Greeks Rebel Against Bailout, Risk Collapse

Yves here. One of the biggest threats to the punitive proposed deal with Greece getting done, ironically, is democratic procedures. Even though there are widespread reports that Tsipras will be able to muster the votes via effectively forming a new coalition (something he started working on the morning after the referendum), he also needs to pass the legislation on an expedited basis to meet the creditors’ July 15 deadline for the first four legislative commitments. From the New York Times:

But with many other parties willing to vote for the package, his most pressing problem was more likely the speaker of Parliament, Zoi Konstantopoulou, also a member of Mr. Tsipras’s Syriza party, who objected to Mr. Tsipras’s attempts to pass narrower proposals last Friday.

Some analysts said that Ms. Konstantopoulou, a stickler for rules, could prevent him from using the fast-track procedures that would be necessary to get the job done in time to satisfy European leaders. Portions of the plan must be passed by Wednesday, and more a week from Wednesday.

We pointed out that the left wing of Syriza constrained Tsipras in dealing with the Troika. We suspected his pattern of making commitments to Eurocrats and then partially or fully repudiating them when he got back to Athens was due to being disciplined by internal dissenters. They may still have the power to derail a deal.

And of course, even if this pact is rubber stamped by the Greek parliament, the government faces a legitimacy crisis. How can what amounts to a puppet government have any authority? As Clive Crook points out at Bloomberg:

Why is all that so bad? Ask Europe’s leaders. The first paragraph of the summit declaration says:

The Euro Summit stresses the crucial need to rebuild trust with the Greek authorities as a prerequisite for a possible future agreement on a new ESM program. In this context, the ownership by the Greek authorities is key, and successful implementation should follow policy commitments.

One doesn’t know whether to laugh or cry at the idea that Greece owns this program. Yet the statement is right to say that ownership is crucial. Greek national pride will be bound up with recoiling at these constraints and releasing them. If the Greek parliament, lacking better alternatives, passes the laws demanded of it this week, there’s little reason to suppose that future governments — which will doubtless appear sooner rather than later — will feel bound by them.

By Wolf Richter, a San Francisco based executive, entrepreneur, start up specialist, and author, with extensive international work experience. Originally published at Wolf Street.

Greece’s union of civil servants, Adedly, called for a 24-hour strike on Wednesday, and for a series of demonstrations, the first one tonight at Syntagma Square, just below the Parliament, and another one on Wednesday evening, when Parliament is expected to vote on the new, even tougher, and immensely hated bailout package.

The union for local government employees, Poe-Ota, also called for a 24-hour strike on Wednesday, the AFP reported. Two other demonstrations against austerity and the “euro” are planned for Monday night, one organized via social networks, the other by Antarsya, an anti-euro party that didn’t make it into Parliament.

It would be the first strike against the leftwing Syriza coalition since it came to power six months ago. An ironic plot twist in this tragedy.

Syriza was the big force in the demonstrations against the two prior bailout packages, totaling €240 billion from taxpayers in other countries, conditioned on economic reforms pushed through Parliament by the conservative governments at the time. Now Syriza is looking at having to pass even tougher measures, including an increase in the Value Added Tax and pension reform, in return for only €86 billion in new money from taxpayers in other countries.

Syriza’s junior coalition partner, the Independent Greeks, is already getting cold feet.

“The agreement speaks of €50 billion worth of guarantees concerning public property, of changes to the law including the confiscation of homes… We cannot agree to that,” explained Panos Kammenos, the party’s leader, adding that the party would nevertheless remain in the coalition. With “confiscation of homes” he probably meant foreclosing on homes with defaulted mortgages.

Prime Minister Alexis Tsipras is already struggling with strong dissent within Syriza. But ironically, the pro-euro opposition parties, those maligned creatures that ran the show before, may support him in getting these despised measures passed.

Just how bad is the financial situation? Greece will default on a €450-million loan repayment to the IMF today, two sources told Reuters, on top of the €1.6 billion in debt to the IMF it defaulted on in June. For July alone, Greece faces debt payments of €8 billion, including the IMF payment, none of which it can pay without new money.

And the banks are closed. At first, it was going to be for six days, to prevent them from collapsing on the spot when the ECB decided not to raise the Emergency Liquidity Assistance (ELA). They’re illiquid and insolvent. They’re toast, but complicated toast [read… The Biggest Greek Banks “Have Failed,” and “Resolving” Them Won’t Work: Fitch].

Now they’ve been closed for two weeks, and there is still no reliable indication when they might reopen, under what conditions they might reopen, and how much of their deposits people will get back.

The €25 billion to recapitalize the banks as part of the bailout is supposed to be guaranteed by privatizations. Good luck, given Greece’s history with privatizations. Even the prior conservative governments and technocrats had trouble privatizing these government-owned enterprises that have long provided reliable opportunities for corruption and vote-buying. And now the leftwing Syriza, which swore up and down it would never privatize any of them, is supposed to vote to privatize them and then actually follow through?

But they will have to be privatized to guarantee the recapitalization of the banks. If not….

Even if it works out, the holes in the banks’ balance sheets will be much larger by the time the banks reopen, if they reopen. About two-fifth of their loans were already bad before capital controls were imposed. But here’s the thing: given the capital controls and Greeks’ distrust in their own banking system, only an idiot would still make loan payments.

So the loans are now deteriorating at lightning speed. And that €25 billion won’t be enough. But don’t worry, depositors….

“The recapitalization is so secure that it fully safeguards deposits,” Economy Minister George Stathakis told his compatriots on Monday to soothe their nerves. The ELA would be increased once Parliament approves the reforms, he said, thus pointing his own gun at Parliament.

