GREECE’D: We Voted ‘No’ to Slavery, but ‘Yes’ to Our Chains

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Yves here. As this article describes, the cheerleaders over the Greek referendum last weekend has badly misread the game in play. Tsipras is now working on a coalition basis with all parties save Golden Dawn, which means firmly pro-Eurozone parties such as To Potami and New Democracy. And as he and other party leaders promised in the runup to the election that with a voter mandate, they’d be able to get a better deal from the creditors.

Einstein defined insanity as, “Doing the same thing over and over again and expecting different results.” And Syriza never thought it lacked a mandate until Tsipras needed to distract attention from the pending IMF default and shore up his slipping support. For instance:

Varoufakis at Brookings Institute, April 17 2015.
– There is speculation that there might be a referendum for the euro or snap elections. Is this an option?

Varoufakis: This is an easy question: Absolutely not!

Varoufakis again at Brookings, 16 April 2015:
“It would be a foolishness to go to referendum, from the moment that we have a fresh mandate and huge popular acceptance”.

On Monday, Tsipras formed a new coalition that included the firmly pro-Eurozone parties of To Potami and New Democracy. When we suggested a couple of months ago that Tsipras would do that in order to cut a deal with the creditors, readers rejected it out of hand. That does not mean Tsipras will succeed; the mood in Berlin and other hardline countries is set on regime change, and the Eurozone rules mean all it takes is one holdout to scupper a deal.

As readers will recognize, we don’t agree with the recommendation of a Grexit. It will produce far more devastation than its proponents imagine. But since the government chose to go with a hardball negotiating strategy, it was reckless and irresponsible not to have examined that option and made what preparations it could. If the ECB continues strangling the banks, Greece will soon be faced with a depositor bail-in, which will result in a wipe-out of a substantial portion of funds still stranded in now-closed banks, or having to start a totally unplanned Grexit, which will be even worse than if they had done the war-level planning necessary to minimize the considerable damage that will result.

The Greek voters, contrary to what Syriza fans have claimed, did not engage in a brave act of democracy. Syriza abjectly misrepresented the alternatives that voters face, and most important, the costs and risks of doubling down on a failed strategy. Syriza failed to acknowledge that the lenders could make it well nigh impossible for them not to start using a domestic currency, which puts them on a slippery slope to a Grexit. As money and currency expert Warren Mosler pointed out:

And so now while Greece isn’t being formally ousted, it will see its economy continue to deteriorate if it doesn’t agree to troika terms and return to ‘normal funding’ via securities sales at low rates under the ECB’s ‘do what it takes’ umbrella, and rejoin the rest of the members.

If the govt starts paying in IOU’s payments get made for a while, however they will be discounted ever more heavily with time, raising the cost of re entry to ‘normal’ funding, and the EU counts those as additions to deficit spending which could cause the terms of re entry to be that much steeper.

And any movement by Greece to use alternative funding will be taken as reason not to return Greece to ‘normal’ funding under the ECB umbrella.

In other words, it becomes difficult to get Greece back into the fold if Greece starts issuing meaningful amounts of IOUs, even if they are intended only for internal use, and even small amounts could be used by the ECB as an excuse to continue the economic quarantine of Greece.

Greece faces multiple impediments. The biggest is that financial time moves faster than political time. Greece needed a deal by June 30. Going past that event horizon, as events are going to prove out, tipped the scales decisively against Greece by given the creditors cover to give their real enforcer, the ECB, free rein. Changing values and ideology are decades-long projects, so moral appeals might make for nice op-eds but will not change the power dynamics in time to have any impact. Look at how long it took for women’s rights and civil rights to become accepted in the US, or even with extremely deep pockets and the most sophisticated messaging money can buy, how long it took corporate interests to move values in the US decisively to the right. Greece was far too small and economically weakened to confront the creditors and have any hope of succeeding unless it got support. Its only conceivable allies are nowhere to be found. The Obama Administration has gone all in with the Eurocrats and the European left has been missing in action.

As we’ve said from early on, many commentators on Greece have wanted to make Syriza into something other than what it is. Despite the bold talk and some Marxist trappings, the core of the party leadership is moderates and its base consists heavily of disaffected Pasok voters, not hard core leftists. And this sadly, is the flaw of the stirring call to action in this post. Even after its incredible suffering, Greece is not as radicalized as those outside Greece would like to believe. The high percentage of Greeks saying, even on the eve of the referendum, that they still wanted to remain in the Eurozone, shows that Greek society is not willing to make a break even from its punitive overlords Syriza’s new coalition with centrist, pro-business parties should dispel any doubt as to what Syriza really stands for, as opposed to what Tsipras would like you and Greek voters to believe.

By Michael Nevradakis, host of Dialogos Radio in Athens with Greg Palast in New York. Originally published at Op-Ed News

We Greeks have voted ‘No’ to slavery – but ‘Yes’ to our chains.

Not surprisingly, by nearly two-to-one, Greeks have overwhelmingly rejected the cruel, economically bonkers “austerity” program required by the European Central Bank in return for an ECB loan to pay Greece’s creditors. In doing so, the Greek people overcame an unprecedented campaign of fear from the Greek and international media, the European Union (EU), and most of our political parties.

What’s simply whack-o is that, while voting “No” to austerity, many Greeks wish to remain shackled to the euro, the very cause of our miseries.

Resistance, not Crisis

Before we explain how the euro is the cause of this horror show, let’s clear up one thing right away. All week, worldwide media was filled with news of the Greek “crisis.” Yes, the economy stinks, with one in four Greeks unemployed. But two other euro nations, Spain and Cyprus, also are suffering this depression level of unemployment. Indeed, more than 11% of workers in seven euro nations, including Portugal and Italy, are out of work.

But unlike Greece, these other suffering nations have quietly acquiesced to their “austerity” punishments. Spaniards now accept that they are fated forevermore to be low-paid servants to beer-barfing British tourists. Spanish prime minister Mariano Rajoy, who has enacted a draconian protest ban at home to keep his own suffering masses at bay, has joined in the jackal-pack rejecting anything but the harshest of austerity terms for Greece.

The difference between these quiescent nations and Greece is that the Greeks won’t take it anymore.

What the media call the Greek “crisis” is, in fact, resistance.

Resistance to Nowhere

But it’s a resistance whose leaders are leading them nowhere.

For decades, Greeks have suffered governments that are both corrupt and dishonest.

The election of SYRIZA changed all that: the government is now merely dishonest. Our new SYRIZA Prime Minister, Alexis Tsipras, correctly called the austerity plan “blackmail.” However, before Sunday’s vote, Tsipras told the nation a big fat fib. He said we could vote down the European Bank’s plan but keep the European Bank’s coin, the euro. How? Tsipras won’t say; it’s part of a policy ploy his outgoing finance minister Yanis Varoufakis calls “creative ambiguity.” To translate: Creative ambiguity is Greek for “bullshit.”

Sorry, Alexis, if you want to use the Reich’s coin you have to accept the Reichsdiktat.

Not a Coin, a Virus

Tsipras’ claim that Greece can keep the euro while rejecting austerity is crazy-talk. The fact is that German Chancellor Angela Merkel, the Cruella De Vil of the Eurozone, will ignore the cries of the bleeding Greeks and demand we swallow austerity––or lose the euro.

But, so what if we lose the euro? The best thing that can happen to Greece, and should have happened long, long ago, is that Greece flee the Eurozone.

That’s because it is the euro itself that is the virus responsible for Greece’s economic ills.

Indeed, the sadistic commitment to “austerity” was minted into the coin’s very metal. We’re not guessing. One of us (Palast, an economist by training) has had long talks with the acknowledged “father” of the euro, Professor Robert Mundell. It’s important to mention the other little bastard spawned by the late Prof. Mundell: “supply-side” economics, otherwise known as “Reaganomics,” “Thatcherism” – or, simply “voodoo” economics.

The imposition of the euro had one true goal: To end the European welfare state.

For Mundell and the politicians who seized on his currency concept, the euro itself would be the vector infecting the European body politic with supply-side Reaganomics. Mundell saw a euro’d Europe as free of trade unions and government regulations; a Europe in which the votes of parliaments were meaningless. Each Eurozone nation, unable to control neither the value of its own currency, nor its own budget, nor its own fiscal policy, could only compete for business by slashing regulations and taxes. Mundell said, “[The euro] puts monetary policy out of the reach of politicians… Without fiscal policy, the only way nations can keep jobs is by the competitive reduction of rules on business.”

Here’s how it works. To join the Eurozone, nations must agree to keep their deficits to no more than 3% of GDP and total debt to no more than 60% of GDP. In a recession, that’s plain insane. By contrast, President Obama pulled the USA out of recession by increasing deficit spending to a staggering 9.8% of GDP, and he raised the nation’s debt to 101% from a pre-recession 62%. Republicans screamed, but it worked. The US has lower unemployment than any Eurozone nation.

As Obama scolded the European tormentors of Greece: “You cannot keep on squeezing countries that are in the midst of depression.” Cutting spending power only leads to less spending which leads to further cuts in spending power – a death spiral we see today in the Eurozone from Greece to Italy to Spain—but not in Germany.

“Not in Germany.” There’s the rub. Normally, a nation such as Greece can quickly recover from debt-induced recession by devaluing its currency. Greece would become a dirt cheap tourist destination once more and its lower-cost exports would zoom, instantly increasing competitiveness. And that’s what Germany can’t allow. Germany lured other European nations into the euro in order to keep them from undercutting Germany’s prices in export markets.

Restricted by the 3% deficit rule, the only recourse left for Eurozone debtors: pay the piper with “austerity” measures.

Tsipras in Wonderland

So therein lies the lie. Tsipras tells his fellow Greeks that we can live in a Looking Glass world, where we can have our euro and eat it too; that we can stay handcuffed to the euro but run free without austerity.

The nonsense continues: Following the announcement of the official results of the referendum on Sunday night, Tsipras tweeted that the Greek electorate voted for a “Europe of solidarity and democracy,” while the now-resigned finance minister Varoufakis tweeted that “Greece’s place in the Eurozone is non-negotiable,” claiming that he would not allow the “only alternative,” the old drachma trading alongside the euro.

SYRIZA’s euro-fetish was already evident in its pre-referendum proposals to the IMF and European Bank, a 47-page document which included 8 billion euros in new austerity measures plus a new round of sell-offs of state industries, the maintenance of a primary surplus of 1% this year which would increase in the coming years, the increase of the retirement age to 67, and making permanent the previously “temporary” taxes upon an already overtaxed populace. In Tsipras’ own proposal, there was no word of a debt write-down or stoppage of payments, despite the fact that the government’s own Debt Audit Commission announced on June 17 that the bulk of Greece’s debt is illegal, “odious,” and should not be paid.

Instead, Tsipras has come out in support of the IMF’s proposal for a mere 30% “debt haircut” and a 20-year grace period, effectively sweeping the problem under the rug. Greece is currently running a deficit, meaning that in order for the 1% surplus to be achieved, SYRIZA must cut, cut, cut. Exactly as Mundell and the supply-siders intended.

Death by “Reform”

Like Obama, Tsipras knows that cutting pensions, privatizing and closing industries, slashing wages — in other words, “austerity” — or, to use the latest jargon, “reform” — is not just cruel, it’s plain stupid: it can only push a nation in recession into depression.

That’s not just theory. The Troika (the European Central Bank, IMF and European Commission) first imposed their vicious austerity measures on Greece in 2010. Greeks watched their annual salaries plummet to half of a German’s paycheck. Greece’s supposedly generous pensions have been cut eight times during the crisis, while two-thirds of pensioners live below the poverty line. Everything from Greece’s airports to harbors, the national lottery to prime publicly-owned real estatewas sold off, while schools and hospitals were shuttered.

