Greek Government Preparing Plans to Cross Red Lines to Avert Default

Some fans of the Greek ruling coalition argued that it had become increasingly intransigent over recent months to pave the way for a default and/or Grexit, that it was not simply playing a game of chicken with its creditors but was working to create a set of conditions that would force a radical rupture in a way that it could tell voters that it had clean hands.

This 11th dimensional chess theory of Greek negotiations appears to be invalid. Both the Guardian and the Wall Street Journal are separately reporting that members of the Tsipras government are working on plans that amounts to capitulation on the most contested creditor demands: that of pension and labor market “reforms,” as in large pension cuts and changes to market regulations that reduce worker bargaining power.

Now it may turn out the Syriza offer is deemed to be too small, too deferred, and/or too cosmetic to satisfy the Troika and the European governments that must approve any bailout extension (we are now so close to the expiration of the second bailout on June 30 that it is now too late to get a deal approved by then. But since IMF chief Christine Lagarde has 30 days before she has to report a Greek non-payment of €1.5 billion on June 30 to her board, the real drop dead date appears to be July 20, when a €3.5 billion payment is due to the ECB). And since the Syriza cabinet is apparently hashing out details now, any media reports are on discussions in progress, and not a final plan.

Note that Tsipras has yet to sign off on a proposal key members of the government are devising. However, note that they would not be working on a proposal to, as the IMF demanded, “make the numbers work” without a go-ahead from him to try to close the gap. And also remember that last week, in a proposal the Troika rejected, Greece agree to meet their primary surplus demands of 1.0% of GDP this year, rising to the insane level of 3.5% by 2018 and thereafter. Last week’s plan from Greece was kicked back because the Greek negotiators freely admitted their reform proposals failed to meet those levels.

Nevertheless, the Greek government is apparently now willing to cross its famed red lines. And the Wall Street Journal indicates that that includes significant, as in non-cosmetic reductions in pensions.

From the Guardian:

Among the measures that the Syriza-led coalition was reportedly working on on Saturday were reductions in early retirement schemes. Pension and VAT reforms, along with labour deregulation, remain sources of friction between the two sides.

Macropolis similarly states that local sources state the the Greek government is devising plans that include pension “reforms”:

State Minister Alekos Flambouraris confirmed on Saturday reports that the Finance Ministry is reworking Greece’s positions in time for Monday’s Eurogroup, which will be followed by the eurozone leaders’ meeting in the evening. Local media reports suggest that ministry officials are reworking proposals on changes to VAT, as well as pension reform in a bid to get as close as possible to the institutions’ targets.

The Wall Street Journal provides more detail:

Government members are putting together a plan they hope would achieve budget targets that bailout creditors want, while relying more on eliminating tax breaks and less on pension cuts than the lenders’ own proposal, the officials said.

The Greek cabinet is due to discuss the proposal on Sunday morning. It isn’t clear whether the cabinet under Prime Minister Alexis Tsipras will endorse the plan, which was being prepared on the weekend by Deputy Prime Minister Yannis Dragasakis and others who are considered among the more pragmatic members of the leftist Syriza-led government….

The new Greek proposals include elimination of many tax breaks, including scrapping exemptions on taxes on income from labor and capital, as well as levies on fuel, retail sales and other items. The extra revenues that this move could achieve, some officials hope, would allow shallower cuts in government pension spending, which could make the overall package less politically painful for the Athens.

Under one version of the proposal, pension spending would be lowered by 0.5% of gross domestic product a year, compared with 1% of GDP under a proposed package of policy measures put forward by the IMF, the EU Commission and ECB in early June. That policy package was compiled after a summit of key European leaders in Berlin on June 2, where German Chancellor Angela Merkel and others decided to present Mr. Tsipras with the outlines of their final offer.

The Greek premier was told he could only change measures in that proposed package if he offers alternative measures that achieve the same fiscal effect. Mr. Tsipras has repeatedly denounced measures demanded by the creditors…

A cull of tax exemptions that Greece’s cabinet will consider on Sunday would not only allow for smaller pension cuts, supporters of the idea hope, but would also allow Greece to avoid imposing a hefty increase in value-added tax on electricity—another measure the IMF and EU have proposed but which is politically hard to sell for Syriza.

Let us put not too fine a point on the matter: the fiscal targets that Greece agreed to meet are harsh, and even a 0.5% of GDP cut in pensions would be significant. It isn’t clear that Tsipras will buy into any of the plans presented to him. But Larry Summers points out the downside in a Financial Times op-ed (Summers is intermittently sane in order to burnish his credentials):

Make no mistake about the consequence of a breakdown. With an end to European support and consequent bank closures and credit problems, austerity in Greece will get far worse than it is today and it will probably become a failed state to the great detriment of all its people and their leadership.

The Journal also stresses that a short-term deal would be a bad outcome for Greece:

Speculation is rife that Greece’s creditors at the EU, European Central Bank and IMF would offer a six-month extension of the bailout programme – disbursing more than €10bn in aid to tide the country over the summer – if agreement was reached. Discussions over a third bailout Athens will inevitably also require would be kicked down the road.

Speaking to the Observer, Athens’s chief negotiator, Euclid Tsakalotos, described the prospect of a short-term deal as perhaps the worst possible outcome. Prolongation of the political uncertainty – and scenarios of Greece’s enforced exit from the euro – would, he said, do nothing for the country’s economic recovery.

“What we need is a mid-term solution that will take us through to the end of 2016,” he said. “A short-term solution might be the worst of all. What we don’t want is a postponement of issues like Grexit and financing, so the economy remains depressed and people don’t have a shift in expectations. Optimism is a material force in the economy.”

Unfortunately, it’s hard to see how the two sides can come to anything other than a short-term deal now, given the urgency of patching something up to release funds before the July 20 event horizon. The so-called “third bailout” of restructuring Greek debt (which would entail further extensions of maturities and reductions of interest rates; see this article by Tim Worstall for more details as to why reductions in the face amount of debt remain a bridge too far). The flip side is that Juncker had earlier offered a “fully funded” bailout extension through the the end of March 2016. If that could be achieved, it might provide enough of a negotiating runway to get through the “third bailout” so as to calm rattled nerves in Greece and get deposits back into Greek banks.

So the choice apparently rests with Tsipras. We’ll know in not too many hours what he elects to do. This is a painful choice no matter what decision he makes, since Greece is in a lose/lose situation. Let us hope he reaches the one that is best for Greek citizens.

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  1. Gerard Pierce

    “More than any other time in history, mankind faces a crossroads. One path leads to despair and utter hopelessness. The other, to total extinction. Let us pray we have the wisdom to choose correctly.” -Woody Allen

    1. which is worse - bankers or terrorists

      I’m not sure Woody Allen really applies here. The path of least resistance for Tsipras was always to:

      (a) Feign enough resistance to the Troika so that the Troika essentially put the fear of God in a certain segment of the Greek population that they would lose the euro and their bank deposits so that:

      (b) at the right time, Tsipras could cross the red lines, pit the a segment of the Greek population willing to trade their pensions for the euro and their bank deposits against the radical elements of Syriza, and attempt to destroy his own party to create a new centrist coalition.

