Greece’s Shortening Negotiating Runway and Possibly Erroneous Assumptions

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Le Monde published a defiant op ed by Alex Tsipras over the weekend. I can’t fathom what Tsipras thought it would accomplish, beyond appealing to Greek voters. The article restates how the program that Greece has followed has led to disastrous economic performance and worsening debt to GDP ratios, paints the creditors as being unreasonable and inflexible, and depicts the EU as undemocratic and dominated by a “core” that increasingly inflicts anti-democratic austerity policies on other countries.

The wee problem is that Greece is well past the point where political appeals will work. It has been trying for months to escape the negotiating framework that was imposed in the February Eurogroup memo that it signed, that Greece would provide detailed structural reforms that had to be vetted and approved by the Troika first, and then by the Eurogroup. Greece has again and again tried to circumvent that process by going to European leaders, most important of all, Merkel. The not-triival impediment is that Merkel, a week ago, backed the process set forth in the Eurogroup memo and effectively told Greece that they had to satisfy the IMF. This missive is not only a blistering set of complaints about the IMF but also about Germany, and thus amounts to a poke in her eye. As Peter Speigel wrote in the Financial Times:

Greece’s chances of striking a deal to access a much-needed €7.2bn in rescue aid looked even bleaker on Sunday after Alexis Tsipras, prime minister, accused bailout monitors of making “absurd” demands and seeking to impose “harsh punishment” on Athens…

In an apparent attack on Berlin, Mr Tsipras also accused some within the EU of trying to break up the eurozone by centralising power among “core” euro members and tying the rest to “extreme neoliberalism” through EU budget rules. Germany has been the leading advocate of such rules and strong, centralised power in Brussels to enforce them.

Now we can agree that the Troika is being rigid, that their austerity policies are misguided and have been an abject failure. However, that is all moot. Greece due to the loss of its primary surplus (it has one on paper only by virtue of postponing all sorts of payments it will eventually have to make) is a supplicant. It needs the financing to stay current with its creditors. Its banks also depend on the continued munificence of the ECB. And by not being financially self-suffient, Greece is faced with the Golden Rule: he who has the gold makes the rules.

One may also argue that Tsipras has overstated his case agains the IMF (for instance, Tsipras depicts Greece as having submitted an adequate set of reforms when the IMF has said they aren’t detailed enough for them to assess them; he also implies that Greece and the creditors have settled on VAT reform: “We also agreed to implement a major VAT reform….” In fact, all that has been agreed to is a framework; the two sides are still far apart on how much VAT is to be increased).

Even in France, which has been the country most sympathetic to Greece’s situation, the op ed does not appear to resonate with the public. At best half the comments were favorable to Tsipras’ article.

Even though Greece has managed to put off its day of reckoning with its creditors, it will be very hard to go past the end of June. By all accounts, Greece is desperate for dough. Greek sources have said it can’t meet its €300 payment due June 5, but even if it manages to scrape enough funds together, it is well nigh certain it won’t be able to make the additional €1.2 billion total coming due on June 12, 16, and 19. As discussed, the IMF does have a rarely-used rule that would allow Greece to bundle its payments and defer them till the end of June.

Moreover, the underlying bailout deal also expires at the end of June. Extending it would require parliamentary approvals in some countries, including Germany and Finland, where getting an extension would be unpopular, as in politically costly.

But an even bigger reason for not letting the Greek drama go on much longer is the increasingly uncomfortable position of the ECB. Greek banks are on a path to run out of eligible collateral for ELA loans at its current deposit flight rate in a couple of months. This week, the ECB is again considering tightening, not relaxing Greece’s collateral rules. If Greece runs out of collateral, the next step is likely to be a forced bail-in, as the ECB imposed on Cyprus. That also involved a bank holiday and the imposition of capital controls, both of which also had nasty effects of the Cypriot economy. So as much as the Eurocrats are established masters of extend and pretend, a number of considerations argue against deferring resolution of the Greek matter much longer.

And the runway is even shorter than it appears. While we have argued that the some Eurogroup members will have to get parliamentary approvals to release bailout funds, which involves some lead time, that could be finessed to a drop-dead date of perhaps as late as the second or even the third week of June. But the Greek government almost certainly needs more lead time, since it will have to draft and pass legislation consistent with a deal for the funds to be released. Eurocrats worry that if Greece and the creditors don’t come to terms this week, it won’t be possible for Greece to get the bills finalized and approved in time. Even if we allow another week, that still means there is perilous little time, given that the two sides are still at a complete impasse on pension and labor market “reforms”.