And, for the first time since World War II, widespread starvation had returned. 500,000 children in Greece are said to be malnourished. Students fainting from hunger in frigid schools which cannot afford heating oil is now a common phenomenon.

This cruel “belt tightening,” the Troika promised, would restore Greece’s economy by 2012 (and then 2013, 2014, and 2015). In reality, unemployment went from a terrible 12.5% in 2010 to a horrendous 25.6% today.

Now, the Troika demands more of the same, a continuation of this disastrous policy.

Crashing into Africa?

Meanwhile, following the referendum result which made him a hero, finance minister Varoufakis resigned. Ironically, while Varoufakis rubbed German officials the wrong way with his unorthodox style, he, too, maintained the pro-euro myth. Previous austerity measures continued under his watch. To please the mad austerity masters, he said he would “squeeze blood from a stone” to repay the IMF–which he did in May, when all remaining funds in the Greek Treasury were rounded up by presidential decree to make that month’s IMF loan payment. Varoufakis was so wedded to the euro that he claimed that Greece would be unable to print its old currency, the drachma, because we destroyed our currency printing presses when we joined the euro. In fact, the government’s banknote printing facility in Athens still operates, printing the 10-euro note.

Meanwhile, our future flees. A quarter million university graduates have abandoned our nation. They have no choice: unemployment for those under 25 has hit 48.6%.

I know that many Greeks, Cypriots, Italians and Portuguese all express a visceral fear of leaving the euro. Depending on which polls one chooses to believe, anywhere from a near-majority to an overwhelming majority of Greeks wish to remain in the euro at all costs. From the hysterical statements I heard from some Greeks that, “We cannot leave Europe!”, you’d think that dropping the euro will cause Greece to break off at the Albanian border and crash into Africa.

It would be refreshing to hear political leaders say the honest economic truth: “Workers of Europe unite! You have nothing to lose but the euro–and your chains.”

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  1. Swedish Lex

    What I lack above is an idea for a plan for what would actually have worked. Or could work. Start with a plan that makes sense on paper, at least.

    If anyone has a smart idea, please step forward now. Criticising Syriza for inheriting a natural disaster and trying to make the best of it is not helping.

    1. Clive

      I think that’s the snag, unfortunately (he said, waiving his hand), there are no smart ideas. The only option given the current setup is a crushing internal devaluation which will result in an even worse slump followed by an anaemic recovery of sorts in a coupe of years or three. It is not without precedent. Britain inflicted on itself a similar “solution” with entirely predicable outcomes. People have done it (or had it done to them) before so can and will do it again.

      I’ll just waffle on about ponder briefly on some cultural observations. I’m about to shoot myself in the foot before I’ve even started here, because you don’t live in the U.S. But it is a curious phenomena, even though it is a sweeping generalisation, that in the west in general — and seemingly the U.S. especially — that within a great many people there is an apparent need to believe regardless of the fact set that we’re all going to, eventually, get a nice outcome regardless of how bad things are. this is reflected in the media of course but also in our literary heritage, more so in the past 50 years perhaps.

      I’ll contrast here with, for example, Japan. There, your typically garrulous Kabuki story seldom ends well. The central character often dies or meets some terrible fate, their love interest suffers greatly and suicide is frequently invoked, with connotations of it being an honourable way out from unbearable suffering. Some plot twists involve existential get-out-of-goal-free cards like coming back as a spirit or some such, but rarely do people get to live Happily Ever After. A not uncommon Japanese mentality is that things are bad, and they’ll just keep getting worse.

      Your comment is typical of the former psychology. I’m not blaming here, I’m just interested. For me, maybe because a lot of that Japanese world view has ended up rubbing off on me, I can’t see any good or even less awful scenarios unfolding here for Greece and I don’t expect there to be better ones. Even Bambi’s mother died.

      1. jrs

        Climate change or something might be such a catastrophe with no happy ending. As wealthy as the west is that people have to be in a condition of such want and poverty like is reported in Greece just seems somehow unnecessary.

        1. susan the other

          lately I’ve been thinking that climate change and supply side are not separate impulses. Way back in the 70s the US was thinking about “service economies”; we trashed Detroit and sent all the cars to Japan; Wall Street demanded “productivity” and short sold any corporation that lagged behind, ergo we outsourced labor and factories at supersonic speeds. And we put a benign name to it: supply side ecomomics – a new econmomics that came from the top down and not from social needs up. And we destroyed industrial jobs. If the world could have survived an ever-increasing amount of industrial jobs globally we would never have decimated our own industrial economy. But we knew early on that 20th C. capitalism was not remotely sustainable. In all that time, since at least the 70s, no one has offered a solution to the hardship this has caused. Which is puzzling because there are solutions. We just have to make them not sound like Marxism, altho if we could admit to the need for social solutions it would be much better.

    2. diptherio

      Pretty much my feeling. It’s easy enough to criticize, and SYRIZA’s representatives have often seemed to not be reading from the same play-book, but I’ve also yet to hear any real suggestion for what they could have done better. Put capital controls in place earlier is about it, but nothing actually useful about how to deal with the Troika.

      We shouldn’t forget who the perps are in this story, and it’s not SYRIZA: it’s the troika and their asinine policies, put in place to protect some banksters. Maybe SYRIZA didn’t save the day, but they cannot be help responsible for the disaster that has developed. It was a disaster from the day they took office.

      1. Swedish Lex

        The stories in Greek mythology often end badly. Or very badly. Modern Greek history has probably taught them to trust only themselves and to have to put up with misery.

      2. qufuness

        What could they have done better? Have a Plan B. Start preparations for the not unlikely possibility that Greece will leave the Eurozone. Hold a referendum when its objective would be clear. Cultivate a different style of politics… Of course, the crisis isn’t one of Syriza’s making, but that doesn’t mean that they couldn’t have done a lot better in response to it.

        1. Swedish Lex

          “leaving” the euro zone is unforseen Under the current Treaties. I suppose that Oregon cannot leave the USD either. Hence would have been politically impossible to begin to plan for an exit from the euro. No-go.

          This is also one of the main problems of the creditors, should they wish to “eject” Greece from the euro zone. A euro zone Grexit requires a new Treaty. A new Treaty would require the approval of Greece to have effect. You get it.

          Even if they wish to get rid of Greece, they cannot. And there is no way around this.

            1. Clive

              Perhaps a worthy aim, but does nothing in the case of Greece. Insolvent banks which need recapitalising have to go to the agency or agencies which can provide the capital. The Greek government does not have that capital nor the means to raise it.

              This means that they have to go to the ECB.

              “Their house. Their rules”.

          1. Carla

            This is also one of the main problems of the creditors, should they wish to “eject” Greece from the euro zone… Even if they wish to get rid of Greece, they cannot. And there is no way around this.”

            Like “the rules,” TINA applies only to the people. For banks and bankers, there is ALWAYS an alternative. And when they are ready to reveal it, we shall see what it is.

          2. Lexington

            Nonsense. Because something is unforeseen does not make it impossible. Because a given contingency isn’t covered by an existing treaty does not mean it cannot occur until another treaty is drafted. In the real world events often outrun the structures created to direct them.

            By your logic the American Revolution did not happen because the royal charters establishing the American colonies contained no mechanism for them to severe their ties to Britain. Now maybe if the colonists had got together with the British authorities and concluded a new treaty…but then that would require the approval of the British. You get it.

          3. bh2

            Greece isn’t Oregon and the EU isn’t the US (and never will be).

            The only time any US states attempted to depart from the whole, they were physically bludgeoned into submission not unlike Carthage by Roman.

            The EU (and let’s honestly and openly name the Germans) have only a treaty agreement in hand — not a constitution or anything close to that (except in their besotted dreams).

            Treaties are binding on sovereign nations only so long as they remain mutually useful. They are merely conveniences of state — nothing more — and are notoriously subject to differing interpretations by each party, respectively, as it suits their differing interests.

            Treaties do not require, therefore, any specific mechanism for termination. Any sovereign power can terminate (or just ignore) any agreement it has undertaken. If it cannot do so, then it isn’t a sovereign power, by definition.

            The Greek vote declares Greece to be a sovereign power, not a captive state of the EU. The EU seeks to reverse that overwhelming democratic statement by means of naked economic force. If that threat fails, the preposterously touted “irreversibility” of the European project will be blown to dust. Game over.

            No doubt Greeks wish to remain in the Euro on terms they prefer. So would South Carolina have wished to remain in the Union under terms it preferred. Both wishes were politically and economically unfeasible. But if a majority of Greeks are now suffering from a delusion of conflicting beliefs, the EU leadership is a roaring drunk of raw contradiction and mad hallucinations. As they have been from the beginning.

            Thankfully, the EU lacks the collective will to march an army into Greece and sack the country to enforce its demands when the Greeks finally sober up and admit they must quit the game.

            Like South Carolina, Greece will suffer enormously for foolishly joining a supremely flawed union based on impossible compromises which were surely destined eventually to fail. Awful consequences will follow for Greece, but less awful than the alternative of perpetual debt slavery among the ruins of the world’s most ancient democracy.

            Other nations will take note — including those recognizing the Greek tragedy created by Eurocrats to be the thin end of a wedge to cripple NATO. The EU leadership may eventually pay a far higher price for their far fetched dreams than they ever imagined possible.

            1. Yves Smith Post author

              Greece will not be free. The one thing the rest of the EU plans to do, since famine in Europe would be embarrassing to them, is to provide “humanitarian aid” as in food (Greece is not self sufficient in food), petroleum, and pharmaceuticals.

              1. Oldeguy

                Source please ? Not being a smart ass, just want to know which institution is underwriting 11 million perpetual welfare recipients ?

                1. MyLessThanPrimeBeef

                  Won’t be the whole 11 million, just the insufficiency portion.

                  And won’t be perpetual. Greeks, just like others, are too proud to make it perpetual. They will emigrate/relocate.

                  The refugees, well, they could be a big problem.

              2. bjmaclac

                I tend to agree. throuhout this whole sordid mess, there is no hiding the fact that the hardball tactics of the troika have indeed precipitated a humanitarian crisis, at least among the more vulnerable Greek population, It may only be a gesture of good faith on the part of the troika in (at least appearance) to mitigate their very bad self-imposed image by providing some token of humanitarian assistance.

                There appears to be some concern that (Nuland-style) “maiden” street protests are in the cards for violent regime change. But really, would the troika risk such a measure, one that could tragically spin completely out of control it its own house?

              3. Lambert Strether

                And presumbly (I hate to be cynical about this) through “international relief organizations” and most definitely not through organic Greek co-ops and networks.

            2. Brian M

              Poor, poor victimized South Carolina.

              Your otherwise excellent comment is somewhat marred by a thick thread of Lost Cause nostalgia. Or maybe I am reading too much into it? (I am so sick of “Southan Cultcha” and its apologists)

          4. Gerldam

            The European leaders have showed time and time again that they do not care a hoot about such legalities. if they want to kick Greece out, they will simply do it by stopping the ELA. Greeks banks with no cash left will be forced, in a unprepared manner, to issue a new currency, whnathever its name, IOUs of Drachma;
            Another problem, on top of the dishonesty, which I prefer to call demagogy, of Tsipras is the sheer incomptetence of his team.

            1. MyLessThanPrimeBeef

              Frankly, I was surprised the referendum was ruled constitutional.

              Perhaps their judges knew better.