      It’s simple power politics: the Troika is much more powerful than the radical elements of Syriza, so Syriza will have to be destroyed as currently constituted. Such an approach is the best chance for Tsipras to stay in the power the longest. The trick will be whether the more centrist political neophytes such as Tsipras within Syriza will be debt enough to pull this off politically. We are about to find out.

      This is the fundamental essence of what politicians do: self-preservation. Once Tsipras cuts pensions the first time, further cuts are much easier. Think about it: pensions are something you expect to get in the future, bank deposits are in your bank now.

      1. Gerard Pierce

        Woody doesn’t quite apply – except as a parody of bad choices.

        I believe Tsipras want’s the EU to be seriously concerned about their own self-destruction. Greece wants to appear blameless to as many people as possible.

        Once in default they can do a lot of things (like cutting a deal with Putin) and claim that the EU left them no other choices.

        Once in default, it’s the EU that has the real problems.

      2. Nathanael

        That type of sellout — running on a left-wing platform, then selling out to the corporate masters — is political death. I don’t know whether Tsipras is doing this, but if he is, the government will fall very quickly.

        If Tsipras is in good faith continuing to make one short-term extension after another, still NOT making a break from the euro…. the government is going to fall at the next election as people tire of endless austerity.

        In either case the next government will default and probably leave the euro. Might be the government-after-next.

        If Tsipras is in fact setting things up for a full-scale default, Greece might actually be able to stay in the Euro, simply by repudiating all the old debts. This is an interesting scenario which I hadn’t seriously examined.

        It seems pretty clear that the natural outcome is to leave the euro, because there’s an unsustainable situation economically when trapped in the euro.

        But if Greece simply defaults on *all* the old debts and refuses to pay them back at all, then it would give them enough breathing room to stay in the euro for another decade. This can be done by running a budget with a mild deficit (funded by borrowing, since someone will always lend, even to 19th century Mexico, which often defaulted *multiple times per year*). This would require that the rest of the eurozone avoid “gunboat diplomacy” attempts to collect on those debts by seizing out-of-Greece assets — I’m not sure how realistic that is.

        1. Yves Smith Post author

          They can’t refuse to pay them back at all. This is a non-starter. Argentina after its 2001 default negotiated a restructuring of its debts to mere private creditors. Official creditors are far more powerful. Oh, and Argentina repaid the IMF in full.

      1. IsabelPS

        Only short and irrelevant comments go through :-) I suppose there are a couple of words that I keep trying to use that trigger a spam alarm. I will avoid them, then:
        My take:
        1) The GR gov believes (believed?) it has weapons of mass destruction, therefore the discussion should be done at a political level, not with numbers on the table;
        2) Nobody (GR/EU) trusts the Greek macro numbers, one more argument for GR to skip them in the discussion (the GR FinMin expressed this mistrust last year as a blogger);
        3) The institutions need some reassurance that the GR side has serious intentions, so they want concrete, quantifiable and verifiable measures put forward. Not so much because they want X millions or billions (the debt doesn’t matter but the willingness to pay does) but because that is the only way to show walking the talk (debt breaks, etc don’t count).
        On the way home I was listening on the radio some talk about VAT changes and other stuff. In my opinion, ANYTHING will do to give the European Council of monday an excuse not to pull the trigger, as long as it is concrete and can be put in practice asap.
        Now, what will come next during the following year(s), I have no idea.

        1. Yves Smith Post author

          The European Council would love not to pull the trigger, but they are not the power players here. It’s the ECB and the IMF, and they are both much more bloody minded. And many European governments simply won’t approve a deal with no pension cuts. The bailout requires the approval of ALL the states in the Eurogroup, and in some, including Germany, Parliamentary approvals. It would be hard for Merkel to get the votes, particularly since she’s done no messaging to soften up the public and her MPs for a deal with no pension cuts.

          1. IsabelPS

            From everything I read I always got the impression that the ECB didn’t want to have the onus of pulling the trigger. That seems to be the reason they extended the ELA again. About the IMF, I have no idea. You are probably right, as I have read that Tsipras (?) would like them out.

          2. dbk

            re: “won’t approve a deal without pension cuts”:

            I think it’s important to qualify this statement by “without further pension cuts”. Pensions have already been cut an average of 48% across the board in the past four years; further cuts will throw every retired person in Greece below the poverty line, and I’m not at all sure where one goes from there.

          3. Nathanael

            Why is the ECB independent of the European Council, Commission, and Parliament? What idiot thought that that was a good idea?

            The ECB is basically illegitimate, having no electoral mandate. This is rather at the root of the problem…

            1. Yves Smith Post author

              Central bank independence is considered in orthodox economic circles to be hugely important and desirable. All economies of any consequence save Communist China have independent central banks. Even Russia’s central bank is independent.

              1. susan the other

                One strange difference is that the ECB threatens to cut off liquidity. Like a racketeer. Whereas our Fed opened up the spigots and provided liquidity even to the most egregious banks. Except Lehman of course. But after Lehman they got it together and fire-hosed everything.

    1. Yves Smith Post author

      If you were in moderation your comment would not go through at all, so this has nothing to do with you personally, much the less actions we have taken. I don’t see any of your comments in the moderation queue. I did see three in the Spam folder, only one for the post today, and that one looked pretty much identical to the comment that posted.

      I’m sorry but we don’t control the spam software. We get well over 1000 spam comments a day, so we have to have it, otherwise the comments section would become unreadable. We get few false positives, and I am sorry that you are having trouble.

      We have caching so it can take up to two minutes for a comment to appear, and I gather that it might seem to take longer for some overseas readers. If you post the same comment multiple times, you are training our software to see you as a spammer. So please do NOT try reposting. It only makes matters worse.

      1. IsabelPS

        I’ve been reading this site for long enough to believe that it is not a matter of human censorship. But it is spooky because I have tried and tried to mention something that I have seen ignored everywhere and I think it is important (and out of the horse’s mouth, BTW), and I can’t. Also, last time I wanted to say what this guy “bets” will happen tomorrow (he wrote it in his blog and I translated it) and I couldn’t:

        It’s a pity because, although I am not at all knowledgeable in finance, banking, etc I read around and I seem to be one of the few “Southern Europeans” commenting in this blog :-)

    2. jim

      I agree. I posted numerous times how the writing was on the wall from the very beginning Syriza was the new face of financial tyranny and will betray their base in no time. Surely, the police will be out in full force dressed like storm troopers to enforce the upcoming economic warfare on the Greek population.

      I didn’t see many of those comments go through. It seems like there is a lot of denial in this circle. The bankers want total enslavement of all of us and the polite response is to be “reasonable” and “nuanced”.

      Do the troika seem reasonable or nuanced–of course not–they are fascists pure and simple.