Tsipras’ op ed makes sense only if he thinks the other side will capitulate. Yet the very fact of the op ed is tantamount to an admission that they aren’t yielding. What gives?

Tsipras appears to have been operating on some assumptions that are bad, and others that are questionable. We’ll see in short enough order how some of the questionable ones pan out.

Tsipras was apparently encouraged by the European Commission to think Greece could get bailout funds with little in the way of structural reforms. This makes the undue Greek optimism make a tad more sense. One of the parties Greece thought was key was sympathetic. But the only problem is that the EC is also the only party with no checkbook and hence no skin in the game. Moreover, Greece chose to ignore evidence from past negotiations and this one that the EC was slapped down by the other members of the Troika. For instance, during the Eurogroup negotiations in February, the EC’s Moscovici tried negotiating a memo with Varofakis. Varoufakis was stunned when the Eurogroup presented him with a completely different draft. Just a couple of weeks ago, the Greek paper ToVima published a proposal from the European Commission to try to force the release of funds to Greece. The EC rapidly issued a denial, and the IMF and ECB reacted angrily.

Tsipras and Varoufakis have repeatedly tried forcing discussions to the Eurogroup/member state level when they aren’t equipped to handle negotiations with Greece. Look at how hard it was to come up with a simple “shape of the table” memorandum in February. Even if via a Damascene conversion Merkel were to decide to take the negotiations away from the Troika, she’d lose the IMF’s half of the €7.2 billion that Greece is seeking. And the Eurogroup would need to figure out how to come up with a negotiating process (who are the leaders, what is their negotiating position, how do they report back) and get the negotiations completed in at the very tops two weeks. It’s just not viable. Even if they tried it would be too chaotic to work. And media reports have said the Greeks have been told that the political leaders (or presumably their key staff members) aren’t equipped to negotiate a complex deal.

Greece believes that the Eurozone creditors and ECB can’t handle the ramifications of a Greek default, and therefore they will blink. That belief would make the Tsipras op ed make more sense: he’s burning all his bridges.

Note that the view that the creditors can’t handle a Greek default (remember, a default does not imply a Grexit) is shared by quite a few commentators and financial analysts. This is a bit of a simplification, but there are two points of vulnerabilty. One is all the credit that the ECB has extended to Greece through the Target2 system, which is now over €100 billion. If the ECB has to recognize losses on the Greek exposure to Target2, they are allocated to Eurozone member states. However, it’s not at all obvious that the ECB has to recognize losses in the event of a default on the IMF. And even analyses of a worst-case scenario, that of a Eurozone breakup, have also devised ways for Germany to avoid Target2 losses.

Similarly, the Eurozone countries who have lent money to Greece have been willing to restructure debt in all sorts of ways short of writing down principal amounts. Why? Under the county accounting rules, they don’t have to recognize a loss on a restructuring if the principal amount is unchanged (maturities are extended and interest rates reduced) but do for a principal reduction. Recognizing losses and allocating them to taxpayers is a third rail issue.

So doesn’t that mean the creditors will do anything to avoid an IMF default? Not necessarily. I hope more expert readers will pipe up, but these loans don’t have the same terms as private loans. And government accounting rules aren’t the same as GAAP. So that means an IMF default may not be a loss recognition event for the countries that lent to Greece.

An indirect proof is that Tsipras called threatened to default on the IMF in May, mere days before the government decided to use the expedient of borrowing reserves in its SDR account at the IMF. As we pointed out then:

Ekathimerini stated on Sunday that Alex Tsipras sent a letter to IMF managing director Christine Lagarde on May 8 stating that Greece would not be able to make its May 12 IMF payment, and also sent the letter to the EU’s Jean-Claude Juncker and the Mario Draghi of the ECb. Tsipras also reportedly called US Treasury Secretary Jack Lew with the same information. Yet the threat of an imminent default did not lead to a breakthrough (as in a concession) from the creditors in the technical-leval talks over the weekend, to the Eurogroup relenting on its existing plan to make no decision (as in not authorize) regardling a release of funds at its May 11 meeting. or to the ECB letting up on its government funding choke chain.

