Greece Bailout Deal Looks Even More Remote

As we said two days ago, despite talk of a breakthrough as Greece submitted a proposal to creditors that amounted to crossing one of its famed red lines, pension “reform” as in cuts, the tenor of comments of key people to the media were nowhere near as positive as they should have been if a deal were on track. But even with the understandable concern that it might prove difficult to work out fine points in time and close remaining gaps, the creditors led by the IMF, stunned most commentators, and most of all Greek officials, by making their own proposal which pretty much rubbished what the Greeks had submitted.

Tsipras went to Brussels yesterday to try to rescue an agreement. In a very bad sign, there were few leaks despite the meeting with Lagarde, Juncker, and Draghi going until past midnight, seven hours in total. Press reports today all indicate little progress was made.

I’ve embedded the document at the end of the post; it’s already been widely circulated and discussed. Even if you don’t want to read it in detail, the amount of red inked revisions speaks volumes. The big changes are:

1. Changing the mix of cuts versus tax increases. The Greek proposal relied overwhelmingly on tax increases; the creditors doubt they’ll raise enough funds, given how tax payments have dropped since Syriza has taken office. Moreover, they also believe that some of the tax increases will harm the economy (as if that’s ever been much of a priority in their thinking) more than spending reductions will. The creditors, in a minor sop to Greece, did relent on taxing electricity at the highest VAT rate of 23% as they had once demanded. However, they also got rid of a one-time wealth tax of 12% of all corporate profits in excess of €500,000 this year, and reduced a proposed increase in corporate taxes from a rate of 29% to 28%. They are also proposing spending cuts, like ending diesel subsidies for farmers, and want defense spending reduced by €400 million versus the €200 million proposed by Greece

2. Although this is technically just a subset of 1, it’s such a heated issue for Greece that it merits separate discussion: serious pension cuts, and a much faster elimination of the so-called “solidarity grant” for poor pensioners.

The creditors have so little trust in the Greek government that they are demanding that the pension fund changes become effective as of July 1, 2015. As mentioned earlier, they also want key legislation passed by the Greek parliament by Sunday so that the German parliament has that in place before it ratifies the bailout. Given that the earlier timetable assumed that officials would be working on drafting legislatoin today, when the two sides remain at an impasse, it’s hard to see how all the moving parts could be marshaled into place, even if someone figured out how to resolve the yawning differences. As the Financial Times noted this morning:

One eurozone official said trust between Athens and creditors had evaporated and “nervousness” had set in. “No one wants to budge,” said the official.

Now one has to ask, what exactly happened? Narrowly, one could say the creditors never moved from their five page memo they gave to the Greek side three weeks ago, which they had said was their statement of principles that was necessary for any deal to be done. But even so, why the cheery talk (well not exactly so cheery as we read it) of the window before the creditors shredded the latest proposal? Was it merely to cheer up Mr. Market or to give Tsipras a pat on the head for crossing his red lines before taking a hot poker to him?

If you’d managed to parachute into this situation today, just from reading that Financial Times story linked to above, you’d be hard pressed to see how the two sides could agree. The European Commission wants the IMF out but Germany insists it won’t agree to a bailout unless the IMF has signed off on it. Other Eurozone lenders likely feel the same way. But the IMF wants debt relief in this deal and Germany says no, that comes in the next agreement. And aside from the German “Nein,” it’s again hard to see how that idea could be sold to the now many other Greece-unfriendly countries that all have to approve any release of funds by June 30, or the €7.2 billion goes poof. The countries are unlikely even to agree to an extension to hash out details without some firm commitments from Greece.

On the Greek side, the offer earlier this week was as far, and potentially further, than Tsipras could go without breaking his coalition. His junior partner ANEL has already said not exempting some Greek islands from VAT increases will cost him their vote. Members of the Left Plaform (about 1/3 of the Syriza MPs) are also likely to rebel. There are rumors that Yanis Varoufakis will go into open opposition over the lack of debt reduction. But even though support for a Eurozone exit is rising among Greek citizens, it’s still far from a majority view:

Tsipras can go to To Potami (opposed to a Eurozone breakup) and New Democracy to hopefully pick up the remaining votes, but that puts his government on a path to dissolution. And with the creditors pushing him even further, it’s hard to see how he can accede without losing what amounts to his manhood as a leader. Even just going outside Syriza to push a deal through is tantamount to career suicide.

The question is whether the Troika is pushing Tsipras beyond where he can go out of a desire to break Syriza or was simply exhibiting their pathological faith in economic quackery, aka austerity, as well as a related belief that members of the Eurozone needed to follow the rules. My guess, and again this is just a guess, is that the Troika is not actively plotting to get Tsipras out even though the path they are on looks awfully close to the same thing. But I suspect their actions are driven in no small measure by frustration and anger. I’m told it’s an old saying in therapy that you are most run by the emotions you are least comfortable with. While political leaders, as alphas, have all sorts of license to show their choler in private to their staffs, it’s quite another to do so in more public settings. An unseemly number of members of the officialdom have been losing their cool over how much time Greece has been consuming and the Groundhog Day feel of seemingly unending negotiations. And remember, if a deal miraculously comes together, the creditors expect to roll right into another set of talks with Greece over debt reduction!

I e-mailed some colleagues on June 16 saying that the Troika would find it necessary to get Syriza out, that they would feel compelled to break them because the prospect of having to continue to negotiate with them over the next bailout would prove to be too unpalatable and resource intensive. You can argue whether the irreconcilable positions generated the bad interpersonal dynamics. But once trust is gone and relationships have soured this badly, they are well nigh impossible to patch up. That might be fine when parties can deal with each other minimally in the future but that’s not the case with Greece as an IMF charge and a big borrower in need of a debt reworking. And being treated as untrustworthy, as Greece is by being required to make detailed commitments and implement plans immediately, is certain to feed into the dynamic of mutual antipathy.

