whether the $1000 ultimately makes my life better.

          1. IsabelPS

            Until recently where a new “citizen card” was introduced and people’ voting place was automatically moved to the place of residence (which created mayhem in the first elections because many people didn’t realise that), people in Portugal didn’t bother to change their voting place whenever they moved around. So they could indeed be registered very far away from where they lived. It could be the same in Greece.

          1. Yves Smith Post author

            The “this is all better in a year” view is, without stating it, based on what happened with Argentina. We’ve repeatedly stated why Greece is not like Argentina, as has Varoufakis, and the results will be much worse. Moreover, the Greek government also clearly is not of this view, otherwise they would not be seeking a desperate deal. If they got a no vote, they could leave the Eurozone. They rejected that idea fiercely when European leaders pointed that out. If the leadership is not fully behind the idea and working full bore to make it worse, it will be appallingly bad, a real plunge downward with no recovery, since the new systems (most importantly related to new currencies) won’t be introduced quickly (which even under the best of circumstances won’t be quick) or well.

            1. John Zelnicker

              Yves – I know you are familiar with Bill Mitchell’s work. Both of you are using the same monetary framework for analyzing the possible impacts of a Grexit and return to the drachma, i.e., MMT. Yet the two of you are reaching almost diametrically opposed conclusions about the results of such actions.

              Bill says it is the only viable solution and Greece can recover soon enough once it has regained its monetary sovereignty. You see little but tragedy and very long term hardship.

              My question: What do you see as the key difference in your analysis as opposed to Bill’s? What is he missing that you see as a critical ingredient in analyzing the Greek situation?

              Thank you in advance. Your coverage of this debacle is fantastic and a much needed antidote to the propaganda and dissembling that comes out of the MSM.

    1. alex morfesis

      no one in business or politics “trusts” anyone…

      at least not in the modern world…too many changes
      in life, too many other options

      they come to understandings…

      I have dealt with one too many sharks…

      but they are the ones which I have had the easiest dealings with…

      we all knew what we were capable of…so no one needed to waste time
      testing the edges…

      and as to virginity…it’s over rated…

      1. RabidGandhi

        Gorbachev trusted Nato “not to move one inch to the east”. Wonder how that worked out.

        1. alex morfesis

          they moved “more” than an inch, so they stuck to the language of the agreement…

          just not the intent

          trust is a wonderful word, usually backed up by lead when it has to
          do with modern nations

          but there are hardly enough tanks in europe to even have a decent parade, let
          alone fight a war, on either side…

          Gorbie and his crew had more oil, more diamonds and more land…but…

          they did not and do not seem to have a way to convert that into a sustainable scenario…

          NATO noise is cute, but europe still needs its natural gas…and if they choose qatar instead, russia just focuses on energy intense industries and crushes the competition with subsidized energy costs…

          if russia would bother thinking forward 10 years…

        2. different clue

          Bush the Elder upheld that understanding and kept the personal gentleman’s agreement promise. It was the Clintonite Administration which betrayed and doublecrossed Russia.

      2. PeterD

        “and as to virginity…it’s over rated…”

        I wouldn’t say that about Laconia extra virgin olive oil.

  2. juliania

    Sorry, that letter is unreadable, at least on my machine. Is there any way just to print it out?

    (As I understand it, the referendum is still on, so I don’t understand the snark.)

    1. Yves Smith Post author

      The letter IS unreadable. You need to download it and read it enlarged and even then it’s hard. The totally goofy and faint fonts are in the original document.

      1. juliania

        Thanks – I went to the Guardian, expanded as much as I could and got the following:

        “Dear Chairperson, dear President,

        On behalf of the Hellenic Republic, (“The Republic” or “Greece”)), I hereby present a request for stability support within the meaning of Articles 12 and 16 of the ESM Treaty. . .”

        Two questions arise for me. First, the question of why the letter was put in this format (It’s a short letter as I see it) and second why is it being approached as if it were incomprehensibly stupid? It seems to me it is being presented in a barely courteous manner as a formality – that would be indicated by the ‘hereby’, as well as the format. The motions are being gone through, barely, in a legal sense. Sort of a ‘take it or leave it since I am obliged to do this by my position as leader of all the Greek (Hellenic!) people.’

        It reads as a legal document I mean.

        Thanks for all help in comments below. Look forward to analysis of the term “stability support”.

        1. NOTaREALmerican

          Re: Look forward to analysis of the term “stability support”.

          It usually means: keeping the existing top 5 or 10% living in the style they’ve grown accustomed too. But, assuming that the top 5 or 10% are smart-n-savvy enough to have reached the top 5 or 10%, one would also assume they were smart-n-savvy enough to have gotten their loot out of country. They sure had enough time to plan for it, no?

          So, that means “stability support” – in this case – means: enough money to keep the bottom 90 or 95% from trashing the country when they realize the top 5 or 10% took all the remaining loot.

          The MOST important thing now is a good scape-goat to blame for all this.

          1. susan the other

            This just in on CNBC: Tsipras willing to call off the Referendum for a good deal. No kidding. They should change the joke from Groundhog Day (If this is Greece it must be Groundhog Day) to Whack-a-mole day. We need another holiday.

            1. Yves Smith Post author

              So now they are seriously trying to pretend that the referendum was a bargaining chip to trade with the creditors, that it was so scary that it will lead to concessions? This is their cover for the big walkback?

              1. MyLessThanPrimeBeef

                Still, diplomats, especially civilized (or feeling the burden to civilize the rest of the world), European diplomats, should never be caught calling their counterparts clowns and not adults…at least not publicly. They can say whatever they want privately.

              2. larry

                OMG!! The Greek govt is becoming more incoherent with each passing day. This is becoming absurd.

          2. larry

            You are mistaken to think that you have to be smart and savvy to have reached the top 5 or 10%. You really only need to be psychopathic and work within a psychopathy friendly environment. Robert Hare considers that most corporations have become much more psychopath friendly over the past 25 years, the years of the ascendancy of neoliberalism and its cousin, neoclassical economics. In addition to lack of regard for others, two of the personality disorder’s traits is an extreme form of narcissism and no conscience.

            The scapegoat, from the Greek perspective, is already in place, the Troika. Especially the IMF. At least, that is what the Greek govt has been arguing. But these aren’t truly scapegoats. They are the true engineers of this crisis. And from the Troika’s point of view, the Greeks are to blame for their misfortune, simply because their govt doesn’t like the country being destroyed by the Troika’s austerity program.

            Now that both sides despise each other, I can’t see how they can work together. As for the threat that leaving the Eurozone means leaving the EU, this is rubbish. The UK left the Eurozone many years ago and there was no question that they would leave the EU. These are two separate questions which the Troika, for their own venal reasons, want linked in the case of Greece.

    2. shash

      Download the PDF and see – it’s a bit better than the embed.

      But that font! My eyes bleed nevertheless!

      1. brian

        I am surprised they did not use comic sans.

        But seriously, I am beginning to think the Greek government have no strategy and no plan. Everything they do seems to be random. I get the feeling they sit in a room like in a monty python sketch, coming up with more and more stupid ideas.

        This is the problem when protest parties actually get to govern (see lib dems in last UK parliament as a another example)

        1. different clue

          The question has been asked before . . . given that the great majority of the Greek public were desperate to remain within the Euro, what was Syriza or anyone supposed to have done?

          1. Yves Smith Post author

            Serbia was able to change public opinion radically with six weeks of propaganda, um, PR. The government never made a case for Grexit. We happen to think that was right, particularly the more news comes out about how hollowed out the government is. No way could they begin to manage the massive dislocations and currency change.

  3. NOTaREALmerican

    The opposite is Austerity is ? __________________

    More debt for more grow-t. There’s no other choices available.

    Let us pray:

    We must borrow more money,
    To stimulate demand,
    So that jobs are created,
    And prosperity ensues,
    Then we payoff our loans.

    May it repeat forever and ever, Amen.

    1. BondsOfSteel

      You’re assuming the money gets paid back.

      In that case, the choices are austerity to save to pay the money back, or borrow to pay the money back.

      The third option is to default and not pay it back. Of course, this will keep lenders away and cause all kinds of political backlashes since the first bailout was to bailout the foreign banks and move the debt to taxpayers.

      The solution then was to extend the bond out 50 years as a way of defaulting and using inflation to keep the Greeks from paying the money back in 2015 dollars. They just didn’t move enough out far enough to make the numbers work the first time.

      1. paulmeli

        “…the choices are austerity to save to pay the money back, or borrow to pay the money back”

        Borrowing to pay money back maintains or increases the outstanding balance, so no money is ‘paid back’. The loan is ‘rolled over’. This kind of debt can never be paid back, as it would collapse any economy if tried.

        I’m pretty sure that in order to ‘save’ to pay money back would require running a trade surplus instead of a trade deficit…austerity without this would never produce (a gain) the funds necessary.

  4. Cugel

    Meanwhile the unraveling of the Eurozone continues despite the smug stupidity of the EU ministers and parliamentary leaders:

    PARIS — To each his own. Greek Prime Minister Alexis Tsipras’ announcement on Saturday that he plans a referendum on the European Union’s proposed bailout plan has been strongly applauded by the leadership of France’s National Front party. While financial markets plunge into disarray as rumblings of a Greek exit from the eurozone grow louder, the party of Marine Le Pen rejoices over this “beautiful democracy lesson” addressed “to the Eurocentric class.”

    “Saturday’s press release on the National Front’s reaction to Tsipras’s referendum decision claimed something prophetic. “One day will come, very soon, when the French people themselves will also decide about their future, their sovereignty, their prosperity and their liberty by referendum. This referendum will not be organized by the leaders of the UMP and the Parti Socialiste, but by patriots committed to democracy and the power of the people.”

    Marine Le Pen’s right-wing party has been refining its ultra-nationalist message since 2012, and demanding a referendum, and now stands to benefit mightily from public perceptions growing all over Europe that an overbearing Germany is once again trampling the continent under-foot.

    It’s been obvious for months that the only victors in the Greek death spiral will be either the extreme left (unlikely) or the ultra-nationalist and Nazi right.

    We haven’t even gotten to full Grexit yet and the nationalists are already gleefully sharpening their swords over the demise of the Eurozone. How the blind imbeciles in Brussels couldn’t see this coming is hard to imagine.

    1. Yves Smith Post author

      Marine Le Pen has been notably late in talking up Syriza. If she though they were real, she would have found a way to piggy-back months ago. She’s riding the media blip of the last few days. With Syriza looking foolish after having made this great row about needing voter approval and how that would intimidate the creditors into given them a tougher deal. Two days of a bank holiday and Syriza leaders realizing they might suffer interruptions in their supply of white wine has led them to rethink their referendum plans.

      I’ve said Syriza will set what is left of the left in Europe back ten years. This is playing out according to script, sadly. This is just going to strengthen the creditors’ hand everywhere save in Italy and France, which are the only countries big enough to stare them down.