Mr. Market will get sufficiently upset to pressure the Troika to relent. While spreads in periphery countries have widened a bit as the Greek drama has become more riveting, and European stock markets shuddered on Friday, this is a pale shadow of the sort of contagion and the wild stock market moves we saw in 2010 and 2012. But one way that Tsipras’ op ed makes perfect sense is to rattle investors even furthers. As former IMF staffer Peter Doyle pointed out in FT Alphaville in February:

On the one hand, in an incredible reversal of practice during the global financial crisis—when central banks were at pains to conceal which institutions were receiving their emergency assistance for fear of compounding the adverse signals and therefore the crisis—the ECB has brazenly publicized exactly which Greek banks depend on its help and how much. And it has overtly warned it would withdraw that help. In this way, the central bank is overtly threatening to blow up the Greek banking system, in order to make the euro work. Walter Bagehot, the nineteenth-century father of lenders of last resorts, would be dumbfounded.

On the other hand, Syriza would like nothing better now than to see the yields on Spanish, Portuguese, or Italian sovereign debt relative to Germany jump, signalling broader market disquiet—that Grexit may be imminent and that the rump eurozone would be badly destabilized by it—so forcing ECB retreat. So Syriza, in league with Podemos in Spain and prevailing anti-euro Italian political forces, is openly threatening to blow up its own exchange rate regime, the euro, in order to make it work. The many fathers of exchange regime credibility would be as dumbfounded as Bagehot.

As of this hour, Bloomberg reports that European stocks are “little changed” so the Le Monde article doesn’t appear to have added enough new information to raise investors’ temperatures. 7:00 AM update: Reader Scott sent a Bloomberg run of changes in spreads on Eurozone government bonds. There has been some widening on periphery bond spreads, but as Ed Harrison put it, “Not worrisome so far.”

The threat of Greece slipping into Russia’s orbit will force the creditors to relent. Greece has tried playing this card before. The US would arguably be the party the most concerned by this gambit, yet last week US Treasury Secretary Jack Lew, in pressing both sides to come to a deal, was pressing Greece much harder to make concessions than the Eurocrats. Greece is still trying to up the ante on this front. From the Telegraph:

Panagiotis Lafanzanis, the energy minister and head of Syriza’s powerful Left Platform, returns from Moscow after securing a provisional deal with Gazprom to build part of the “Turkish Stream” gas pipeline through Greece….

The Russian energy minister, Alexander Novak, said over the weekend that the project has been agreed in principle. ” We are now discussing technical details,” he said.

Greek officials have told The Telegraph that Russia is offering up to €2bn in up-front credit to sweeten the arrangement, though it will not be a state-to-state transaction.

As Mark Ames has said, “You never want to depend on Moscow for your survival. Just ask Serbia how well that worked out.”

It would be unheard of for Greece and Russia to complete a detailed agreement by the end of June. More important, Russia lacks incentives to do so. It’s always cheaper to buy out of bankruptcy than on the courthouse steps. Greece will be even more desperate if it defaults, which would give Russia more negotiating leverage. And if Greece and the Troika somehow manage to kiss and make up, Russia may be less eager to consummate this deal, and again may decide to hang tougher in the negotiations (as in it becomes less eager to consummate the agreement). So while it it not impossible for Greece to get an “up to” €2 billion advance by the end of June, I’d assign it well under 5% odds.

One thing Tsipras’ Le Monde article may have done is forestalled the Troika putting forward a deal to Greece, given that Greece apparently still has not tabled a new complete set of proposals. While they might have wanted to do it to demonstrate that they have tried every option, the op ed yet again confirms that Tsipras is not willing to budge on issues that are also red lines for the IMF and Eurogroup.

What the Troika instead might turn to is a deal to prevent a default from turning into a Grexit, say offering a package of humanitarian relief, with paying past-due pharmaceuticals suppliers as high on the list, in returns for hard commitments that Greece will not take steps consistent with a Grexit.

As Lambert said via e-mail, “The Tsipras op-ed rings true to me as futurology. Which alas is not the same as governing.”

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  1. Matt

    If you look at private sector non-consolidated debt throughout Europe, Greece is doing relatively well:

    The Netherlands has 248 percent private debt to GDP, while Greece has only 130 percent. That means the two countries’ total debts are in the same ball park. I’m not in favour of high levels of debt but they are here to stay unless super rich start paying a greater share of tax.