Alas, the Greeks themselves know better than anyone else to never believe anything that their government publicly says about Greek banks. Hence, the near incessant withdrawals that have now lasted for years and that have finally helped topple the banks.

Turns out, one of the measures to be passed by the Greek parliament no later than July 22 is Europe’s new directive on the resolution of banks. It provides that even senior creditors, including depositors, get haircuts before taxpayers are called in to pick up the tab. The fact that the Greek Parliament has to pass this law in a hurry shows that the dreaded bail-ins of depositors may be part of what’s next.

In theory, the banks’ €32 billion of equity, hybrids, and senior debt will be hit before depositors, according to Barclays. And maybe that’s enough to cover the hole. But as we’ve seen in Cyprus, once a banking system collapses, the holes are always vastly bigger because everything has been ripped out before.

However, deposits below €100,000 will be covered by Greece’s deposit insurance… unless Parliament fails to pass and implement the reform measures that come with the bailout money, the very measures that the people are now demonstrating against.

If the deal falls apart somewhere along the line, Greece has no money to bail out the banks, insure deposits, or do anything else. Given the chaos, uncertainty, and distrust of their government, Greeks are now unlikely to pay any taxes. And so the government then won’t be able to pay salaries and the like, at least not in euros, to their striking civil servants. And there still is no final deal, no money, no debt relief, no nothing. That’s one heck of an accomplishment for six months in power. But outside Greece, the party goes on, and stocks are soaring.

And the one industry in Greece, the largest and most vibrant one that no government has been able to kill? Read…  Greece’s Largest Industry Suddenly Takes a Terrible Hit

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  1. Ben Johannson

    The left’s purpose in the 21st Century is to legitimize and institutionalize the will of conservatives. Tsipras will get his legislation done on time. Let the little ‘uns and paupers chant as they like, they’ll soon shut up.

    1. vidimi

      true. it is to usher extremist policies into the mainstream. britain and america have never moved right as much as under blair and clinton/obama. under conservative governments there is at least a healthy opposition.

    2. Oregoncharles

      That isn’t the left. Apparently even Syriza wasn’t, except for the Left Platform.

      Demonstrations are even now gathering on Syntagma Square. Their previous efforts to break through and overrun the Parliament building were clearly symbolic. Now? I wouldn’t be at all surprised – I’d be surprised if they don’t. At this point, it’s probably the only way to stop the deal and remove Tsipras.

    1. Yves Smith Post author

      I used Richter’s headline. I take his “collapse” reference to be to the deal.

      However, the economy is getting even worse as we speak and can easily decay further. Just watch what another week of no banks, which is pretty much baked in, does to prevailing conditions.

      1. Bill Smith

        I 100% agree with the ‘baked in’ idea.

        That is why I just don’t see how getting out can be worse in the long run.

        This is just slow moving collapse. Likely the slow movement is reason why nothing is being done in regard to what would need to be done if they purposefully were going to get out.

        Somewhat like when someone gets attacked and a lot of people happen to see it. Nobody does anything under the assumption somebody else will do something.

        1. Kay

          It can get a lot worse. Greece passports can be denied entry into other countries in the Eurozone. I’ve read The Telegraph and the Independent where there is nothing left on the store shelves, the manufacturing companies are out of raw materials. Nothing is coming into the country via its ports. The family farms that have produce were just giving it away (see Fox News for the clip) to the one reporter as it was going to spoil. They had to b/c nobody had any money to buy it so the local farmers thought – better to give it away then let it rot. Now that its gone though, there’s nothing left. Pharmaceuticals for the elderly – gone. Diabetic medicine? Not available. Formula for babies? Can’t import it b/c nobody has any money.

          We are watching a country being pushed to the brink of starvation which is why the EU at one point said they had a humanitarian package ready to go (a la Zimbabwe) but Germany wouldn’t let Greece even have that!

          Germany seems hell bent on making the Greek people to ‘sell’ their ancestral rings, paintings, islands, electrical grid (what there is of it), and anything else of value at pennies on the dollar to pay off a bill that the Greek people never wanted. They were at 117% debt ratio when Goldman Sachs brought them into the Eurozone and now they’re at 170%.

          GS should be held accountable and so should Germany. They all knew Greece couldn’t do the EU but they were on a march toward victory of a new world order that now makes the democracy in Greece a farce as was told to Tsapris by the Troika:


          Without a shot fired, they took over a country.
          I’m in shock at how bad this is.

          1. Fajensen

            Well. During the last German occupation 500000 Greeks starved. Someone is bound to remember any day now.

            I don’t believe there is any legal way to block European citizens from traveling within the EU.

            EU-membership is not the same thing as euro-membership.

            Several countries are inside the EU, but not part of the euro zone. Denmark & Sweden, for examples. Given recent events, support for Denmark joining is about nil.

  2. MikeNY

    It does seem like a noxious deal, and a Pyrrhic victory for the EU. It is humiliating for the Greeks, and the Germans and Troika come off as bullies and loan sharks, threatening everything but busting kneecaps.

    I suppose there is a remote possibility that it can all work and the Germans will offer up actual debt forgiveness, but it feels to me that the unraveling of the EU drew quite a bit closer with this ‘deal’.