      That referendum gambit was all about Tsipras trying to get out of the corner he painted himself into and it didn’t work. From the Guardian:

      The collapse of Greece’s corrupt political centre was marked earlier this year by the election of the left coalition, Syriza. Its success was built on the lie that it could deliver the same financial aid with fewer of the austere strings than its predecessors. Now that this lie has run it course, Syriza has abdicated responsibility for its own failure.

      The result will be a referendum this Sunday with a crudely designed ballot in which the “no” box is given top billing and the question is framed in almost meaningless bureaucratic language. Greece’s prime minister, Alexis Tsipras, who has gone into full obfuscation mode, will push for a “no” vote without any discussion of what that would mean. In other words, the Greek government will now campaign to have its own failure at the negotiating table endorsed by the very people it will hurt the most. And there is every chance this deception will succeed.

      It has been clear that the choice awaiting Greece was a future that looked like Portugal, a degraded economy of the European south; or Serbia, a proud nation led into the international wilderness by populists’ lies and fantasies of Russian rescue. Neither are good choices, but one is incalculably worse than the other.

      Now is the time when the lazy lie of Greek exceptionalism, dripped like poison for decades into the country’s dysfunctional, nationalistic education system, will find its full expression. Bankruptcy, rupture and isolation will be welcomed with unfathomably foolish pride. The giddy talk of a second “oxi day” (the anniversary of Greece’s second world war refusal to surrender to fascist Italy) will not be calmed. For all its lunacy a “no” vote looms.

      Outsiders will look on in bewilderment. Unlike money, there is plenty of blame to go around. The scramble to avoid responsibility will be excruciating, as the press conference on Monday by European Commission head Jean-Claude Juncker demonstrated. But this shambles will be of comparatively little consequence for those outside Greece.

      The return of the drachma will bring misery with it. Devaluation, runaway inflation, shortages of food and medicine will be managed by an administration and populace whose default response is to blame enemies abroad.

      Many critics of austerity who cheer on Tsipras wear their ignorance of Greek specifics like a badge of honour, with the US economist Paul Krugman a particularly egregious example. Others, like the British broadcaster Paul Mason, who is steeped in the lore and mores of the Greek left, are willing to see the country used as the vanguard of a doomed challenge to capitalism. Perhaps when the coffee runs out – for all its sunshine Greece lacks the altitude to grow it – a reflection point will be reached. By now I doubt even that. In the Greece we love and are all complicit in creating, there will be no end to lies.

      1. Oldeguy

        With all the the respect that is due ( no sarcasm ), just what exactly should have Mr. Tsipras and his party have done to extricate their people from the grip of lunatic Bankster Austerians ?
        If meeting the Troika’s demands was ( deservedly ) political suicide and even if that were not so would deepen the country’s current depression and merely facilitate the acquisition of new debt to pay old debt, what would Yves have done differently if she were in charge ?
        Legit question- no snark.

        1. James Levy

          Yes, too many around here seem to say “don’t fight, don’t give in, don’t lose to the banksters, don’t impoverish the people” then talk about how Syriza wants it both ways!

          If, as many now maintain, the Troika were never going to concede a goddam thing, then how is it the SYRIZA has fucked everything up??? What Yves et al. seem to want is for Syriza to lose (which they seem to maintain was inevitable) but look good doing it so as not to hurt the cause of “the Left.” Well, it’s time to put up or shut up. I envy the Serbs for having some balls, as I do the Russians. Being the bank’s bitch is no way to live. It’s time for the Left to fight, not capitulate because giving the banks the fingers is “hard.”

          1. Yves Smith Post author

            Syriza was not fighting in any kind of serious way. I hate to be harsh, but you’ve bought their bullshit. Throwing china in negotiations, which is the most serious thing they did, is not fighting. You as a military historian of all people should be able to look at this dispassionately.

            This was a party that had never been in power, composed largely of academics that were constantly showing how divided they were (contradicting each other in public). They DID want it both ways. To change metaphors, wanting to end austerity but stay in the Eurozone when you are indebted is like being married to an abusive husband, clearly knowing he is abusive, complaining about to everyone, but not being willing to leave him because you like the house.

            Syriza had only two courses of action, ultimately. It could negotiate the best deal it could or leave the Eurozone. When you are bankrupt and continue to need money and support from the creditors (in consumer terms, you need to still have a credit card so you can travel, otherwise you won’t be able to work and will be utterly destitute), you don’t poke the other party in the eye and make this about your rights and your manhood. The creditors don’t. You recognize that you are in a weak position and figure out how to cut a pragmatic deal that gets you as much as you can. And you do it out of the public eye since you might be able to work out fudges that serve the optical needs of both sides. Syriza’s pension red line position was a fatal mistake. This was a charged issue on the creditor side, since many of the countries that have to fund the pension have more meager program. How can they justify asking their citizens to put money towards a BETTER deal for the citizens of other countries? Syriza never made any kind of a public case for the fact that their pension system was costly because it was a multipurpose social safety net. It was used in place of other programs like unemployment insurance and food vouchers.

            As we wrote, the creditors evidenced some recognition of that issue. Their first proposal, the five pager that set forth the parameters under which a deal had to get done, called for the government to design and implement pretty pronto a minimum guaranteed income. That is a cheap to administer social safety net that would make up for some of cutbacks in early retirements under current programs (IIRC, over 22% of pension spending goes to people under 60). There was not corresponding proposal on from the Greek side! They were so stuck on their red lines as to not allow for compromises that would have met their concerns, not leaving the poorest with no support, while satisfying the creditor need for pension cuts.

            If they really were going to fight, they needed to take downside scenarios seriously and plan for then. They are clearly unwilling to do a Grexit and have not prepared for it. If there was ever any doubt of that, the fact that they came back so quickly to the negotiating table after all their bluster of last weekend is proof. It was obvious from the second they took office that the ECB had them by the balls. The Greek banking system is bankrupt and exists ONLY due to the ECB bending all sorts of rules to prop it up. All they have to do is stop supporting it and it’s game over, as we are seeing know. And the ECB did that to Cyprus in 2012! We wrote about that at length. Trying opposing the creditors and having no idea what they could do, when you had a clear history from their earlier actions, is gross, abject incompetence.

        2. steelhead23

          Rather than ask Yves, leave the question open to commenters – What should Syriza have done? I’ll raise my hand first – aggressively go after tax scofflaws. I have seen estimates of a billion euros per month to 30 billion per year goes uncollected. In my view, that would change the dynamic in the negotiations. Who are those scofflaws? Why, I wouldn’t be surprised if they include a few banksters, perhaps even a few who are friends to the players in the Troika. Nothing like getting your fingers burned to reinforce mommy’s edict to “never play with fire.” No, they could never recover enough back taxes quickly enough to pay their bills – that’s not my point. When Madame Le Pen and Mssr. Junkers start getting panicked phone calls from their friends, their tude just might change a smidge – and suddenly Varoufakis’ overly smug visage would become appropriate.

          1. Pookah Harvey

            Varoufakis found he had 100 tax collectors, for a population of 11,000,000, when he entered office due to the austerity cuts. Now the troika want to increase those cuts. On top of that the oligarchs have control of the judicial system making it almost impossible to get a timely judgement.

            This is the insanity of the neocons. The Republicans in the US have cut the budget for the IRS and the CBO estimates that for each dollar of cuts the US loses $3 in revenue. This from a party that says one of their main worries is the deficit.

            The loonies are running the mad house.

        3. washunate

          This I think is one of the great services NC has provided. Due to Yves’ tenacity, we were able to live this in real time and have a record to refer to in the future. As politicians all over the western world claiming to uphold leftist perspectives have demonstrated, it’s all words. What matters are the actions.

          My two cents at a stab at your question:

          1) Not appoint Varoufakis. He’s sensationalist, an affluent globalist, who has spent a significant chunk of time in the Anglo-American world. That is not necessarily bad, it just wasn’t a good fit for this kind of diplomatic situation (unless, of course, that kind of abrasion is exactly what Tsipras wanted…)

          2) Make a clear statement – publicly – that Greece intends to reject the socialization of bank losses from fraudulent financial activity. The invitation to friends of Greece everywhere is to help them figure out how to renounce their debt, not help them figure out how to pay it.

          3) Accept the unpleasant reality that number 2 may run into significant pushback and be prepared technically and politically to implement countermeasures should number 2 run into very predictable resistance. This is called hoping for the best and planning for the worst, a fundamental guide for responsible policy making. Also note that Syriza supposedly has opposed the bailouts from their inception. So they have had five years to be making plans along these lines for once they were able to move into positions of power.

          4) Refrain from making mutually exclusive and confusing statements like simultaneously appealing to Greek nationalism while also advocating to remain part of EMU. Either fully accept Frankfurt as the heart of monetary union, or fully reject it and reintroduce the drachma. Any lukewarm compromise is untenable. There is no middle ground. A government either exercises monetary sovereignty or it does not. Force the EU to explain why the UK gets to use the pound but Greece cannot use the drachma.

          5) Offer some kind of concise, non-technical strategy statement or vision or whatever lingo you prefer to explain what a real leftist alternative is to those ‘lunatic Bankster Austerians’. In short, does Greece want to be part of an integrated Europe or not? If so, then what is different about the Syriza vision from the present arrangement?

          1. PlutoniumKun

            Thats a pretty good overview of what should be done.

            I’ve been following this with a sense of despair for months – I’ve been desperately hoping Yves is wrong in her ongoing analysis and assessment, but sadly it seems she has been right (as so often). I did assume Syriza had some sort of strategy, but it does seem that they simply believed that default was such a nuclear option that they could just face the Troika down, and that leftist supporters around Europe would build strength around them. They seem to be suffering from some sort of groupthink whereby they have simply been unable to face the fact that they don’t have any serious cards to play.

            The one thing I would say about your alternative is that I think pursuing unpaid tax was never realistic. It does seem that Greece has a particularly weak bureaucracy – coming to power in Greece is not a case of being able to assemble your civil servants on day one and say ‘here are your instructions’. That sort of structure doesn’t exist – previous government essentially ran things through political appointees. Syriza simply doesn’t have the people or experience to run a country like Greece – at least not without a few years to assemble the needed structures. I’m sure they would love to chase down all the unpaid tax, but its long gone into Swiss bank accounts and London property.

            Its an unfortunate paradox of revolutions that the people who are best equipped to win a revolution are often the worst equipped to run the country if they win. Syriza seems to be stuffed with people who can talk all day about Greek history and Marxist dialectics, but when faced with the reality of governance, will just walk away.

            But ultimately, I don’t really think they even could have succeeded. There was no way they could realistically recruit major European countries in support – each country (including those with left wingers in government) had a good reason not to support them, whether it was the money owed, or being subservient to the ECB/Germans, whatever. Greek institutions seem to be chronically dysfunctional – it would take a generation to create a workable tax and welfare system that is fair and works.

            In the longer term though Yves is right – I don’t doubt that Syriza’s failure will damage Podemos in Spain and will only boost the likes of the Front National in France. There is a good chance that Sinn Fein will do very well in Ireland, but they will have seen what happened, and take a much more conservative approach to economics.

            1. MyLessThanPrimeBeef

              ‘…weak bureaucracy…’

              I found a chart from Business Insider that had public sector worker percentage (of total employment) and Greece was right around there at 30% with France, Italy and Germany (this was back in 2011).