    In its favour, Holland has a current account surplus. The vast majority of Dutch keep their money in Dutch banks. No saying how deep the recession would be if these things weren’t the case. Seeing the average mortgage burden for instance, no wonder the Dutch get angry when there is talk of more taxes to cover Greek shortfalls. The number of food banks is rising steadily as are the number of temps and part timers. The situation in the core countries is not as bad as Greece. It does seem however that the Greeks must do what they can to help themselves. I’d like to believe that the anti-neoliberal ‘revolution’ will begin in Greece as Yanis would have it but I think they’ll be cut loose from the euro than that with all the awful ramifications that entails.

  2. Paul Smith

    One thing Tsipras’ Le Monde article may have done is forestalled the Troika putting forward a deal to Greece, given that Greece apparently still has not tabled a new complete set of proposals. While they might have wanted to do it to demonstrate that they have tried every option, the op ed yet again confirms that Tsipras is not willing to budge on issues that are also red lines for the IMF and Eurogroup.

    Is there any evidence whatsoever that a Troika plan is in the pipeline or that they don’t already believe they’ve tried every option? There have been are signs of discontent within the Troika (Juncker Plan) but no all-encompassing “Troika deal.”

    Otherwise, this paragraph seems like pure speculation similar to the sort of narrative that concludes that Greece would be rid of austerity if it wasn’t for Syriza’s disdain for ties and traditional diplomatic courtesy. It’s just nonsense, and contradicts the idea usually put forward by NC – that Europe seeks total surrender and nothing less.

    Would you also pin blame on Varoufakis’ various op-eds for Project Syndicate, or the Schäuble op-ed for the NYT for delaying a deal? Why is this any different? It seems a silly line of argument when there are real ideological and/or policy differences that will better explain the lack of any hypothetical deal. Or perhaps everyone is basing their policy decisions on op-eds now?

    1. Yves Smith Post author

      The Greek press reported last week that Syriza was going to table a new plan. For instance, see this report from May 28, which was around when Tsipras again said a deal was near and the creditors disagreed within 24 hours:

      Sakellaridis’ comments come a day after Prime Minister Alexis Tsipras said a deal was near, and Greek officials said the text of an agreement was being written up. Late Wednesday night, Economy Minister Giorgos Stathakis said he expected a deal during the weekend.

      Reports in the Financial Times was that all that Greece offered was a new structure for VAT. The creditors seemed to find that acceptable but even on that, the two sides remain far apart on how much Greece should raise VAT. The Greeks want IIRC 900 million euros v. the creditors want double that.

      Remember, the creditors say that Greece has yet to deliver a complete and sufficiently detailed set of reforms. And media reports suggest that Greece only delivers changes in bits and pieces, and is negotiating issue by issue as opposed to on an overall deal basis (where you might trade across issues). If I were negotiating against Greece, I’d strongly suspect they were seeking to drag things out.

      1. Alan

        Remember, the creditors say that Greece has yet to deliver a complete and sufficiently detailed set of reforms.

        That’s the usual Brussels bs. How can a country deliver a “complete and sufficiently detailed set of reforms” if said “complete and sufficiently detailed set of reforms” expected is in reality the same old austerity straitjacket, which according to the latest reports now amounts to 3.5 billion of cuts and taxes?

        Btw, the text of an agreement you refer to was not a new Greek plan (which for Brussels would simply mean a different and creative way for Greece to surrender unconditionally and impose their austerity) but an attempt to get out of the way every little point and detail where there has already been agreement to speed things up. Another very important reason for that has also been the negotiating tactics of the “partners” to time and again backtrack from issues that had been settled with new demands, what you might call moving the goalposts constantly, and in my opinion the Greek government should have been doing this from the beginning.

        So I don’t understand why people get confused, even though I understand why part of the financial press pretends to be confused. It’s what you’ve been saying all along. The “Institutions” still demand total surrender, and the Greek government refuses to relent. By any fair standards, it is the “Institutions” who haven’t offered anything new or different while the Greek government has already given in on so many fronts that even the stability of the government might soon be in question. So, framing this simple fact the way you just did simply puts the blame on Greece for not capitulating by presenting a supposedly “credible plan” for total surrender, which of course it can’t and won’t deliver unless it does decide to surrender unconditionally! It shouldn’t be difficult to see who’s to blame here, and it isn’t the Greek government.