    3. alex morfesis


      there was no discooperationalism in greece, it could be switzerland and not nearing zimbabwe(or lebanon)…

      let us clean up this noise about legally verses practically…

      legally, the euro NOTES belong to mario at the central bank which should be properly described as the (european) national bank IN greece not OF greece…the printing press in holargos/halandri (athens area) which was built by metaxas but never allowed to come into operation by the nazi invasion…are only allowed to print up to three denominations…apparently they only print one…

      HOWEVER, the MINTING of coinage is legally the right of the ministry of finance…as it appears to be in every nation in europe…

      the euro NOTE is a non sovereign financial instrument of the european bank in frankfurt(otherwise known as germany)…so calling them modern reichmarx is “technically” correct…and those reichmarx are the property of frankfurt…not the greek people nor the greek government…

      but creating coinage is a different story…there are many commemorative operations globally that could berp out the new drachma coins…for security purposes, one would need to technically make the facilities secure by making them consulate facilities and then placing proper military personnel at the facilities to try to prevent counterfeiting…

      but everyone is dreaming if they think there is time to pull this off…there is none…

      what needs to be done is to surrender…that is why tsipras called for his grand coalition…that way everyone has agreed to be supplicants to “muti”…

      live to fight another day…

      today is not a good day to die…

    4. PghMike4

      Here’s a plan: starting printing and minting drachmas. Convert the euros held in Greek banks at some rate, and let the currency float. Get your country’s spending under control, to limit inflation.

      Or alternatively, impose a fixed exchange rate with currency controls. I’m not an operational expert, but this has been done often enough in the past, such as when Argentina unpegged its currency from the dollar, that people should be able to figure the right way to manage the transition.

      And stay in the EU, just like GB, but without the shared currency.

      1. Clive

        The scope of your plan is limited to physical cash. It does nothing for any electronic payments systems. On its own, it would render Greece a cash-only economy, until not only the electronic payments systems in Greece had been changed, but also the payment systems outside of Greece in countries with whom Greece would still have to trade with have been changed. Care to pay for that shipload of LNG from Qatar in cash Mr. Tsipras ? Okay, I’ll get my wheelbarrow. Or truck.

        Zimbabwe, Somalia, North Korea and Afghanistan are good examples of cash-only economies (or where cash transactions are overwhelming prevalent). These are not role models for Nice Places to Live. Even these countries would have better abilities to transact electronically than the sort of thing you’re proposing for Greece. Note too that these countries have, to a degree, informally dollarized due to the collapse of a functioning internal banking system. So it could end up being out of the euro frying pan and into the dollar fire for Greece.

        1. MyLessThanPrimeBeef

          Not good to be between the frying pan of a rock and the fire of a hard place.

    5. kolyn phlabyn

      nothing would or could have worked and I think Syriza must have known that pretty soon after meeting their Eurozone ‘partners’ but AT and YV kept deceiving the Greek population that they could end austerity, write off the debt and live happily ever after. And they’re still at it. The same day that Tspiras called the Trokia proposal blackmail he submitted pratically the same proposal, the 47 page document mentioned above, albeit with minor modifications which the Trokia rejected. The Trokia want total capitulation: no deals, no bargain, no compromise, only submission. And Tspiras knows this but continues the rhetoric that he will prevail.

      I think Yves mentioned in an earlier post (i hope i’m not misrepresenting your argument but IIRC…) that a possible alternative strategy could have been to approach the negotiations quietly and while appearing outwardly contrite behind the scenes work to build sound realtions and thereby soften the austerity slowly overtime. But their bombastic approach has only hardened the Trokia’s resolve to not give an inch.

      1. tgs

        a possible alternative strategy could have been to approach the negotiations quietly and while appearing outwardly contrite behind the scenes work to build sound realtions and thereby soften the austerity slowly overtime. But their bombastic approach has only hardened the Trokia’s resolve to not give an inch.

        Might have worked. Then again maybe not in which case the ‘optics’ for Syriza would not have been good.

        IMOP there was nothing that Syriza could have done other than capitulate. And in fact, every time they did the troika went for another pound of flesh. I think we are seeing collective punishment – the treatment of Greece is a warning to others – Spain, Ireland, Italy. Part of the message is clear – if you don’t pay and attempt to interfere with the looting of your assets, we will starve you.

        It’s rare that an EU neo-liberal opens their mouth without bloviating as to the ‘shared values’ of the EU. I would love to see some specific language specifying exactly what those ‘values’ are.

      2. Robert Dudek

        This is what the previous Greek governments did – be a model prisoner like Spain or Portugal. Didn’t soften austerity.

      3. wbgonne

        their bombastic approach has only hardened the Trokia’s resolve to not give an inch

        I doubt rhetoric has much to do with it (which we will see demonstrated now that the mouthy Varoufakis has fallen on his sword). The reason the Troika will never give an inch is because they know that an inch will immediately become a mile (Ireland, Spain, Portugal, Italy). It seems to me that everyone knows this, on both sides, and it is the fundamental impediment to any deal. Nothing has changed. Either Greece capitulates or Germany grants debt-forgiveness. There are no other options I can see. Same as it was months ago. Tick tock.

        1. Nathan Tankus

          Rhetoric definitely has something to do with it. The Troika are a set of real people stuck in long negotiations that have them burnt out and frustrated. Rhetoric gets people angry on an emotional level that pulls them away from cold analysis of the facts at hand.

          1. wbgonne

            Not to put a fine point on this but there no is evidence that Germany would grant debt-forgiveness to Greece if only the Greeks asked nicely. In fact, I’d hazard a guess that that approach, i.e., begging, was tried very early on.

            1. Lambert Strether

              Absent debt forgiveness — not in Germany’s power to grant, since all the countries must vote, as I understand it — they might still have gotten a better deal. I mean, that’s why negotiation tactics — assuming that Syriza was, in fact, negotiating — matter, right? They certainly do in business.

              1. wbgonne

                I think Germany is the hegemonic power in the EU and the other countries will fall in line, mostly because they have no choice. Merkel’s domestic politics are the bigger non-economic hurdle, IMO. As for the economics, it seems everyone knows Greece’s debt can not be repaid and, unless it is forgiven, Greece will consequently be a permanent debt-slave. I have a difficult time imagining a “good deal” for Greece that includes permant debt-slavery. I’d say all this is pretty obvious.

                The problem is that Germany won’t forgive the debt. It may be national predisposition but I suspect that the real reason is that Germany believes that Greek debt-forgiveness will be quickly followed by applications from other distressed Eurozone countries and will likely be accompanied by a Leftward political lurch across Europe. I don’t think Merkel wants any part of any of that, nor do the rest of the neoliberal powers.

                I recognize that there have been some recent stories suggesting Obama, as virulent a neoliberal as Merkel, favors debt-forgiveness for Greece. The release of the IMF report being exhibit A. Assuming this to be true (often a dubious proposition with Obama), I don’t know the significance but I suspect it may come clear soon.

            2. MyLessThanPrimeBeef

              Syriza was not drafted or forced into taking the position.

              They volunteered that they could get the job done.

          2. MaroonBulldog

            …. to which I would add, that real, actual human beings are not well-adapted to do cold analysis of the facts at hand to begin with, and psychologists have shown that no decisions can be made without emotional engagement.

            Also, while Syriza seemingly approached these negotiations with an “aggressive” style, as compared to a “cooperative” style, I’m not sure that reflects a choice, any more than Mr. Varoufakis could choose to be an introvert rather than an extravert (if that’s what he is), or left-handed rather than right-handed (if that’s what we is). Human brains and minds are not general purpose computers that can be programmed to be whatever we need them to be.

            Same considerations apply to all those on the other side of the table. Rhetoric matters. Personality matters. Rhetoric reflects personality, not vice versa.

            One shouldn’t criticize another person’s choice without first reflecting upon whether or not it really could have been a choice.

            1. Alphonse Elric

              Once I lose my temper, I don’t have much control over what comes out of my mouth. But if I sense a tense conversation is looming, thinking through my approach ahead of time does make it easier for me to control my mood.

              I imagine (without proof) that my experience is fairly widespread. So I feel like choices can impact rhetorical style.

              1. James Levy

                Lloyd George in 1916 and Churchill in 1940 were appointed to fight, not dicker. Syriza was appointed by the Greek people to fight, not dicker. It would have been virtually impossible for them to adopt any other line than the one they did. If we want to get so worked up the way Yves does about them lying to the people, well, if they had gone in there after their election and kissed German ass big-time and been all contrite, they would have been betraying their people more completely and effectively than they have been. It would have been like Clemenceau, after giving his I wage war speech, immediately going to the Germans cap-in-hand begging for peace. Wasn’t going to happen.

                1. MaroonBulldog

                  Exactly right: Syriza was chosen precisely because it showed fight, not dicker,

                  Choosing cooperative negotiators as representatives maximizes the probability of coming to terms, but it raises the probability that something will be left on the table. Choosing aggressive negotiators increases the probability of concluding the deal on the best possible terms, but it also raises the risk that negotiations will break down with no deal concluded at all. Syriza was therefore the high-risk, high-reward option: unfortunately, so far, the risk materialized but the reward did not.

                  1. MyLessThanPrimeBeef

                    On the other hand, if your advertisement says you can do the impossible, or nearly impossible, you have to be fairly certain you can do or at least believe you can probably do it.

                2. Alphonse Elric

                  Syriza’s negotiating strategy looks like aggressive dickering to me. Also, they were willing to cross most of their red lines, and I doubt they were certain their offer would be refused (eleven-dimensional chess)

                  I think they should have either spoken aggressively and openly made contingency plans for Grexit, or struck a conciliatory tone if they weren’t willing to accept Grexit as an option.

                3. norm de plume

                  Spot on. For my money, the criticism that can be made of them is that they weren’t nearly aggressive enough. The idea that they were ‘bombastic’ and ‘aggressive’ is nearly as absurd as the notion that Germany and the Troika might have cut them a few cents in the dollar if they’d ‘played nice’. They bent over backwards to be courteous under immense and unyielding provocation. To a fault, as it turned out – this neither fish nor fowl routine was employed past its use by date.

                  Did they actually promise that they would remove austerity while remaining in the Euro, or did they just promise to try? Big difference. From memory, the Troika promised that the economy would grow and unemployment shrink after the bailouts didn’t they?

                  Either way, they failed, but the idea that this is more down to them than their interlocutors is hogwash. It is honourable to be able to say ‘we tried, but as we warned was possible, we failed’ Try to find one skerrick of honour (not Corleone style honour) on the other side.

                  ‘There are two teams out there, but only one of them is playing cricket’

                  They should have been as radically left as they were painted from the get-go: demand debt haircuts, prepare for default and Grexit as options, print shedloads of currency, court external support, emphasise Germany’s WW@ debt haircuts and remaining debt to Greece, and for God’s sake tell the people each step the way – ‘we cannot promise that they will see sense, they may not, and you must understand that to free ourselves of the yoke we may need to leave the Euro’

                  1. NotTimothyGeithner

                    I don’t think the issue was their aggressive stance or lack of it as much as they didn’t seem to have a plan beyond asking for more. Merkel like all good conservatives went, “Mooore! You want more!”

                    Without a plan, they can be as aggressive as they want, but they are effectively toothless. In light of the Scottish referendum*, Syriza should have known having a plan is how one molds consensus not vague promises.

                    *At least in the Scottish case, the organizers were aiming for 40% and a future try not a separation at that moment.

      4. Jerry Denim

        “could have been to approach the negotiations quietly and while appearing outwardly contrite behind the scenes work to build sound realtions and thereby soften the austerity slowly overtime. But their bombastic approach has only hardened the Trokia’s resolve to not give an inch”

        100% pure speculation, and in my opinion highly unlikely. As another commenter already noted this complete supplicant strategy did not pay dividends for Portugal or Spain. Furthermore rolling over for the Troika and doubling down on more austerity is not what Syriza was elected to do. If the party you’re negotiating with has already decided that you are expendable before they even sit down at the table there’s nothing that can be done to force the stronger side to concede anything more than what they already want to give. If the Troika deemed Greece an acceptable casualty in the furtherance of their ulterior motive of making a disciplinarian example out of them (this looks to be the case) then the only thing that could have saved the Greeks would have been a very strong and credible plan B that actually stood a chance of succeeding. The Troika and Germany in particular may be prepared to see Greece burn and they probably believe the total destruction of Greece could even achieve certain European bankercrat goals such as scaring the hell out of Italy, Spain, Portugal and anyone else getting any bold ideas about leaving the European monetary union, BUT the one thing Greece cannot be allowed to do is leave the union and succeed because such a success would start a stampede. As Yves said in her introduction;

        “But since the government chose to go with a hardball negotiating strategy, it was reckless and irresponsible not to have examined that option and made what preparations it could.”