The negotiations are continuing and the summit of European leaders continues into Friday which in theory allows for all day and night to try to salvage a deal. The fact that the Guardian isn’t running its usual live blog on the Eurocrisis today speaks volumes as to how little progress they expect to see.


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  1. Ruben

    “The question is whether the Troika is pushing Tsipras beyond where he can go out of a desire to break Syriza or was simply exhibiting their pathological faith in economic quackery, aka austerity, as well as a related belief that members of the Eurozone needed to follow the rules.”

    Regarding the motivations of the Troika, the Europeans are mostly motivated by crushing the outsider to the European political establishment as a strategy to secure the continuity of political power allocation Europe-wide, whereas the IMF is mostly motivated by creating a scenario conducive to secure payment of the debt.

    The Europeans would rather have the outsider surrender and sell out so business would continue as usual, and they are about to get what they want, but the outsider still presents some resistance, it has to, it is supposed to be ‘radical left’.

    Negotiation fatigue and dynamics plays a minor role compared to the two major motivations of the more powerful side.

    1. Ned Ludd

      “…the outsider still presents some resistance, it has to, it is supposed to be ‘radical left’.”

      Additionally, every move by Syriza to appease the Troika will be attacked by KKE, who loathe Syriza and refused to meet with them after the election.

      With PAME and a media operation, KKE can tear down Syriza’s image from the left. This also creates problems for the Left Platform – every time someone within the Left Platform criticizes a decision by Tsipras or the Syriza leadership, KKE supporters mock and ridicule the Left Platform for being part of Syriza in the first place.

      if there is any “dissidence” worth mentioning in SYRIZA, it must be that of the “Left Platform”. But the “Left Platform” has never, ever carried a victorious motion within SYRIZA. In the few instances in which it introduced motions alternative to those of the Unity Ballot, it was predictably and summarily defeated and then handled the defeat by enthusiastically hailing the “democracy” and polyphony of the party, i.e, by flooding the Press with more SYRIZA cheerleading and self-congratulation.

    2. Yves Smith Post author

      I think you are misconstruing what I said about anger.

      The pols among the negotiators (meaning all of them) can’t be seen to be as angry as they almost certainly are about Syriza. The effort to not be seen as acting out of anger will come out nevertheless. So I am not referring here to negotiation fatigue, I’m referring to a dynamic similar to the one that spouses get into in a nasty divorce, when they have not just decided that the relationship isn’t working but come to hate each other because they want to be done with each other when they aren’t (divorce not final) or can’t be (kids and shared custody).

      1. Ruben

        These pols conducting the negotiations are all hardened politicians, they are not losing their cool in a nasty break up. The outsider needs to be neutered, steps are being taken in that direction.

        1. German native speaker

          Re the “outsider” argument, I don’t see it that way. Don’t forget that the first thing Syriza did was throw Troika representatives out of the country, claiming they don’t need their money, i.e. the very bailout tranche that the current back-and-forth is about. What the rest of Europe wants to see is that Greece actually acts on its promises, no matter whether they are Syriza or not. For five years, there were so many promises by various Greek governments, and not much action. Again – it’s not only the last months that were tiring to the different parties, but the five years before that.

          Second, most Germans know that debt restructuring/forgiveness will happen – if they are not living under a rock – but Merkel avoids admitting this to her critics from the right, because she is afraid of losing voters. But there is also the aspect that many fear that after cutting the debt, Greece will again try to heal itself by borrowing more. With Varoufakis stating again and again how he believes in the “European idea” during his talk circuits, what he left out repeatedly is the small fact that Greece is/was able to take advantage of the “tiny” “trivial” aspect of low interest and EU subsidies.

          What is true at the same time, is that the shortsighted insistence of the IMF on primary surpluses is just absurd and damaging to Greece. The German print media never criticizes the IMF for this – but you know what, they have long been trained to applaud everything that comes via Washington.

          I had hoped initially that the Euro would become a counterbalance to the dollar (there was that rumor that Iraq and Iran wanted to sell oil for Euros, way back when), but I guess TPTB won on this one too.

          1. todde

            There are not enough euros in circulation to be a counterbalance to the dollar.

            And Europe would have to import more goods than it exports outside the Euro zone for that to work.

            1. Don W

              “And Europe would have to import more goods than it exports outside the Euro zone for that to work.”

              And, that can never happen because at that point a lot more countries become Greece.

          2. Edward Qubain

            “What the rest of Europe wants to see is that Greece actually acts on its promises, no matter whether they are Syriza or not.”

            This statement implies that the failure to resolve Greece’s economic woes falls on Greece. However, isn’t it the EU’s austerity plan, forced on Greece, that has failed? This talk of responsibility seems to me a way of avoiding discussing what will work and what will not work.

        2. Yves Smith Post author

          These negotiations have gone on longer than normal political fights, and the Greek government’s tactics and actions break all sort of unwritten rules for negotiation. Violating cultural norms leads to irrational responses. The reactions and leaks out of these negotiations are way way outside the pale of what you normally see.

          1. Synoia

            When faced with a cliff, try to avoid the fall.

            SYZRIA was elected with two conflicting agenda,

            1. Stay in the Euro
            2. Recover some degree of sovereignty

            Failed mandate.

      2. Oregoncharles

        I don’t think personal pique should be underestimated (think of how the Greeks feel!), especially when it runs in parallel with their political interests.

        My previous conclusion (for what it’s worth) that a Grexit was inevitable, regardless of peoples’ desires, was based largely on the reporting here. In fact, it’s based largely on Yves’ own point that there was (and is) no basis for negotiation – no common ground.

        I’m standing by it.

      3. Cugel

        Yves, if you’ve ever been involved in multi-party settlement negotiations, the dynamic from the Greece-EU negotiations are very familiar. The problem for the creditors is the need to get everybody on board and the need for politicians to save face and not admit that their policies have been disastrous, and have led to big losses that are being saddled onto the taxpayers.