              US at around 18%, China at around 50% and Japan the lowest on the chart at around 3 or 4%.

              My impression is that Japanese bureaucrats are quite powerful.

              Is this a case of quality over quantity, if Greek bureaucracy is weak (if the structures are not there, more people won’t help)?


          2. Argosy Jones

            2) Make a clear statement – publicly – that Greece intends to reject the socialization of bank losses

            But this already happened years ago. The debt is now in the hands of governments and the troika.

          3. Jim

            Looking for explanations for the behavior of Varoufakis I will speculate on one possibility.

            I don’t know much about his intellectual influences but is it possible that he was persuaded by the communication theory of Habermas, which was articulated a couple of decades ago?

            A major assumption in this theoretical framework is that there is a supposed emancipatory character in what Habermas labeled as undistorted communication, which would inevitably generate a rational consensus, no matter what the power dynamics, (in this case among the “institutions” and Greek negotiators) on what needed to be done.

            Consequently there was no need to consider real points of power leverage or their absence, since honest communication, in itself, would solve the problem.

            1. TheCatSaid

              On the other hand, social research has shown that facts & objective research results DO NOT WORK in changing minds or belief–in fact, they can make people even more entrenched in holding on to their opinion, no matter how ungrounded it may be.

              See ecologist Allan Savory’s keynote talk at The Savory Institute’s 2014 London conference about grasslands. He talks about the challenges in introducing new concepts, and how these can be more effectively communicated so as to reduce the typical 150-200 years (!!!) between scientific confirmation and institutional adoption of the new information and methods. Lord Eric Ashby’s research is also quoted.

        4. bh2

          Virtually all commentaries by various media about who is responsible for the Greek tragedy is guided by their respective attitudes toward the EU. Nothing to do with Greece, actually.

      2. hunkerdown

        I don’t suppose some brogrammer from a hiring software startup in Boston would be seeking a particular goal? Is there any way a person like that might have some direct skin in the market he’s not telling us about?

          1. ambrit

            Socratic Questioning, one of Greece’s many gifts to Philosophy. What’s not to like?

          2. hunkerdown

            One can presume from both his CV and his unimaginative regurgitation of the “lazy Greeks” and “sparkle pony leftists” memes that, at the very least, he’s not very concerned about any Greek people he doesn’t own.

      3. Nell

        Also from the Guardian
        It appears that secret documents have been leaked to the Süddeutsche Zeitung, that the creditors were well aware that their proposals mean that Greece would be suffering austerity in perpetuity. Even in the best case scenario Greece’s debt to GDP ratio would be above the ‘sustainable’ threshold of 110%. And as we are all well aware the best case scenario is a fiction based on models that have consistently under estimated the fall in GDP and the rise in unemployment caused by austerity measures to date.

        1. which is worse - bankers or terrorists

          If you’ve ever read “Confessions of an Economic Hit Man”, perpetual debt slavery is sort of the point.

      4. Ken

        Yves, is Tsipra an ex-boyfriend cause you sound very snarky in your tone It’s always easier to give advice than follow it.

        1. Oregoncharles

          Personal innuendo is completely inappropriate.

          She’s made a good case that Syriza made a lot of mistakes. I’m not convinced that actually changed anything, but digging into the details is her job, her strength, and the reason we’re all here.

        2. RalphR

          Sexist slur. How charming. And Yves saw through Tsipras and Varoufakis early on. She’s been calling out the romantics. She’s never been one of them.

        3. Yves Smith Post author

          You are damned right I’m angry and I’m not ashamed of it.

          The pom-pom wavers on the left were all in for the sham referendum being a meaningful democratic exercise. They treat fights against oppressors as if its a Sundance movie and they help by wearing the right T-shirt. And they refuse to call out dilletantes like Syriza who says they are standing up to the creditors with their amateurish negotiating stunts while stripping the government coffers bare (including borrowing, as in spending, pension fund reserves) to keep paying them! No one was willing to look at what they were actually doing. They all fell in love with the idea of someone appearing to stand up against the bullies and bought the branding.

          1. myshkin

            The hopeless left is easily caricatured as it splits into its useless factions.
            Perhaps not Sundance but this is indeed a dance of media manipulation, political maneuvering on a national and Euro level and cold hard negotiations with an entity that holds all the cards.
            Early on in this you doubted that Syriza had the negotiating skills to deal with the Troika, well it seems you were right. One wonders how a band of outsiders could have realistically fared better under the overwhelming circumstances.

              1. myshkin

                “…I am not yet able, as the Delphic inscription has it, to know myself; so it seems to me ridiculous, when I do not yet know that, to investigate irrelevant things.”

          2. Newtownian

            Thanks for this clarification Yves. It seems to explain your recent comments which seemed out of character .

            Perhaps I begin to understand now where you are coming from – a disillusionment with the numerous noble motherhood beliefs the left espouses which appear admirable but dont add up when lined up? Your reply here suggests Syriza is rife with such muddy thinking – and you see this as responsible to a significant part for the current mess?

            For what its worth I’m sympathetic to that problem albeit in an environmental setting where too many ‘Greens’ seem to think we can have massive increases with affluence and largesse for the less fortunate without horrendous ecological costs when my gut and profession knowledge tell me their dreams don’t add up.

            With your frustrations in mind I a last request. Can you point me/us towards an extended reference that details these Syriza limitation? I have seen one and unfortunately most anti-Syriza commentary is too short to provide the big picture or frames the problem in overly simplistic terms.

          3. larry

            If you read Nick Cohen’s What’s Left, you will find argument supporting what you have just written. In his terms, the Left is f*cked. They no longer know what they believe and they no longer know what to do. This is in stark contrast to the other group, neoliberals, who know both what they believe and what they want to do consistent with their beliefs. This makes them a powerful adversary. Act like a jerk-off and you will lose.

            The fact that security for the few necessitates security for all in the long term appears to mean little or nothing to them, as they think in the short-term, even if destroying now those they despise leads eventually to their own destruction. The elites have benefited from the European Social Model, which is now under threat to some extent.

      5. Oregoncharles

        didn’t she endorse them a long time ago?

        Very interesting, this implied alliance between Left and Right.

        1. Yves Smith Post author

          You may be correct, but even if so, I don’t think this was more than a passing mention. If she were serious about making hay from Syriza, you’d have seen her thumping on it regularly. In politics, you have to make repeated mention of something (unless it’s scandalous or a real foot in mouth, which is close to the same) for it to stick in the public’s mind.

        2. larry

          If you distinguish between the Moderate Left and Moderate Right and then between the Far Left and the Far Right, then it becomes understandable why moderates of both sides might find issues in common, as would those advocating the more extreme positions of those perspectives.
          (This comment should be moved to the left consonant with a reply to Oregoncharles.)

      6. susan the other

        This looks like the final blow to the Cyprus Project. Greece might have been a festering sore that was tolerated for decades. Until the financial crisis called in all debts. We need to look at that knee-jerk reaction. That was the most brutal stroke. Should the Greek taxpayers pay for the Greek kleptocrats? I think they should get a break. Either they should get a break or there should be laws of democracy that cannot be skirted. Because as it is, democracy is effectively a big joke. (Here in the US our oligarchs have gotten away with bloody murder.) That responsibility of the citizen-taxpayer is apparently contingent on their ability to control their leaky (non existent) legal system. My read on the EC is that they genuinely want Greece to stay in the EU, no subterfuge at all. But they see things are out of control.

      7. larry

        Guardian: This is not a challenge to capitalism. It is a challenge to neoliberal politics and its cousin, neoclassical economics. There is a significant difference between the two, even in this context. The Guardian, not for the first time, hasn’t got it quite right.

    2. NOTaREALmerican

      Re: How the blind imbeciles in Brussels couldn’t see this coming is hard to imagine.

      Maybe they – like many “intellectuals” – actually believe (and still do) that perpetual increasing prosperity comes from perpetually increasing debt and that the resulting corruption and distortions caused by the debt are simply “challenges” (in the modern management vernacular) that present “opportunities” for a “win-win solution in a going-forward space”.

      So, not really imbeciles, just normal smart-n-savvy people who happen to be benefiting from the resulting corruption and distortions of their actions. The people in Brussels seem to be doing as well as the people in DC & NYC, so ya can’t really call them “imbeciles”.

    3. financial matters

      I think Ed Harrison has an interesting take re France:

      “I believe that the Greece debt bailout negotiations are really about France, not Greece. Here’s why.

      As I put it earlier in the month at Credit Writedowns Pro: “The eurozone negotiators are most concerned about Greece as a precedent and example for other countries in terms of so-called reforms. We’re talking about pension reforms, labor reforms, privatization and so forth. German Finance Minister Schäuble has been quite explicit about this. In Mid-April, he gave a talk at the Brookings Institution in which he said that the French wish they had a Troika program the way Spain had one, in order to make structural reforms easier to implement. The French government denied Schäuble’s comments were true because they smacked of anti-democratic fiat from above

      “But the incident made clear what is happening in Europe. Individuals in Europe who want less socialism – for lack of a better word – are using this crisis to force their agenda. And in some ways, they have exacerbated the crisis in order to make this agenda stick. With Greece, then, there is less room to compromise than meets the eye, particularly because the Greeks have been the most deviant from the desired model of structural reform. The thinking, therefore, is “if we let Greece off the hook on these issues, the others won’t implement the necessary reforms either. And France isn’t even in a program. The socialist government there has much less political pressure to comply with this agenda. Unless we get reforms, there will not be economic harmonization and we will be back in crisis in short order.””


      and from a 4/29 NC link

      UPDATE 1-Bundesbank head: euro state insolvency possible without system collapsing Reuters

      “”Turning to France, Weidmann said the euro zone’s second biggest economy after Germany had a particular responsibility to put its public finances in order after repeatedly missing deficit targets.

      “A currency union… can only reach stability when its member states run solid budgets…France is an important role model in this regard,” he said.

      Last month, the European Union gave France two extra years until 2017 to cut its budget deficit to within prescribed limits, extending the deadline for the third time since 2009. “”

      Money is a relationship that should lead to a well-functioning economy rather than a ‘solid budget’. France doesn’t seem to be too eager to become an austerity role model.

  5. alex morfesis

    guessing at the speed of fright

    speculation is not so wonderful but here goes

    Pushing IMF out of the room by forcing them to not be able to put any more
    money on the table by not paying funds today might be what I call a
    bear hug moment…not planned but once noticed is now “owned”

    IMF was brought in to be the didn’t work

    Fin Min Schaueble stepped back from the edge by saying
    (or so it has been “leaked”) that Greece, “no matter what”, is
    eligible for 30 billion in Euro funds…

    by not paying IMF but extending to allow a new two year

    thus no technical “end of program”

    Draghi/central bank can play footsie again…

    Tsipras has already given some in Eurozone
    what they wanted by saying he will respect a
    YES vote, but will basically not run the country
    to implement it…he will resign…

    I don’t think he should resign…a nation needs
    a pit bull…not the chi hua huas that were leading
    greece these last 40 years…

    Schaeuble hates being pushed back…but he will
    hate having to deal with the same old stale bread
    if Tsipras and Syriza resign…

    he might not like Syriza, but he is probably smart
    enough to know that it will cost Germany less long
    term dealing with the new kids than the old goats…

    the truth is hardly ever what it appears to be…

    I smell a plot….