    1. tegnost

      True. I scratch my head in wonder at what the intended outcome may be, but I think they’ve crossed the rubicon and have gone too far to backtrack even into a less noxious deal. It’s also distressingly early in the summer, and even in orderly places the crazy picks up with the heat. Also, something I’ve noticed in my personal life is the upper echelons don’t consider the impacts of tangible suffering on individuals and communities. When you’re up on the cloud it’s too far away to see but easy to rationalize away with some slogans along the lines of “you can’t make an omelette without breaking some eggs”, but when you’re on the ground with those who are suffering it leaves a mark. So later on from the cloud we’ll hear “why can’t you be more reasonable?” but only after it seems to affect them, like obamacare, now wealthy dems who supported it are backing away from responsibility and claiming tina but it’s empty. They’re tainted and have lost credibility. If Germany et. al. were to suddenly offer a better deal I would simply view them as being distressed about a miscalculation and trying get a better deal for themselves, not because they’ve suddenly “found religion” and care about those weeping pensioners on the bank steps.

      1. Jim Haygood

        ‘… even in orderly places the crazy picks up with the heat.’

        If I were Greek, tomorrow night I would be outside the parliament. In one hand I’d be holding a sign: “NO” MEANS “NO”. And in the other hand, a burning torch.

        Learn not to burn … *wink*

      2. samhill

        Also, something I’ve noticed in my personal life is the upper echelons don’t consider the impacts of tangible suffering on individuals and communities.

        Used to drive a cab in NYC. These creeps don’t even know what it’s like to have a raindrop land on them. Between the awning of their apt. buildings, offices, restaurants etc and the cab is about 1-2 feet of space that the doorman runs out and covers with an extra big umbrella. I reckoned they shrivel up an vanish like the wicked witch in the Wizard of Oz if a single raindrop hit them.

        1. MyLessThanPrimeBeef

          To be fair, they don’t know if those rain drops are radioactive or acidic.

          Precaution is necessary.

          (End of sarcasm).

    2. susan the other

      I don’t think there is even the remotest possibility that anything put forward by the EU/EC is going to work. EU austerity is a catastrophe even if you have a peaceful, cooperative population. It’s as if the austerians think they can go back in time and make everything balance again. They’d have to go back to 1941. And overlook the blatant deceptions. If we are so smart why aren’t we coming up with things that do work? I think Germany is toast. Her favorite export market isn’t selling enough cars. And Germany can’t fudge her own budget much longer. So how can any part of the EU import anything? So if trade slows to a trickle, the EU will have to become self-sufficient. But that will never happen if all the countries are imposing impossible debt burdens on each other. Microcosm of the world.

    3. washunate

      Great comment. I think what is unraveling is the notion of indefinite growth, as if everyone in Europe wants to be part of a single centralized system. A smaller EMU core has better long-term survival odds if everything comes to a head and only those who want to stay stay.

      At this point, I’m only half-kidding in thinking that Brussels and Frankfurt are actively rooting for the Greek rebels. They want a straight answer on whether Greece wants in or out in a system where the majority of the population lives pretty far from Athens. Vacation season is upon us, and unlike hardworking Americans, lazy Germans really like their paid time off. Gotta travel while the kiddos are off school.

  3. edmondo

    Quick question:

    Based on the Greek experience, if you had any money in a Spanish or Portuguese bank yesterday, would it still be there?

    1. Praedor

      Hell, all this crap makes me almost start to reconsider my own money in my US bank (credit union actually). The mattress looks better all the time.

        1. ambrit

          A mouse couldn’t live off of what our money in the bank earns. Add in the ever growing fees and we have a situation where we are paying for our bankers country club greens fees.
          Forget mattresses; invest in a garden plot and, *cough*, varmint elimination devices.

          1. RUKidding

            Yeah, bank fees. It seems like every other day the horrible BigBank where I park some of my cash is out there charging me some new fee that I’ve never heard of before. It’s really insane. No interest to really speak of and fees for everything and sometimes fee for nothing that I can tell. I think BigBank is learning from BigHospital. If you happen to walk past your bank randomly, I think they charge you for that now. (only slightly kidding)

          2. Gio Bruno

            …you’ll need some cash (in the mattress) but having items/knowledge/tools/insight will serve you better.

          3. Gio Bruno

            …you’ll need some cash (in the mattress) but having items/knowledge/tools/insight will serve you better.

      1. John Zelnicker

        Praedor – A credit union is currently the best option for banking; locally owned by the depositors, can’t be a TBTF, you get a share of the profit.

    2. Santi

      I am Spanish, and I have a reasonable amount of money in Spanish banks. There is little alternative. I found a job, from a Spanish company, but to work abroad. So I’ll keep another account in the country I’m going to, and will try to shuffle money back and forth according to the situation. But I don’t expect anything immediate. In one year the situation could have worsened significantly, though…

      I see the situation of Portugal, Italy or Spain like Greece pre-2010 with less austerity at play:
      * nominal GDP growth small
      * small primary deficit
      * not too big interest payments
      * debt grows 2 points per year
      * slight deflation

      I guess we still have some time left. Spain or Italy are “too big to fail”, not so much Portugal.

    3. IsabelPS

      Just checked. It’s still there, at least it’s electronic being.

      Mind you, it’s some 7 or 8 years now that I decided that I much prefer to have tangible things (houses, land) to money in the bank and get very nervous “in-between” houses or land. One of those moments happened when Portugal was suppose to go bankrupt any time soon so I ended up earning the highest interests ever because I decided to be a contrarian an invest (a little bit!) in Portuguese debt.

  4. Eric Patton

    This is, of course, a fantastic article. And NC has been, of course, the best place to go to understand events in Greece (though the World Socialist Web Site has been pretty good too, albeit from a different perspective).

    Everyone reading NC knows what’s going on, but many people (well, most people, really) in the United States do not. Okay. But what about in Europe? Is there no one in Europe who can or will help the Greeks? I mean, is there really and truly nothing? I honestly don’t know.