        I think Syriza was correct to attempt an insouciant, erratic, hardball negotiating strategy but they forget the other half of the equation: a credible threat. Syriza should have done their best to line up some form of alternative financing with a BRICs country early on and they should have been printing Drachmas at full speed shortly after their victory at the beginning of the year. Alternatively a disinformation campaign to convince everyone of the same would have yielded similar negotiating leverage as well, but you sure don’t want your bombastic finance minister going on record saying we smashed our Drachma presses 15 years ago and have no way to bring back the Drachma. Stupid. If you’re attempting to do a bank stick-up you have to at least trick people into believing you have a gun in your pocket. I believe I heard this Sun Tzu quote in reference to the Greeks around here sometime in the past few days, “Tactics without strategy is the noise before defeat”. I’d say that pretty much nails it.

    6. Larry

      I think Varoufakis had his plan and it didn’t work. He tried to appeal to the hearts and minds of the European populace to try and get more debt relief. To get the EU to act as one and change course in policy. Unfortunately, logic and reason cannot compete with prejudice and dogma. The Germans must administer their painful course of action to punish the Greeks. It’s the only thing that can make their financiers feel better about all the terrible loans they extended them in the first place.

      1. financial matters

        I think Varoufakis’s plan was to make sure his society was firmly on board with any changes that needed to be made. I think the no vote was a big step in that direction. I see Tsipras continuing that plan.


        “The lesson Thatcher taught me about the capacity of a long‑lasting recession to undermine progressive politics, is one that I carry with me into today’s European crisis. It is, indeed, the most important determinant of my stance in relation to the crisis. It is the reason I am happy to confess to the sin I am accused of by some of my critics on the left: the sin of choosing not to propose radical political programs that seek to exploit the crisis as an opportunity to overthrow European capitalism, to dismantle the awful eurozone, and to undermine the European Union of the cartels and the bankrupt bankers.

        Yes, I would love to put forward such a radical agenda. But, no, I am not prepared to commit the same error twice. What good did we achieve in Britain in the early 1980s by promoting an agenda of socialist change that British society scorned while falling headlong into Thatcher’s neoliberal trap? Precisely none. What good will it do today to call for a dismantling of the eurozone, of the European Union itself, when European capitalism is doing its utmost to undermine the eurozone, the European Union, indeed itself?”

        1. Jerry Denim

          Great quote, it has much more resonance now than it did when that piece first ran six months ago. I too don’t think the snap referendum was such a politically amateurish move. It seems to have affected global and European public opinion and is solidifying Syriza’s support at home. It’s certainly not as good as a effective plan B to staying in the Euro, but when you got nothing a political rabbit in a hat stunt is something.

        2. susan the other

          European capitalism is killing itself (Varoufakis). But it is going to take down the EU with it simply because a European union does not even exist. I heard two conflicting things yesterday: 1. The euro is a NON-Sovereign legal tender (oxymoron?) of the ECB (and the EU), and 2. Merkel said, “We (in the EU) share sovereignty.” Also an oxymoron. So how do you sort that one out? The EU banksters, private members of the ECB, socialized all their losses onto the taxpayer! Even tho’ the Euro is a non-sovereign currency – i.e. a currency with no legitimate mandate for any taxpayer bail-out anywhere. And the EU members completely fail to behave as a union because they have shared their sovereignty (opposing interests) with every other member and none of them can agree, yet in order to make a decision there has to unanimous consensus (amazing and such a socialist concept!); and the EU/ECB cannot make fiscal decisions. It’s not in either “remit”. So no fiscal decisions can be made at any level of the EU unless by miracle. How can the Euro be used to settle any accounts with contradictions like that? It’s absolutely stone age.

    7. Bubba

      I agree!
      Yves – I generally like your rather insightful posts(like the Speenhamland ones) but this time I have quite the problem with it, in particular your attitude towards the Syriza government in this post. It just seems like you simply criticize without considering that staying in the Euro IS the best option for them rather than opting out. Worse, you dont state any better alternatives. Put yourself in their shoes and atleast tell us what you would have done. Atleast that would be constructive.

      With regards to the referendum, I think it was an interesting move. In my opinion, unless the troika gives them a better deal, their legitimacy along with the European project’s will be under public scrutiny. I suppose they cant just say “To hell with your vote, here’s a worse deal” because that might just expose them for who they really are. This is by the way just speculation. Any opinions on this?

        1. Lambert Strether

          The money quote:

          Greek premier Alexis Tsipras never expected to win Sunday’s referendum on EMU bail-out terms, let alone to preside over a blazing national revolt against foreign control.

          He called the snap vote with the expectation – and intention – of losing it. The plan was to put up a good fight, accept honourable defeat, and hand over the keys of the Maximos Mansion, leaving it to others to implement the June 25 “ultimatum” and suffer the opprobrium.

          Not sure how to discount this for AEP’s closeness to Syriza, however.

          And then there’s this:

          Yet if Greece is in turmoil, so is Europe. The entire leadership of the eurozone warned before the referendum that a “No” vote would lead to ejection from the euro, never supposing that they might have to face exactly this.

          Mundell must be chuckling in his grave, rubbing his skeletal hands.

    8. Dino Reno

      “Criticising Syriza for inheriting a natural disaster and trying to make the best of it is not helping.”

      Here, here! I detect a pathological hatred for Syriza for being bunglers instead of what, being cool-hand technocrats maybe? What I find impressive is how they removed the scab and revealed the festering sore that is the EU. As Piketty commented yesterday, if the Germans persist in taking it to the Greeks, they will wind up in the trash heap of history. (The Germans seem to have a serial affinity for self-destuction when they are on top.)
      I think there is something special about Tsipras and his leadership that will be proven correct in the fullness of time. He didn’t make the mess; he can’t fix the mess; he can only lay it all out and hope tide will turn in his favor.

      1. lambert strether

        This matches a number of Obot talking points

        1) You hate Obama

        2) Obama’s only been President X months. Give him a chance

        It’s so interesting to see the excuse making emerge in a differenr context.

        Never vote for hope. Hope is not a plan.

        1. juliania

          I don’t think it is like the Obots for this reason: Tsipras has been concerned (perhaps too concerned, but this is Greece) about the will and understanding of the people, which will has been described here as conflicted, which understanding muddled – they wish less draconian austerity while remaining in the European Union. That concern for what the people think and recognize was seriously undermined during the siege of the Occupy camps here – and Obots overlooked it completely; they still clung to Obama, even though he orchestrated that crushing of the Occupy spirit.

          Nothing like Occupy’s demise has yet happened in Greece, because Syriza has been aware it needs to proceed carefully and gradually. Now the attempt is being made to draw in more elements of national unity because in reality they face a similar problem. Hopefully they will whittle out the elements which feed on Greece’s subservience while continuing to feel proud of the resistance, the peaceful resistance that has occurred.

          We have yet to see a crushing of that ‘occupy’ spirit in Greece. If and when it happens, feel free to equate it to Obamabotism if we stay quiet about it. If they stay quiet about it, the young people, the old people, the Greek population, then yes, they are in chains.

          It hasn’t happened yet.

          1. Lambert Strether

            The best operational test about whether “Tsipras has been concerned (perhaps too concerned, but this is Greece) about the will and understanding of the people” would be a referendum held to world standards. He flunked that test miserably.

            This is parallel to the Obot talking about: “Obama’s a liberal at heart.”

            It’s eerie.

            Adding, I’m all for the spirit of resistance by the Greek people. I only hope they find a better vessel for their hopes than Syriza, since they sorely need one.

            1. juliania

              World standards?

              Ah, I have such respect for this site that I can only think the plan is to play bad cop to such a degree that comments will have a foil against which to support democracy in action, warts and all.

              My point about Occupy (which you supported here, you did!) was that the movement broke new ground and changed public perception. That is what the Greek referendum did and is still doing.

              Unfortunately world standards have so far brought only slavery to an out of control system of finance. I’m relying on people who can chart a course out of this whirlpool to make sense of it all; I can’t, I freely admit.

              But, it’s just human nature to want to avoid vast sucking sounds of a disastrous magnitude. And as others have said, it is not only Greeks who are menaced by this peril, which is not of the ordinary person’s making – not at all!

              The standards of banks too big to fail have to be abandoned, and bailouts extended to those who are crying “Enough!” We must, if we must, perch on logs along with bears and vipers in that common cause to escape it – we have little choice in that. Throw everything against the wall – see what sticks.

              That’s how FDR got this country out of the Great Depression, as I understand it. He broke the mold, but he brought the financial class out of it along with everyone else. They may have been kicking and screaming, but they also survived.

                1. bh2

                  You believe, Lambert, that a referendum operated to “world standards” would have yielded a different outcome?

                  And exactly how did “the world” achieve higher standing than Greek courts about the meaning of Greek law?

                  1. Lambert Strether

                    1) Where do you get that? A referendum to world standards is what the Greek people deserve, and what the Greek government had a duty of care to provide.

                    2) Where do you get that? The Greek courts ruled — I don’t know why — that a Constitutional challenge to the referendum was without merit. This has nothing to do with the points I raise.

                    I believe the Greek people deserved a clear question and time to decide. You don’t. That’s fine.

        2. James Levy

          Yves, except your plan and Yves is now “they should have rolled over, offered the Troika their ass, and then pleaded nicely for them not to ram a baseball bat up it.” Great plan, boss.

          1. Lambert Strether

            No point responding to this level of distortion. Sorry you feel bad.

            Anyhow, read AEP today. Your comment is a classic case of projecting on to others the very thing those you defend turn out to have done (colorful metaphors aside).

    9. cnchal

      Move Mercedes – Benz from Stuttgart to Athens.

      What high profit export businesses does Greece have, whereby Euros can be “earned” to pay off it’s lenders, since the Greeks cannot devalue the Euros they use?

    10. stephen

      Maybe they could have started a parallel currency and economy. You know, print drachmas and tax in drachmas as well as in Euros. Then pay the part of the debt in Euros (“we are doing our best”). Might have led to a better managed exit. Too late now. They either take the Euro punishment or leave. Their biggest sin was not controlling events. Maybe they felt politically constrained. The have certainly created the political cove for grexit.

    11. ben

      Build a time machine and stop the German and French bankers from lending to corrupt Greek oligarchs 15 years ago?

      Seriously, we seem stuck with the mindset that it is never too late. That any situation can be rectified. What if I drive towards a cliff at 100mph, my stopping distance is 60 feet and I’m 40 feet from the edge. Modern finance says hit the brake and spend your remaining seconds reading the manual. Why not put the radio on?

      1. Jack

        Better yet, go further back and smother Bismarck in his crib. A unified Germany has been one disaster after another for Europe.

    12. lambert strether

      Two obvious things. Attack the oligarchs directly and immediately by:

      1) Indicting them for tax evasion

      2) Breaking up their media monopolies

      The first buys some credibility with the EU

      The second gets you some control over the discourse for the coming PR battle

      and of course

      3) Don’t throw away Grexit as a threat, even if it’s not a very good one


      4) Put planning for both EZ and EU exit on a war footing so you know what your organizational capabilities are

      5) Be honest with the Greek people about what you are doing.

      Remarkable that a putatively Marxist party didn’t go for the oligarchs. Instead we got neoliberalism lite.

      Adding… Syriza did none of these things, most especially #5.