    1. alex morfesis

      oh well…allergy season…

      smelled the avgolemono soup burning

      thought it was a plot…

      it was just the pot burning…

      that is why its called a guess…

      this is gonna get ugly….

  6. Sally

    Didn’t Kerry intervene yesterday urging the Greeks not to leave the Euro? That was the public face of diplomacy, but behind the scenes you can bet there is some very hard talk going on and pressure and threats will be piled on to the Greek govt.

    America will not allow Greece to leave Euro at this moment in my view. It is not just about the money, but keeping the Euro going with TPP and TAP on the verge of being rammed home. Never mind NATO and the ratcheting up of the Russian conflict. You can bet all those hedge fund managers have been on the phone to the American govt demanding they try and stop a Greek exit. I would not rule out the threat of possible assasination of Greek leaders. You don’t know what the Greek military is doing behind the backs of the Greek govt.

    Any deal they cobble together is about buying the elites more time to do more propaganda against a Greek exit. And keeping the ponzi scheme going a little longer I just don’t think the
    Greek people or the Greek govt really want to go it alone. Fair enough, but you can’t have sovereignty and be in the Euro. Every time the Greek govt go to the wire, and then fold they do themselves no favours. They might as well resign now, and hold new elections.

    1. bjmaclac

      It sort of reminds me of what we witnessed in Egypt in the past few years. The “established” political elite is dethroned, replaced by an “elected” government, and then – due to the lurking of the “deep state” in the background – magically public opinion turns radically against the “elected” government; and voila, the return of the “traditional” political regime, and with open arms by the public.

      As for why Syriza, I hearken back to what Leo Panitch observed on TRNN program of a few weeks ago; that Tsipras and Varoufakis came into this whole process with only a
      Plan A in place, and no plan B. How foolish to have so much hope and faith in one course of action; and utterly no plan in place for the worst possible outcome should the political option fail. They really have painted themselves in the proverbial corner.

      1. Lambert Strether

        On paragraph one, see here.

        I think the key problem for the Tahrir Square insurgents was that they had no plan, no plan at all, for what to do after they won. Power as lying in the street, and they did not know how to pick it up. As a result, the reaction was savage and successful. Glorious and inspiring though Tahrir Square was, it’s not clear to me that the Egyptian people were better off after its consequences worked themselves out. We’ll see.

        1. The Insider

          The problem with not having a plan and leaving power lying in the street is that sometimes there is someone else who already has the organization to pick it up and run with it. We already know who that was in Egypt, who will it be in Greece or other potential failed European states?

  7. Jerry Denim

    “Two days of a bank holiday and Syriza leaders realizing they might suffer interruptions in their supply of white wine has led them to rethink their referendum plans….

    ….That referendum gambit was all about Tsipras trying to get out of the corner he painted himself into and it didn’t work”

    HA! Good one. So is that your final take on Syzria Yves? They were just some privileged bourgeoisie lefties who were never serious about their threats to leave the monetary union? I thought the taste of reality brought on by the bank holidays and chaos unleashed by the referendum announcement may have inspired a change of heart by Tsipras and Co. but perhaps they planned to capitulate from the very beginning and were just trying one last ‘Hail Mary’ to get the best deal. Very sad to see ‘what’s left of the left’ so badly discredited but as you suggested sometimes you can only get what the other side is willing give in negotiations, meaning if the other side see you as expendable and could care less if you live, die, or rot in hell there’s nothing that can be done to press them to give up more than they want to give you. Sucks to be Greece right now.

    1. sid_finster

      Of course. Syzria was elected with a mandate to do two things: get rid of austerity and keep Greece in the EU. These are incompossible goals right now, as the Troika are well aware that if they cut Greece any slack, surely Portugal and Ireland will demand that their deals be renegotiated, and Italy and Spain will start to get ideas of their own.

      The US is pushing for another extend and pretend, because it does not want further disruption to financial markets, and because it wants to keep the IMF an EU money flowing to its favored Nazis in Ukraine.

    2. juliania

      Wouldn’t they have been more polite if they were capitulating? Varoufakis looked awfully happy riding that motorbike – and somewhere I glimpsed a headline that Turkey was offering financial aid – (sorry, it disappeared before I could track it down.) I guess all will be revealed eventually – there’s a ‘ne’ rally going on in Athens right now; haven’t been able to find a link to that.

      I don’t think it sucks to be Greece. Even if they fail, they’ve resisted.

      1. Jerry Denim

        I was buying into what Varoufakis and Tsipras were selling. I thought they were for real and ready to abandon the Euro for the Drachma. I was hoping they would default and somehow secure financing from one of the US/European banking rivals from a BRICS country. I guess we’re all going to have to wait and see how this plays out.

        I don’t think Syzria has been such inept negotiators as many others have charged. They had an impossible mission if the Eurocrat’s behavior is to be believed. As I said in my post you can only get what you can get when the other side sees you as expendable. I wish the Greeks the very best and hope they can find a way free themselves of Troika imposed austerity and rule from Brussels.

        1. notabanker

          I agree their negotiation position was extreme and improbable, but under mining your negotiation team with a nuclear option and half backtracking two days later is pretty much game over for negotiating credibility.

    3. Sally

      ” but perhaps they planned to capitulate from the very beginning and were just trying one last ‘Hail Mary’”

      It does seem so. Why go all the way to Moscow if you are not going to genuinely follow through? Yet as soon as they returned to Greece they immediately ruled out any Russian deal. Now they threaten a referendum, and before it has taken place are still pushing for a deal. It seems their game plan was to hope the other side would blink first. There appears to have never been a plan B.

      If the Greek people want to stay in the Euro that much then they must now face Austerity on the ECBs terms.

      1. MyLessThanPrimeBeef

        While the other side were screaming ‘we need more details,’ they always appeared cool (we are close to a deal).

        No time for detailed calculations, but time for interviews and fining dining in the limelight.

        Then, at the last minute, the people are asked to decide on a deal that probably is not better than what was on the table months ago.

        This seems to me to favor the planned-all-along thesis.

      2. Jerry Denim

        Yes, I remember seeing those here a few months back. A most unfortunate profile. What could Yanis have been thinking? I’m sure it won’t take Golden Dawn long to seize on these pictures of him and his wife if Athens goes up in flames.

      3. PhilJoMar

        They’re eating fish so normally it’s white wine…and?
        Plus fine dining this is not…it looks pretty average.
        Plus having just read the interview…it’s not bad for the length. I think the puritans in the US might be missing something culturally here.
        Time to return to the economic analysis perhaps?

        1. MyLessThanPrimeBeef

          First, i have to prepare my home-made dinner here in California (and it’s about 5:30PM).

          Too expensive to dine out.

      4. Newtownian

        I’m not sure I see the problem – white wine, probably Retsina, bread, water and a Greek salad. This is what backpackers live on.

        1. Lambert Strether

          The fact was questioned; and I presented the fact. Surely you’re not saying that backpackers get feature spreads on their lifestyle in the pages of Paris Match?

    4. David

      I don’t think they’ll capitulate. I think they’ll be huddled up in the bunker, moving non-existing divisions around the map while the cities above (financially) burn. Cue the Hitler rant video….

  8. sid_finster

    I’ve said it before: rules are for the little people.

    Rules don’t apply to Titans of Finance, Captains of Industry or Statesmen, unless, of coursel, it is convenient to such personages at that time.

    1. Oregoncharles

      Yes. Very important, and the reason the legalities are largely irrelevant – except maybe later, when the cows come home.

  9. juliania

    I don’t know how verifiable this is, but at the following:

    “German Finance Minister Wolfgang Schaeuble told lawmakers in Berlin that Greece would stay in the euro for the time being if Greek voters reject austerity in a referendum scheduled this week, according to three people present.”

    It has today’s date on it.

    1. djrichard

      I think Schaeuble has figured out the bigger picture. If Greece stays in the Euro, they’ll still be a colony to Germany, no matter what gets negotiated. So what if it’s not as draconian as some quarters want.

      If I was Greek Parliament I would’ve worded the referendum differently: exit the euro? Yes/No. The way emotions are now, the people of Greece would probably vote to exit the euro.

      But that’s not what they’re voting on. So the referendum allows leeway for a different outcome. Syriza could be gaming for the same outcome that Schaeuble is allowing for.

      1. MyLessThanPrimeBeef

        While expensive, maybe we need another referendum after this, and hopeful the creditors will help pay for it (partial or 100%).

      2. MaroonBulldog

        ” Syriza could be gaming for the same outcome that Schaeuble is allowing for.” {Greek government defaults within the Euro.}

        Now you see it. One hand washes the other, and both become “clean”.

        Schaeuble gets his Greek market; Syriza gets Greece’s insolvent banks and insolvent government floated on a financial lifeline from the ECB; the IMF gets defrauded and taken out of the picture, for the mutual convenience of both.

        The last few days events are too strange to make any sense. Unless they are intedned to divert attention from the perpetration of a fraud.

        1. djrichard

          I think you’re connecting some good dots, especially the tactic for getting the IMF away from the table. Smart!

          ‘One hand washes the other, and both become “clean”.’

          LoL, and I was wondering why I had flashes going through my head of how the TPP fast track vote played out.

        2. Pookah Harvey

          I like it . But physically picturing Schaeuble and Varoufakis in bed together is rather disconcerting.

    2. Yves Smith Post author

      Wow, was THAT a toad that hopped out of Schauble’s mouth.

      This is not Germany’s and certainly not his choice. This is an embarrassing revelation of German leadership acting as the self-appointed leader of the Greater European Co-Prosperity Sphere. We saw that too with Obama calling Merkel as if she were the President of Europe when she isn’t.

      Under treaty, the Eurozone is irrevocable. Greece CANNOT leave by law. Of course, it if were to start issuing drachma and convert deposits in domestic banks, all sorts of fur would fly.

      And Schauble has zero say in whether Greece decides to issue drachma or scrip. It is the ECB that is running the game plan that is squeezing Greece till it screams which is not increasing the ELA, which is what forced the government to have the bank holiday and impose capital controls. The ECB is independent but waited until it had political cover. They are ruthless.

      Even with that, the Greek government always has the choice of whether to pursue other options (capitulating, engaging in super radical payment cuts, which would mean not paying pensioners). As a Guardian writer we quoted above said, Greece can choose between being “Portugal, a degraded economy of the European south; or Serbia, a proud nation led into the international wilderness by populists’ lies and fantasies of Russian rescue.”. These are not pretty choices, but they are choices, and they are and never were Germany’s to make. But Syriza told voters the Big Lie that they didn’t have to make a choice, that plucky Greece could miraculously have it all.

      1. Robert Dudek

        I’ve heard that life in Serbia these days isn’t all that bad. Comparing Trsipas to Milosevic is assinibe. Let me know when the former starts killing members of neighbouring ethnic groups en masse.