    1. Praedor

      The left of Germany, France, and others who are sympathetic to Greece and strongly anti-austerity have been just as neutered as Syriza has been. They can WANT to end austerity and help Greece (and themselves) all they want but they are walled out of power so all there is are good intentions expressed into a room filled with vicious, selfish banksters.

      1. BillC

        Praedor, I think your answer omits the crucial and toxic influence of the so-called “center-left” ruling parties within major EU states. There’s a HUGE difference between the nominal left (the ruling parties) and what I would regard as a real left (a pretty low bar: economic policy that stimulates stable employment at a living wage, universal public health care, good public education pre-K to university, a social safety net, and pensions that provide at least a minimal level of human dignity to all).

        By that definition, the real left is not a significant influence in the present governance of any major EU nation. They may be found in a few small minority parties or as nostalgic and ineffective rebels within the major parties but their hands are nowhere near the levers of power. Just look at the “center-left” PMs of the EU’s #2 and #3 economies: Hollande and Renzi. Both talked of achieving a reasonable Greek solution.

        Renzi did just that (talk) … and only for the press. Try to find any reportage indicating he had any influence at all on the PM summit Sunday — I sure haven’t seen any. He talks a hopey-changey line but never even slightly threatens TPTB with effective action to mitigate austerity or improve conditions for the bottom half of Italian society.

        As for Hollande, who did play a visible role in Sunday … looks like he’s hallucinating. The Guardian live blog today quotes him as saying the final agreement that he helped craft does not humiliate the Greek people. Maybe something is lost in translation, but if he doesn’t regard the final agreement as humiliating, I can’t imagine what it would take. In any case this attitude renders plainly obvious that he, likewise, is unwilling to take forceful action to allow preservation of even a low of public welfare in Greece.

        These guys know who they work for. The difference between the well-functioning social states in pre-EU western Europe when I first lived there in the late 70’s and now is stunning. The Mastricht treaty, the (in)Stability and (non)Growth Pact, and the other EU-wide agreements have firmly cemented Thatcherism into every EU state, with totally predictable consequences. I think they’re trying to beat the US in the race to the bottom … and doing a good job of it.

        1. flora

          ”the crucial and toxic influence of the so-called “center-left” ruling parties within major EU states”


          Talking anti-austerity is safe. Where is the “center-left” critique of and work to stop predatory bank lending — the trap that when sprung shut results in austerity programs. Are they saying or doing anything to stop the practice of what Michael Hudson calls “lend-to-foreclose” banking. There is some posturing for the cameras but little else. This also applies in the US.

      2. Dr. Luny

        Right. In fact, Varoufakis mentioned in an interview the other day that the stronger the left-wing support in the other European countries, the more hard-line their negotiating position would become. The “Kartelparteien”, the center-right/center-left/liberal established parties in Europe, fear being discredited by parties, like SYRIZA, that don’t toe the line. The bigger the political threat from these parties, the more invested the establishment parties become in making sure SYRIZA fails. This is why there’s no hope of a left-wing solution on the European level.

      3. EricT

        What bothers me is why does owning or managing a bank afford anyone special rights? When did a right to profit become the sole province of those that run large companies or run banks guaranteed by the government? When did we agree the feudal society should be revived. I think we are now in the stage of defining who the lords and ladies are going to be for the new World Feudal Order.

        1. LifelongLib

          The ultimate catastrophe didn’t quite happen in 2008 — what a poster here described as banks closed, 70% unemployment, people eating tree bark because they can’t get money. My view is that we’ve actually been on the verge of that ever since, and that the TPTB know it and are terrified of it. But they aren’t willing to make the kind of fundamental changes (bank nationalization, having government provide basic banking services) that would truly solve the problem. So they’ve been propping up the current system and praying a lot.

    2. human

      Make no bones about it… Merkel is working for her handlers in much the same way, and for the same interests, as Obama works for his.

    3. washunate

      That’s a great question. For my two cents, partly it goes to what does it mean to help? It’s actually the Germans that were most directly talking about things like Greece leaving the euro or accepting deeper monetary and fiscal union. They explicitly talked about providing assistance in the form of humanitarian assistance rather than pretending there is a business case for investment (Brits and Yanks love to pretend on this front). The most recent thing that became public was Schauble’s trial balloon suggesting Greece pay workers in IOUs (rather than scarce euros). That’s pretty much exactly what’s been discussed at NC the past six months :)

      It has been the Americans that have balked at this kind of talk. DSK was removed from the IMF for the more compliant Lagarde. Geithner was horrified at the suggestion in Sylt a couple years ago that it was possible for Greece to leave the euro in such a way that it was better both for the Greeks and for the remaining eurozone members.

      What it appears the Americans want is for the Germans (and the French, to a lesser extent) to pay for the fraud committed by the Anglo-Americans (think Goldman Sachs et al). It’s actually pretty brilliant, if the implementation has been somewhat clumsy. The financial gains from predation accrue to London, DC, and NY, while the losses are paid for by Berlin, Paris, and Frankfurt. But something interesting geopolitically is happening along the way. Berlin appears to be starting to be fed up with the dicates from DC, and European integration appears far enough along that the Americans haven’t been able to drive a big enough wedge between Paris and Berlin to force German capitulation.

      Uncharted waters. It is difficult* to know how to help the Greek people when their government cannot decide whether they want to submit to Frankfurt (akin to how the US works) or operate independently of the eurozone as a monetarily sovereign nation (very different from the US model). Both are legitimate options, but the trick is they are mutually exclusive. And many of what we might broadly call the eurosceptical parties are not just opposed to European integration as a general concept. They are specifically anti-immigrant ultra-nationalists. We would call them racist and xenophobic in the American context, but that language is too pejorative and doesn’t translate well into European politics since every European country is so much more homogenous compared to the US. In the US, we talk about white and black and Latino and so forth.