      How is Greece regaining its sovereignty by exiting the euro a long term loss compared to fascism?

      1. Yves Smith Post author

        We are incubating Skynet in our moderation software. Apologies. All sorts of comments get hung up in the mod queue that break no rules we’ve set up, including pretty much all the commments by three members of the commentariat who are typically very much in synch with the site’s point of view. I

  2. Michael Robinson

    Some fans of the Greek ruling coalition argued that it had become increasingly intransigent over recent months to pave the way for a default and/or Grexit, that it was not simply playing a game of chicken with its creditors but was working to create a set of conditions that would force a radical rupture in a way that it could tell voters that it had clean hands.

    This 11th dimensional chess theory of Greek negotiations appears to be invalid.

    Au contraire.

    A solid consensus amongst 3rd party observers (and even the IMF as well!) has emerged that “both sides” need to make concessions to reach a deal. Greece has to capitulate on pensions and VAT to make a bailout politically palatable in creditor nations, and the creditors have to recognize losses and restructure Greece’s debt such that there are credible economic prospects for repayment.

    And that Greece has to move first.

    So, in eleventeen dimensional chess, by making these concessions, Greece cleans its hands, as the troika has shown absolutely no willingness whatsoever to even consider writedowns and restructuring until never ever after.

    As far as the European elite is concerned, the reason God created roads on this earth is for the kicking of cans.

    1. alex morfesis

      capitulate to resuscitate lose/lose means a chance to fight again one day

      being a hero is a fools game when one has responsibilities

      no one visits the grave of axileas anymore…

      even the great odysseus knew when to fight and when to retreat and regroup

      “Now what? It will be bad enough if I lose my nerve and run, but worse yet if I am caught here alone, as I will be, since Zeus has scattered all the Danaans. But why am I talking to myself like this? I know only cowards depart from battle. A real warrior stands his ground whether he is hit or hits another.”

      but he fought long enough to prove a point, and then fell back…

      25 billion dollars in free PR this mess has brought to Hellas…

      2 million sunsets the hellenes have survived in the glorious
      land the world calls greece…

      well done SYRIZA…

      now let us give them that little horse they are demanding and let the real fun begin

      those fools from Illium…they never learn…

      1. MyLessThanPrimeBeef

        Frau Merkel’s problem is she can’t trust Greeks, even when they bear gifts.

    2. Yves Smith Post author

      It is not 11th dimensional chess to say loudly and repeatedly that you will never cross your red lines if you in the end cross them. You look like a sellout and a traitor. Or do you consider ruining the reputation of one’s party and of its key individuals to be strategic brilliance?

      And it is not 11th dimensional chess to default with inadequate preparations for what happens next., which at a minimum is capital controls and more likely a bank holiday. That would be massively destructive to the Greek economy coming at the beginning of the tourist seasons. Expect lots of cancelled bookings. Moreover, the other side has the capacity to force a Grexit, an as we’ve explained, it’s beyond the organizational capacity of any government to handle that without years of planning, which is clearly impossible given how short a tenure the ruling coalition has had in office.

      Paul Mason of Channel 4, who has been sympathetic to the Syriza, reports that the government has so little in the way of capabilities and so divided that Syriza officials have been almost entirely reactive, which is consistent with our observations from afar. And he also says they were taken aback by pro-Eurozone demonstrations.

      Despite polls regularly showing that 60% to 80% of the population wanted to remain in the Eurozone, as Syriza had had to promise to get elected, they apparently had drunk their own Kool Aid to the degree that it didn’t occur to them that portions of the public would be upset at them violating a core election promise. How 11th dimenional chess-y is it to ignore polls and discount the possibility of domestic opposition?

      1. Michael Robinson

        It is not 11th dimensional chess to say loudly and repeatedly that you will never cross your red lines if you in the end cross them. You look like a sellout and a traitor. Or do you consider ruining the reputation of one’s party and of its key individuals to be strategic brilliance?

        Well that would depend entirely on whether the red-line-crossing is conditional on the other side doing the same.

        If Tsipras brings pension and VAT concessions to the table, and says, “you can have these in exchange for writedowns and restructuring, as every economist and the IMF say you must”, and the EC doesn’t take the deal (and they they can’t and they won’t), then Syriza have not crossed their red lines in fact, and their hands are clean, and they demonstrate the bad faith of the EC.

        The long game for a left-lefter-leftest coalition is undermining the political legitimacy of the anti-democratic, neo-liberal eurocracy.

        1. Yves Smith Post author

          The reports of this AM are that the other side has not done so at all. Greece will not get any debt reductions as part of this deal. That will be in a separate deal, as was always contemplated (the so-called “third bailout’ scheduled to start being negotiated once these ‘second bailout” talks were concluded).

      2. financial matters

        I think Mason describes the situation pretty well.

        “Then the entire problem of the split sovereignty implicit in the Eurozone will be focused into a single moment. The ECB will order, as in Cyprus, a “bail in” of depositors – that is, savers could lose some of their money. If far left government resists that it will be forced to detach itself from the governance mechanisms of the Eurozone.

        So even as it pledges to remain in the single currency, it will be at war with – and partially seceded from – its structures. If the ECB throws in, as threatened, the suspension of the Target 2 payment system for Greece, it will effectively be a Euro member in name only.

        Whatever the outcome of Monday, the credibility and reputation of the Eurozone’s mechanism of governance, and of the IMF, are damaged. To understand why, study the final picture: the graph of the lenders predictions versus reality when it comes to what austerity does to GDP.

        As this plays out the population of Europe will watch closely. Yes a lot of people are sick of the Greek crisis. But they are also fascinated by it, because what’s playing out on this landscape of burnt-umber, urban decay, torrid nightlife, graffiti and Mediterranean passion the basic dilemma of 21st century capitalism: shall it be for the rich or for everybody? “

      3. Praedor

        It’s impossible on its face to keep aa bipolar populace happy. The people of Greece cannot demand to stay in the EU AND end austerity. It’s one OR the other, not both, because the EU is a corrupt syndicate of rich looters who only seek to enrich the very few elect while intentionally impovershing the rest. Normally they seek to do this by slow, steady theft but with Greece it is to be done in one big orgiastic explosion. Impossible to hide it behind gradualism.

  3. PlutoniumKun

    I think Tim Worstalls article expresses very clearly why a cut in Greeces debt is nearly impossible – and also why Greece has received so little help from other countries (such as Ireland) which also need a cut in debts. The 2010 deal really was a disaster, it let the creditors off the hook and (as with the deal that ‘saved’ Irelands banks) but it all on European taxpayers.

    I don’t really think there is any way out for Syriza – either option is disastrous for the Greek people and for Syriza politically.

    1. Yves Smith Post author

      One thing to bear in mind is that Greece was always expected to get more debt relief. This fight is over the last payment in the so-called “second bailout”. The negotiations were always anticipated to roll into the “third bailout”. The Finance Minister of Spain created a ton of consternation by estimating it would cost 30 to 50 billion euros, meaning in the economic value of the extension of debt maturities and interest rate reductions and payment deferrals. But that’s not the same as a principal writedown.