        1. Yves Smith Post author

          Huh? Greece has a tradition of what comes awfully close to civil war, and not all that long ago. And I hope to have a post on this by an expert, but based on the research he’s done (and this by talking to folks close to the Greek government), a Grexit means at least a year of near starvation across Greece. And that assumes effective rationing, which I doubt this government can pull off. Actual starvation means widespread violence.

  10. IsabelPS

    I’m getting a bit lost. But isn’t this what they were trying to get in the negotiations of February? Forget the old MoU, just gives a bit of money to tidy us over this difficult period and lets start on a fresh new deal? Apologies if I am totally out of whack.

  11. RabidGandhi

    According to the usually staid Tariq Ali:

    I have it from reliable sources that Schauble offered Tsipras an amicable Grexit and 15 billion to see Greece through the first phase. IF this is true it should have been accepted.

    Sounds dubious to me given that the Grand Austerity Ayatollah seems to have such a hard time raising funds for anything worthwhile.

  12. Demon Cat

    I wanted to support Syriza badly through this entire circus, but these last couple of moves just strike me as not well thought-through. What is he hoping to achieve with this letter? It looks like he realized the Yes vote might win on the referendum and is pulling another desperation move.

    1. stefanos

      That’s exactly it. Most Greeks are scared shitless that they will lose their pensions and salaries that got deposited (??) in their accounts while the banks were closed. I’d guess a 70% YES vote if it happens.

  13. mpr

    For the life of me, I can’t figure out what Yves thinks the Greek Government should have done.

    On the one hand she criticizes Varoufakis’ original position as having already conceded a continuation of austerity because it envisioned continued budget surpluses (so presumably they should have had an even tougher negotiating position), and says that they should have introduced capital controls earlier.

    On the other hand, having reached the same point – breakdown in negotiations and capital controls – she faults Tsipras for inflicting further hardship on the Greeks.

    Yes, I get that if they had defaulted sooner they would have had a few more Euro’s left. But that couple of billion of Euros is not going to make a big difference in what happens if Greece has to leave the Euro. In fact one could argue that in return for those couple billion Euro’s the Greeks got 10 billion out of their banks during that period.

    Anyway, I’m genuinely mystified. Is the position that they should have defaulted more aggressively or just accepted they couldn’t win against the Troika and given in to further austerity ?

    1. spacemanspiff

      [This is my first comment on NC after reading since 2008. Thanks, Yves, for encouraging folks to step up and participate]

      I’ve been mystified by the Greek actions, too, but I think Yves et al have been pretty clear about the concrete alternatives available to them at each step of these “negotiations.” All of those alternatives have now been foreclosed, which makes it very difficult to understand them from this point in time when their viability has long expired.

      At every step of the way, Tsipras has used nothing but values language. It seems we no longer need to look to Thucydides for examples of the futility of idealistic appeals in the face of overwhelming power (

      I was excited when Varoufakis was appointed Finance Minister in January because his writing on the specifics of the eurozone crisis and policy options open to different institutional actors has been consistently clear-headed, realistic and pragmatic. Reading Varoufakis’ “A Modest Proposal” now is maddening in that it’s very hard to reconcile the author of that paper with the political actor who has been participating in the negotiations for the past 5 months. His public performance does not indicate an even basic understanding of the interests of the other parties in the negotiations, even though his past writing clearly demonstrates he does possess such an understanding.

      There has been very little public focus on the particularities of shoring up the capacities of Greek governing and administrative institutions. Similarly, there has been little focus on positive alternatives to austerity in Greece, even though those of us who read this blog could sketch out several parts of a policy program that could serve as a viable alternative without on-the-ground knowledge that all Greek actors should have of the situation.

      Seeing the theatrics of an increasingly prominent Tsipras (I’m still trying to understand when/how/why Varoufakis and other Greek figures became so thoroughly marginalized in the negotiations) leaves the increasingly strong impression that he has no detailed understanding of governing and administration and, perhaps worse, that he has no understanding of the power dynamics at play or even how to conduct basic diplomacy.

      A viable left government should always demonstrate a clear understanding of the practical demands and strategic necessities of directing and carrying out the activities of the state. They should always foreground the interests of poor and working people and demonstrate an understanding of the impact their work will have on the immediate lived realities of the people. They should also be able to speak to the specific interests of other political actors and be able to propose practical changes to the mechanics of policy and administration. Syriza has consistently failed in these things, and increasingly so in recent weeks.

      Finally, a question. Why didn’t Syriza institute capital controls the moment they assumed power? Didn’t they understand that such a step would be necessary if their banks were obviously insolvent and they were facing oppressive financial negotiations with overwhelmingly powerful parties whose strongest desires were punitive? Yves, can you provide some insight there? And possibly refute and/or elaborate on anything that sticks out to you in this long comment?

      1. mpr

        What exactly would have been the advantage of introducing capital controls sooner ? Its a huge negative for the economy. This would have been like applying thumb screws to yourself in the negotiation.

        The one narrowly coherent argument I remember from Yves about this is that this would have signaled a willingness to leave the Euro by showing some concrete preparations for it. But we’re at that point right now, and we’ll see if it works.

        In my view doing this earlier would have been irresponsibly risky. It was right for them to try to negotiate with the Troika, even if that ultimately failed.

        1. spacemanspiff

          I think Yves’ argument about capital controls being a concrete preparation for an exit is dead on. It would have made their negotiating position stronger by indicating, in my mind at least, that they took seriously the operational issues they were facing.

    2. Jerry Denim

      Agreed. It seems many on the left that cheered Syriza when they swept into power have now unjustifiably turned against them now that they are perceived as failures. Correct me if I am wrong but I do believe Tsipras said very early only that Syriza was prepared to led Greece out of the Euro if that was the only way to end austerity economics dictated from Brussels. If after five years of slow-bleeding and preparation for a Grexit, the Germans and the Troika had really come to believe that Greece was expendable and an acceptable causality of austerian discipline then no amount of masterful negotiating could have forced the Troika to concede more than they were prepared to offer. Varafoukis’s game theory and Tsipras’s erratic behavior were the only hopes of a player that had been dealt a hopeless hand of cards if the game was to be played by their opponent’s rules. The surprise referendum announcement looked like a ploy to turn the democratically elected European heads of state against the ECB technocrats and perhaps buy time for Syriza to print Drachmas and attempt to work out alternative financing with another creditor country outside the Anglo-European/NATO axis. It also seemed like a rear guard fig leaf to mitigate domestic anger coming from a possible Grexit. All three of those goals could be deemed quite sane and logical. What Syriza is up to now with this last minute plea for a deal is also open to speculation, but it could be something other than outright capitulation.

      This Greek crisis has entered a very interesting and dangerous phase, but I still think it’s too early to declare winners, losers and fools.

      1. David

        I turned against Syriza when it became clear, to me, that they couldn’t run the country.

        If the country can’t function, the negotiations don’t matter and the problems won’t get solved.

      2. MaroonBulldog

        The surprise referendum announcement blew up the negotiations in the middle of the night between Saturday and Sunday, after Angela Merkel had demanded on Friday that the negotiation be settled before the markets opened on Monday. That doesn’t seem like a ploy to turn the democratically elected head of Germany against the ECB technocrats. If that was it’s intent, it failed, because the democratically elected heads of all other 18 EZ members jointly refused to grant an extension of time to end the negotiations until the referendum had passed. If it was meant as an appeal to Angela Merkel, instead of as a poke in her eye, it’s strange, because she couldn’t get Bundestag to vote for such an extension over the objections of Wolfgang Schaeuble.

        The surprise referendum announcement also had the effect, intended or not, of baking in today’s default to the IMF. Now that that particular bridge has been crossed, Syriza is back to the table, attempting to ask for a deal from its other creditors, with the IMF out of the picture. To me, this looks like another poke in the eye of Angela Merkel, who insisted on bringing the IMF into the bailout the last time around, against the wishes of Wolfgang Schaeuble.

        So I think I may see a pattern emerging here. It looks to me like Syriza figured out whom they need to work with here, to get the bargain they are willing to live with, after all else has been said and done.

        Tsipras is just another politician, same as all the other politicians.

  14. juliania

    The Guardian has a photo of the assembling crowds for ‘ne’ rally in Athens (‘ne’ meaning yes on the referendum ballot.) Lots of folk there so apparently they think the referendum is still on. I can’t see the periphery to compare with yesterday’s, but the contrast is that these folk seem all to be in business suits, or most anyway. And, it is raining.

    Also, a popular site for ‘bailout by the people’ has crashed, apparently due to overwhelming input. It had already raised a considerable amount.

    1. Lambert Strether

      IIRC, the “oxi” crowd was around 20,000, which was what one would expect Syriza to be able to generate on its own as a functional political force. 50K or 100K, and for sure it would have been organic. So it will be interesting to see the numbers (and sponsors) here.

      1. wendy davis

        from the Guardian, and fwiw,

        There are reports from Athens that some firms have been pushing their staff to take part in tonight’s Yes rally.

        Not sure how substantial they are, so I’ve alerted our people on the ground – in the meantime, regular reader equusmulusoctopus has kindly provided the details:
        User avatar for equusmulusoctopus
        30 June 2015 3:49pm

        The labour inspection of the Greek ministry of work and social insurance says that it has been receiving dozens of complaints since early this morning about employers trying to force their employees to participate in the “yes” demonstration this evening. The attempt appears to be well organised and the employees are told to gather at certain places where they will be given placards and whistles and be marched to Syntagma. Those who don’t go are threatened by immediate dismissal.

        The attempts to force employees to the demonstration are made at all sorts of companies, mostly big and medium-sized. The ministry mentions shipping companies, companies trading in foodstuffs, German companies trading electric goods and insurance companies explicitly, but adds that the complaints come “from everywhere imaginable”.

        Source: Efsyn

        1. TheCatSaid

          This was clearly in the cards when, within hours of announcing the referendum, certain blocks within the Greek establishment had already announced their formal organizing structure to push for a “Yes” vote.

      2. grizziz

        Maybe USAID and NED will show up for the festivities. Nuland might offer some cookies to Golden Dawn.

        1. Lambert Strether

          Just let me get my brain bleach, now that you’ve put that picture in my mind….

          Actually, it would be interesting to know the US officials on the ground in Athens.

  15. madisolation

    According to Max Keiser, if the Greeks do “go it alone”:

    In particular Deutsche Bank is the most exposed. This is a hundred trillion dollar derivatives book that could go the way of Lehman Brothers. That’s an enormous shellacking to the global economy, and I think now we’ve got to raise the odds of this happening above 50 percent.

    Also, Patrick Young wrote:

    However, the simple truth is that previous bailouts delivered a dead dog and recent talks have revolved around how many fleas creditors can inject into the rotting carcass. Greece should never have accepted an impossible bailout to paper over the design flaws of the euro while backstage Mrs. Merkel laundered some cash to support her wayward domestic banks.