      1. flora

        Attack the oligarchs directly and immediately…

        I agree this should be done. However, since the Eurozone and the ECB have become neoliberal projects I don’t think attacking the oligarchs for tax evasion would win any favors or credibility from the EU. Just the reverse. My guess is that demanding oligarchs pay taxes would alarm Brussels even more than this week’s referendum.

        1. flora

          …..demanding oligarchs pay their fair share of taxes might lead to demanding that the big banks that made reckless bets suffer their lost profits, instead of putting all the middle class tax payers on the hook to bail out the banks. Unthinkable.

      2. flora

        “Remarkable that a putatively Marxist party didn’t go for the oligarchs. “

        Yes. amazing how the so-called left (see: Obama, DCL, et al) acts as the middleman for neoliberal economic interests.

      3. Lambert Strether

        None of the cheerleaders have jumped on this bandwagon; I’m amazed, except not.* I mean, the demand is “What would you do?” and here’s a list.

        And even if all the outcomes are bad, and the cause is lost, why not go down with all guns blazing — at the near enemy, the oligarchs?

        NOTE * The relevant Obot talking points are:

        1) “The President is not a dictator” and

        2) “It takes 60 votes in the Senate.”

        Please feel free to translate these to the Greek context as needed.

      4. Jim

        Modified Lambert plan for Greece:

        1) Attack both the oligarchs and the centralized Greek State

        2) Indict the oligarchs for tax evasion and then call for a radical reform of the Greek State into a decentralized federal political structure (a multiplicity of Greek city-states) similar to what existed in Greece between 1000 and 300 BC.–See empirical support for this reform in the recent Joseph Ober analysis “The Rise and Fall of Classical Greece.”

        3) Don’t throwaway Grexit as a threat

        4) Put planning for EZ and EU exit on war footing

        5) Be honest with the Greek people and let them know that embedded within ancient Greek history
        is the existence of a decentralized state structure that was the foundation for cultural greatness and economic growth. Also tell them that it is time to go back to their roots and that most intellectuals, politicians and bureaucrats have been wrong about their assumption that it is necessary to have highly centralized bureaucratic state in order to foster a sophisticated culture and economic success.

    13. David

      “Greece will soon be faces with a depositor bail-in…”

      This for the banks and asset seizures to collect the errant taxes.

      1. MaroonBulldog

        When the bail-ins are completed, and all the assets they represent are gone, the unpaid tax debts will still be due and owing. And that is as it should be.

    14. Cugel

      Basically, Tsipras tried to gain political support to force concessions through Parliament by aligning with the discredited center parties and calling the referendum. But, all such efforts are meaningless in the face of this:

      According to sources in Brussels, 16 of the other 18 countries in the eurozone are in favor of letting Greece leave the eurozone and they will have to weigh up the cost of any agreement to keep Athens in the single currency.

      In short, the EU is saying “no!” to any deal. You already see the creditors lining up and insisting that Greece “come up with a new plan”. Only they don’t want a “new plan.” Remember that the “old plan” they rejected amounted to this:

      Nothing new to report from Euclid’s presentation to finance ministers it seems. Reports now suggest the Greeks repeated a previous plan for an ESM loan for two years worth around €30bn. That’s already been dismissed out of hand by creditor powers, who want the Greeks to come up with a new more “credible” plan.

      This means that the Greek capitulation has been rejected out of hand. Further efforts to bridge the gap will also be unavailing under these circumstances. The creditors have been demanding regime change, only the voters just decisively rejected that. So, there’s an impasse.

      Since the EU parliaments must approve any new deal, and since they are flatly stating that they want Greece out of the EU, how can there be a deal? They won’t take “yes” for an answer.

      And given their ideological blinders it’s not at all unreasonable for the EU to force Greece out, rather than deal with the utter failure of their own policies. This crisis is a standing indictment of Hollande and Merkel and her colleagues. They must find a way to blame Greece for everything, but if there’s a deal and Greece capitulates, then everything becomes THEIR fault rather than the fault of the “lazy Greeks.” Because default is going to happen anyway. The reason we’re in this mess is because of the Troika’s insistence on “extend and pretend” that the debts would be repaid, when that was never possible. The only solution for Merkel et al. is to make Greece “disappear” and make the resultant catastrophe someone else’s fault and someone else’s responsibility.

    15. PlutoniumKun

      The article reminds me a little of the probably apocryphal story of a man lost in a rural area in Ireland asking for directions to a particular town from a local farmer and being told ‘well, if you wanted to go there, I wouldn’t be starting from here….’

    16. Pelham

      Good question. I’ve encountered many discussions on the subject, and the only solution that sounds the least bit plausible is a Grexit. But Yves rules that out, and I respect that. So what’s left?

      As for Syriza: Granted, it doesn’t help to just criticize. On the other hand, they richly deserve the barbs that some are throwing. Their defenders and those who even celebrate Syriza on the left, I believe, are desperate for a success story somewhere and are purposely avoiding even a casual glance at what Syriza has been promising and what it has actually wrought.

      I know the feeling. I was a fan of Varoufakis well before he became finance minister, having read and appreciated his book “The Global Minotaur.” And I was pulling for him as he entered negotiations with the troika. But his slippery statements and talking points began to strike me as 1) a betrayal of what Syriza had campaigned for (Tsipras is even more guilty of this) and 2) just outright irritating. Syriza increasingly begins to look like the Democrats in the U.S., who calculate they need to be only a hair’s breadth to the left of the Republicans on economic issues to win office.

      I’ve heard the Communist Party in Greece is thoroughly disgusted with Syriza, moreso than they are with even the former mainstream parties. Maybe the Communists are right.

    17. Rosario

      Yeah, mark me as dissatisfied with these perspective as well. There seems to be a great deal of 20/20 hindsight coming from the left critics, it could have, should have been x, y, or z. More irritating than the ex post facto critiques of SYRIZA are their apparent lack of context or understanding that this is largely an ideological problem (I thought the left was good at doing this). I think it is important to remember a few points about SYRIZA:

      -they are an anti-establishment, left coalition that was, more-or-less, put together in a few years (no small undertaking in Greece and not winning them any friends among the Euro elite)
      -they are operating under a coalition government (maybe not a mind-blowing thing in stable GB but a major factor in Greece)
      -their negotiations are not as much economic as ideological, and their negotiating partners are as ideologically flexible as Catholic Inquisitors (Specifically, what do pensions, worker pay, and public land have to do with state debt? Hint: any of the countless answers to this proves my point.)

      If this was to be dealt with in the style of the corporate boardroom negotiation using conventional economic wisdom that time came and went back in 2009 or 2010 when the higher powers that be had the opportunity to put the brakes on the financial sector that is now completely out of control. Instead, they doubled down, and pumped up a whole lot of debt that they knew was bad. Now the best offense that much of the left can offer is against their own team, go figure. I think this is the reason Hudson has continued to show support for SYRIZA even if they have stumbled, and on that note I don’t think they did. Not implementing capital controls is quite brilliant if Greece’s negotiating partner never had the desire to work with them in the first place, and I trust the likes of Varoufakis, not an idiot by any measure, to know this in a far more intimate way than any of us could. Greece had the time to stuff its mattress, per se.

      Politically, what other option is there? Another technocrat? That was a bad idea in 2011 and will be a bad idea today, not to mention it is a direct affront to Europe’s supposed democratic values. The right wing? A rerun of an obviously shit idea. This is the reality of the best you can get from 21st century popular left opposition, be it as you may, and until we create something better I respect the effort.

      1. Yves Smith Post author

        Your criticism is sorely misplaced. We criticized Syriza’s tactics in real time, repeatedly and specifically, from the get go. We are the last people you can try that accusation out on. And if you had bothered to check, Michael Nevradakis, the main author of this post, has an English language website,, and he has also been chronicling the negotiations in depth and has also taken issue with Syriza’s tactics .

  2. ChrisFromGeorgia

    I have no reason to quibble with this analysis. But there are things that just don’t add up. If Tsipras wanted to fold like a cheap tent for a crummy deal, he could have done that 5 months ago and spared his people and the world the drama.

    At the least the vote did accomplish a few things – it solidified Tsipras’ political power, and it put him in a better bargaining position. For him to do nothing with that makes zero sense. He has to at some level understand that without debt write downs and hair cuts on the external debt held by the ECB, this is all just an exercise in brinksmanship with no value for his people.

    1. Swedish Lex

      While I am no particular fan of Syriza I do not believe they are complete idiots.

      By saying 1) we want to stay in the euro zone and 2) we wish to end austerity, the only reasonable conclusion is that what they really are saying is; “Give us a substantial debt relief now”. Or the numbers do not add up.

      Which is what they are doing.

      1. ChrisFromGeorgia

        It’s possible also that at this stage the parties despise each other so much that they are resorting to lies and open sabotage. That makes any kind of analysis very difficult.

        There seems to be wildly contradictory news threads. I saw a headline that some German made an un-sourced statement that the Greek offer today will not differ much from the one rejected on Sunday. I suspect this might be the equivalent of a divorce fight where one side starts accusing the other of child molestation.

  3. rob urie

    Time will tell on the broad theme. Two technical points: U.S. government spending as a percent of GDP rose from automatic stabilizers and the stimulus, which was quite modest, and the decline in GDP. . The denominator affect (GDP) is pronounced. The idea that Mr. Obama brought the U.S. out of recession grants that the weakest recovery since the Great Depression is an accomplishment worthy of praise. Second, the unemployment rate fell largely because of the way that unemployment is counted. The ratio of the working age population to the employed shows that employment fell off a cliff in 2008 and approximately stayed there.

    This recent paper from the Levy Institute illustrates both points.

  4. NV

    Regarding your headline, this is a perfect encapsulation of why the KKE (the party of stubborn old line Stalinists) were against both the Oxi and the Na.

  5. Ned Ludd

    Varoufakis, who struck me as a bit impulsive, “was starting to harbour ‘dangerous‘ thoughts” and began to consider the possibility of a Grexit.

    When I asked him before the vote whether he was prepared to contemplate seizing direct control of the Greek banking system, a restoration of sovereign monetary instruments, Grexit, and a return to the drachma — if the ECB maintains its liquidity blockade, forcing the country to its knees – he thought for a while and finally answered yes.

    “I am sick of these bigots,” he said. […]

    He was putting out feelers for technical experts in London, targeting veterans of Britain’s ERM exit in 1992, though he was under no illusions that Grexit could ever be anything other than gruesome.

    Varoufakis may have been partly motivated by pride and self-respect – “I am sick of these bigots.” However, even contemplating Plan B was too much for Tsipras.

    Mr. Varoufakis’s popularity in Greece has deterred Mr. Tsipras from ousting him until now, these people say. But the premier reacted after Mr. Varoufakis told a U.K. newspaper late Sunday that Greece might introduce a parallel currency and electronic IOUs similar to those issued previously in California. Mr. Varoufakis quickly backtracked on his comments to The Daily Telegraph but his prime minister had had enough, say the people familiar with the matter.

    A parallel currency and IOUs would put Greece on a slippery slope to exit from the euro, economists and European officials say. It was only the latest of Mr. Varoufakis’s frequent ideas that didn’t have the support of the rest of the Greek government.

    While Varoufakis may have been waking up to the possibility of a Grexit, Tsipras will not allow talk about or preparation for a future outside of the eurozone.

  6. linda amick

    We can hope for a continuation of the noticeable strategy employed thus far in Greek negotiations with the EU/ECB/IMF which has amounted to decision-making which responds to the day’s negotiations realities.
    The Greek position of attempting a rational long term solution for the citizenry via promoting the status quo as optimal but modifying their position based upon the EU/ECB/IMF decisions as they go along has been effective.
    If nothing else it has raised awareness of the class war going on between elite leadership which seeks to enrich themselves at the expense of the lives of citizens. More understanding of the situation we live in in the west could aid in potential changes in the future.
    I fully expect the Greek government to continue to negotiate an anti-austerity program with debt haircuts and to resort to alternatives as negotiations fail.
    In true “12 step program” methodology, it is one day at a time.