        In such circumstances, the only thing the creditors can agree on is the lowest common denominator, i.e. no significant concessions. Any real concessions to Greece triggers resistance from multiple parties whose agendas are to avoid the appearance of giving in.

        IMF has to be tough on the Greeks because Lagarde has to justify any further bailouts to skeptical members who didn’t want to be part of the Greek crisis to begin with and certainly want their money back now.

        The Germans have political critics who can stand on the sidelines and attack any concessions from a position of smug moral superiority.

        The ECB is worried as bankers are about “moral hazard” from recognizing reality and writing down the debt.

        The other EU countries like Spain and Italy that have inflicted suffering on their peoples in the name of Austerity cannot permit Greece to escape punishment.

        In short, there is no-one capable of stepping in and acting in the collective self-interest of the EU.

        Combine this with ideological rigidity and group-think that refuses to accept that Austerity is a disaster, and you have a recipe for failure. So, everybody loses, because nobody can saddle the burden of facing unpalatable truths.

        Certainly, the Greeks didn’t win any friends by constantly pointing out that the Emperor has no clothes, and suggesting that admitting that fact and getting the Emperor into at least a night-shirt would be preferable to freezing to death. But, I seriously doubt whether a more conciliatory attitude by Tsipras or a more nuanced negotiating strategy could possibly have saved the negotiations.

        Right now, the Troika is in the process of refusing to take “yes” for an answer, and pushing for ever more crushing terms.

        From the EU perspective, they are certainly correct not to trust Greece to keep to any terms that are negotiated. That makes them angry and willing to demand something immediately tangible before releasing the funds. The Greeks meanwhile have been forced to promise impossibilities, and will not be able to deliver. Then the blame game will begin anew as the Greek economy continues to tank. The Troika would much prefer to force Greece out now, and blame the Greeks, than undergo endless further negotiations.

        Certainly, they are angry like in a bad divorce, but the EU is absolutely right (given their insane assumptions) that the Greeks cannot be trusted. That doesn’t however, leave much room for successful negotiations.

        I’d give the odds of default sometime in 2015 at about 95% right now.

    3. ennui

      they find Syriza annoying and embarrassing but the idea that they find leftish “outsiders,” at this point, threatening enough to need to be crushed is just self-aggrandizement. I mean, look what “they” did to Mitterrand in 1983.

      1. Calgacus

        I mean, look what “they” did to Mitterrand in 1983.
        That is “their” version of history. The very false socialist Mitterrand did it to himself, intentionally snatched defeat out of the jaws of victory. Basically it was all play-acting to convince an audience that “socialist” “Keynesian” “expansion” didn’t work, when it most certainly did. “Their” greatest power is fooling the oppressed that “they” have (magical) powers. So this French production with a cast of millions was and is very important in fooling billions.

        The real story is in:
        Jean-Gabriel Bliek, Alain Parguez. “Mitterrand’s Turn to Conservative Economics: A Revisionist History.” Challenge 51.2 (2008): 97-109 &

        Robert Eisner “Which way for France?” Challenge (1983): 34-41.

        Eisner’s paper was the outcome of a study commissioned by the French government itself, which it completely ignored when it did not yield the pro-austerity results and recommendations the government desired.

    4. Ned Ludd

      Kevin Oveneden also commented that, for the Troika, the negotiations are about “raw politics and power”.

      The Troika’s rejection of the Greek proposals has little to do with economics… The hard line position by the Troika — led by the Washington-based IMF — is about raw politics and power. They want the Greek government to be seen to be crushed, and with it the hope for an alternative to crippling austerity…

      They also want to force now the open confrontation with the Greek popular masses which further austerity entails. They wish to force a government of the left to conduct a war against the most combative working class in Europe.

      teleSUR’s article ends with this speculation:

      The presence of Greek opposition parties To Potami and New Democracy in Brussels, where negotiations are taking place, is causing speculation that the lenders are hoping to provoke a split in the ruling Syriza party, with some elements of the party supporting the latest proposal and pushing it through the Greek parliament with the support of smaller parties.

  2. Nick

    One day this will be seen for what it is – an Imperial Power base whipping one of its weaker colonies into submission.

    1. which is worse - bankers or terrorists

      Exactly. In the 17th century, European powers gave the American Indians blankets with smallpox. Now we have the euro.

    2. Pookah Harvey

      Greg Palast, an investigative reporter, has a piece on Prof. Robert Mundell, supposedly the father of the Euro. He had interviewed Mundell who also is a leading figure in supply side economics.

      The article states

      The idea that the euro has “failed” is dangerously naive. The euro is doing exactly what its progenitor – and the wealthy 1%-ers who adopted it – predicted and planned for it to do.

      The euro would really do its work when crises hit, Mundell explained. Removing a government’s control over currency would prevent nasty little elected officials from using Keynesian monetary and fiscal juice to pull a nation out of recession.

      “It puts monetary policy out of the reach of politicians,” he said. “[And] without fiscal policy, the only way nations can keep jobs is by the competitive reduction of rules on business.”

      He cited labor laws, environmental regulations and, of course, taxes. All would be flushed away by the euro. Democracy would not be allowed to interfere with the marketplace

      Interesting read.

      1. Rhondda

        Thanks for that. Short, to the point and –in my view– correct. From the piece: “And when crises arise, economically disarmed nations have little to do but wipe away government regulations wholesale, privatize state industries en masse, slash taxes and send the European welfare state down the drain.”

        And if crises don’t arise quick enough to suit the Banksters, they are so easily created.

        I think it’s notable that Euro powers seem hell bent on controlling HOW they get their money back. Syriza says we will pay the debt with tax increases on the wealthy rather than cuts to the poor… and the ECB says no, here’s how you must pay us back. It’s as if I had a debt and I said to my creditor, “I am broke but I will get a part time job and use that money to pay this debt” and the creditor responded, “No. We insist you pay the debt by selling your children into slavery. Nothing else will do.”