    The publisher of the “Athens Courier” said:

    “There are attempts to isolate us but so what? The Qataris, Russian or Chinese will not ask for permission to invest in the Greek economy. The Greeks have a great democratic tradition, with Greeks isolation will not work,” concluded Ignatiadis.

    Read more:

    Just do it, already. Grexit. A delay only benefits the bullies in Brussels.

      1. alex morfesis

        this has always been a cover operation…

        Papandreou did a new CEO move by over stating the mess in October 2009 trying to look like the hero in typical blowhard fashion…

        Dubai World crashes a month later and people are still burping up TBTF free USA money, so…what next is obviously asked…

        spreads go to 400 basis points in Jan Feb and March of 2010

        by end of March, Euro parties smell problems and need someone to draw cover for them

        Giorgakis does europe the favor…even though the market is handing over capital, he burps up for public consumption the “possible” problems of needing to find 50 billion more in 2010 and IMF and EU say, here take this money to pay off our friends…and say a few stupid things during the week for us…

        so sunday may 2, 2010, money flows to grece…

        AND MAGICALLY one week later…a TRILLION DOLLARS gets handed off to Italy, Spain, Portugal and (i think) Ireland…but it was all the fault of little old greece…if giorgakis had just been quiet that week, we would not have had to hand off this trillion the following sunday, may 10, 2010….

        broo hahahahahaha…

        and the funny thing about the fine print that wonderful sunday, may 2, 2010…Greece only had to REDUCE its deficit to 3%….NOT SURPLUS…deficit…by 2014…which was more than done…

        but, it is what it is…I am just going to have my greek coffee metrio this week and just sit and worry about what happens Tuesday, July 14th….I think that is d-day…destruction day, draxma day or DB day

  16. financial matters

    Tsipras is again making it quite clear that he does not favor a Grexit. He wants backing to stay in the fight for debt reduction and labor reform. To move past extend and pretend, austerity inducing bailouts.

    Also I think Varoufakis is taking an interesting step by forcing the issue of the purpose of a central bank.

    I don’t think the troika is excited about a Grexit either.

    “According to tweets from his staff members, Tsipras in a television appearance on Monday maintained that a “no” vote on the referendum would strengthen Greece’s hand at the negotiating table, not begin the process of a Grexit. He implied that Greece’s differences with the other eurozone nations were relatively narrow on budget savings, but that the two sides were further apart on matters like debt relief and labor union rights.

    Greek Finance Minister Yanis Varoufakis said the government would seek an injunction from the European Court of Justice to force the ECB to resume its emergency lending to Greek banks.”

    1. MyLessThanPrimeBeef

      As usual, incompetence or pre-planned?

      Maybe the question should have been clearer – do you reject the deal, but want to remain in the Eurozone (if that is his intention), or accept the deal and remain in the Eurozone?

      And if he intends otherwise, the question then is – do you reject the deal and wish to exit the Eurozone, or aceept the deal and remain in the Eurozone?

      Maybe even like this:

      A. Accept the deal, but exit
      B. Accept and remain
      C. Reject and exit
      D. Reject and remain

      With what we have, both sides bicker on (it means Grexit. No, it doesn’t).

      1. financial matters

        I would call it evolving or adaptive.

        Syriza is a party of heterodox economists aligning with disenfranchised groups trying to establish a workable governmental system in place of the failing status quo (and of course not just Greece)

        It’s a process and the troika should give it a chance to work. Although what if it shows the way to a different status quo?

        I think this Paul Mason article does a good job of discussing the situation.

        “Yannis Dragasakis, Greece’s deputy prime minister, was in many ways the embodiment of Syriza’s long-term dreams. His team of advisers included those most attuned to the “horizontalist” agenda emerging out of the networked social movements; people whose main desire was to nurture the 70-plus small-scale economic experiments they had promoted: local currencies, Wi-Fi networks in the mountains, producer co-ops.

        But Dragasakis was given “operations”: to operate the government, to firefight the banking system, to sort out the state energy company. Those who expected his department to unleash a wave of entrepreneurship and experimental projects have had to wait.”

        1. Lambert Strether

          “is team of advisers included those most attuned to the “horizontalist” agenda emerging out of the networked social movements; people whose main desire was to nurture the 70-plus small-scale economic experiments they had promoted: local currencies, Wi-Fi networks in the mountains, producer co-ops.”

          I keep asking for examples of these networked social movements and not getting an answer. That means we don’t know what their organizational capacity is, so we don’t know if they’ll scale to a crisis. Personally, I’m all in favor of structures like this, but I’m even more in favor of structures I’m in favor of that actually exist.

          (I might also that that this is the sort of question I’d expect Syriza enthusiasts to be able to answer immediately with hard data and links, since it’s a key element in the balance of forces between Greece and the creditors, and also speaks to the strengths of the Greek people. Shows you the uselessness of pure enthusiasm, I suppose. But the a cheerleader doesn’t need to know the game. Just the color of the jerseys.)

          1. financial matters

            Yes, I think it would be good to get this more fleshed out.

            We know they have things in the works:

            From Pavlina Tcherneva:


            “funding for a job protection program that is currently being devised by the Greek Ministry of Labor.”


            In Tsipras’ recent letter he mentions labor legislation. This is difficult with the troika’s demand for a surplus to pay them back. Most people agree that it takes running deficits to get the economy moving again. Properly designed job programs can create demand which can reverberate to create true surpluses.


            Mazzucato has some useful advice here:


            “Instead, insisting on the status quo full of more austerity produced an increasingly weaker Greece, more unemployment and more loss of competitiveness. Now alone, the only hope is that Varoufakis’ insistence on a European-wide investment programme will at least find a national solution. Perhaps it can begin with Greece forming a development bank like the KfW, and use it to kickstart the kind of long-term investment strategy that should have been part of this ‘pact’ from the start.”

          2. IsabelPS

            Lambert, in the same article by Paul Mason, you have this paragraph:
            “We meet at a council-run clinic where, after midday, the official GPs and psychiatrists give way to a team of volunteers. It is run this way because the austerity under the previous govenrment means they can’t staff the clinic with paid employees. The volunteers include doctors, psychologists and qualified pharmacists, but I find them engaged in the menial task of hand-sorting donated medicines. They note the sell-by dates, count the pills and sort them. This is Syriza’s mass base – but it is not Syriza.”
            Even Paul Mason seems a bit… I don’t know… in two minds about it.

          3. IsabelPS

            Also, I know that the president of the federation of european food banks, who is also the president of the Lisbon food bank which is the biggest one in Europe, has been to Greece to help set up food banks there. (Food banks are one of the most respected charities in Portugal, although they (and especially the president) are very much under attack in the media and, generally speaking, from the left that would much prefer to see these problems of poverty and hunger being tackled by the correct State politics).
            The Portuguese that work in emergency relief are always fairly circumspect when asked to draw comparisons between Portugal and Greece (at least as far as I have seen), but sometimes they mention that Greece lacks the very important network provided by the Catholic Church. (Again, the left doesn’t like it either, but it is an undisputable fact that no alternative political movements have ever reached the level of organization of the RC church in Portugal).
            I have read, of course, that the Orthodox Church provides help, too, but, from the two things above I got the impression that in Greece emergency relief is not very well organized or, at least, not sufficiently to take the brunt of an economical crisis of this scale. Or, maybe more precisely, the local efforts lack coordination and synergy.

      2. TheCatSaid

        Preferendum / ranked preference voting methods would provide clarity of where the consensus actually lies among these 4 options. I wish more people were familiar with this–immensely practical, no spoilers, difficult to “play the system”, and fair results that genuinely reflect the will of the people. Unfortunately, some governments require a 2-option Yes/No vote in referendums–a big mistake, as this is the LEAST democratic of all voting methods.

        Reducing a referendum it to 2 unclear options muddies the waters, though it may indicate the relative size of status-quo-austerity-don’t-rock-the-boat-at-any-cost vs trust us (current gov’t) to try to stay in euro but follow us out if Troika doesn’t cooperate.

  17. John Yard

    The Guardian has just published – unpublished current IMF documents that states that if Greece were to accept the EU demands it would have unsustainable debt in 2030 :
    The IMF has a history of extreme optimism about greece. The IMF assumes 4% growth (!) for the near future.
    If the extreme optimism of the IMF is unfounded , we are looking at depression like conditions for a indefinite period.
    If the current government fails, Golden Dawn is next. They won’t be so nice.

    1. MyLessThanPrimeBeef

      They won’t be so nice…to anyone, including Syriza.

      That’s the scary part. Maybe some MPs can move to London or America, so they don’t have to worry about that.

    2. ambrit

      Perhaps something on the order of a ‘Golden Dawn Lite’ is what’s coming.
      The old Golden Dawn leadership was kneecapped. However, using the Night of the Long Knives as a template, some other equally authoritarian oriented party can fill the void. Use the remnants of Golden Dawn to secure power and then eliminate them.
      For an earlier response I looked up the history of the Reichstag Fire. One of the major consequences of that event was the outlawing and arrest of the German Communist Party and its’ deputies in the Reichstag. With them gone, the NASDAP went from a plurality in the Reichstag to an outright majority. Right after came the Enabling Act of 1933 which made Hitler legally a Dictator.

      1. alex morfesis

        not golden yawn again…

        the nahtzeez height of actual elected power was july 32 election…it was going down hill with november 32 election and then they refused to allow a formation of government and pushed for a march 5 1933 election…pushing for a super majority to push thru article 48 powers…

        most people suddenly realized the shortee with the chaplin moustache and his keystone kop friends were crazy…

        the nahtzeez knew they were going to lose even more seats in the election so they burned down the reichstag and starting killing off resistors…cut a deal with oskar van hindenburg to work on his dad and the rest is greece still has not been paid its four percent from world war ONE reparations,..

        BIS(yes that bis) was the trustee for the instruments which were secured by gold mark bonds of the german railway system…after morgenthaughs’ bretton woods arrangement to eliminate the BIS after the war was magically overturned with the death of fdr, the BIS has officially claimed it just “burned the notes” and somehow that was to allow a claim the debt was no longer “secured”…

        like experience has shown…at a certain level in life, agreements are as valuable as the amount of lead in the brass casings you have available to enforce them…

        that is why they were called “banksters”

        and back to golden yawn…they can’t even get their clowns to march in formation…

        and remember what the yiayias of crete did as they would walk by the last group of clowns goosestepping in greece…

        beware of greek yiayias bearing carving knives

        1. ambrit

          As for Golden Dawn, or someone like them; the events transpiring in Ukraine show what can be ‘accomplished’ with the right ‘puppets’ and adequate funding.
          If the Ultra Right can’t or wont do the job, what about the Left? Remember, many coups, and, as you pointed out, counter coups, come from the lower officer corps of the military. The army can support the aspirations of the people. How this support is expressed is another matter.
          I tried to look up Cretan Yiayias and got nothing but recipes and fond remembrances! The power of controlling the information flow!
          The correspondence between the German troops rampaging through Greece, and Golden Dawn trying to get in front of the self help mob and calling it a parade is, er, inexact. Golden Dawns main weakness, if my imperfect reading is correct, is that the Freikorps evolved into the Brown Shirts while the rank and file of Golden Dawn came from, where? Most Freikorp men were veterans of WW1. They were acculturated to an authoritarian system, and, unlike most, seemed to like it. (The actions of internally disciplined versus externally disciplined persons are usually extremely different.)
          Crete sounds like an interesting place. Tell me, what is the main difference between mainland Greece and the islands. Is it simple City versus Country, or does it go deeper? (Legitimate question, no snark.)