  4. Nell

    So the choice apparently rests with Tsipras. We’ll know in not too many hours what he elects to do. This is a painful choice no matter what decision he makes, since Greece is in a lose/lose situation. Let us hope he reaches the one that is best for Greek citizens.

    And what choice is that? The commentary on naked capitalism has been excellent and well argued but since Greece is in a lose/lose situation how can there be a ‘best for Greek citizens’ choice. Either Greece capitulates to continued austerity and depression levels of unemployment, exodus of its young and complete loss of democratic rule, or it goes for default, exit from the eurozone, financial/political chaos and an uncertain future. Maybe default, even with the uncertainty is the best choice. If you are a prisoner suffering brutal treatment under a jailor, and you have the opportunity to escape, where escape could mean freedom from oppression or death, which choice do you make? The certainty of being alive but physically and mentally brutalized or escape with the risk of death?

    1. RepubAnon

      There’s another option: Russia could wait until the Grexit and propose a 100 year lease on a port that the Russians could use as a naval base. If the price offered by the Russians was high enough to stave off Greece’s immediate woes, Russia could peel Greece out of NATO, and eventually pull the same tricks that they used in the Ukraine to take over the rest of Greece. After that, they’d need a land route to Greece through the Balkans… I’d say that today’s Russia will have recovered most of the former Soviet Union within 20 years.

      1. Yves Smith Post author

        The US would give Turkey the green light to go after Greece if that happened. It would need to be tided up but Greece would need to be deemed to have violated NATO rules so that NATO would stand aside.

        The US and the rest of Europe would also apply Iran-level sanctions to Greece.

      2. alex morfesis

        the greeks trust the russians less than they trust the germans, and working on a pipeline Which INCLUDES turkey is not a step away from nato, but step towards ending historical animus between turkey and greece…if they were going to give into that, it would be smarter to give in to muti…

        besides…you over estimate what a port is worth…and russia does not have a real navy to need any more ports than it already has access to…having a navy in the mediterranian is as useful as having me play center for the lakers…

        when was the last major naval battle there…300 years ago ?

        1. ambrit

          If you include convoy battles, long, drawn out wars of attrition they, the Axis attempt to supply Afrika Korps from Italy across the Med to Tunis, Benghazi, Tobruk, et. al. counts as a crucial turning point in WW2. Mid 1940’s at least, and it determined the fate of Europe. Also consider the strategic importance of the Suez Canal. The Russians wouldn’t have to take it over, just wreck it. (I’ve read arguments to the effect that destroying the Suez Canal is part of the Samson Option.)

    2. brazza

      precisely, Nell. NC (and it it the best at what it does) seems content to gauge tactics and claim kudos when its analysis proves accurate. But who cares if it doesn’t have a guiding policy? This article is akin to a patient claiming victory for a correct cancer prognosis. Well … lets wait and see whether its going to be chemo … or if the dude opts alternative after all …

      1. Lambert Strether

        Damn! Where’d I leave my pom-poms? Thanks for sharing your concern (as well as your blissful belief that accurate analysis is easy to come by. Of course, if accurate analysis is a problem for you, it’s big Internet).

      2. Yves Smith Post author

        Go look at the Nathan Tankus post on the operational requirements of a Grexit.

        Continued austerity is like allowing one hand to be cut off.

        Capital controls, a bank holiday, plus a badly managed introduction of new currency (and it will be badly managed because it takes years of planning, computer coding, and testing to have one go well), along with the damage done by a rapid currency depreciation is like cutting both your legs off.

        These are terrible choices but it’s not hard to imagine which choice most people would make.

        1. brazza

          Is this the same blog that spills rivers of ink to accuse BO of backing off the banks in late 2008, early 2009? Yet in real-time (with no benefit of retroactive vision), and faced with a far less world-wide life-style threatening choice, it argues for self-interested appeasement. Except in this situation there won’t even be that immediate palliative few years of QE-morphine relief, only slow inexorable asphyxiation. There are times when leadership does not entail taking the path “most people” would choose, but to inspire and rally the courage and fortitude to face the consequences of a principled approach. But yes … to find examples one would need to hark back to a time before Clinton handed government over to poll-based political expediency.

          1. lambert strether

            Your comment inspires me to name what it exemplifies: “Juvenile Left Adventurism.” It’s characteristics are shared by others; perhaps I’ll make time tomorrow when it’s not 4am to expand on this.

          2. Yves Smith Post author

            Obama was not president in late 2008.

            Please see our post on why taking on the banksters would not have been hard in January 2009. You seem to have a poor memory of that juncture of history.


            Moreover, taking on the banks would have been better for the economy than the path that was taken, while a bank holiday + Grexit would be a devastating blow to an already depressed economy in the midst of a humanitarian crisis. The two cases aren’t remotely comparable.

            1. brazza

              “This juncture was a crucial window of opportunity. The financial services industry had become systematically predatory. Its victims now extended well beyond precarious, clueless, and sometimes undisciplined consumers who took on too much debt via credit cards with gotcha features that successfully enticed into a treadmill of chronic debt, or now infamous subprime and option-ARM mortgages.”

              “The widespread, vocal opposition to the TARP was evidence that a once complacent populace had been roused. Reform, if proposed with energy and confidence, wasn’t a risk; not only was it badly needed, it was just what voters wanted.”

              “But incoming president Obama failed to act. Whether he failed to see the opportunity, didn’t understand it, or was simply not interested is moot.”

              “Defenders of the administration no doubt will content that the public was not ready for measures like the putting large banks like Citigroup into receivership. Even if that were true (and the current widespread outrage against banks says otherwise), that view assumes that the executive branch is a mere spectator, when it has the most powerful bully pulpit in the nation. Other leaders have taken unpopular moves and still maintained public support.”

              I concur with all the above! And yes, circumstances are not carbon copies. Yet to this “Juvenile Left Adventurist” the similarities are striking – reading the above, I might think you were addressing current Greece. What I fail to comprehend are your reasons for arriving at what appear as radically opposing conclusions, particularly at moral/ethical levels. AT was elected to oppose creditor demands, so far (whether he’s successful or not is not the issue), he’s dedicated his efforts in alignment with his campaign promises. I don’t demand perfection of politicians, and don’t expect to agree with all policies – but I DO expect them to stand true to their own electoral platforms.

              1. Yves Smith Post author

                Obama’s platform was not hopelessly contradictory, as Syriza’s was. They promised ending austerity and staying in the Eurozone. They did not have, and did not try to obtain post election, the consent of the governed to leave the Eurozone. AS we’ve pointed out, this would be a catastrophe economically, since it would entail all of a bank holiday, capital controls, introducing a new currency on an insufficiently planned, emergency basis, and a large currency depreciation. Any one of those done alone does huge economic damage. No one in modern times has done them all together in a deeply depressed economy. This would likely push Greece into being a failed state.