      2. Doug Terpstra

        Today the Euro, tomorrow the Amero, purely digital of course, in perfect synergy with TPP, TTIP, and TISA. It’s all dovetailing quite nicely really, except of course for a few beligerents like Russia and China. This is why “we” are escalating offensive re-armament in Eastern Europe and why the IMF applies such glaring double standards to Greece and Ukraine. As conspiracy theories go, the confluence is just about as speculative as plate techtonics.

      3. todde

        Palast has been saying.that for a.while. it is in his book armed madhouse.written un 2006 I believe.

        I dont.know if it is exactly as he says it is, a big conspiracy but if the outcome is the same it doesn’t really matter.

    3. WorldBLee

      I think a closer analog may be how Germany was treated in the Treaty of Versailles at the end of WWI…

  3. financial matters

    These 3 articles today seem to have a common theme. Lack of demand, poor corporate governance and poor social governance.

    All 3 are self defeating. They are short term and extractive.

    I think 2 people that show a good practical vision of moving forward are Michael Hoexter and Mariana Mazzucato.

    Hoexter would have us get demand going in the right direction by focusing on what we need to do to combat climate change which is a lot. Mazzucato takes an anti private equity, anti loanable funds approach by harnessing a sovereigns potential to have a vision for long term worthwhile projects

    The humanitarian consequences of these self defeating polices are getting a lot of attention in Greece. These consequences are proving hard to ignore as are the steps institutions are taking to deal with them.


    On a related note, I wonder if rising market prices are still seen by most people as reflective of a healthy economy. Just saw this from seeking alpha.

    “Greece is about to be presented with a “take it or leave it” choice by its creditors, and the Eurogroup is set to come together at 10 ET for a chance at a final compromise. Markets are active, but higher, with U.S. index futures up 0.5% and Europe ahead just under 1%.”

  4. Eric Patton

    The west wants regime change in Greece. They want a military dictatorship there. Greece is a laboratory — a test case: How far and how violently can you push people? You’re robbing them blind. At some point they have no choice but to fight back. Can you contain it with sufficient violence? If you can, the model will be exported across Europe, and later the US.

    Tsipras’s life is literally in danger. Not yet, but eventually.

  5. Swedish Lex

    I have the impression that the Troika is hiding behind a joint paper with demands (that do not make any sense, by the way). A paper as an excuse for not using brains individually an collectively.

    For Greece to accept the demands, it would be a joint political and intellectual suicide. Also a very emotional capitulation to the brute force applied by the Troika. Such a surrender would probably be the beginning of a (true) radicalisation of Greece. Is that what the Troika wants? Is that what the Troika wants to send a signal to Spain and Portugal? Is that what the Troika wishes to be remembered for?

  6. Dino Reno

    Headlines should read “Technocrats Propose Deal to Overthrow Democratically Elected Government.” Doesn’t matter if it’s Greece or the TPP, this is the how it will all go down in the 21st Century. Right now dissent is just annoying and distracting, but we are edging toward the day when it’s treason. Because a convenient path has already been established in the last century, it will probably start with Russian sympathizers. Greece is learning right now that playing with Russia is fatal.
    Today Bernie Sanders was interviewed on NPR and asked if being a spoiler is productive because it distracts people from the establishment view. It sounded like he was shaking his head like a Warner Bros. cartoon character who can’t believe what he just heard. Welcome to the mono-opinion state.

    1. Doug Terpstra

      “Right now dissent is just annoying and distracting, but we are edging toward the day when it’s treason.” How prescient:

      Stranger than fiction, the Pentagon states that journalists may now be labeled “unprivileged belligerents,” eerily reminiscent of the Bush regime’s “unlawful enemy combatants”, which ludicrously legitimized torture and stripped targeted people of all human rights, including the right to life. Apparently, unapproved propaganda can be defined as terrorism, but that’s okay now under a Democratic president. Orwell’s dystopia nightmare has now been eclipsed by the Neocons.

  7. Maju

    Unlike Yves, I believe that there was never real intention of reaching any agreement on the Brussels side, even if it was a total surrender in terms nearly identical to those of Samaras. The real intention is to crush the resistance of the Greek people (and by extension the potential of resistance of other European peoples) by any means necessary. Can you tell me a single reason why the NATO Empire will put up with “Bolivarians” (i.e. old style social-democrats à la Olof Palme) inside its borders? Can you tell me a single reason why the decadent financierist capitalists of our age will surrender their plunder-by-privatization plan (the same one being promoted by the triple-T secret treaties) without being actually defeated in a real fight that has not yet almost happened?

    They will fight and they consider Greece expendable, Grexit manageable and they are already plotting their next steps to (attempt to) force the total surrender of Greece even once it is outside the EU.

    Tsipras, Varoufakis, etc. may have tried their best to manage within logical (and social-capitalist) parameters the Greek crisis but they probably underestimated the dimension of the challenge they (and we all) face. This dimension is that Greece is at the frontline of a colossal civilizational battle for the enshrinement of (a hopefully utopic) feudal-capitalism in which one side has all the power and the other just pretty much disorganized and unarmed masses of “citizens”, to whom all rights are being denied law after law, treaty after treaty, reform after reform, in the benefit of a small but growingly wealthy oligarchy.

    Greece, with its humble request for a bit of humanity and common sense, stands in between those global plans of recycling of Capitalism under old Victorian dogmas. Goliath expects to smash little David without much trouble. We’ll see though.

      1. JEHR

        I think this overview by Maju is correct. Why? We have a PM in the process of treating our provinces as “outliers” but he did not count on one of the provinces bucking the trend and that may bode well for our next election. I hope Greece succeeds in debt reduction no matter what method is used.

        1. Cugel

          This view of a plot to crush Greece is greatly over-simplified. Varoufakis has been right all along that it is certainly not in the long-term best interests of the capitalists to dissolve the Eurozone, but that is exactly what is happening. FDR saved capitalism from the threat of violent revolution during the Great Depression, and instituted some mild corrective measures like increased taxation and Wall Street regulation. His reward was intense hatred from the 1% of the day who accused him of being a class-traitor.