  18. Oregoncharles

    Surely it would be irresponsible NOT to make a final appeal.

    And something popped into my head as I was reading the comments (perhaps this is not a new insight here): the Euro was specifically designed to negate Modern Monetary Theory.

    Do all MMT theorists support Grexit?

    1. financial matters

      MMT states that there is more flexibility with monetary sovereignty. So many were opposed to the Euro because countries would be giving up this flexibility.

      Of course having control of the printing presses and using them wisely are two different things.

      On the policy front MMT is supportive of job guarantee programs where the government steps in especially in a downturn to provide employment. To implement this it helps to have your own printing press.

      Bill Mitchell and Steve Keen support Grexit as they think Greece is better off with and capable of dealing with these issues on their own.

      But I think they and other MMTers like Tcherneva would be happy if the ECB wanted to adopt MMT policy and use their funds to put people to work and create social services rather than focusing on banks.

  19. Frenchguy

    I actually think it’s quite possible that Tsipras was convinced of his line that a “big no” would help him win concessions in future negotiations. Actually he has a point (Schauble’s comment confirm that) which is that it’s legally impossible to expulse a Member from the EMU (see the classic paper on the subject: so the plan to win a new mandate then continue negotiating since the other side has no choice is not irrational.

    If that’s true, he might have been surprised by the reactions from the creditors which made this a referendum on Grexit. He might be starting to realize that there is a gap between legal theory and the real world (Varoufakis’s hint that they might try to sue the ECB is another sign that they take the word of the law a bit too seriously). Furthermore, if the referendum starts to look like it’s going to be a big yes then cancelling the referendum is the least bad option. Sure, they look even worse than when they were sending the wrong documents to the eurogroup but at least they’re still in power and the Greek economy has a chance to recover (at least try).

    1. Yves Smith Post author

      I agree he conceived of it that way but that looks to be desperation. He had poll ratings as high as 80% and he and Varoufakis repeatedly rejected the idea of a referendum when asked, saying they had a clear mandate. The creditors don’t care about Greek opinion. They have institutional imperatives or domestic political constraints, and those trump doing what makes sense for Greece, even if making a wreck of Greece will also later hurt their countries.

  20. PeterD

    From the FT:

    Greek pension funds ration payouts

    (FT) — Haris Theoharis, formerly the head of Greece’s independent revenue collection office, said the government was preparing to issue IOUs next month to pay more than 600,000 public sector workers as a first step towards readopting the drachma.

    He said a team from the national accounts office at the finance ministry was working on a “drachma plan” at the office of prime minister Alexis Tsipras.

    A government spokesman denied the existence of such a team.

    Of course he did.

  21. susan the other

    Just a note. Last nite France 24 Debate. So good. One of the panelists was Steve Keen! Friend of Varoufakis. It was a set up to include him because Fr24 did an internet segment from FT that trashed Varoufakis as a “narcissist” and Tsipras as a “half baked commie”. But Steve Keen did get his licks in about the debt crisis (it was due to private debt not public debt which is being tortured for it – and the French guy agreed with him – so call it progress) and he was a solid friend of Varoufakis as usual so that his opinion offset the FT’s insane obsession with money out of thin air as “valuable” and worth bleeding anyone and everyone dry for and etc. It was an interesting debate. Where will followup come from now. Money as a store of value is questionable. So what should we do?

    1. Pablo

      Thanks for the heads up. I try to follow Steve keen, but that was not yet posted on his site.
      For those interested, it is online now on the france24 site:

      part 2

      Although his interventions are quite short (downside of televised debates), all 3 of them are very interesting, and offer a different perspective on what has been going on. Both on the question of the debt, the path that lead here and his take on the negotiations. On that latter subject his perspective is far different than the very critical approach taken here at NC. (I wrote a long comment about it in another post here, but I think it was not published, don’t know why, maybe too long).

      And as Stiglitz, who suggested he would support a no (that’s how I understood his piece in the guardian), Keen arrives at that same conclusion, but in a much more assertive way. I think it is certainly worth considering his take on all this, and what he tells about the negociations, as reported to him by Varoufakis (not about the last days, but in a broader scope, since Tsapiras arrived in power, and the difficulty on discussing macroeconomic subjects in any other way than an accounting perspective).

      I would add that he has a fondamental disagreement with varoufakis (ie he is not in a blind ideological defense of the greeks), since he considers there is no solution within the euro (specially for greece but as I understand it also true for most other southern europe countries — anyone that wasn’t directly in the “deutsch mark zone” prior to the euro), greece being just the first to crash. Not because it is greece, but because how the monetary union was constructed and (mis)functions.

  22. Booboo

    Gosh, this is just terrible. The EU bureaucrats should really be ashamed of themselves. If they cant even save a small country like Greece, how the hell are they going to manage when a bigger country like Germany or France faces a crisis. I am amazed the bigger countries have not decided to pull out or push significant amendments to the EU to gain their sovereignty back after seeing the EU bureaucrats’ behaviour. Haven’t they realised that THEY.DONT.GIVE.A.SHIT!

    1. Yves Smith Post author

      Their objective is not to save Greece. The problem is that Greece probably never should have been admitted to the EMU, which meant they got rolled into the Eurozone. The rules were stretched for political reasons in the old Cold War days. Everyone, the Eurocrats as well as the Greeks (plus Goldman!) was involved in fudging the numbers for them to get in.

      If there was a not too painful way for them to exit, it would be best for everyone involved. But the Eurozone was designed to be a roach motel. It’s massively costly for Greece, even more so than continued austerity, for them to leave (which the Greek government understands on some level, that’s why they get hysterical when anyone talks about Grexit). And having Greece leave is also very damaging to the EU and Eurozone. It exposes all the fault lines that no one has the will to fix. It would mean Germany has to give up its privileged position of being the de facto leader while having very few of the usual duties of leadership.

      So the Eurocrats are defending the institutions of Europe at the cost of European citizens. A variant of burning the village to save it. We referred to Gotterdammerung for that reason.

      1. Robert Dudek

        Given this fiasco, I wonder how many more nations will agree to join the Euro. Britain? No chance. The others might think that Greece is a special case and that similar things could never happen to them.

        Having lived in Poland at the time of its entry into the EU, and despite nearly ideal conditions (roaring economy, falling inflation rate) there was a great deal of EU skepticism. Having narrowly avoided Eurozone entry thanks to the timing of the GFC, the devaluation of the zloty really helped cushion the blow. Yes there were a bunch of people who foolishly took mortgages pegged to the Swiss franc, but that seems to have been just a speed bump for the economy.

        I think the main reason it hurt less than expected was because a large number of people acquired their properties from the state for relatively meager sums. Those who gambled with mortgages were generally the well off.

        In any case, unless there is a catastrophic economic disaster in Poland, the pro Euro side will have a hard time carrying the day. Poles regarded Greece as part of “the West”, lucky enough to have escaped the ravages of Communism. There will be palpable fear that what happened to Greece and what will happen to Portugal and Spain could easily occur in Poland.

        1. MyLessThanPrimeBeef

          Does it depend on the Greek referendum?

          How would Poles view a vote for staying in the Eurozone by the people of Greece?

          1. Robert Dudek

            I suppose it depends what kind of deal Greece gets. I suspect that the Polish view will be in lock step with whatever the German view is. Poland is firmly in the German economic orbit now, as Poles’ rabid fear of Russia causes them to “move West” in a metaphorical sense. That means that Poland will remain among the staunchest US and German allies until such time as the perceived Russian threat disappears (probably not this century).

        2. supermundane

          I live in Norway and support for the Euro and the EU has fallen through the floor since this crisis began. There is no way that anyone would seriously prosecute the case for it,

      2. John Jones

        It’s massively costly for Greece, even more so than continued austerity, for them to leave (which the Greek government understands on some level, that’s why they get hysterical when anyone talks about Grexit).

        I don’t believe this no matter how much the pain would be for an adjustment there is a difference. And there is no argument that can or has convinced me otherwise.

        They will have something left, light at the end of the tunnel if they leave the E.U and Eurozone. If they continue on the same path they will sell off everything that is left have more economic and job cuts have a depleted military when they face constant legitimate threats, more of a brain drain, a worse medical system, more early deaths and people dying from things they shouldn’t have to die from and more suicides.

        All this is going to happen and they might end up leaving or been thrown out in the end anyway. Or wanting to leave when they are at an even weaker position in the future. And a weaker position is sure to happen if the choose to stay in the E.U and Eurozone. There will be no recovery EVER if they choose to stay.

        Sorry but taking this is not better than leaving and taking destiny into your own hands is always better. Even IF they would have to face difficulties in the beginning.

        I prefer this for my people and my family.

        1. Yves Smith Post author

          The government doesn’t believe in doing it. This is a war-scale undertaking to pull off and even then it means tons of pain if it goes well. This government is hollowed out and its leadership infights like cats and dogs.

          People who forced by circumstance to undertake tasks where they think they will fail will fail.

  23. Merf56

    You can throw out all the silver dollar Econ terms you want here trying to sound brilliant and correct but the bottom line is Greece can and will never be able to pay anything close to the amount of money it owes over ANY time frame. It is a fantasy. I have as of now now stopped listening to any and all of you here and on any other news source until some of you at least begin to face that fact and say so loudly publically and often. The ONLY way forward for anyone in this whole pathetic debacle is complete debt forgiveness And yes that means Portugal, Spain and Italy as well. Sorry Ireland you were profoundly stupid to agree to such terms. Then jail the European and American bankers who loaned these monies to countries they CLEARLY knew would never get out from u dear the debt. Until you bloggers and know it alls start saying this and ONLY this a pox on you all.

    1. ambrit

      Dear Merf;
      Don’t kill the messenger.
      The operative decisions are being made by “captured” politicos and their minions.
      The Two Options:
      Option One: Cry ‘Havoc’ and let loose the dogs of (class) war.
      Option Two: Incrementalism as a strategy for change.
      I have heard various Gurus advance versions of a Third Option, but they usually end up being some unworkable synthesis of the first two Options.
      It can become very frustrating, I agree.

    2. MaroonBulldog

      The debt can never be repaid. Absolutely agreed. Extend and pretend is a fraud, don’t you think? It’s a fraud perpetrated by debtor governments and creditor governments, and their banker masters, working and conspiring together, to defraud the electorates of the countries who are going to get stuck, one way or another, who are going to get stuck with the losses, down the road. Wouldn’t you say so?

      Bill Black publishes here, a lot. Maybe it would help to get an update on his views concerning how control fraud by bankers might work in this case.

      But don’t hold your breath while you wait for the government authorities to jail the bank defrauding bankers who defraud the banks they work for by making loans to debtors who can never repay them. The government authorities and the bank defrauding bankers are in it together, all the way to the top. That’s a point made here a lot, too. Maybe you’ve missed it.