                By contrast, going after the banks in the US would have had no major downside save Obama earning the enmity of financiers.

        2. Praedor

          They can still go with dual currency. Caving in but then doing what’s necessary to do dual currency to relieve much austerity is perhaps the best option.

    3. Lambert Strether

      Unfortunately, this is not a choice that was presented to the Greek people, either during the election, or immediately afterwards, which would have been the appropriate time to address it.

      In a way, this line of thinking (which is pervasive) is like a lot like the “sheeple” argument in this country; it’s very easy to preach revolution, especially for others, but most people also have hostages to fortune: Families to support. It’s one thing to sacrifice one’s self to make a moral or a political point: it’s quite another to sacrifice others you have an obligation to care for. So I really don’t think the prisoner metaphor is appropriate, because it’s only about one individual.

      1. Peter Mayers

        In a way I’m reluctant to enter into a discussion of metaphors and analogies, given the notorious abuses to which the use of analogies lends itself. Perhaps a decent rule of thumb would be to regard an analogy not as a way of proving any point, but instead simply as a way of illustrating the contention for which one is arguing. If one regards, namely, one’s favoured analogy as constituting proof (or even just more modestly as constituting evidence) for one’s contention, then one is stacking the deck. If one can get one’s listeners to accept a given analogy, the chances are very high that one has thereby succeeded in getting them to accept that one’s conclusions follow like a logical freight train. I believe logicians would refer to this as the fallacy of misplaced concreteness.

        I intend the following analogy, then, not as any proof or even only as evidence; instead, I mean it merely as an illustration of my point. The analogy here is with resistance fighters struggling to end a brutal military occupation. By, say, blowing up a dam, such persons endanger not only themselves; they also call down the violent vengeance of the occupier upon the members of their family, the neighbours in their village or town, the fellow citizens of their suffering occupied country, and so on. A choice to carry on such resistance is accordingly as morally fraught as ever a thing could be, and it’s the furthest thing from something to be taken lightly. And yet, still, all the same … can’t it be a reasonable and defensible choice to decide upon such resistance — even given the peril (an even worse peril than is being suffered already) which is thereby brought down not just upon oneself but also upon others?

      2. Robert Dudek

        When you are at war, you have to fight. Your tactics can be overt or covert or both. Greece has been in a war of self-defence against the troika, and given that, innocents will get hurt.

      3. Calgacus

        Lambert Strether: Unfortunately, this [apparently, austerity vs. default/Grexit] is not a choice that was presented to the Greek people, either during the election, or immediately afterwards, which would have been the appropriate time to address it.
        I think the prior non-presentation is debatable. In any case, they’re addressing it now, suggesting a possible Grexit referendum. Tsakalotos: Greek people will decide on Grexit if we don’t get deal

        Arguments about sheeple/revolution/sacrifice cut both ways. They depend on what the sacrifice is, what causes it. On disputed conclusions and arguments. Everyone agrees that a “good Euro” would be the best for all involved. But it doesn’t look too likely, basically because the Eurocrats & politicians & “economists” hold insane beliefs.

        After that, one person may think that default within the Euro is the best option while Grexit is a catastrophe. Another may think that defaulting within the bad Euro is just more of the same, but worse, while Grexit leads to finite, tolerable, rather short-term costs, followed by continual, substantial improvement. Just as the first can think the second is calling for heroic sacrifice without wanting to or being called on to pay the price, the second can think the same about the first.

        The only meaning to be extracted is that one should be serious. I agree. Someone with a genuine responsibility to get things right, to be serious takes the second position above:
        Dimitris Stratoulis – SYRIZA is not afraid of Grexit &
        Prime Minister Alexis Tsipras’ statement at the Economic Forum in St. Petersburg seems supportive.

        IMHO, the legal framework should be taken more seriously than almost anything. But NC and a number of commenters here have unfortunately made IMHO provably, horrifyingly wrong statements about it, outside all legal debate. Would be nice for this to be resolved, or at least I’d appreciate having my personal puzzlement put to rest, to learn if anyone has seen my comments on it in the last couple of weeks.

        1. Santi

          The sentence of Tsipras statement that I liked most in Saint Petersburg is:

          Let us not fool ourselves: the so-called Greek problem is not a Greek problem. It is a European problem. The problem is not Greece. The problem is the Eurozone, and its very structure.

          Also, now that I’m in Siberia I have come to notice things that I didn’t about the Russian financial system, including that (most?) their banks accounts can be used with dollars, euro and rubles in separate accounts so that their practice is, as a Russian told me, “it is often cheaper to get physical Euros and carry to a booth to exchange”, though Катня had hinted me about those practices when talking in Europe.

          It then occured to me a provokative question: what if all of those energy negotiations were just a smoke curtain for a deal that would involve selling the management of one of the main Greek banks, post nationalization, to a Russian bank that would integrate it very easily in their information systems for a new Greek, multicurrency, accounting system? This would all, of course, be conditional on the failure of negotiations that guarantee, in writing, a sane Greece inside a sane Euro (that can recycle surpluses).

          1. Yves Smith Post author

            Offering euro and dollar bank accounts is a weakness not a strength. They are the result of the fact that Russian citizens don’t trust the ruble as a store of value. Even worse, the banks allow depositors to make FX transactions readily, so that put Russian banks at risk of bank runs due to Russians moving more into foreign currencies. And when that happens, Russia has to use its own FX reserves to plug the hole. By contrast, the Fed can just create more dollars with no knock on effects.

            I told Mark Ames this was nuts, and why didn’t Putin have capital controls. He said it was because Putin believed in market liberalism, as did contemporary Russia, and going back would be regarded very negatively by Russian citizens.

            Moreover, a new interview at Real News Network with Leo Panitch, who is very pro-Syriza, makes clear that the meeting with Putin last week was of little significance:


            In any event, the Russia overtures seem to be moot as numerous media accounts now say that Greece has made concessions on pensions (as in it has crossed its red lines) and VAT and it is scrambling with Troika to get a deal done.

    4. Nathanael

      Default is quite obviously the best choice. In fact, it’s the only choice; it’s just a question of when.

      Old economics rule: Debts that cannot be paid will not be paid.

      I would expect default to require exit from the euro, but I’ve seen recent information which indicates that may be wrong.

      1. Yves Smith Post author

        The Greek government does not agree with you. It’s working hard to get a deal done that meets the creditors’s draconian primary surplus targets.

    1. Yves Smith Post author

      If the analysis is accurate, the ECB is lending without sufficient collateral. But this doesn’t square with earlier estimates published in Bloomberg as of mid-May that Greece would run out of collateral on a 400 million a day burn rate in mid-late July. The run rate was actually lower for quite a few days following that forecast. Even with the rapid acceleration this week, this seems a bit early.