      But immigration in Europe is not just about the broad racial categories we use in the US. It’s about national identity, something we have done a very good job of blending and overriding in the new world. It doesn’t matter whether you’re Irish or German or French. You’re white in America. But you’re not just white in Le Front National. Vous etes francais. As in, being French means by definition you are not Greek or German or Polish. And certainly not Algerian or Turkish.

      *The most obvious thing for Americans to do, I think, is suggest that we should tax financial fraudsters here at home and send the proceeds to Athens. That makes the actual predators pay. Which of course will never happen, because the whole point of this charade is to avoid accountability.

    4. Oregoncharles

      1) Russia.
      2) China.

      Yesterday’s Irish article on them adopting the Renminbi was very amusing. Whether it was also serious is a very good question.

  5. MikeOhio

    I’ve really enjoyed the analyses presented here. My gut response to this whole crisis is that Greece should follow the KKE political line and tell Europe where they can stick it. Like the authors here, the KKE has never been under the impression that the Greek left can “fix Europe”. It is unfixable. Presumably the KKE has thought out and prepared for Grexit a bit more than Syriza, whose negligence on this issue is verging on criminal.

    Now I have a much greater appreciation of the potential problems with Grexit. But we can all agree that there should be a red line somewhere beyond which the Greek government should not cross. Folks on this website trot out the case of Somalia to argue against Grexit. Well what about the case of the Belgian Congo or the Haitian Revolution as arguments in favor of Grexit? Sometimes economic relationships are so hyper-exploitative that the oppressed should sever them. So those of you who counsel against Grexit, what are your red lines? Geek citizens’ kidneys as collateral? But seriously, I’d like to know.

  6. Cugel

    Yves, I fear that it’s much worse than you are pointing out, which gives me no pleasure at all to say. Even if the Greeks totally capitulate, it’s clear that Grexit is going to be forced on them anyway, sooner rather than later.

    From the in-depth reporting about the recent minister’s meeting, it appears that the French and Italians faced down the Germans and forced Schäuble to accept Greek capitulation — for the time being. They rejected his ridiculous “time out” proposal and insisted that “enough is enough” in the words of Italian Prime Minister Rienzi.

    But, Schäuble of course has never changed his views and he still dominates the Eurozone. The key commentary from Varoufakis’ interview:

    HL: And is that group [the Eurogroup] controlled by German attitudes?

    YV: Oh completely and utterly. Not attitudes – by the finance minister of Germany [Schäuble]. It is all like a very well-tuned orchestra and he is the director. Everything happens in tune. There will be times when the orchestra is out of tune, but he convenes and puts it back in line.

    HL: Is there no alternative power within the group, can the French counter that power?

    YV: Only the French finance minister has made noises that were different from the German line, and those noises were very subtle. You could sense he had to use very judicious language, to be seen not to oppose. And in the final analysis, when Doc Schäuble responded and effectively determined the official line, the French FM in the end would always fold and accept.

    What appears to have happened this time is that what Schäuble proposed was “a bridge too far”, immediate Grexit – characterized as a “time-out” and that French and Italian among other ministers were not ready to take that step – yet.

    “There was in Germany a rather strong pressure for a Grexit. I refused that solution,” Mr Hollande said after a deal was reached.

    But, we’re only at phase I, the easiest and least intractable portion of the negotiations. This part should have gotten done 6 months ago with the slightest goodwill on the part of the EU minsters.

    As Varoufakis said:

    my constant proposal to the Troika was very simple: let us agree on three or four important reforms that we agree upon, like the tax system, like VAT, and let’s implement them immediately. And you relax the restrictions on liqiuidity from the ECB. You want a comprehensive agreement – let’s carry on negotiating – and in the meantime let us introduce these reforms in parliament by agreement between us and you.

    That should have been a no-brainer. It’s negotiation 101, immediately dispose of those issues on which there is substantive agreement, and get them out of the way, then proceed to the harder issues. And it would have cost the Troika nothing, because the ECB could always tighten the screws at a later date.

    It seems the only reason this wasn’t done was that Schäuble wanted Grexit from the beginning and was running the entire show.

    Well, he still is. And he’s going to get his way. The failure of the Greeks to “keep their commitments” – because the demands were simply absurd and designed more to humiliate Greece and force them to default rather than to achieve any useful end or even be possible, will be used as an excuse. Forced Grexit is still on the agenda, probably by this autumn.

    Of course it could happen much sooner, if the Greek Parliament fractures over accepting the unacceptable and Tsipras falls amid a power vacuum. That is what I predicted months ago if Tsipras capitulated and it’s still a realistic possibility.

  7. oho

    **** my own money in my US bank***

    the US has the world’s most expensive military, no one’s putting a lien on Florida and sending Cuba to repo Miami.

    it’s good to be the king (though probably with some clay in them feet).

    1. flora

      no one’s putting a lien of Florida

      True. Well, except for Goldman Sachs and subprime mortgage predators. Wait a minute. Wasn’t Mario Draghi, president of the ECB, also managing director of Goldman Sachs in the early 2000’s ?

    2. jrs

      Yea although I think that poster didn’t think it likely either. Those who do think it’s likely in the U.S. are easily spooked. And can be easily spooked into any austerrorism (like a Grand Bargain) measure IN THE U.S. imaginable with “but you don’t want to be Greece do you?” Well look there are a whole bunch of basic reasons that analogy probably doesn’t apply including the military power. Only the BRICS could pose any possible challenge, made on economic grounds, with their alternate reserve currency and new world bank etc. proposals.