          So, stupidity and the rigid ideological inflexibility of institutions plays a much bigger role than some plan to crush Greece. The Troika recognizes the threat to their entire power structure that unraveling the Eurozone amid a massive growth in nationalist and racist extremism would present. They just can’t do anything about it, any more than “sensible Republicans” can do anything concrete about Global Warming without being attacked by angry Tea-baggers. Dealing in what would objectively be their own self-interest would require them to accept that most of what they believe and preach is pure economic nonsense.

          1. Yves Smith Post author

            Agreed. I may not have said that as clearly as I could/should. This is bureaucratic power and ideological rigidity that is almost structurally incapable of changing course all that much, even in the unlikely event that they were to accept that it was necessary. You see that in spades with the IMF program staff not being able to act on the findings of the IMF research staff that austerity does not work (and then the bizarre spectacle of the research chief Olivier Blanchard semi-repudiating his prior work in having to defend the IMF’s stance in negotiations). Of course, that also assumes that the IMF’s job is to fix overindebted economies, as opposed to act as an enforcer for financial interests.

            1. Percy

              ” Of course, that also assumes that the IMF’s job is to fix overindebted economies, as opposed to act as an enforcer for financial interests.”

              Even you cannot possibly make that assumption — and I think a lot of you.

              Greece is doomed. Whether it gets out, is thrown out, or stays in. The changes needed — and there are some — in Greek sociopolitical society are too enormous and too abrupt for them. They flunk the tests. They will be poor and put upon for the foreseeable future.

              1. Yves Smith Post author

                I am being ironic. I can describe the power of the creditors over Greece, which is insurmountable (Greece may indeed refuse their terrible offer, but trust me, going through a banking system collapse with no ginormous foreign support as Iceland had AND having to convert to new currency on an emergency basis would be tantamount to taking a blowtorch to the rest of their economy) without buying their bullshit. It’s not unlike being an anthropologist of a criminal gang. I’ve been quoting The Godfather for a reason.

          2. Maju

            That would imply that the capitalists have a “long-term plan”, something I disagree with. Their only plan now is plunder while you can, repress those who dissent. It’s not a long-term plan, obviously. You call it stupidity but I think it’s just the nature of things: Capitalism (and very particularly financier-capitalism) is in essence short-termist (want profits and want them now) and only in the height of the Cold War, when the bolshevik model became a realistic alternative (i.e. while the USSR was doing well and revolutionary offshoots spawned all across the globe, from Vietnam to Cuba), they organized something of a mid-term planning, which implied significant downward redistribution of wealth, as you say well, not without resistance from the stingy and short-sighted oligarchs. That planned capitalist system was blown up in the 1980s and then there was only the credit bubble between Thatcher and outright Hell. Maybe that’s why the credit bubble lasted so long: because they could not figure out any other trick.

            Anyhow it’s not immediately obvious that the EU will collapse just because Greece is more or less forced or chooses to leave it. It will face a crisis but it will be a slow-motion one. The oligarchs hope that punishing Greece will teach a lesson not to Greeks but to other potential dissidents like Spaniards, Irish, etc., so in their book it makes total sense.

    1. ennui

      again, the intellectual self-aggrandizement: “crush the resistance of the left.”

      From the very first meeting, they have signaled that they consider Tsipiras et al to be ludicrous annoying children. The negotiation strategy has been to either force Syriza to agree to a deal which would destroy them politically in Greece or lead events to a #Grexident whereupon the chaos in Greece would destroy the Syriza government extra-democratically. But it has nothing to do with “crushing the left” merely about being able to have non-annoying servants in Greece.

      If Tsipiras were really clever, he would have provoked a serious Greek riot in response to the Syriza pensions and taxes offer. The fact that everyone thought the Syriza MPs were desperate enough to vote for it, doomed any possibility of Syriza redline crossing succeeding in Brussels.

      I don’t understand why Yves is promoting the idea that these “negotiations” have ever been serious. If Tsipiras and Syriza took them seriously, more fault to them. But, this final reversal by the IMF, in collusion with Schaeble should be all the proof you need of bad faith. No one has commented on the constant exaggerated pantomiming going on about how tiring these meetings have been for the Troika representatives. These are people who are professional meeting goers, who have climbed their institutional hierarchies on being successful at meetings. I think it just shows how much of a farce they saw all of the pretend negotiations, having to listen to these earnest Greeks bend lower and lower. It’s demeaning to everyone involved…

      Again, Syriza signs on to something which will destroy them politically, or the IMF shock troops take command after the chaos of a #Grexident destroys the Greek government

      1. Rosario

        Much agreed, WRT “bad faith” just look at the IMFs loan to the Ukraine:

        Currently Ukraine’s loan is sitting a bit above 17 billion. Note the loan is for “fighting corruption” and “restructuring banks” whatever that may mean behind the fog of war. Greece currently has a tad under 22 billion outstanding IMF debt. Not too far off from Ukraine by IMF standards. Same type of loans different countries, what is the fix? How much of that Ukraine money will be accounted for after fighting all that corruption [sarcasm]? I will say none. At least none that won’t be paid by Ukrainian citizens for the next few generations. Ukrainians had no say in the matter, there was no political process, there will be no political process in the future. There never were negotiations, and there won’t be in the future, the order must be maintained at all costs.

      2. Yves Smith Post author

        These negotiation have been serious All you need to do is look at the amount of time it has consumed of national leaders like Merkel and Hollande, as well as of Lagarde and Draghi. Blowing up the Greek banking system, which is what happens if these negotiations fail, is not something they want to do without having given Greece other options. even if those options are painful.

        1. Santi

          There is a fiction they live in, a fiction they need to maintain: the fiction that “playing by the rules” will make the monsters go back to the shadows under the bed.