        Finally, another point. The LeMonde article was not Tsipras addressing his voters, in fact this article was such a good summary of what has been happening and what’s at stake that it didn’t receive much play at all at the usual media and TV suspects who hate Syriza’s guts, what many call the Oligarchs’ mouthpieces (of which I should warn you Kathimerini is a big part). Most of them didn’t even present a full translation. It was meant for an international audience, and more specifically the many of the older heads of state, political power brokers, diplomats and European Unity theorists and other parts of the European Establishment (what you might call the voices of moderation and reason) who may be retired or sidelined but can still exert some pressure. It looks to me like an act of desperation to try to get them to exert whatever pressure they can for a true honorable compromise. We’ll see if it had any such effect.

  3. Brooklin Bridge

    Burn the bridges indeed. Everyone seems to be boxed in. This looks to be a lethal game of who takes the blame in front of who.

  4. financial matters

    I think that this is what it means to be at the crossroads and that this is the essence of good governing.

    What’s being decided is whether loans need to be paid back at all costs.

    1. Lambert Strether

      No, that’s not what’s being decided. Everybody knows that the loans will never be repaid, but as long as the Greeks keep paying interest, and the other European countries don’t have to recognize the losses, everything’s jake.

      What is being decided is how badly the troika is going to put the screws to Greece on structural reforms. And Greece doesn’t have much of a role in that process, sadly for the Greek people.

      1. financial matters

        Yes, I’m just considering paying back/servicing the loans as opposed to using that money for other purposes such as structural reforms that could rejuvenate the economy and provide for the social welfare.

  5. Santi

    I think the main issue here, and the impact of a Greece default and/or Euro exit, is not financial but politic. The Southern Europeans believe that when the European bell toll, as Donne would say, “It tolls for thee.” Spanish or Portuguese unemployed, or Italian youngsters emigrating, won’t accept a neoliberal Europe that lets Greece down, because they know that it is letting them down in the same act.

    Europe will change the way it behaves or implode. And the Greeks are making us all a big favor by exposing the nude situation before it is too late. Today Krugman said:

    Against mathiness and political ideology, the gods themselves contend in vain, but that’s not a problem with the models.

    If we think that the “mathiness” of the consequences of a default/Grexit is safe, then nobody can help us. But I still trust on the political instinct of Angela Merkel and some other agents in Europe to shift gears and drop the austerians. Because the problem is political at its core, as Tsipras demonstrates in his op-ed, and should not be treated as a financial problem.

    1. Yves Smith Post author

      But Tsipras just poked Merkel in the eye with that op ed. She was his best change for a deal and he couldn’t resist attacking the German government and therefore her. How was that helpful?

      1. Santi

        Signaling firmness. The troika is all the time expecting the Greeks to fold, ally with PASOK, accept the bribes and run.

        Showing them that they are principled people helps a lot to avoid expecting retreats.

      2. Mr. G

        wasnt Tsipras just trying to show his own people how hard he’s trying. He’s balancing bending on reforms with keeping a coalition together. Not an easy walk.

  6. alex morfesis

    article 50 withdrawal notice

    the only take away left in the negotiations…hand it to dr strangluvauble…he might start walking again…

    why stay in an abusive relationship ?

    Besides, as the only marx who knew anything about money once said…i don’t want to join any club that would have me…

    one can always rescind the article 50 request and it opens up a two year window…

    do it…

  7. Jackrabbit

    Frecnh Far Right Calls for EU Referendum

    France’s far-right National Front party has called for an in/out referendum on the EU at the same time as the UK holds its vote.

    Florian Philippot, an MEP and the party’s deputy head, wrote…:“The time has come to ask everybody in Europe Yes or No – if they want sovereignty to decide on their own future”.

    He also said that if Hollande declines to do it, the National Front will put an in/out EU vote “at the heart” of its 2017 presidential election campaign.

    Now, the French Right is NOT trying to help Syriza, but is playing on deep dissatisfaction of EU. Greece’s situation is sure to provide ammunition for detractors on both the left and right.

    H O P

  8. Jackrabbit

    The French Right called for a referendum on EU membership just a fews days before the Op-Ed. That followed talk of British plans to hold a referendum.

    These moves are not to help Syriza, but to tap discontent about loss of sovereignty. Greece has also raised issues of sovereignty.

  9. Jackrabbit

    It seems to me that taking Greece’s case to the people of Europe was a necessary part of Syriza’s strategy (if the Troika could not be reasoned with). If this were purely a commercial negotiation, it would have been over long ago.