    3. Foy

      Sheez merf56, Yves hasn’t stopped kicking the bankers and TPTB and saying that people in the finance industry should have been jailed for fraud since she started this blog, that the banks shouldn’t have been bailed out, that the Irish government should never have taken over the debts etc etc. All along its been acknowledged that Greece cant pay back the debt and that there is a fundamental flaw at the heart of the Euro (can’t recycle internal trade surpluses/deficits) that would bring the current situation about, that this is a game of kicking the can down the road.

      Yves is just explaining what the Greek situation is within the legal framework as it stands, and how it is likely to play out. She has never said that what is happening is right, and has always said there are big ramifications (ie contagion) for the Eurozone down the track if the Troika continue the current path with Greece. She’s not supporting what they are doing in the slightest, just explaining the state of play and where the failings of tactics and strategy are by the players within the legal and political parameters/constraints of the whole sorry mess.

      Think you’re being very unfair with that comment…

      I cant even start to tell you how much I’ve learnt from this blog over the last 8 years, it’s fascinating and amazing stuff, thanks for everything Yves.

    4. Lambert Strether

      Absent a plan for to take a pony, there’s not gonna be a pony. So it really doesn’t accomplish much to stamp your feet and shout “I want a pony!”, now does it?

    5. John Smith

      “The ONLY way forward for anyone in this whole pathetic debacle is complete debt forgiveness And yes that means Portugal, Spain and Italy as well. Sorry Ireland you were profoundly stupid to agree to such terms.”

      Why not instead Steve Keen’s “A Modern Jubilee” but for Eurozone governments? Debtor governments could then pay down their debts while non-debtor governments could spend or distribute the new Euros to their citizens.

  24. Jeff

    The current behaviour of the EU bureaucrats should warn any other big countries about trusting them. They cant even save a small country like Greece, how the hell will they manage if a bigger one like Spain or France goes down?!

  25. charles 2

    It is a pure legal move. As the Greek government is not infringing human right and democracy (quite the contrary in the latter case), the only basis for an temporary exclusion is lack of rule of law. I expect the Greek government to wage its battle over legal arguments (cue Varoufakis saying to AEP that the Greeks will go to ECJ if forced to exit from the Euro Area). For that, they need to be as legally tight as they can (note the mention of safeguarding not only their banking system, but the whole eurozone banking system despite the action of the ECB). I wouldn’t be surprised if they justified the takeover of the BOG on the legal argument that it follows the instruction of an institution, the ECB, acting ultra vires and in contravention of the treaties.

    As an aside, The president of Greece is ex-ND, but also a distinguished lawyer. The Office of the president is important to use emergency power. He had kind words for the President of the parliament preliminary report on the build-up of debt. As an ex minister of Interior during the go-go days, he may have kept some useful records for the auditing effort.
    I don’t think Tsipras picked him randomly.

    By the way, Schauble move to say that a “no” to referendum doesn’t necessarily mean a Grexit is also a legal move. He too is a distinguished lawyer and an ex-minister of Interior…

    1. MyLessThanPrimeBeef

      Is the Greek referendum constitutional or not constitutional, according to these lawyers?

    2. susan the other

      You’re right. Since January it does seem that both sides have been positioning themselves legally. It will take years to go thru the legal process but in the end if Greece wins they can collect. The EU looks to be already suffering a thousand cuts. Just wait.

  26. dk

    I think in the backs of their minds many Greeks are thinking, screw it, screw the EU and the IMF and the %$#@ Germans, we’ll just go back to living off the land and the Aegean, like our ancestors did for generations.

    What Western Borgoise observers (like ourselves) think of as corruption is the old way; resource trading, informal leasing, informal payments… the drachma was the currency you might use in a store, but you might also just approach the store owner (or employee) to trade some olive oil you had for fishnet yarn. You’d harvest olives from your neighbors yard when he was away.. and it wasn’t a terrible deal for your neighbor, because you pruned and irrigated the trees, too. Your sister painted plates and sold them to the tourists, and your aunt and uncle who worked in a big hotel in the city would send back packages of sugar. Don’t kid yourselves, this is a huge chunk of the real Greek economy, and one of the reasons their formal EU economy has been such a disaster; the Greeks, as a whole, never fully bough in.

    Is this corruption when everybody does it? It’s hell for bankers, hell for a government trying to tax transactions and real holdings, hell for formal business investment (heaven for lawyers, btw)… but people survive, mostly. Sure, Grandma died of cancer at 56, but she was tended by her family and surrounded by them on her death bed; her grandkids will remember that funeral. There are lonelier ways to live and die. Some call it dignity (I’m of two minds about it myself, but I do understand the human reasoning).

    This is what a significant chunk of Greece is thinking.. it’s like the absolutely vile retsina wine, which is the most horrible thing you’ve ever tasted.. until half way through the third glass, at which point it becomes a nectar of the gods. Contrariness is in the Greek blood, trickled down from the Balkans. It leavens misery, and bears a lean dignity that much of the rest of civilization (sic) is running short of (while blogging furiously about it.. just sayin’).

    The problem with taking the few short steps back to that way of life is that the resources this strategy depends on have been sadly and profoundly degraded, the Aegean polluted and decimated, climate change increases southern drought, some of the best olive groves tilled over for resort developments that were abandoned half way. Meanwhile population grew (antibiotics) so the resource to population ratios are not what they were; probably a disaster in the making.

    But the Greeks would still be the Greeks. If they capitulate to the investors and the Germans, who would they be, what would it mean to be a Greek? That’s what the referendum is asking, point blank. Greece, the land, has always been a harsh mistress, but for the Greeks it was their own, and they became who they were, and who they may still be, under its terms. Faced with a crazy choice between tissue-paper pensions and the prospect of a brutal wage servitude, and a heritage of grim life with a meager measure of some of the purest freedom and most vibrant community there has ever been… let’s see what flavor of crazy those crazy Greeks pick.

    1. Lambert Strether

      Oh man, that’s discouraging. From talking to my Greek friends, I assumed the villages hadn’t been paved over.

      But of course tourism and resorts are utterly destructive of a resilient Greek countryside.

      Your scenario might be called “the Archdruid Scenario.” Again, I’m not opposed to it in principle — one of the first permaculture posts I wrote was on a project in Cyprus — but it hasn’t been honestly presented to the Greek people as an alternative, that I know of (and it’s certainly not in accord with what Syriza has said). I’m also not sure how the portion of Syriza’s base that is academic and professional would react to it.

      1. dk

        I don’t think anyone in an authority position would acknowledge this at all, especially not in the way I presented it. But they have to and do acknowledge that there is a huge informal/undocumented value flow, which in the formal sense is “corrupt”, in as much as it avoids oversight, regulation, taxation, etc. That doesn’t make all of such traffic necessarily immoral.. unless maybe you’re a banker or policy make or financier.

        But I personally think that the concept of “corruption” is misunderstood, distorted, and effectively abused. When the Soviet Union collapsed, the vast black market network in commodities literally kept millions of people alive, and facilitated a rapid recovery. In the USA, the drug, stolen car, and prostitution markets circulate money at the lowest levels of the economy. I’m not trying to defend the morality of these markets, just saying that they provide circulation that would not otherwise exist; when economists and policy makers shrug and ignore or decry these markets, they also fail to do much to replace them, or address the base economic needs that drive their volumes. They circulate value more laterally than the formal markets that keep driving value incrementally upwards, away from the poor. Until money/value circulates downwards, not just upwards, these markets will remain sizable and significant.

        Employment of undocumented immigrant workers is another example. It is corrupt, but objection to it on purely moral/legal grounds ignores its causes and functions.

        Greece now has a significant population, mostly urban, that is almost completely uninvolved in the informal economy, but they must know it exists, although there is certainly some level of denial/deniability there.

  27. Pablo

    Following up on the France 24 debate, the links are posted in a post above.
    I found the “old” paper Keen mentions in the debate, a 1992 paper about the Maastricht treaty, by Wynne Godley. He makes some points that seem very pertinent to the situation at hand, and since it was written 23 years ago, clearly the problem is structural, in the genes so to speak.

    a short excerpt:
    “It needs to be emphasised at the start that the establishment of a single currency in the EC would indeed bring to an end the sovereignty of its component nations and their power to take independent action on major issues.

    It should be frankly recognised that if the depression really were to take a serious turn for the worse – for instance, if the unemployment rate went back permanently to the 20-25 per cent characteristic of the Thirties – individual countries would sooner or later exercise their sovereign right to declare the entire movement towards integration a disaster and resort to exchange controls and protection – a siege economy if you will.

    [In a country] if one region suffers an unusual degree of structural decline, the fiscal system automatically generates net transfers in favour of it. In extremis, a region which could produce nothing at all would not starve because it would be in receipt of pensions, unemployment benefit and the incomes of public servants.

    What happens if a whole country – a potential ‘region’ in a fully integrated community – suffers a structural setback? So long as it is a sovereign state, it can devalue its currency. It can then trade successfully at full employment provided its people accept the necessary cut in their real incomes. With an economic and monetary union, this recourse is obviously barred, and its prospect is grave indeed unless federal budgeting arrangements are made which fulfil a redistributive role.”

    Someone, somewhere, should have taken that insight into account since then.

    1. susan the other

      No kidding. This was written 23 years ago. And it was considered wisdom already. It refers to “depression” and it is true we never surfaced from our western face plant in the late 70s and 80s – we just financialized it. Can kicking. MMT is the most rational way to approach this mess, imo. But it will be a long cold day in Hell before Draghi confesses. Sovereign money is like demand money. (The post yesterday on how we have misunderstood money to have intrinsic value when all it is is demand and this has perverted our entire economic sense.) But still all the monetary geniuses are busy defending the value of their currencies even if they wither up and die. I would just like to turn Juncker’s latest comment back against him and the EU/EC: “Don’t commit suicide just because you are afraid of dying” you obsessive European currency freaks.

  28. IsabelPS

    FR Sapin says to RTL that in the negotiations it was not Germany that took the harder stance, it was the small countries (and he named Slovakia and Slovenia) that tell Greece “we made efforts, things are going better for us, make efforts yourself but don’t ask my people to help you when your minimal salary and your pensions are higher than ours”.
    I think that one of the great diplomatic mistakes of Tsipras (that is much reproduced in the media, that at the most, mention Portugal and Ireland) was to focus on Germany and ignore everybody else. In spite of a simple, black and white narrative, it is not quite how it works in Brussels. I think this level of isolation in negotiations is unprecedented: there is always somebody that votes with you, either because of size, or because of geographical situation, cultural affinity, common economic interests, whatever.

  29. dcb

    I’m sure you know much more about the technical details of what is going on in Greece than I . But one factor which it seems (from my reading you overlook) is that those at the top decide to brake rules when it suits them. Hence, I imagine greece can default, but not be declared in default (for example) if it suits the powers that be. We saw this over and over during the crisis. I don’t know what will happen, but I know from my experiences very little is written in stone when those at the top don’t want it to be so

Comments are closed.