  7. vteodorescu

    Yes, good analysis. It seems that Syriza got infected with the “kicking the can down the road” virus…

    I suppose we are in for part two of the tragedy in a few months, when the winter will come and people will start dying… Probably the far right is going to get in power, and reject the Euro, as the hardships would have changed the people’s mind by then.

    It ain’t gonna be pretty.

    I am moving to Brazil for the gallery seat

    . :)

    1. NotTimothyGeithner

      Early on, I thought Syriza wanted to get through the Spanish elections in December. With new and likely sympathetic governments in Spain and Italy along with general dissatisfaction in the Southeast, I think Greece would be in nature position to renegotiate and push positive eurozone changes. With the spectre of Le Pen and her anti-EU rhetoric, Hollande might be more pliable to push against Germany and the Troika.

      1. Cugel

        Syriza simply wanted to get through July without default. They wanted to get to the point that they could begin serious negotiations about debt restructuring, once the immediate crisis was pushed back. But, that never happened because the Troika flatly refused to extend the debt unless Syriza immediately capitulated and agreed to a complete and long-term commitment to Austerity.

        Until now, that has been impossible. Now, apparently, Tsipras feels he can steam-roll such a program through Parliament with the aid of the referendum, and the help of the discredited center-right parties like ND.

        Only, that’s not going to work any better than resistance would have. The creditors are not going to seriously negotiate with him. The EU wants Greece out. Period. No deals, no extending the crisis. No talk about debt restructuring.

        If they are going to have to deal with the fact that Greece cannot repay its debts, they would prefer to expel them and deal with it among themselves rather than in creditor-debtor negotiations. That way the Greeks can be blamed rather than the Troika for political reasons.

        It’s not going to work as a viable long-term political strategy, but being short-sighted idiots they can’t see that.

  8. Ché Pasa

    Couple of things:

    First: Polling credibility has never been strong in Greece, and it collapsed entirely with the ridiculously wrong “neck and neck” horse race leading up to the referendum.

    Thus, I wouldn’t make too much of the polls showing “overwhelming support” for sticking with the Euro. It may be true — or maybe not. Polls cannot be relied on to prove it one way or another.

    Secondly, one of the stated objectives of the SYRIZA program is “changing Europe.” What that means is subject to interpretation, but Greece is unlikely to change Europe from outside the eurozone. Consequently, Greece’s apparent capitulation — over and over again — to the demands of the Troika would be a necessary precondition to staying in the eurozone, no? And yet, interestingly, the Troika keeps rejecting Greek capitulation, keeps moving the goalposts, keeps demanding more and ever more suffering from the Greeks before it will consider anything else. Yet the suffering of the Greek people is ostentatiously ignored by the same Troika demanding it.

    It appears that both the Greeks and the Euro-Titans are playing a different game than all the advice-givers so eager to tell them what they should do.

    It hasn’t been going well for either side, but the wedge tactic being used by the Greeks appears to be having an effect. I wouldn’t write them off just yet.

    1. vteodorescu

      Among the few constants of history, there is the “when politics and economics clash, economics wins”

      Maybe not immediately, but it wins.

    2. Doug Terpstra

      Your skepticism about polls is bolstered by Politico’s whopper today in the Warren post, re: “…free [sic] trade deals — which the public broadly supports.” One needs a hazmat suit to wade thru that pile.


    why this hatred for Tsipras ?

    he’s been clever for himself so far… managed to get the money. to default to the IMF.
    still 1 week into default, the lights are still on (so far). hes got fresh popular support.
    Thats his hedge if/when things go down from here.

    He’s been consistent. Saying the debt was illegal, odious , now asking for a significant haircut.

    We cannot read his mind, but I believe his *secret* plan was to get out of the Euro, despite what he says or seemingly does. The man is wicked.

    Don’t forget politicians that *really* act in the best of their countries is something like an extinct species.

    1. Yves Smith Post author

      There is no evidence that Tsipras wanted out of the Euro. All the evidence, most important, his near-total capitulation in the week before the IMF default (crossing his red line on pensions and his last ditch offer on June 30) says the reverse.

      We have further confirmation today via Ambrose Evans-Pritchard, who has good sources in Syriza. The source for this is likely Varoufakis himself, since he’s been previously reported to have been a source to AEP (not just by the media, AEP has told me himself):

      Prime Minister Alexis Tsipras never expected to win Sunday’s referendum. He is now trapped and hurtling towards Grexit

      1. MyLessThanPrimeBeef

        He used up a week hoping the people of Greece would vote yes and approve an offer that is no longer on the table, while publicly urged the voters to reject it?

        That’s so 11 dimensional only really smart people can comprehend.

  10. Bub

    Yves, I dont think you are being very constructive with your critiscism here. Atleast suggest an alternative because to most people it seems like there arent many.

    1. Yves Smith Post author

      We’ve been saying for a very long time that there were no good choices for Greece. You do not go into open confrontation and even worse, escalate when you have a very weak hand. We said Syriza’s only hope was to get support from other parties, most important the US and the European left. They never showed up to help. In fact, the Obama Administration threw Greece under the bus in February. Costas Lapavitas of the Left Platform said that Syriza’s original plan was a failure in early March. Yet the party stuck with a failed plan and made no Plan B. That persistence for months and refusal to change course is inexcusable, particularly since lives are at stake. Another big leg down from the depression that Greece is already in means more people die.

      I’m not about to come up with a rescue plan for Syriza when it got itself into a corner by doing something that was contrary to what I suggested was a better approach months ago. Step one would have been to impose capital controls. Step two was not to take the Grexit threat off the table (but downplay it as much as possible, as in “We really really don’t want to go that route, but we have to consider all options.”) Three would have been to take the negotiations out of the media spotlight and say, “Look, we are the only people that can crack down on the oligarchs. No ‘program’ will ever work in Greece unless we can tax more than the 30% of the economy that is taxed now. You see how you can’t get there by squeezing. But we can’t get tax receipts overnight and we certainly can’t get at oligarch property, particularly overseas, overnight and without help. You need us to look like a success, or at least not a failure, to do that. How do we negotiate a timetable of progress against that? And how do we finesse optics on the issues where we are at odds so we can both pretend to have won?”

      Instead, Syriza has managed to produce the worst possible outcome for Greece, worse than even if they had rolled over in January and just signed the memorandum. I am at a loss as to why readers cannot see that despite the overwhelming evidence.

      1. cnchal

        To find out after the fact, that the person that forced the referendum wanted to lose it, and the result of that gamble is that neither side expected this result, is simply stunning.

        A fork in the road has been taken, and there is no turn around room and it keeps getting narrower.

  11. myshkin

    We are all outside guessing at what is going on inside the halls of power and while I accept your expertise and appreciate the attention you have paid to the crisis I think you are misreading the unanimity within the blocks of actors in the ongoing Greek Tragedy.

    Tsipras’ Syriza and Merkel’s CDU have factions, the Bundestag has factions and the Eurozone has factions of poor countries and rich, including Germany, the economic powerhouse against all others in some variant. Because Spain has conservative Eurozone flunkies in power now does not mean that Spain is solidly behind punishing Greece. Even France must have doubts about the leadership role that Germany has assumed as a fait accompli.

    Because some disagree with the assessment of Eurozone events laid out in NC does not prove abject cheerleading for Syriza. There are nuances that NC’s evaluation does not seem to be considering in their analysis.

    Democracy Now had an extended segment on Greece this morning presenting a different evaluation from two analysts, Paul Mason and Richard Wolfe. They suggest that the Obama administration, with their dangerous polarizing strategies of Russian isolation and disruptive Middle East dabbling, has concerns with the geo political results of a fracturing Eurozone and may be pressing for a more conciliatory approach from Germany toward Greece.

    Also the recent coalition of Greek parties includes, I believe Golden Dawn, which has traditionally maintained a ‘no to the Eurozone’ position. The excluded party is the Greek Communist party.

    1. ira

      I’m pretty sure that KKE (The Greek Communist Party) excluded themselves, as they seem to never join any ‘bourgeois’ coalitions as a matter of principle, while Golden Dawn was excluded by SYRIZA (and probably all the other Greek parties) since Golden Dawn is literally a neo-nazi party.

      1. dbk

        Mm, not exactly.
        The KKE duly attended the Council of Party Leaders yesterday, but after a seven-hour meeting refused to sign the joint statement empowering Tsipras to negotiate on behalf of all parties. But then, the KKE never signs anything. GD was invited to the Council meeting by the President of the Hellenic Republic, but regretfully declined to attend “for ideological and political reasons”.

    2. tegnost

      Funny to read “dangerous” blundering in russia and “disruptive” in the mid east, but on the topic of greece these same disaster capitalists are soft spoken wise men and women quietly cajoling germany to “have a heart”…

  12. Eureka Springs

    Nice clear concise post. Thank you. As is so oft the case, such as the referendum, the questions or possibilities are limited in scope to neoliberalism or more neoliberalism. Yannis V. for years here on NC was always boxed into that myopia. We try more than most to escape, but spend far too much time limiting ourselves to the same box whether as voyeurs, victims, lessor weasels or whatever.

    I’ve never sensed Syriza was an honest player for the Greek people. I’ve never sensed Syriza leadership spoke honestly about the design and intent of neoliberal Euro such as this post mentions so clearly. I sensed Syriza and their ilk leading in obfuscation of the simple true nature of the debt and the banks and the nations bilking the Greeks. I have sensed a determination not to tax the rich. Syriza are perfect Democrats (American style), death by a thousand slow agonizing paper cuts.

    I’m not saying there are obvious quick answers but suggesting perhaps why not. At this point it seems the problems should be this clear and concise by now so much more time is spent on solutions which at least get everyone out of the failed box of old once and for all discussed at a much higher ratio.

  13. Robert Dudek

    I believe that a big part of any agreement will be depositor bail ins. This is something that Syriza will be happy to agree with, since its main constituency seems to be both pensioners and unemployed young people. Neither of these groups are going to have substantial funds sitting in Greek banks. The only people with substantial funds in Greek banks are business owners. They need them there for logistical reasons. This latter group voted Yes in large numbers, so it is perhaps ironic that they will be the ones the Troika throws under the bus

    1. financial matters

      I doubt that Syriza would like to see bail-ins of business owners. I think Tsipras understands the concerns of the yes voters and is also making a point of reaching out to them.

      I think Varoufakis in his recent op-ed tries to keep focus on the real problem. The Global Minotaur centered on Wall Street has not been providing its usual demand. This hurts exporters such as China and the Eurozone (particularly Germany). China has been able to respond with using its own currency. The EZ is responding instead by punishing its own members.

  14. Mattski

    I think that what I object to in the analysis here is the assumption that the solutions lie with state planning, banks–at the macro level. It’s through such a narrow prism that you can convince yourself that Greece is f*cked if it doesn’t kowtow. But food grows in the ground. La Via Campesina is the world’s biggest social movement organization, with 200 million members; you’d never know it from reading anything here. Of course, the site founder is a former Wall Streeter–that’s the expertise and the viewpoint, and the analysis is often insightful. But it’s fundamentally skewed away from the material realm where we must construct any lasting alternative.

    1. Lambert Strether

      See here for NC information on Greek networks in “the material realm.” (Interestingly in retrospect, one of the earlier permaculture projects I wrote on was in Cyprus.) Of course, these isn’t the main focus of the blog, but we did realize this was a missing piece of the story and when out and covered it (which you seem to have missed).

      It would be nice to know if La Via Campesina has any effective presence in Greece. Do you know?

      As for “food grows in the ground,” that’s a matter of organizational capability. I think it’s up to the advocates of Greek autarky to run the numbers on it. Had Syriza put Greece on a war footing in January, we might have had some information. As it is, all we have is hand-waving, and “wouldn’t it be a good idea if,” and so forth.