      But even if the numbers are right, it means the ECB is waiting for political cover (which is what we’d said would need to happen first). Not clear what it would deem to be sufficient. Regardless, I can’t imagine it would take drastic action prior to the Monday evening summit. And it might wait longer to let national Treasuries do more ring-fencing.

  5. Jose

    The Syriza leaders – especially Varoufakis – are old and true believers in the “European project” and presently the divergences in the negotiating positions amount to only 900 million euros (according to Larry Summers), that is, small change compared to the 25% drop in GDP that the EU has already imposed on the Greek people.

    So it’s just a matter of one extra step by the true believers and presto they can have the much sought agreement with the beloved EU.

    Just a few more cuts to pensions and rises in the VAT – in exchange the EU will concede some debt restructuring. That is the restructuring that the neoclassical IMF economists had already demanded in 2010 as a precondition for a bailout. The difference is that those economists defended a much larger restructuring than the one likely to be offered now.

    If this comes to pass we’ll watch a depressing outcome in which a “radical” government will swallow conditions well to the right of those defended by orthodox economists.

    What a letdown!

    1. vteodorescu


      That Varoufakis is the European Trojan horse in the Syriza camp is my impression too! He does not do it deliberately, but that just makes him even more dangerous :)… Syriza thinks “hey, if this smart economics dude who is on our side says these things about the state of the matter, they must be true…”

      Unfortunately it seems that, like most of us, he has unconscious biases, and wants to save Europe from itself. The “Knight in shining armour” image can be a powerful seducer…

  6. Demeter

    There is a great need for leaders with vision both in Greece and in Europe. Too bad there aren’t any such visionaries available.

    I am hoping this press release is push-propaganda, and not actual reporting.

    Well, Monday is only hours away. We will soon know (perhaps) what is afoot.

  7. Steven Greenberg

    I also hope it is “push-propaganda” that we are reading from these “unbiased” sources. With an alternate currency, Greece would be free to at least get its internal economic engine going again. What Germany can’t sell them by lending them money to buy, will just cut off German exports to one lucky former victim. I can’t see how that escape for Greece amounts to a death sentence.

    Perhaps Greece is trying to cover the tracks of its preparation for introducing its new currency. Perhaps they are only too happy to see the press print these false reports.

    One can only hope.

  8. financial matters

    “This is a painful choice no matter what decision he makes, since Greece is in a lose/lose situation.” Yikes!

    Are we that enslaved by the concept of money as debt that we can’t imagine people living in a better situation? I think the idea of money as a relationship to be used for the common good needs to be nurtured.

    1. susan the other

      It seems apparent that the EU doesn’t know how to change. They know things aren’t working but all they can do is fall back on tried and true methods. The problem is that the world has changed. The contract between the EU and its members is bound by certain anachronisms, like military obligations, and additionally each country itself is a member of NATO. That is expensive. It is equally a waste of resources and the major cause of world pollution. If politix is ever to prevail (as we all know here quite well) it must assert itself over military conflict. Debt and war have always gone hand in hand. I wonder how much Greek debt was accumulated over the Cold War and rolled up into the present, debt that reflects massive and pointless expenditures on tanks and guns and missiles and bombers and bombs and that whole long list of obscenities. All that debt whether from an EU country of the US should be nullified. Yesterday.

      1. Lambert Strether

        You think our legislative process is complicated? The filibuster rules are baroque? Try the EU! The EU makes our political process look linear (and believe it or not, I think we the people have greater democratic input here than Europeans do in the EU).

  9. Linda Amick

    While the western banking mafia continues to hold primary sway for all nations, an alternative is under development. There is no future for greek people under the so called current debt burden. Bad loans should be a shared responsibility between the lender and lendee. Lenders have extensive knowledge about the ability of the lendee to repay a debt. This whole business of war and control through debt needs to be abandoned otherwise eventually the vast majority of mankind will be slaves.
    It looks like current greek officials are no better that the rest of “paid off” oligarchs.

  10. Bernard

    wow, to see the complete sellout of Greece, after all this kabuki.. kind of like “Hope and Change,” European version.

    1. hardWorkingBee

      Exactly my feelings from the start. Political negotiations conducted in public are almost always kabuki to make the marks feel like “there was no alternative” when the final sellout takes place.

  11. todde

    I for one was willing to fight the powers that be to the last greek.

    I’d hope for the best but my supply of hopeium is running low.

  12. pascal

    what I read elsewhere is that that early retirement will be suppressed. I know there are reasons for early retirement, not the least hard physcial work, but those can be taken care by social security, and others are debatable in a crisis context ( why not longer studies grant on the other side of the pipe, for example?)

    it is also reasonnable from the east european euro country to say they can t sell to the general public a help package with lower average pension age and higher amount than their countries. The actual answer is that those country should not have participated in the initial bailout, but that is not much help in practice, and they have their vote anyway in the finance minister council. Above that, Greek government also did not communicate so well on the pension levels either ( my son s grandmother s pension went for example from 400 pre-crisis to 250 euros, and she worked more than 40 years)

    since pensions is the most important welfare net in Greece (the other ones being rather below the euro avreag) swapping early retirement with others solidarity means is, or more caping the pensions to a euro average (which seing the above amounts, would not change much, but would be good communication) while adding extra low revenue relief, as seemingly proposed by the Commision, and as note by Yves in a previous column, does nt sound like such a scandalous compromise to me.

    1. Yves Smith Post author

      That is what the creditors have been calling for for some time and Greece has refused to give, in large measure because Greece has no unemployment insurance. Early retirement is as substitute for that but winds up being more costly by virtue of not being temporary.

  13. juliania

    As nobody else is mentioning this, I will give it a try. What if Tsipras agrees to the EU demands on pensions but begins financing them through the deal they just concluded with Russia on the pipeline? I realize that is very simplistic and maybe a dumb suggestion on my part, but given that Putin has had a similar attitude toward the IMF, that it is desirable for the new institutions to work in parallel with the old ones, is Greece straitjacketed into EU solutions only?

    (Ready to be shot down in flames, no economist I.)

    1. Yves Smith Post author

      They did not “just conclude a deal” on the pipeline. They merely signed a preliminary memorandum. Those are typically not binding since many details need to be negotiated before a final deal is inked. It is month, and more likely close to a year, before they’d have a deal.

      We’ve provided links in Links yesterday which has Russian officials stating after the Putin meeting that there would be no loans to Greece.

  14. Synoia

    These concessions are subject to the GDP deflator, I believe estimated by the IMF to be about 1.4.

    For every E1 the Greek government cuts form it spending, the Greek GPD drops by E1.4.

    This agreement is then a death spiral, and Greece has absolutely no chance to achieve its surplus required by the Troika because of the GDP deflation due to Government spending cuts,.

    What happens in another year when the number continue to look abysmal? More cuts?

    1. which is worse - bankers or terrorists

      “What happens in another year when the number continue to look abysmal? More cuts?”

      More debt and bailouts.