    Markets may react more to opinion polls that come out in the days ahead than to the Op-Ed itself.

    1. Jackrabbit

      Also, markets may have already reacted last week when it was expected that Greece would default on June 5th.

      From TRNN interview with Michael Hudson (

      SHARMINI PERIES, EXEC. PRODUCER, TRNN: The Euro is slipping against the dollar, and the European financial markets are in flux, expecting Greece to fail on its 1.6 billion Euro repayment due to the International Monetary Fund on the 5th of June.

      1. Yves Smith Post author

        The ECB and Europe would LOVE the euro to be cheaper. They don’t mind this outcome at all. The euro failing does not help Greece at all. The only reaction that would is periphery country bond yields blowing out.

        1. Santi

          Spain spread has gone from ~100 around February to 143 at close today (1.99% 10y yield). This morning it opened at 136/1.85%. While it is still reasonably small, it is starting to move at the rhythm of the press regarding Podemos and Greece.

        2. Jackrabbit

          The cheaper Euro is good for exporting powerhouses like Germany and other ‘core’ countries. It will make energy and other imports more expensive for the others. Thus, it will exacerbate the core vs. periphery divide.

  10. Jackrabbit

    While things look bad for Greece (if you believe that default is worse than debt peonage), Greece has already won an important battle.

    The IMF has been embarrassed and has called for restructuring the debt.

    Tsipras mentioned this in his Op-Ed, but I think he could’ve made the point more forcefully. There are still many who see Greece as profligate. The IMF’s independent and credible analysis are important to counter that view.

    1. alex morfesis

      greece is profligate, but that is why people love watching that mexican play zorba and keep watching it over and over again…and if Chief Kat-hurder Tsipras sips a few more shots of Tsipouro, he might get up the nerve to try to catch up with Germany in the “we don’t pay no stinkin debts” profligate hall of fame…Germany has always paid back the gold it borrowed with the lead it uses to fill bullets. It has never paid anyone back anywhere near its debts, at least not in the last 100 years. But they are really good at making you think they are from the upright citizens brigade. Everyone (else) must pay their bills and stick to their commitments.

      to me the interesting part of the hemingway reflection by the Prime Minister is one which maybe most people don’t see…although we know what happens to Spain at the end, we actually have no idea what happens to Robert Jordan. He has gone from someone who has avoided potentially deadly conflicts, to someone who is ready to fight and die, since the fates have left him no more choices. But I think if you ask 100 people what FWTBT is about, you will get 100 different answers. We don’t know that Robert Jordan does not push back the tired Falangists led by Berrendo who we know has his burp gun on his saddle, finger near the trigger ready to fire. The horses are tired from having had to pull through the forest. How do we know in one last burst of energy, Jordan did not get off a lucky shot and not only killed Berrendo, but somehow, Berrendos grip tightens as he and his horse fall and he takes out some horses and fellow royalists, causing chaos and leading to a retreat back down the hill. How do we know Primitivo does not come back to help as he had so wanted to do with El Sordo ? We don’t know anything in life other than what is in front of us in the next hour or so ? Although it is quite true I have not been back to greece in over 7 years, here in Tarpon (I’m back down south), there are thousands of Greeks who live dual nation lives. I don’t see or smell any panic in their eyes. Maybe they don’t see the future…or maybe they smell elmer season coming along…maybe having dealt with the axis powers, the civil war, the papandreou/karamnlis axis, the junta, the bavarian royals posing as greeks, the drying up of the islands of the aegean, the rise and fall of the draxma, the failure of the juntas attempted invasion of cyprus (it was the greeks who did the coup in cyprus, not the turks), the somewhat failed 2004 Olympics, and now the failure of the introduction of the Euro…well, maybe they know that Greeks always find a way to survive and thrive…and as Krugman pointed out a few days ago, the real danger for the Kyffhauser crowd is the resilience of ” the Greek Peoples”…two years from now, when the sun continues to shine on and in Greece, if the economy for most Greek people is better than it is today, will that not maybe, just maybe, spell the end to European Royalty and its wet dream of a united undemocratic EU ?

      FWTBT was published only a few weeks before Metaxas told the fascist clowns:

      “Alors, c’est la guerre”

      which most greeks translated as


      1. Jackrabbit

        “Profligate” is used like “rioter” to confuse the issues and tune out most of the public.