      But with all that military and etc. the U.S. could not put pressure on Germany to say write off loans if it wanted a different outcome? Wasn’t the Fed at one point basically bailing out the whole world? Silence is consent and more, Washington’s is in on it for sure.

      1. MyLessThanPrimeBeef

        BRICS’ alternative currency is only credible if they have lots of the global reserve money in their reserves.

        But the key point here we should focus on is that the BRICS have to continue to earn it from its issuer.

        The power they will be challenging can print it at will.

        How do the BRICS prevail in that game?

    3. ambrit

      Dear oho;
      I have lived in Miami for years, on and off. Miami is already a part of Cuba, the neo-liberal part. Even these Cubans are up in arms about the transnational banks looting Florida. As for a military, well, expense doesn’t work out to efficiency and effectiveness.

    4. Romancing the Loan

      Just wait till the F-35 (or “flying coffin”) gets its first real-world trial.

  8. hardWorkingBee

    Talking about a poorly played hand by Tsipras seems misguided to me. The currently proposed deal is where negotiations were headed to, anyway, by the time the third bailout was signed at the end of this year. Tsipras and his ministers decided to pull the band-aid all at once now, rather than stretching it for a few more months.

    At the risk of sounding jaded, I think the reports about ‘crucifixion’, ‘anger’, ‘humiliation’ are kabuki for the masses. This situation is just standard crisis capitalism and shock doctrine as practiced for decades by the IMF in Latin America, “corralito” included. In the end, Greece needs foreign capital to grow and keep paying installments to the creditors. A lot of the reforms are intended to make Greece foreign investor friendly. Because Greece doesn’t have the devaluation route available to depress wages (and thus become more attractive to capital holders), then the depression route is the next option.

    Prosperity for the elites, several thousand pounds of flesh for the foreign creditors, looting of Greek resources by foreign investors and bankers, endemic high criminality, extreme poverty and marginalization, and lowering of life-quality for the majority of the Greeks will follow (if the experience in Latin America can be used as a guide here).

    1. Sally

      And to make your point look at what’s going on in Puerto Rico…..

      From Investmentnreaserchdynamics

      “A big fight is brewing between Oppenheimer Funds and the Governor of Puerto Rico. The battle is a smaller scale version of the battle between the EU and Greece. Currently hedge funds own $15 billion in Puerto Rican debt, mutual funds hold $11 billion, and comatose high net worth investors have been stuffed with the rest – $46 billion – by their brain-dead, trusty financial advisors.

      Too be sure, there is no doubt many $10’s of billions in credit default swaps connected to the bond insurance on Puerto Rico’s debt underwritten by MBIA, Ambac and Assured Guaranty. I would not be surprised if Oppenheimer has exposure in this derivative form as well.

      Puerto Rico announced on June 28 that it was unable to handle the debt service requirements of $72 billion in debt it has issued over the years. The debt issued by Puerto Rico is structured as “super” municipal bonds. This is because it is triple-tax free for everyone in the United States. Typically muni-bonds are only triple-tax free for residents of the issuing municipality.

      Puerto Rico’s economy has been sliding for nearly 10 years. Nearly 50% of the island’s residents are living in poverty. Yet the buyers of Puerto Rico’s debt continued to have insatiable appetite so Wall Street was more than willing to oblige, naturally.

      The Oppenheimer Funds mutual fund complex is the largest bagholder of Puerto Rico’s debt. including $4.4 billion of uninsured bonds. Not including tobacco bonds, insured debt and pre-funded bonds, 13.8% of Oppenheimer’s total holding holdings are in Puerto Rico bonds.

      This explains why Oppenheimer has assumed the role of Germany in the ongoing battle between creditors and Puerto Rico’s Government. Puerto Rico’s Governor is seeking to restructure the $72 billion in debt down to a level that will enable Puerto Rico to continue servicing it. The alternative is to force Puerto Rico to implement draconian budget cuts and tax hikes which would crush the economy and throw even more of its residents in brutal poverty.”

      1. MyLessThanPrimeBeef

        Those triple tax free bond investors are war-on-inflation dodgers, if my analysis is correct.

        Yet, the question lingers – why are we warring on inflation now, and which kind of inflation? How about cutting taxes on anyone who is not a corporation and not super rich (or not medium rich, or not even just a little rich)?

    2. tegnost

      I too have been pondering the comparison between greece and latin america as i try to figure out what purpose the harshness of the deal serves

    3. MyLessThanPrimeBeef

      It’s important for them to identify themselves as Europeans first, and not Greeks, Germans, French (nor even Greek-Europeans, German-Europeans, Gypsy-Europeans, African-Europeans, Asian-Europeans, etc).

      Then, it would not be about being ‘foreign investor’ friendly. That is, the foreigners will not be foreigners (when coming from within the Zone or Union, of course).

      The playbook is pretty clear about this:

      1. General Scheauble’s March to Athens
      2. Reconstruct
      3. Carpetbagging money pouring in to buy, buy buy. (We are all one union, all Europeans. No foreigners here).
      4. A stronger central Brussels
      5. Eventually, a right to work Greek state. And even American defense contractors (or less likely, admittedly, US automakers) set up factories down there.

      1. tegnost

        I think thats right, there isn’t enough labor advantage, as compared to how much the u.s. system benefits from latin america, so maybe as you suggest a sort of industrial reconstruction that benefits the Davos crowd with some chosen winners

  9. Sally

    Has there been another change in the site policy on comments?

    I have read down the page and can see no announcement. But you seem to have a number of threads with comments switched back on again after saying last week you were shutting them down.

    This is no way a criticism, it’s your site and you should run it how you like. But I was under the impression you were going to close most of the comments sections?