      1. susan the other

        IMO growth is never coming back because the planet can’t afford it. So if nobody has the courage to acknowledge that reality, Greece will be ever more impoverished for no good reason at all. The sooner debt burdens which cannot be met are forgiven the better. Worldwide it does no good at all to try to squeeze blood out of stones. And it is illogical because demanding blood money is really stupid when there is no place to invest the stuff. The world needs a jubilee. And money is going to have to be invested in projects that will make no money at all, ever, because we have to repair the environment and it’s not a money-maker. Don’t let anyone kid you about that one. Seems like we are witnessing, real life, the evolution of money into something entirely different.

  15. MyLessThanPrimeBeef

    “The choice apparently rests with Tsipras.”

    “The choice, I am very much afraid, is hers*,” wrote Yanis in the Frankfurter Allgemeine Zeitung.

    That’s where things stand.

    *referring to the German leader.

    1. Yves Smith Post author

      Did you read the post? Greece was working on and has submitted proposals, which the Trokia says are the first ‘serious” ones they’ve seen, meaning they have real concessions in them.

  16. Pelham

    Can someone enlighten me on a particular issue here? I’ve read glancing references elsewhere to suggestions that the Greek government has indeed offered proposals that meet the fiscal demands of the troika, though not by the means the troika demands.

    The Greeks have supposedly offered to cut certain kinds of spending, including on military bases, and raise certain kinds of taxes that yield the savings demanded. But the troika supposedly have rejected these plans because they would prefer that austerity be imposed on working and poor Greeks rather than the military and the wealthy.

    Is there anything to this? I apologize in advance if this has been addressed elsewhere as I haven’t been keeping up with this complex and interminable story as much as I should. But there are only so many hours in a day.

      1. Yves Smith Post author

        Those were the proposals he wanted to present at the Eurogroup. The Greek government had been told repeatedly that the Eurogroup was not a forum for taking that sort of presentation. The Eurogroup was not going to consider any proposal not previously vetted by the Troika. Plus proposals need to be in writing. The hostile reaction he got in the meeting was the equivalent of “What about ‘no’ don’t you understand?”

    1. German native speaker

      I have read extensively in the news, Greek news, alternative news, any news I can find, for a sign that the new government of Greece is actually starting to tax its wealthy population. Sorry to say, have not read anything. Varoufakis was in Switzerland, and it was reported that the Swiss offered to cooperate with recovering some of the Greek money in Swiss accounts. Therafter, heard nothing. Mr. Varoufakis therafter gives another academic speech in Berlin, but remains totally mum about what he has accomplished re taxes.

      Same for VAT: it is a shame that VAT for electricity will be raised by the highest amount. But do you remember, or have paid any attention, as to why the IMF wants that? Because, they said, it is the only VAT that is collectable!!! And who is to blame for that? Certainly not the Troika! The various Greek governments had over five years to create a VAT system that works, but no.

      1. dla

        And who is to blame for that? Certainly not the Troika!

        Poor Troika, powerless at the mercy of the Greek people. :-(

      2. pascal

        Varoufakis explains in the Tagespiel in more detail that: ” the institutions are telling us, if we legislate before we reached a comprehensive agreement this will be seen as a unilateral action and it will blow up the negotiations. One of the very first things I said to my Eurogroup colleagues was, why don’t we push some of the legislation we agree on – the taxation system, the anti-corruption rules – through parliament and meanwhile continue the negotiations? And I was actually told a number of times if I dare to suggest this again this would constitute reason to settle the negotiations.”

        No idea if this is common in negotiations, I find it weird they would refuse greeks to make any legislative progress, and reversely on the greek side – except hidden agenda.

        As wether switzerland is keen, by its own will, of helping to fight tax evasion in other countries, I have seing the efforts it required to the US, strong doubts :)

        The point you mention on VAT is interesting. Greece proposed to raise all rates but give a rebate on paiment by card to move, precisely, to a more collectable VAT which seems a reasonnable answer.

        1. German native speaker

          From your Tagesspiegel link:
          “But we also have a broken down judicial system. With the big tax cheaters, if you take them to court they get a court case that will be heard in 2023.”

          It’s one example of why some people say, esp the German public, “Greece needs reforms”. While others immediately scream that “reforms are being imposed in order to further the neoliberal agenda”.

      3. Pookah Harvey

        Varoufakis has stated that due to cuts in the budget required by austerity he had only 100 personnel available for tax collection for a population of 11,000,000 when he took office. Then the Troika are upset at the lack of progress in tax collection. This was an example Varoufakis gave of the self defeating nature of the austerity required of Greece.

        1. Pookah Harvey

          I just found the link:

          Varoufakis states in an interview

          In a normal country we would prosecute the tax cheats. But we also have a broken down judicial system. With the big tax cheaters, if you take them to court they get a court case that will be heard in 2023. And by that time you won’t gain one penny from them. We don’t even have tax officers. The salaries for the tax officers were reduced a lot, so a lot of them went into private practice. The first day I was in office I asked: how many tax inspectors do I have access to? You know what the answer was? 100. 100 for the whole of Greece.

          We don’t have the personnel and we are struggling with the banking system to allow us access to the bank accounts. But concerning the Lagarde list, the previous government didn’t do anything for years. So a lot of these cases are too old now. But we have new lists now and we are working very hard towards an algorithmic system of automatic checks of all the movements between bank accounts in Greece and abroad. We are making a lot of progress and we expect good results until September.

          Syriza inherited a broken system that the Troika won’t let them even try to fix without first agreeing to further austerity. But increased austerity would would make it almost impossible to fix the system, a perfect Catch 22.

        2. German native speaker

          I read that too and am wondering, because I remember reading somewhere that when some Greek tax auditors exposed tax fraud, the governments response was to sideline them. It was some previous government. Oh, I remember: this was an article about the real estate swaps by Mount Athos monastery, by Michael Lewis, but I don’t find that article anymore, where he describes how he went to Greece and talked to a couple of Greek tax auditors.

  17. IsabelPS

    Peter Spiegel in the Brussels Blog (June 16) quotes a paper circulated among the creditors that says that the European Commission and the European Central Bank considered cuts in the defense budget but that the IMF “is prohibited in its rules from requiring military cuts as part of a bailout programme.”

  18. susan the other

    Tsipras might not wear his beret for a while, but he accomplished some big things. We all know about Greece’s plight now and we all have our opinions; the EU has been proven to have no solutions whatsoever, least of all political ones; the old paradigm of debt and war has been brought into full focus; hypocrisy and fraud are accepted as regrettable facts of life. And everybody is ready for change.

  19. Jess

    Anybody taking odds on Golden Dawn’s margin of victory in the next elections? Weimar Germany all over again.

    1. Yves Smith Post author

      It’s not likely to be Golden Dawn. The party never got above 7% in the polls and what following it had has collapsed after Golden Dawn member Giorgos Roupakias killed Greek left-wing, anti-fascist rapper Pavlos Fyssas in 2013. But another group will likely rise in its wake.