        Greece has suffered under austerity, which is so severe that it is counter productive. It has NOT renounced the debt, but called for restructuring. The IMF agrees that it should be restructured.

        So, I’d say that Greek people have been irresponsible in that they have allowed themselves to be led by an oligarchic government. To the extent that they benefited from that oligarchy during the good times, they were “profligate”.

        But what of the Banks that were complicit in this profligacy? They were bailed out. And now taking loses from that bailout is politically unacceptable – even if that means deepening the hardships of a fellow EU nation.

    2. Yves Smith Post author

      No, the IMF has not been embarrassed. They had already planned to undertake a review of the Greek program, as in analyze why it turned out badly.

      And the IMF has called for debt reduction by the Eurozone country lenders, who BTW promised the IMF in 2012 that they’d write down debt to Greece but failed to do so. The IMF tried blocking the negotiations then because the Eurozone lenders (who hold 60% of the total Greek debt v. the IMF’s roughly 15%) wouldn’t agree to do it at the time of the bailout. They promised to do so subsequently and never did.

      So you have utterly misread what this is about. The IMF is basically saying “I told you so,” and is repeating the same line they took in 2012.

      And the lack of IMF “embarrassment” is confirmed by the fact that they have not relented in the negotiations and Merkel backed them at the end of the week before last.

      The IMF are not nice. They are enforcers for the banks. That means they are mainly in the business of crushing labor to benefit the capitalist classes. How have they not succeeded at that aim?

      I must also point out the the IMF programs had similar negative effects in Asia. South Koreans still refer to its post Asian crisis downturn as the “IMF shock”. But white people in nominally advanced economies took no interest because the victims were Asian and in supposedly “developing” economies. Things like that would never happen in our neighborhood…..

      1. Jackrabbit

        I think it to be a black mark on the IMF that they went ahead even though they knew that the debt needed to be restructured but wasn’t. NOW they have had to acknowledge their error and say that they will not participate in any further bailouts unless there is a restructuring.

        Even this I view suspiciously. It is an inducement to the Greeks to abandon their goal of a debt restructuring at this time. As in: Trust us, there WILL be a restructuring – the IMF will not participate otherwise! Yeah, the IMF may simply not be a part of any further bailouts. After all, why do they need to be when Greece proves (with its structural reform plan) that they can pay the debt!

  11. papicek

    Granted, I’d love to see more left-wing radicals elected, both in Greece and in Spain. That’s my focus, but anyone who fails to realize that the sentiment of Greek voters is part of this ongoing negotiating process here is being specious.

    And no. This round of negotiations isn’t going to succeed. I don’t believe they were ever meant to, but I won’t blame Syriza for bargaining hard. That’s what they were elected to do.

    Political considerations apply to both sides, though I wonder if the troika (why bother accepting their euphemisms?) realizes this. Generally speaking, battle lines have been drawn throughout the EU. That’s a new reality and it’s not likely to disappear in the lifetimes of anyone who reads this today. More granular, the northern bloc who support their bankers (and this is all about EU bankers, make no mistake) should find their political isolation growing as we see the radical left making gains in the south. Spain’s municipal elections are a reflection of this. (Podemos will need to do a better job of reaching out to rural & suburban voters, but they’re certainly astute enough to realize this and general elections are far enough away for Podemos to make inroads there.) In Portugal, Socialists, the mainstream opposition party, have recently announced their opposition to austerity and Poland recently elected a euroskeptic president. Cameron is committed to holding an EU membership referendum as well.

    Voters in Europe are beginning to realize that when the rubber meets the road, the EU has devolved to a banking cartel. Could be wishful thinking on my part but I think voters will go along with this less and less as time passes. June and July should be interesting, though I suspect a real showdown might be avoided in the next week or two by the troika making just enough of a concession (by unlocking a tiny bit of funding) to string things out without enabling Syriza to claim a meaningful victory. Apparently, this would be politically toxic enough that northern bloc officials feel the need to pass the political hot potato off.

    We’ll see.

  12. EmilianoZ

    More important, Russia lacks incentives to do so. It’s always cheaper to buy out of bankruptcy than on the courthouse steps. Greece will be even more desperate if it defaults, which would give Russia more negotiating leverage.