      1. dbk


        A nice reminder, thanks.

        “Food grows in the ground”. Indeed it does. Currently, only 32% of cultivable land in Greece is actually in cultivation, due in part to EU CAP (=Common Agricultural Policy, basically structured to ensure that each country “specializes” in certain crops) subsidies to take land out of cultivation and/or replant with cash crops which deplete the soil.

        A mid-term goal must be to return land to cultivation so that Greece can be self-sufficient once again in terms of food production. I say “mid-term” because, to take one glaring example, an olive grove requires seven years to the first harvest, and that will not be a good one.

        Greece has the potential both to feed itself and to earn foreign currency through select exports of luxury foodstuffs – fruits, vegetables, olive oil, wine, and – if the industry is fully developed – fish farming (aquaculture) – given that it has the longest and one of the least polluted coastlines in the Mediterranean.

        But this will require years – and as Yves constantly reminds us, “financial time” is insistent and impatient.

  15. Jesper

    From the article:
    ” By contrast, President Obama pulled the USA out of recession by increasing deficit spending to a staggering 9.8% of GDP, and he raised the nation’s debt to 101% from a pre-recession 62%. ”

    Has Obama done well for the US economy?
    Is the US out of the recession? If the US is out of the recession and the lives of many ordinary Americans has not improved then I have to ask: Is the current measure of ‘out of recession’ relevant?

    I believe most economists don’t care where economic gains end up, however, I do believe that most of the ordinary citizens do care where the economic gains go. Maybe time for another more relevant measure? Maybe something as simple as median income and workforce participation rate?

  16. margsview

    When decisions are made by groups that are neither your friends or enemies they take on a cold bloodied indifference. The EU representing the 1% will give varying but necessary spin, but what is now known is that they will have one policy treatment for peripheral southern European countries —and only one. That of forcing the continuance of austerity. Neither the 1%, or the EU, care one iota about the people, their suffering or stability of the region, on the contrary. So, if that is the reality, then the Greek leaders must first, make these facts understood and second, make processed plans to leave the EU, in short order, so as not to lengthen the chaos. To that end, smart strategies may include other interested parties (or countries) who wish to help in varying degrees. Especially, if they give cause for sober second thought (if their (1%) is still even capable of deeper thought).

  17. samhill

    I don’t see how Greece could have prepared in any way for a Grexit and any attempt to leverage that and the consequent effort to educated/convert their populace would have handed the small moral capitol they have over to the euro-bigots and shits who would have turned their monolithic mass media mud-slinging machines into torrents of slander and “the Greeks are shirkers on the run” would now be the trope rather that “righteous resistors to financial terrorism”, which even the mainstream business press is now echoing, at least the anglophone press. Any secret effort to prepare for Grexit would have leaked and looked even worse, “surreptitious shirkers escaping in the night”. For a nano second I had thought that part of the meetings with Putin might have been to work out a contract to have the Russians quietly mint a mountain of new drachmas, at the ready for an accelerated introduction. If then a deal happened no one would ever have to know, but I’m sure western intelligence would have been right on top of any secret preparations of any sort. For myself, I really think all Tsipras and VF had going for them was to ride the train and hope for the best, if it goes over the cliff then they crawl from the wreckage and start there – the sad fate of underdogs. To the world the unhinged brutality imposed on the Greeks will have destroyed the EUs credibility as anything but a giant forced labor camp run by an elite monetary club.

    1. Alphonse Elric

      To people who find narratives about how “you must always pay your debts” persuasive, the Greeks are shirkers on the run, and no strategy besides complete and immediate capitulation could have changed that. The comment threads in e.g. the WSJ are filled with examples of this attitude.

      I imagine Varoufakis/Tsipras, back in February (or December), saying something like “Greece has been fiscally waterboarded and the creditors are trying to turn us into a debt colony. We are fully committed to finding an agreement with our partners, but we will not sign an agreement that crosses our red lines. It would be irresponsible to take this stance without preparing for the possibility that there will be no agreement, so we are currently evaluating our government’s ability to react to a banking crisis in the absence of a bailout agreement. There is no legal basis for leaving the EU, but all legal options are on the table, including the introduction of a parallel currency.”

      Perhaps that would have made the creditors even madder than they were after six months of failed negotiations, I don’t know. But unless that statement lead to the immediate expulsion of Greece from the EU, they’d have been more prepared for Grexit than they are now.

  18. Cano Doncha Know

    What’s making me suspect Tsipras/Syriza et. al are not that bad is that the corporate/mainstream press keeps giving voice to the Greek communist party’s criticism. When elites start quoting the communists, even openly aligning themselves with the communists, and searching for more extreme groups to say that the people in the streets aren’t authentic enough leftists, then I start to think things might be kinda real. I’m sure Syriza has issues but I don’t think anyone’s expectations are as high as the mainstream media (and maybe even NC) thinks they should be.

  19. Jesper

    About the Greek banks:
    Which is better?
    Having local/national banks remain local/national or do it like in the US, let big banks swallow up small banks if/when the small banks get into trouble?

    Has the US way of dealing with failed banks improved the situation of the too big banks or?

  20. Bridget

    “Normally, a nation such as Greece can quickly recover from debt-induced recession by devaluing its currency. Greece would become a dirt cheap tourist destination once more and its lower-cost exports would zoom, instantly increasing competitiveness.”

    Quite. Not to mention that default is also a dandy way to recover from a debt-induced recession. Both are less bad options than continuing the insanity of extending and pretending. However “cutting pensions, privatizing and closing industries, slashing wages” are part and parcel of recovery no matter which way they turn. Tourism and olive oil a welfare state do not support.

    1. Yves Smith Post author

      This is a fatally flawed analysis, as we have written repeatedly.

      Greece has no currency to depreciate.

      The process of getting to a new currency takes months to over a year MERELY in terms of getting cash printed and in circulation. That is the easiest part of the equation and does nothing to help with imports, unless you believe that importers are willing to truck cash to and across the border and deposit it in banks across the border on an ongoing basis.

      Greece and the parties it trades with need to do a great deal of IT work, and it has to be to mission critical standards, for its banks to be able to handle drachma and euros. It took ten years of planning and three years of execution for the conversion to the euro to go smoothly. Greece has done no planning and does not have an independent central bank (its “central bank” is a branch of the ECB). Getting the IT work done is a massive undertaking, and in the mean time, the Greek tourist industry takes an enormous hit (tourists overwhelmingly use credit cards when they travel, and they won’t be able to use them in Greece if it goes to drachma, or they will continue to pay in euros, and tourists would be left wondering if they were getting fair conversions). More important, Greece will have difficulty importing at all. You can see now how food and pharmaceutical suppliers are reporting shortages. It’s going to be ongoing. The Eurozone expects to have to provide humanitarian aid to Greece. “Tourist destination” and “humanitarian aid” don’t exactly go together.

      Tourism is 18% of GDP. Greece is not self sufficient in food and also imports petroleum and pharmaceuticals.

  21. thom

    Yves, this post is just awful, deranged, deluded, magical thinking. It is your insanity of writing the same thing over and over again on Greece which seems clear. TAKE DOWN YOUR OCCUPY WALL STREET BANNER! It is HYPOCRITICAL to write what you do on Greece yet fly the Occupy flag.

    1. Clive

      In early 20th century London, a group of intellectuals gathered at the home of the Stephen family to discuss the issues of the day, art, culture, society. Hosted usually by either Vanessa or Virginia (later Bell and Woolf respectively), other luminaries such as historian Lytton Strachey, economist John Maynard Keynes, poet and horticulturalist Vita Sackville-West debated and inspired creative thinking. Known as “the Bloomsbury set”, they were probably a little redolent of the bourgeoisie being pretty much your classic rentiers and I doubt they actually had to do anything so hard as work for a living.

      That notwithstanding, they were a model of how to spur each other to sharpen their respective talents through the application of intellectual rigour.

      We cannot of course offer such luminaries here. About the best we can get is craazyman, which does rather say it all. Nevertheless, Yves invites us to participate in her salon in the anticipation that we might emulate their example.

      You do not, then, respond to that generosity by marching in, mouthing off a load of unsubstantiated and downright rude rhetoric topped off with shouting us in block capitals. I really doubt any of the aforementioned Bloomsbury set would react, should you have displayed this sort of behaviour to them, in quite this way and unfortunately I lack their breeding, but please, if that is the best you can do, kindly sod off and let the rest of us air our various points of view uncluttered by your moronic outpourings.

    2. susan the other

      Don’t be mad at Yves for understanding the enemy. The “roach motel” as she calls it. It isn’t just the EU, flea bag that it is, it is all of the West trying to operate by the same old and expanded crony rules of finance when all hope of capitalist growth to service those financial obligations is gone. Forever. The western economic system is anachronistic. But the creditors still want their odious debts repaid at any cost.

  22. Jim K

    Unfortunately, right. Syriza has capitulated. The referendum is just another element of that.

    What was the point of the referendum? A Yes vote was a vote for nothing, for a deal that is off the table. And a No vote, far from effecting some kind of rejection of debt and austerity,was just going to be used, as Tsipras tells us, to go back to the negotiating table and beg the banksters to accept the capitulation on nine-tenths of the Syriza program he has already made, rather than the twelve-tenths they’re insisting on. Any result of this referendum, in other words, was going to be used, by Syriza or some other party, as an excuse for accepting compliance with the neo-liberal austerity agenda.

    Merkel & Co. actually appropriated the strong political stance Syriza should be taking. By insisting, “This referendum means in or out of the euro,” they pre-empted Syriza’s bluff, and showed their contempt of Syriza’s weakness: Go ahead, have another of your “democratic” exercises. We know you don’t have the stomach to make it mean anything. Here’s how you’d do it if you did. We know that you’ll come crawling back to us.

    Tsipras and Varoufakis’s discourse throughout has been deeply dishonest, perhaps self-deceived. It perpetrated the worst kind of electoral evasion, promoting false hopes that many wanted to hear, and burying the need to prepare for the inevitable fight that was coming.

    See analysis at Syriza’s Last Charade

  23. Demon Cat

    I think it’s unfair to say that voting No wasn’t a brave act (for every individual who voted like that). I expected the fear mongering to win honestly; I was positively surprised with the vote.

    1. Lambert Strether

      Please use the actual words of the post, which are:

      did not engage in a brave act of democracy

      The referendum wasn’t up to world standards, which demand two weeks to consider and a clear question.

      Nobody said the vote wasn’t brave.

    2. MyLessThanPrimeBeef

      Just a general question, not specifically related to Greece alone.

      Can a vote be a wrong one?

      Can an entire nation be guilty? They all knew the monstrosities, were aware of the crimes… (Maybe except kids younger than 3 or 4, perhaps). They didn’t do anything.

      Can an entire nation go insane, under mass hysteria?

      Can an entire nation be brainwashed, by a demagogue?

      Can an entire nation of humans want incompatible goals?

      The people have spoken. It has to be respected. The vote went to the statesman, the dictator or the savior…

      It’s all probabilities? God plays dice?

      1. ambrit

        Stephen Hawking opined that not only does God play dice with the cosmos, but he, (or she or it,) often throws the dice around a corner where we mere mortals cannot see them.

  24. PaulG

    Seems to me it’s all up to Germany and the ECB at this point. Greece has nothing more to bargain with. I think the question is whether there is a way to save the Greek banking system (and have a chance of avoiding a Mad Max outcome for the Greeks) while letting the Greek government go bankrupt. Will Angela and the ECB keep “moral hazard” as their to worry, obliterate the Greek people and risk the eventual end of the euro, or compromise in some fashion that at least avoids total nuclear winter in Greece – which Germany and the ECB will be blamed for, in many quarters at least.