      1. Sanctuary

        The Nazis only polled at 2.5% in 1928 but looked prescient a year later (after the Great Depression began) when they said all of the loans being given to Germany were just bankrupting her silently and would lead to a much worse crisis. By 1930, they climbed to 18% and then by 1933 they were over 37%.

        The killing of a left winger will be forgotten if Golden Dawn appears to have the correct take on the nature of this crisis.

        1. Yves Smith Post author

          I’ve had Greece-based readers in other posts tell me that Golden Dawn is overrated as a threat. It’s not hard to see people of the same ideological stripe coalescing under another banner, particularly since that happens all the time in Greece (parties fracturing and reconstituting on somewhat different lines). Just look at any genealogy of the Communist/hard left parties, for instance

  20. Aaron

    So Tsakalotos thinks an agreement lasting through 2016 would be good but a short term can kicking exercise would be bad. Aren’t these one and the same thing?

  21. Maju

    I keep thinking that the only thing Brussels, Schauble and Lagarde want is to force the bankruptcy of Greece in a way that it has to be managed by SYRIZA, so they achieve their real goal, which is a Bela Kun episode. Meanwhile SYRIZA is probably trying to play the Ecuador card, not by purchasing its own debt at ridiculously low prices (as Ecuador did without being of any help re. its CCC rating) but by choosing to manage the inevitably post-bankruptcy scenario by means of enhanced “socialism” (social-democracy the old way, nothing more radical but even that is radical enough nowadays), what has worked very well for Ecuador.

    The issue of the currency is not the key problem here (Ecuador uses the US dollar and so could do Greece with the euro once the overspending caused by the debt burden is removed by bankruptcy), the real problem is EU hyper-capitalist legal frame, which does not allow for actual state intervention, at least not at the level demanded.

    So I still forecast the bankruptcy in a matter of days (not sure which is the actual technical limit), largely because that is what EU, Germany and the IMF want (so it doesn’t matter what Greece “concedes”: it will be never be enough). However I also forecast a subsequent spiraling of increased state intervention, growing legal conflicts with the EU as result, and eventually, maybe after new elections that grant SYRIZA absolute majority (ANEL can become a drag at some point), the sliding of Greece out of the EU altogether.

    Something I believe most commenters around here are wrong is about the perception that Greeks or other Southern Europeans are “euro-fanatics” of some sort. That used to be the case years ago but today it’s clear that the British are more supportive of EU than Spaniards, Italians or Greeks (cf. ). This is only logical because they get many more benefits from what has become a clearly rigged colonial institution that favors certain states above others.

    However it is true that exiting the EU is problematic. But is it not harder than trying to reform it and it can hardly be worse than remaining trapped in its viced dynamics.

    1. alex morfesis

      you have maybe not had to deal with the government in greece anytime in your life…
      perhaps in the seven years since i lived there things have changed…but…

      you have heard of filing cabinets and staplers.???
      there were no filing cabinets for sale nor used in 2008 in athens…not the basic type
      the filing system used was what in america we use to keep magazines in order…and when i went to solidify my greek citizenship…they did not use staplers to bind documents…they used pins…the type
      you find on a collared shirt when you first purchase it…pins…not staples…hopefully things have modernized a bit since then…

        1. alex morfesis

          “it can hardly be worse”

          yes it can and would be much worse

          given no other option one would have to find a way…but the idea of going it alone outside the euro is a fantasy…at least for now…


          1. John Jones

            I don’t see how what you wrote about dealing with the Greek government or filing cabinets and staplers has to do with “it can hardly be worse”.

            This is neither an endorsement or against but.
            Been out of the E.U or the euro does not mean going it alone there is a whole world out their besides western Europe.

            And as for rebuild and rebirth what rebuild and rebirth are they going to have while under the thumb? They have been going backwards since entry into the E.U. and Euro and it has been accelerated under the troika. How can you rebuild when you are in an organization which has control over you and uses it to actively demolish you by destroying your society and sucking out all the money you have.

    2. Rosario

      I appreciate your take on the subject. That seems to be Greece’s dilemma. They can build their own project with all its uncertainty, or they can face a well known suffering beyond their capacity to control. Strange that people often choose the latter. Early in the negotiations I sensed that Varoufakis had the hope that the EU project could be reformed, and I think he was/is right to assume that greater connectivity and distributed liability are the answer to many of Europe’s and humanity’s problems going into the future. Unfortunately, this connectivity and distributed liability was built to serve the free market bottom line and the globe is paying the price nation-state by nation-state.

      As far as politics (something often neglected in the analysis of debt relations) Greece has always been a useful chunk of rocky terrain when serving the more detached (however essential) interests of the European North (proxy war, vacations, real estate investments, etc.). The same could be said of the rest of the Balkans, Italy, Spain, etc. That is why I sympathize with Greece’s inability to “reel in” their tax insolvent oligarchs. Generations of instability generated by external forces play hell with a nation states ability to govern. If people don’t buy that I point to South America and Africa which have been dealing with the same absurd debt relationships with Northern powers for over 500 years. I’m certain Varoufakis has been keenly aware of these dynamics all along (hint: Marxist) and wanted to move toward the development a more rational framework for the EU so that these compounded generational problems of governmental instability could be remedied through a truly supportive economic and political framework. The EU at present is far from this. The argument that Greece should simply “go after” their tax dodgers and “reform” their corrupt political system ignores 100 years of political and social turmoil on the peninsula. If the high powers of the EU wanted these goals to be achieved they should have assisted the Greeks with the development of a political model earlier on, but they didn’t, because those were not the ambitions of the EU.

      1. Nathanael

        The comparison to South America and Africa is interesting. South America appears to have slowly developed cultural “antidotes” to Great Power meddling. Africa certainly hasn’t.

  22. timbers

    Said if before and I say it again.


    Greece will benefit form leaving the EU.

    It’s obvious.

    1. Yves Smith Post author

      The Greek government, which has more at stake in this fight than you do, seems to think otherwise. Handelsblatt report that it has made a proposal that includes cutting pensions (but not the smallest pensions) and VAT increases. They are trying to get to a deal and this is not just posturing for the sake of Greek voters. That does not mean a deal can get done, BTW.

  23. calpha

    I saw this online from Zerohedge

    According to BBC this is latest proposal
    1) new tax on businesses
    2) A new tax on the wealthy
    3) Some increases in the VAT
    no pension cuts

    It seems to me we are relying way to much on reports from anti-Syriza, pro EU, sources. Anything German, Wall Street Journal, etc says the same thing every week. These seem to always be claiming the Greeks are caving in and yet no agreements. While Syriza seems to be giving on somethings but ot on what Europe wants

  24. Praedor

    All 3 points are fine. It is always good to increase taxes on businesses and on the wealthy (the higher the better in that case), and SOME VAT increase (throw in some reimbursements for lower income/pensioners to counter the increase). TECHNICALLY do as the troika demands but soften it afterwards, at least for real people.

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