    That’s assuming that Russians behaves like greedy western capitalists. Westerners always judge others attributing them their own motives. But everything I’ve read on the Saker’s vineyard leads me to think that the Russians are different. They’re still decent human beings with a big heart. Russia has staunchly rejected neoliberal values. Russia’s fight is not only for her own security. It is also a civilizational choice. Russia’s fight is a fight for a new humanism that will put human beings before profits. Russia is our only hope for defeating neoliberalism. Russians will not behave like cold-hearted capitalists towards their Greek brothers, waiting until they’re in the gutter to swoop in like vultures. Russia will offer the Greeks a good deal right now. Russia will save us from neoliberalism like she saved us from nazism.

    1. alex morfesis

      who saved us from the nazis ? russia…??? you have heard of a little country called Poland maybe, yes ?

      1. Alan

        who saved us from the nazis ? russia…???

        Not according to Saving Private Ryan. But according to pretty much all WWII historiography, the Soviet Union was indeed who saved Europe from Nazism and payed a colossal price for that. Compared to the Eastern Front, the Western Front – which couldn’t be opened until Hitler was retreating with heavy losses in the East – was a picnic and where Hitler was mostly sending his German youth as cannon fodder while the overwhelming majority of his skillful armies, panzer units and officers were getting slaughtered in the East.

        Poland is a sad story but it became a footnote in the larger scheme of things. That’s why until a few years ago you would see all major Western leaders celebrating the defeat of Nazism in the Red Square in front of Lenin’s Tomb, including George W. Bush and Bill Clinton earlier.

    2. Jackrabbit

      I think you are making way too much of Russia as some sort of do-gooder.

      If they help Greece, it’ll be because it serves there interests to do so. They have sought to entice Europe (especially Germany) away from the US sphere of influence with very little success to date. Helping Greece would show other countries that there is a workable alternative.

      BUT (and this is a big ‘but’), if the Russian relationship was to move much beyond trade, there might be a military coup because Greece is in NATO and I have never seen anyone question the Greek military’s loyalty to the West.

    3. vidimi

      that’s why the saker is too propagandistic for my liking. people are people everywhere. putin is no angel. russia will do what’s in its best interest. perhaps that does mean bailing greece out prior to bankruptcy if that meant other vultures would snap up the assets it wants, but philanthropy is not the goal.

  13. kaj

    I don’t understand why you make so much out the highly neo-liberal and almost reactionary Financial Times and its plebian and some what vacuous correspondents. Tsipras in a very eloquent piece in the Le Monde made it very plain that he has been and is cognizant of the Creditor’s game which is to stall and asphyxiate Greece. Which is exactly what has been happening.

    Merkel did not deserve to be the Chancellor and Hollande like Obama is a habitual, mendacious fool. The Greeks have a very committed and smart team and a chance to break free of this neo-liberal nonsense and I believe that they will. They are being held up their election promises which will be subjected to a referendum and hopefully a difficult but better future will ensue.

  14. pblacque

    Your tack here is very surprising. Why shouldn’t Tsipras repeat in Le Monde what he and most of your readers believe to be an important issue; namely, the IMF-based austerity/reform program is the major cause of their humanitarian disaster since 2009. That’s not a “moot” point. It’s the POINT and it should be repeated has often as possible with clear examples of failed IMF SAPs in other countries – there are many, as you well know. Tsipras is pleading his cause to all the intellectuals and “influential” elites out there (Le Monde still being one paper that’s has some cred) hoping they will muster the courage to place a call, organize a solidarity march, do something… it is a desperate cry.

    Also its not because “he who has the gold makes the rules” that Greece, the “supplicant” (really?) should simply and necessarily assume the position… without a peep. That’s the other point = they should cry out, poke fingers in everyone’s eyes, and call attention to what’s being done … there is an injustice being perpetrated here … do you not agree?

  15. freddo

    Doesn’t basic game theory teach us that Greece only has leverage is if it convinces the Troika that it is prepared to default and Grexit. That is why the pressure from the left wing of Syriza on Red Lines is so important. It helps Tsipras to convince the Troika that Greece is prepared to do what the Troika consider entirely illogical and irrational (according to its outlook). If he convinces them that he is basically “irrational” he will greatly strengthen his power at the negotiating table. Of course, whether that will be enough to do the trick is an entirely different matter.
    I certainly don’t see how being “nice” to Merkel is going to help the Greeks much. She’s a politician. She can take it.

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