    1. Ames Gilbert

      it seems that any writer can choose to have the comments turned on for their particular article.

  10. Steven Greenberg

    What is not ever talked about is when the military will take over the Greek government.

    How can anyone doubt that this will be the eventual outcome?

    Will the Euro Zone claim this as another victory for Democratic Capitalism?

    1. Sally

      I think this maybe the preferred model.

      If you look at the kind of draconian policys the Spanish govt is passing. Even making jokes about the monarchy is now a criminal offence. Never mind all the stuff about making protest illegal. Franco would be proud. Europe seems to be slipping back into full blown fascism.

      Breaking a few eggs seems to be quite popular if you can get the trains to run on time.

    2. ambrit

      The subject did come up several months ago. A commenter from Greece stated that the Greek Army was generally supportive of Syriza. The lessons learned from the Junta years are still barely within the collective memory of the Greek Army officer corps. Any political meddling the Greek Army might try will more probably be tried second hand, as in, clandestine support for a ‘political solution.’ That they have remained quiet so far is a testament to their professionalism.
      If Greece became a de facto ‘failed state,’ expect the Army to play coy and let the nation call for them to “save the country.”

      1. susan the other

        Here’s a thought. What the Greeks and the EU just did was inoculate Greece and the EU from a military coup led by the US state department. Greece just became a German protectorate.

      2. NotTimothyGeithner

        The junta was formed from officers once in exile. I’m not sure there is a Cadre capable of seizing power. Attaturk was a hero. Nasser plotted for years and had a figure head ready to go. I’m not sure a potential junta can count on soldiers or police following orders.

        Without the USSR, wow, NATO will be in a bind.

      3. alex morfesis

        ummm…go look at protest videos in greece…notice how the protesters beat up on
        the police at will…in that respect, it is the global opposite of america today…

        no fear of a policeman shooting you because you were selling ciggeez without a license

        and no police saying they were in “fear of their lives” by being around humans…

        and also, no lyndon b johnson sitting by and doing the texas two step…and thankful
        the magic bullets only hit politicians named john…

        juntas were a part of life globally in the 60’s and 70’s…

        generalisimo francisco franco was not dead yet in 1967…

        and chevy chase was just the name of a town…

        again, when was the last time some european country had a military uprising…

        can you say moscow…????

        and the end result was raz- Putin…

  11. Blurtman

    How can what amounts to a puppet government have any authority?

    – The banksters seem to have pulled it off.

    1. MyLessThanPrimeBeef

      Sadly, theirs won’t be the only puppet government in the world.

      We find it in every continent.

  12. kevinearick

    As demonstrated, poverty, and taking advantage of poverty, is a choice, made by the majority, regardless of what it may say to the contrary. Money is a token, nothing more. What matters is how it is distributed, and by eliminating anonymous cash, working capital in the hands of those who can make it productive, the critters have placed themselves in a hangman’s noose, increasing rent/income at the cliff edge.

    Labor is not going to install stupid technology on top of stupid infrastructure as a means of generating debt for the nation/states to trade, until all the natural resources are gone. Chauvinist or feminist, republican or democrat, christian or muslim, capitalist or communist, the Fed or ECB, makes no difference, because from the perspective of labor, they are all thieves, seeking something for nothing, and as their number grows, labor disappears.

    If you filter out all that is not the stock market, you will see how to trade it, as a superimposition of civil marriage demographics, which feeds the bond market, which feeds the real estate market, the articulation of which you will see if you isolate them with filters accordingly. Capital and the middle class are always locked into a path to the DNA churn pool, because they cannot change behavior in real time.

    Only the individual can adapt, which requires recompilation to generate aggregate change. If you filter out all that is not programming, you will see the kernel. If you filter out all that is not the circuit, you will see an AC computer to run it. Labor is not going to accept taxation at 75%, subject to having its children taken and given to a couple in civil marriage for failure to comply, just because the majority voted it so, claiming to target the rent/income 1%, while actually attacking the income/rent 1%.

    The answer to turning an aircraft carrier around on a dime is that you don’t. You reconfigure it, and ignite the remainder. Tada, what they really want in Greece is to eliminate anonymous cash, and enforce arbitrary credit and debt on everyone. Those sneaky Germanic tribes.

    Like everything else in empire, immunization and antibiotics kill a perceived short-term threat at the cost of destroying the population in the long term, with climate variability in a positive feedback loop with debt. With human DNA comes DNA for thousands of critters to maintain its health, which the hospital is systematically killing, as an economic activity to grow GDP, surprise.

  13. kevinearick

    Funny, a critter that has run out of options enters on every floor, and whether you choose to provide an option depends upon whether it is a dress of misdirection on top of extortion, waiting to prey, Little Red or the Wolf matters not.

  14. P. Peterovich

    Apparently, Tsipras bows to save his banks from total collapse. But the question remains will it be possible to restore normal banking operations. The corralito induced a preference for cash that will be difficult to reverse. Every Greek is now aware that scriptural money doesn’t equal cash and it is highly unlikely that it will change anytime soon.

    1. MyLessThanPrimeBeef

      You won’t find many happy campers at the Let’s-All-Go-Cashless faction of conspirators.

      Is it a case of elites losing control? A mild setback? In-fighting?

  15. Bill Frank

    The financial elites will continue to tighten their economic strangle hold in their ever escalating attack on the masses. Lie, cheat, steal or even worse, they are determined to grow their power at any cost to achieve absolute control. Decades ago, in my youth, I never imagined such a scenario becoming reality in my lifetime. Guess I was just a naive optimist. Now, I believe all options to vanquish this madness must be open for discussion and action. I fear that the window of opportunity for taking meaningful action is closing faster than most realize. Somewhere, somehow, a line in the sand must be drawn and defended against this assault on humanity.