          There is also the fact that, whatever new (and improved!) sacrifices they are going to ask from the European citizens, those will all be the fault of those evil Greeks and their radical dirigents…

          Kicking the can forward would buy us another couple years of agony, so I prefer if Greece defaults and we arrive to see how the Emperor will dress after acknowledging nudity.

    2. Rosario

      Thanks for the post. Though I appreciate Yves’ coverage and sympathize with her stress I also differ with her take on the affair. It is too politically and ideologically loaded to be boiled down to the fundamentals of economics (of which the analysis has been excellent). I’m coming closer to the point of having no interest in reading on or discussing the subject because the majority of the discourse revolves around alleviating the symptoms (austerity/privatization) rather than curing the disease (Neoliberalism or Capitalism depending on how far one wants to go). As I see it the Greeks are faced with a crisis placed on them at the national/trans-national (ECB) bank level, and their (mis)behavior is being used as a red-herring distracting the broader EU “partnership” from the corruption and special interests present within the major EU and global (American/London banking, IMF) institutions. More precisely, what purpose does a central bank have if not to ensure the well beings of citizens within a nation-state/nation-states (EU) no matter the behavior of elected officials? Is that not the purpose of quantifying economy with monetarist economic policy, to put aside the politics in service of undeniable numbers? This is why the issue is no longer economic in nature. The economics broke down once they were applied toward political/ideological ends. Thus it becomes largely a political issue shrouded by the veil of economic metrics. Not to say the metrics do not matter at all, just that the inability to question those metrics, however faulty, appears more a sign of rigidity in political ideology to serve very particular interests.

      1. Yves Smith Post author

        As I said from the very outset, the Greeks were very unlikely to prevail on their own. You can bemoan the immorality of the situation, but the Greeks were never going to succeed without help from the US or the international left. Where were the Podemos rallies in support of Greece, for starters? Or rallies by leftie groups better yet in Brussels and Frankfurt?

        The job of a central bank has long been accepted as being the guarantor of financial stability and the soundness of the currency. You have a lot more slogging than you even begin to recognize in taking that one on. It is first of all a bankers’ bank, second a war financier (and those two roles are already in conflict). The only time you saw a central bank behave virtuously was the Fed in World War II, and that behavior is airbrushed out of the collective memory.

        1. Maju

          Demonstrating in Spain is now semi-illegal. The conservative government is pushing ahead with all kind of extremist authoritarian laws, for example this July 1st becomes active the so-called “gag-law”, that totally curtails freedom of speech. In general there is a feeling that the government is, on one side, living on borrowed time (since years ago) and, on the other, that it is totally autistic and corrupt, so the only hope seems to be to wait for elections and hope that the “great coalition” does not produce other four years of more of the same.

          Anyhow, for what I can see, way too many in the Spanish and Basque “real left” fear that Syriza is just another PASOK and go overboard supporting the KKE’s supposed “correct” stand, which is not the kind of attitude that makes you stand in solidarity but rather in awe and distrust. I often find myself being the only one defending (with due caution) the stand of Syriza, as they have to manage the situation somehow and can’t go around doing radical things without first showing the people that is the only possible thing to do.

          Elsewhere in Europe, excepting maybe Ireland and Scotland, there’s nearly no left that could rally the masses (it’s too weak and does not seem to grow strong yet). And that may be the real problem to save the EU in any form: because if you have one or a few countries that are just tired of it all and a vast majority that is still sleeping through the “extreme center” dream or (worse) looking for alternatives in the far right, as happens in France, Denmark, Finland, Sweden, Netherlands…

  8. ChrisFromGeorgia

    I can’t thank you enough for this in depth coverage and analysis. It is so much better than the idiotic headline ping-pong of “Greece saved/Greeced doomed!” that predominates elsewhere.

    If there is no movement by the odious Troika today then I think it is likely they will wait for the collapse of the Syriza coalition and deal with a more favorable government down the road.

    Whether or not they get another set of neo-liberal patsies or something far worse than Syriza is of course an open question. Again I put far more blame on the IMF and the Germans than the Greeks, because when they allowed Greece into the EU they should have known this was a possibility.

    To use your bad marriage analogy, they now seem to be saying “never mind” on the “for better or worse, in sickness and in health” vow.

  9. JohnB

    Ah, here is todays Guardian liveblog?

    I usually keep an eye on this page below, which lists all of their Greece articles – however, sometimes the Guardian forgets to label articles under the ‘Greece’ keyword, so it might miss the odd article if someone makes a mistake – they forgot to do this with one of their liveblogs months ago, and I only found it at the end of the day:

  10. thom

    Of course the Euroz Uber Allies are trying to break Syriza. Fascist capitalism just cannot tolerate dissent any more than it can tolerate democracie. Any dissent. At all. Not a smidgen. Not even an, well … an “iota” ;). (Or even NakedCapitalism, so watch y’alls backs, s’il vous plait por favor … ).

  11. purple

    Smashing Greece will extend far beyond pushing them out of the EZ. It will also mean sanctions (for some made up reason), tariffs and a capital strike to prevent them from being successful once they are out of the EZ.

    Greece will not be allowed success.

    Also, military coups are on the table once EU membership is suspended.

    1. steelhead23

      With Le Pen campaigning to have France leave as well, I believe the financial elite have every reason to make Greece an example. Not only should Greece leave the European Union, it should simultaneously leave Nato and embrace Putin. Not that such a move would “save” Greece, but it might just chasten the powers that be that there is a price to be paid for kicking sovereigns around. Otherwise, they win.

  12. Eric Titus

    Isn’t a core Greek demand a partial write-down of the debt?
    Is that not even part of the the discussion or am I missing something here?

    1. Oregoncharles

      It was mentioned. The troika is ignoring it, insisting that can be dealt with only in the next round. If there is one.