  25. Morris

    How can a blog that praises the banal half measures and minisucle victories of someone like Elizabeth Warren go so hard on Syriza, which is in a real fight?

    1. Yves Smith Post author

      Because they are naive about what they have taken on and have lied to the Greek people. If you had bothered to read the post, they have never walked their talk. Varoufakis volunteered to having Greece run primary surpluses, always. That’s austerity.

      Syriza will set back the left in Europe by 10 years. They are committed to staying in the Eurozone. They have until July 20 to cut a deal or they default with the ECB, which would force them to do a defacto Grexit, which they are completely not willing to do. The lack of time means they probably fold. If they wind up doing a Grexit, Greece falls quickly into disastrous economic conditions and becomes a dependency of Europe. which will supply them with essentials like food (Greece does not produce enough to be self-supporting), petroleum and pharmaceuticals.

      The Greek people have not made informed consent to any of this. But the left waves pom poms rather than look at what they have done and are actually doing (forming a coalition with all the centrist parties that pumped for a Yes vote).

  26. Roquentin

    I’ve been thinking about this off and on today and I realize that in a lot of ways it doesn’t even matter how sincere Syriza was in its intentions. The fact that this is being portrayed in the minds of Greek voters and observers worldwide as a popular vote against austerity is already an accomplishment in and of itself.

    If Germany in the ECB persist with their plans, they will look like a bunch of dictatorial thugs (which is sadly exactly what they are). Maybe Tsipras and Syriza’s plan all along was to resist just long enough to save face before they caved in and signed off on more austerity. I don’t necessarily agree with that, but hypothetically let’s just say that’s how it is. This referendum has taken on a life of its own. On a certain level, if public thinks the referendum was a vote against austerity, then that’s exactly what it was.

    I think a Grexit has been the eventuality no one wants to acknowledge and I’d agree that they can’t have their cake and eat it too, but the referendum at least illustrates just how mean-spirited and unfair the ECB is being. As a publicity stunt it says “you aren’t offering us anything close to a fair deal,” which is undeniably true. Greece leaving the EU is on them…Merkel and the ECB. They have no one to blame but themselves….too blinded by insatiable greed to see anything else.

    1. MyLessThanPrimeBeef

      Worldwide, opinions vary…even among non-Europeans.

      Some are shaking their heads. Some admire or even worship.

    2. Lambert Strether

      “[I]t doesn’t even matter how sincere Syriza was in its intentions.”

      So — taking for granted what many readers have projected onto Syriza, as opposed to Syriza in reality — you’re arguing that “I plan to sacrifice you on the altar of the fight against neo-liberalism without actually telling you” is a winning electoral strategy in the rest of the Western world?

      1. Roquentin

        I mean that sometimes things that are illusory take on a life of their own, even becoming a little bit real. If we’re talking about real, authentic democracy, popular opinion is ultimately sovereign. If the people believe that’s what they were voting for, that’s progress in and of itself.

        Also, what politician doesn’t do this? How defeatist is the attitude of waiting for a party or candidate to come along that meets the pristine standards of not being corrupt you’re setting? You’ll be in your cold grave before a candidate like that comes along. Waiting for some kind of perfect political party or candidate to come along amounts to doing nothing at all in practical terms. Ask Russel Brand how well telling people not to participate worked. Now they get to put up with the Tories running the UK because people felt it was better to keep their hands clean.

    3. Cano Doncha Know

      @Roquentin, I completely agree. I’m wondering if the criticism of Syriza/Tsipras assumes/promotes the idea that the game is a fair game, and that it is through “negotiations” and ECB meetings, etc. that Greece is going to come out of crisis. It is not: the only option is debt relief, and the only way that is going to happen is through people in the streets, and Greek people demonstrating/getting heard through other democratic measures (including voting). Whether or not the people support Tsipras, or whether or not he is genuinely on the left or actually pro-austerity, and the minutiae of the referendum Greeks in which overwhelmingly voted no–is completely besides the point, and meant to distract and victim blame. The demonstrations against austerity–whether pro-Tsipras/Syriza are not–are not only helping the fight against austerity, they are the fight against austerity. There is nothing wrong with getting more facts about Syriza and being critical, but to dismiss the entire movement as misguided and uninformed and duped is just ridiculous.

  27. Oregoncharles

    How do you know they haven’t planned for a Grexit? Wouldn’t it have to be done in deep secrecy? Otherwise, merely planning for it would precipitate it – and that’s against Syriza’s mandate.

    More alarming is the Grand Coalition. That cuts out their left wing, who’ve been trying to keep them honest.

    1. Yves Smith Post author

      Basically, you can’t plan for something of this scale in secret. It requires large-scale mobilization on several fronts. And even parties friendly to the government and in close contact with them have said they are totally preoccupied with the negotiations, that’s all they think about (tactics) and aren’t planning ahead. They say this with concern and regret.

    2. MyLessThanPrimeBeef

      Does it seem like a play from the Shock Doctrine – don’t waste an opportunity to power-grab when there is a crisis?

  28. samhill

    I still think Grexit was never a six gun Tsipras could place on the table next to him as he sat down. Grexit is much more of an internal issue to negotiate with the Greek people than a lever towards the EU. As such the clout necessary to effect it was just not something Syriza had to start out with but something they’d have to build up along the way, if that’s how it went, accumulated from one too many Bild Headlines, insulted negotiators from bigoted self righteous ministers who are supposed to be equals, ganging up by half-rate woosies and phoneys like Holland and Renzi, and mega-thieves like Rajoy, and a Central Bank that would dare to break you by forcing scared pensioners to stand online in the Greek July sun for grocery money. The only question concerning Grexit is whether at this point Syriza has amassed that clout to sell it back home and be sure of having enough of the population united in anger and disgust and resolved to avoid civil unrest and tough it out. IMO unlikely.

    BTW anyone wonder if Tsipras was coldly told by the special nasty parts of USA/NATO that if a Grexit was attempted all the demons of hell would be unleashed upon him, Syria and Greece? Everything from polonium in your ouzo, mysterious plane crashes of Syriza leaders, exploding cars, to outright war in the street. It’s been done so many times before there’s no need to even work up logistics, just grab any old hoary CIA script, fill the 55 gallon trash bags with money and off it goes. In which case everything that seems to be going so f’ing bad for Syriza is because they are behind an even bigger rock and harder place than anyone imagines: relentless ultimatums and no Grexit.

  29. German native speaker

    1) “the European left has been missing in action.” Europe has a thousand times more of a left tradition than the US, everything from the Internationale, the communist Eastern Block, to reformist Social Democrats. There is currently a left (“Linke”) president of a German state – unimaginable in the US. Another German state’s president is from the Green party, equally unimaginable in the US. The “Linke” (is he not left?) commented on Greece a few days ago, that they should tax the capital gains and properties of the Greek Orthodox Church. Makes sense, but is not done. What kind of notion of “left” is missing here according to Yves? There were solidarity demonstrations with 30 000 people in Munich before the G7.

    2) I have lost all respect for Mr.Varoufakis a while ago, saying one thing one moment and the opposite the next. His latest and hopefully last lie: he told the Greeks that the banks will be re-open a couple of hours after they vote ‘no’ in the referendum.

    3) A majority of Germans want a referendum of their own and want to get out of the Euro, and not just ‘the left’. Just because the Financial Times does not report on this, it does not mean that Germans are in favor of the Euro, they feel betrayed by it. Even more, Germans of all political colors are so fed up with Greece, they would prefer if Greece left now rather than later, and there is a lot of awareness that this would mean costly humanitarian help. The majority of Germans is fed up with extend and pretend.

    4) As to what is claimed in above post, ‘two thirds of Greek pensioners live below the poverty level. That was in the post by Mr. Nevradakis. . Where does he get his numbers from? To play loose with the numbers just to gain sympathies? His statement is already debunked by the recent decision of the Greek High Court, which addresses the almost a million Greek pensioners who get between 1000 and 2000 Euros a month. Where is the money that they sent abroad? Mr. Palast also makes a big deal of solidarity from the EU – please talk about solidarity between Greeks first.

    5) Last not least for today: Maybe it is better to use words than weapons, but I have seldom in a political conflict seen such vicious four letter language used towards ‘the other side’ as from arm chair leftists that comment in Ekathimerini, in the Guardian and other UK papers, and also here. PS my grandfather was thrown into the concentration camp by Hitler because he was prominent in the SPD. Just saying this to the ones who have already either called me a Nazi due to my user name, or who have called Germans in general Nazis, and I do remember these user names.

  30. Brooklin Bridge

    Many of the comments to this post are deeply perplexing and I’m not referring to the rude ones. The referendum seems to have unleashed a tidal wave of sympathy for the Greek people that extends to virtually anything Tsipras does and that simply sweeps away objectivity in its wake like bits of flotsam. The Germans, the ECB, the Troika, are monsters and somehow that excruciating, but very real fact also makes it axiomatic that Syriza is the little David, that Syriza must be sympathetic, that their almost Keystone Cops blunders must, MUST, have been shrewd moves anticipating the future, no matter how many facts get in the way. Worse, the undercurrent of criticism of Yves – as if her clear eyed analysis somehow put her at fault – is nothing short of breath taking for this blog, particularly in so far as not one single fact she has reported or analysis she has presented has been clearly described in this frustrated cry, never mind refuted.

    None of the Syriza players, in particular Tsipras or Varoufakis , for instance, acted in any way like “fighters” – ever – whether or not they were elected to do so. If they were fighters, they were the kind who punch themselves in the face and fall down without the opponent so much as lifting a finger. The first words out of their mouths were, “There will be NO Grexit.” And they subsequently went on to agree to almost every single demand Merkel, the Troika and company made. They never got up publicly and explained why pensions in Greece only seemed high but were in fact less than most of their equivalents in the rest of Europe. They did not clearly explain why the debt imposed on Greece represents a man inflicted human catastrophe on a whole country – except when they were IN Greece and not facing the people they were supposed to be doing “battle” with.

    These are not fighters, getting the message of the people and their rejection of austerity boldly out to Europe and the world, nor anything like it. This was a group of negotiators, out of their depth, who quickly turned out to be demonstrably acting in bad faith; saying one thing to the creditors and then with incredible lack of adroitness the exact opposite when back home as if their puffed up bravado would remain entre nous.

    Early on, Yves described one approach to negotiation that might have been far more successful; it combined bold moves (not taking a Grexit off the table) with subtle diplomacy. For some unfathomable reason, that suggestion has been met, totally uncharacteristically for commenters on this site, with an attitude not far from that some American general might take where anything other than shock and awe is weakness and submissive.

    My views are mine and I’m painfully aware of my limitations – so yes, perhaps I’m missing a lot, but if not, something very human but very troubling is unfolding here.

    1. Jim

      “Worse, the undercurrent of criticism of Yves–as if her clear eyed analysis somehow put her at fault–is nothing short of breathtaking for this blog, particularly in so far as not one single fact she has reported or analysis she has presented has been clearly described in this frustrated cry, never mind refuted.”

      “Something very human but very troubling is unfolding here.”

      Brooklin Bridge: what specifically do you think is going on? What do you see as the nature of this “frustrated cry” by many in the commetariat?

      I agree with you that this phenomena is significant and may center around her “clear-eyed analysis” threatening cherished ideological assumptions about the left..

      1. Brooklin Bridge

        I don’t know what’s going on. I would be uncomfortable with the “left” categorization. I see no particular trap I can put my finger on.

        Throughout the last five months, Yves’s analysis has been little short of uncanny in it’s accuracy and (to my mind at least) it’s ability to make events make sense. It has been equally obvious she has taken no joy in the telling. That this is creating such a problem of perception by sophisticated clear thinking individuals is alarming. It suggests a vulnerability I hadn’t even considered. Perhaps I’m the one who is not thinking clearly, or missing something, or making too much out of nothing, but limited as my perception is, I don’t think that’s it.

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