  16. Robbo

    So, you’re Tsipras, and you’ve got two options, either:

    (a) Take the deal on offer (total stinker) or

    (b) Go for Grexit

    Schnaueble obviously hopes Greece will take (b) because then, after the EU has provided a bit of token humanitarian assistance, Greece will be off the books: no more bail-outs, no more complaining – just a smoldering ruin that will discourage the other piigs from trying to escape.

    Despite my indignation I’d be inclined to take (a) for no other reason that maybe something will come along (what?) which will blow up the whole Eurozone project and then Greece can be part of the big settlement. Or maybe the pressure will get so great there will have to be a big debt haircut.

    Reminds me of that scene in the movie Last of the Mohicans (is it in the book?) when natty bumppo says to his girlfriend (who’s about to be kidnapped by the Indians) “just survive OK, just survive. I will come for you.”

    Life flows along. Often the important thing is to survive and wait for the next turn of the tide.

  17. Jim

    Bill, we need to focus on building leverage (on a multiplicity of fronts)

    What Syriza just did in Greece seems to be a perfect example of ignoring the reality of the asymetrical distribution of power that existed between themselves and the Troika monolith, Their strategy appears to have been to risk everything on the supposed power of rational discussion to persuade a bureaucratic monolith to meet their objectives.

    In addition the Left and Syriza, in particular, does not have a political theory of the State which would have enabled them to confront on both a rhetorical and practical level, the issue of how to use power in a democratic manner as leverage against such a monolith.

    Until the Left is willing to seriously consider radical democratic decentralization along with such concepts as populism, genuine federalism, subsidiarity and direct democracy( of various sorts) it will never be capable of mobilizing a population in a social formation of democratic leverage against corrupt centralized public/private power.

    The traditional dream of using highly centralized State as a vehicle of liberation is over–just ask Syriza.

    As all of the recent discussions on organization capacity have indicated, this bureaucratic conglomeration of rules, regulations and technical capacity( in both Europe and the United States) are totally in the service of corrupt and now solidified private/public networks of power.

    But such a monolithic structure is vulnerable through the creation of democratic leverage– first by concretely addressing how a modern State ought to operate.

    For example, Modern Monetary theory has no chance of ever becoming an operational reality(by simply relying on the presently existing highly centralized unreformed public/private structure of power). It must begin to analyze, discuss and debate concepts like subsidiarity which might serve as a model for allowing some centralization(with fiscal policy) within the context of radical decentralization in other areas.

    Again, the Left has no political theory of the State and therefore no answer to the question of how to actually use power to benefit the average citizen.

  18. salvo

    hard to believe but according to what Kouvelakis Tsipras & co were really clueless about what germany and the eurogroup were up to

    “Tsipras, who it has to be said is a kind of a gambler as a politician, thought of the referendum — an idea that was not entirely new and which was floated before by others in the government including Yanis Varoufakis — not as a break with the negotiating process but as a tactical move that could strengthen his negotiating plan.

    I can be certain about this, because I was privy to detailed reports about the crucial cabinet meeting on the evening of June 26, when the referendum was announced.

    Two things have to be said at this point. The first is that Tsipras and most of the people close to him thought it was going to be a walk in the park. And that was pretty much the case before the closure of the banks. The general sense was that the referendum would be won overwhelmingly, by over 70 percent.

    This was quite realistic, without the banks closing down the referendum would have been easily won, but the political significance of No would have been changed, because it would have happened without the confrontational and dramatic atmosphere created by the bank closure and the reaction of the Europeans.

    What happened in that cabinet meeting was that a certain number of people — the rightist wing of the government, lead by Deputy Prime Minister Giannis Dragasakis — disagreed with the move. Dragasakis is actually the person who has been monitoring the whole negotiation process on the Greek side. Everyone on the negotiating team with the exception of the new finance minister, Euclid Tsakalotos, are his people and he was the most prominent of those in the cabinet who really wanted to get rid of Varoufakis.

    This wing thought that the referendum was a high-risk proposal, and they understood, in a way that Tsipras did not, that this was going to be a very confrontational move that would trigger a harsh reaction from the European side — and they were proved right.

    They were also afraid about the dynamic from below that would be released by this initiative. On the other hand, the Left Platform’s leader and minister of energy and productive reconstruction, Panagiotis Lafazanis said that the referendum was the right decision, albeit one that came too late, but he also warned that this amounted to a declaration of war, that the other side would cut off the liquidity and we should expect within days to have the banks closed. Most of those present just laughed at this suggestion.

    I think this lack of awareness of what was going to happen is absolutely key to understanding the whole logic of the way the government has been operating so far. They just couldn’t believe that the Europeans would react the way that they actually reacted. In a way, as I have said, the right wing of Syriza was much more lucid about what they were up against.

    This explains also what happened during the week of the referendum at that level. Tsipras was put under extreme pressure by Dragasakis and others to withdraw the referendum. He didn’t do that, of course, but he made it clear that his next moves were the ones that the right wing would agree with, and the measure was not a break with the line that had been followed up until that point, but was rather a kind of tactical move from within that framework.
    And that was the meaning of the kind of backtrack on the Wednesday before the vote?

    Exactly. That Wednesday some people even talked about an internal coup happening, and Athens was brewing with rumors that Tsipras was going to withdraw the referendum. During his speech he confirmed the referendum but also made it clear that the referendum was conceived as a tool for getting a better deal and that this was not the end of the negotiation but just the continuation under supposedly improved conditions. And he remained faithful to that line during that entire week.”

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