    2. Maju

      It seems to have been dropped for the sake of attempting yet another provisional agreement, bailout that will only expand the debt bubble a little more a little farther in time. Possibly Tsipras thinks he does not have money to pay the bills and has to gain some more time or maybe he’s just doing mass pedagogy: “see: we give in in everything and they won’t give us even a minor concession or two, time to break up with the EU”. Honestly: no idea what he has in mind but the fact that even a moderate Keynesian like Varoufakis is threatening to join the “montagnards” may well mean that Tsipras has lost course and very possibly with it his position as captain of the Greek ship. That’s at least the opinion I most commonly read in Spanish leftist media, including photoshopped pictures of the meetings with Tsipras pants down.

      I want to believe that he’s smarter than that and what he’s actually doing is mass-pedagogy by showing the Greek and other European peoples our illusory expectations about a humanitarian deal being possible at all. But I’m ready to admit after this last ditch attempt that I may well be wrong and that Tsipras does not know what he’s doing after all.

      Regardless, I doubt he can push this deal through Parliament even in the event it is signed. He cannot count with the loyalty of much of the Syriza bench if he makes too many concessions, let alone guarantee peace in the streets, which are already boiling again.

  13. JTMcPhee

    So many moving parts…

    Let’s not forget all the various “stakeholders,” including the long-game players in the US Imperial security establishment. Who have had so much fun, over the generations, mocking “voters” and “citizens” of various sovereign states ™ (sic) and doing their little fandangos to be sure that “our bastards” are in power, with socio-politico-economic sub-rosa-structure in place to keep the spice oil and velocity-of-money flowing. Like this: , and so many others, economic hit men in all their different suits, and like this:

    On the other hand, Bloomberg sees some rosy pink in the cadaverous cheeks of the Greek χωρικός : Yep, bootstraps and rising tides, cue Pharrell Williams’ “Happy…”, and

  14. David

    If the Troika no longer trusts Syriza, is there a group in Greece that they do trust and are willing to negotiate with?

    1. purple

      There’s no one left in the mainstream who has any credibility with the Greek public. There are some hard left parties waiting for SYRIZA to stumble, as are the fascists. Those are the next options.

      1. Maju

        Nah, those extremist parties and several others are stuck in about the same voting intention as in January elections, while New Democracy (tories) shrinks dramatically and Syriza grows and strongly so. June 2015 Ipsos poll:

        Syriza 47.5% (+11.2%)
        ND 19.5% (-8.3%)
        Golden Dawn 6.5% (+0.2%)
        The River 6.5% (+0.5%)
        Communist Party 5.5% (=)
        PASOK 4.5% (-0.2%)
        Independent Greeks 4% (-0.8%)
        Union of Centrists 2% (+0.2%)
        Others 4% (-2.9%)

        I guess it means that Syriza are doing things as well as possible according to the judgment of the Greek people and that they still blame New Democracy and PASOK for all the damage.

        Personally I do not think the Greek People being inclined to support Golden Dawn. KKE may be an option for some but not too many (they are too “Stalinist”). There’s no replacement for Syriza in the foreseeable future.

        The most extreme scenario I can imagine is a Nepal-like one, in which the leader “betrays” the party and this one splits, then new elections give no majority and the reformist faction forms coalition with the bourgeois parties. But I don’t see that happening in Greece either, really, because the perception is that the enemy is outside and that the nation must rally together, a different case from the Nepalese one.

  15. John Yard

    Here is a link to output in European Southern Tier countries ( Greece, Italy, France, Spain, Portugal ) :

    Note that Greece did very well from 1962 to 2000 ( EU formed ) – 600%. Then , as a group they stagnated, then fell, and are now at late 1980’s levels. Clearly , there are structural issues at the heart of the EU, and with an absolute fall in output social support becomes strained. Since this change of direction started in 2000, the problem goes beyond austerity vs. fiscal spending.

    1. IsabelPS

      Thank you for this excellent graph. It makes it so obvious that the stagnation started with the euro.
      Spain seemed to be leaving the peloton up to the 2008 and then it turned quite suddenly (housing bubble?). But what really worries me it’s France. Unlike most people, I don’t think the problem of Europe is created by Germany, it’s the void where France used to be.

  16. MaroonBulldog

    The Greeks have abandoned the position that the write-down issue must be settled in this negotiation, and reverted to the process agreement they signed in the beginning, which stipulated that the write-down issue will be addressed in separate negotiations to be taken up after the current bail-out negotiation is concluded.

    They Greeks pretty much poisoned the atmosphere of these bail-out negotiations at the beginning by trying to address the write down in these negotiations after having promised not to. Yves pointed out in another post, awhile back, that retrading an agreement that one has made is bad faith. II would add that retrading is especially offensive to parties who conduct negotiations in the German manner.

    On the troika side, the IMF’s position also has been that Greek debt must be written down. However …

    Writing down any portion of Greek debt will be bad news for other European sovereigns, since they guaranteed payment of some Greek debt in the last Greek bailout, 4 or 5 years ago.

  17. hemeantwell

    I’m told it’s an old saying in therapy that you are most run by the emotions you are least comfortable with.

    True, but often it’s the case that the defensive reaction to the emotion becomes its dominant expression and most determining of behavior. It would be great if Troika hatred for the Syriza challenge came to be governed by a reaction formation, or identification with the victim, in which case austerity would be at an end and reconstruction could begin.

    1. MyLessThanPrimeBeef

      The worry then is that they become too identified and decide to run the country…directly (not the present indirect route).

  18. sid_finster

    As a member of the feline-american community, it seems that the Troika is trying to force Greece out of the eurozone, and to make such exit as punitive as possible.

    Since no euro-politician wants to be “the one that broke up the Euro” the IMF is the one taking the hard line, thus affording the elected politicians a measure of political cover.

    1. MaroonBulldog

      The IMF was brought in to the restructuring last time to enforce the hard line. Merkel insisted that the IMF be brought in. But the IMF is also the most economically rational troika party, saying as it has the a write down of Greek debt is imperative.

  19. juliania

    Why am I suddenly reminded of the image in the Dr. Seuss cartoon How the Grinch Stole Christmas? You know the one, where the Grinch’s sled full of little Who’s presents is perilously balanced on the mountain crag, and all is lost – but then the Grinch’s small heart grows three sizes. Why? Because the Who’s down in Whoville were singing – without any presents at all.

    He hadn’t stopped Christmas from coming; it came.

    Somehow or other, it came just the same.

    I had thought perhaps the Grinch being a corporate Grinch was being foisted upon us as somebody with heart, and that we know now is a purely propagandistic thrust, because apparently the corporate corpus is heartless, so there’s none there that could expand in the manner of the fairytale. Cut back that tax! Increase that pension rip-off! You can’t even ride a bicycle, Tsipras, without our sayso – what are you thinking??

    But what about the Whos? Can they make Christmas without any presents at all? That is the question. I think maybe they can.

    Maybe Christmas (she thought) doesn’t come from a store.
    Maybe Ch-/Sovereignty means a little bit more . . .

    1. Santi

      This was a preliminary conclusion. I guess this information is background in case an agreement is not reached and a default occurs. It will be part of a difficult Court process in this case. If an agreement can be reached all these committees will be moot.

    2. Yves Smith Post author

      I’ve discussed this repeatedly in comments. This is not an accepted legal theory and will go nowhere. Plus past domestically elected Greek governments took these loans, so they were fully culpable.

      Greece does have a good claim against Germany for fund Germany took from the Greek central bank during WWII and never returned as they were supposed to. But that will take years to adjudicate and Greece has yet to lodge a case.

    3. Maju (full report) (executive summary)

      Actually the debt is, at least largely, illegal, not just illegitimate and odious, but it breached the Greek constitution, the IMF statutes, the ECB mandate and a variety of international laws. But IMO what really matters is legitimacy because Greece, as sovereign state, establishes its own legality (as do other states).

      1. Yves Smith Post author

        The Greek courts have no authority over the IMF or the ECB. Their violation of their own rules to extend a loan is none of Greece’s business. It is at most a governance issue for the IMF board and the ECB board. Since the ECB board was involved in approving these loans, that is already handled. As as for the IMF, Greece is guaranteed not to get the votes for any action to be taken. And you can easily argue that they were doing Greece a big favor by bending their rules, as the ECB is now by giving clearly insolvent Greek banks loans under the ELA, a facility that is meant ONLY for solvent banks and then only for short-term liquidity needs.

        1. Maju

          Being Greece a partner in all those contracts, I would think that Greek tribunals, particularly high court or constitutional court do have jurisdiction. More so if there have been breaches to the national constitution, which stands above any treaty that Greek governments could ever sign carelessly. A properly functioning constitutional court should declare such treaties or agreements void and null.

          Anyhow who, in your opinion, has jurisdiction to put the IMF behaviour to trial? Being the IMF an international organization I would think that all jurisdictions apply simultaneously. The ECB is different because there is a EU judiciary system but regardless of whether the ECB as such cannot be put to trial in Greece, the agreements of which it is party along with the Greek state can. As a minor note the European Court of Justice has been presided by a Greek magistrate since 2003, who has already been controversial in ruling in favor of the right of Cypriot refugees to housing against formal private property rights by an absentee British owner.

          Finally there is the principle of universal justice, which allows any court to judge on matters of crimes against humankind anywhere. Several such trials have already happened or are in course. Again not sure if it may apply here, being the debt extortion racket quite apparently guilty of triggering a major humanitarian crisis.

          I doubt this last would apply. But the previous two considerations seem to: (1) anti-constitutional agreements signed by Greek governments or other people subject to Greek jurisdiction could (and should) be declared void by a properly functioning Greek Constitutional Court, (2) indefinite jurisdiction applies to international institutions if no proper courts are in charge of them, national jurisdiction would definitely apply in matters pertaining to those states.

          My opinion anyhow.

    4. Calgacus

      I gave some legal background on the concept of odious debt here. “Not an accepted legal theory” is too strong.

  20. Erwin Gordon

    Good analysis of the two positions. But once again, the reality is that there is no way for Greece to pay its debts. Borrowing money to pay the interest on existing debt is just madness. There can be no debt relief because the bonds the ECB soaked up for all the liability challenged banks during the crisis were swapped for ECB bonds that CANNOT TAKE A HAIRCUT! Otherwise, how do you think that they were able to build up tier 1 capital on their balance sheets? So the reality is the troika have no interest in allowing for debt relief because it would cause a significant drop in the tier 1 capital in most of the major banks causing the crisis to further spiral out of control. And Syriza have no interest in giving concessions when it is clear that what the troika is proposing has no end in sight as to the level of pain they could continue to inflict on the country. Therefore the only solution is for Greece to default and sort out its economy’s problem so that it can go forward on more solid footing.

  21. Kunst

    If you ever spent a day “negotiating” a car purchase with a dealer, you should have learned that you can’t get the best deal without being willing to walk out the door. For Greece, that means missing Tuesday’s payment. What are you going to do about it, Troika? Ready to talk now? Russian Roulette isn’t real without a bullet in the chamber.

    1. Yves Smith Post author

      The facility expires on June 30. so there is no getting better terms if there is no deal by then.

      And I suggest you read the Nathan Tankus posts on the operational issues involved in a Grexit. The reason the creditors are being so bloody minded is that a default is vastly worse for Greece than for them, and also vastly worse for Greece than even the terrible deal they are offering.

  22. Maju

    Just woke up with the news of Tsipras resorting to a snap referendum on the deal, which so far I don’t even know if it has been signed anyhow or in which terms. Syriza officially supports “yes”, ANEL says “no”, PASOK says “irresponsible”, Varoufakis writes on Twitter:

    “Democracy deserved a boost in euro-related matters. We just delivered it. Let the people decide. (Funny how radical this concept sounds!)”

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