Tentative Deal Strips Greece of Sovereignty, Makes Debt Relief Dependent on Compliance

The cost of Greece avoiding a Grexit is submitting to becoming an economic serf of the Eurozone, subject to even more draconian austerity than was ever on the table before. I’ve embedded the statement that sets forth the deal that was tentatively agreed today. The Greek government still has to pass four bills by the 15th and another two by the 22nd to comply. It’s not clear that that will take place.

Due to the hour, there are yet to be detailed analyses up, so I’ll provide quick media reactions and some additional observations. This deal is simply vicious. This is far and away the most one-sided agreement I’ve ever seen, by an insanely large margin. Even the language is shamelessly punitive. For instance, the document repeatedly mentions that all the previous terms under consideration will need to be made vastly more stringent in light of the deterioration of the economy and how the Greek government needs to prostrate itself to gain the trust of the creditors.

As Politics.co.uk puts it (hat tip Swedish Lex):

As the dust settles this morning on the Greek bailout crisis, it is increasingly clear we are witnessing one of the most daring raids on national democracy in post-war political history. If this new plan passes the Greek parliament, Greece can no longer be said to be a genuinely sovereign state. Brussels and Berlin are taking over Athens. Even one of Alexis Tsipras’ minor victories – that a £50 billion privatisation fund would be based in Athens, not Luxembourg – was entirely superficial. As Angela Merkel insisted this morning, it would not be under Greek control.

The fact that Greece is even considering it means that they recognize what we have argued: that a Grexit would be such a cataclysm that even this dreadful deal would be considerably less costly to Greece and its citizens. But this is like asking someone to choose between cutting off an arm versus cutting off both legs.

This gives an idea of the crumbs that Tsipras was fighting to salvage. According to the Financial Times:

Mr Tsipras succeeded in removing from the final statement a German-proposed sentence saying that, in the event of rescue plans failing, “Greece should be offered swift negotiations on a timeout from the euro area”. Ms Merkel later said there was no Plan B and there would be no discussion of a Grexit without agreement with Greece.

And here is the overview:

Under the planned deal, the stricken Greek economy would receive its third rescue in five years, a three-year programme, funded mainly by the ESM (European stability mechanism) , the eurozone rescue fund, and by the International Monetary Fund.

Mr Tsipras has promised to pass tough new reform laws, including on tax and pensions, by Wednesday and prepare further rapid reforms, such as labour market liberalisation, opening up closed professions, deregulating Sunday trading and reinforcing the financial sector. In a particularly humbling move, the government has to reverse some of the extra spending measures it introduced earlier this year, when it trumpeted its ambitions to end five years of EU-imposed austerity.

The major terms include:

Increasing and simplify VAT

Cutting pensions. More on that shortly. The terms here look to be vastly worse than the cuts Greece fought a few weeks ago

“Requesting” continued IMF “support” (monitoring as well as financing)

“Introducing quasi-automatic spending cuts in case of deviations from ambitious primary surplus targets after seeking advice from the Fiscal Council and subject to prior approval of the Institutions”

Sequestering €50 billion of assets, nominally supervised by Greece but under strict oversight of the creditors. Half will go to recapitalizing the banking system

Implementing labor market “reforms” along the lines sought by the creditors

Not only is there no debt relief, there is no prospect of any debt relief unless Greece meets targets. And forget about principal reduction. From the letter:

…the Eurogroup stands ready to consider, if necessary, possible additional measures (possible longer grace and payment periods) aiming at ensuring that gross financing needs remain at a sustainable level. These measures will be conditional upon full implementation of the measures to be agreed in a possible new programme and will be considered after the first positive completion of a review.

The Euro Summit stresses that nominal haircuts on the debt cannot be undertaken.

And it’s Greece’s fault that it is having trouble with its debt loads. From earlier in the document:

There are serious concerns regarding the sustainability of Greek debt. This is due to the easing of policies during the last twelve months, which resulted in the recent deterioration in the domestic macroeconomic and financial environment. The Euro Summit recalls that the euro area Member States have, throughout the last few years, adopted a remarkable set of measures supporting Greece’s debt sustainability, which have smoothed Greece’s debt servicing path and reduced costs significantly.

I’ve seen nothing in the media reports or the Twittersphere (I have not had the time to check it extensively) that suggests that the ECB is going to let up on the Greek banks today. It’s not clear how they limp through till Thursday if they are utterly drained of cash. Do they simply freeze all operations? In the meantime, suppliers will remain unable to bring anything in, which means intensifying shortages of drugs, particularly insulin, and the start of food shortages. The document takes the airy posture that dealing with the banking system is a tiresome detail that can wait:

The Euro Summit is aware that a rapid decision on a new programme is a condition to allow banks to reopen, thus avoiding an increase in the total financing envelope. The ECB/SSM will conduct a comprehensive assessment after the summer. The overall buffer will cater for possible capital shortfalls following the comprehensive assessment after the legal framework is applied.

Rapid decision on a new program? Does that mean getting the “first set of measures” as in the initial six sets of bills due to be passed by the 22nd, or the more detailed resolving of the updated “proposals” which will take more time? I’m leaving reader comments open (but please play nicely!) so that readers can post links and tweets as more analysis comes in.

Now to pensions. I must confess to not being certain what the critical highlighted section means, but if it means anything within hailing distance of Nathan Tankus’ and my best guess, the pension system is about to be gutted. This is the reference to what Greece needs to agree with the Institutions regarding pensions (emphasis ours):

….carry out ambitious pension reforms and specify policies to fully compensate for the fiscal impact of the Constitutional Court ruling on the 2012 pension reform and to implement the zero deficit clause or mutually agreeable alternative measures by October 2015.

That would seem to mean that Greece needs to fund its pensions from dedicated sources with no deficits. I have no idea whether any Greek tax sources are segregated to pay for pensions, analogous to America’s payroll tax which funds Social Security. The only other source would presumably be pension assets. A post by LOL Greece examined the Greek pension system in some detail.* This gives you an idea how much it falls short of being able to pay pensions:

To cut a long story short, the total assets of the greek social security funds would not pay for ten months’ worth of pensions and benefits, even if we could somehow liquidate them all without causing a fire sale. I have nothing but respect for the actuarial profession, but an actuary’s work right now would not be to discuss what pensions are affordable or what the pensionable age ought to be; it would be to discuss how much of the Greek public sector’s wealth would need to be injected into the funds to make them halfway viable while targeting modest outcomes.

If this take is correct, it means Greek pensions are about to be cut to close to nothing. The 1% of GDP reduction in pensions that Syriza rejected would be a paper cut compared to the wholesale gutting that we fear is in the offing. Any informed comment here would be very much appreciated.

And anyone who has been following the Greece saga for a while knows the efforts to pluck Greece of assets aren’t good cash generators. Again, they seem designed more to satisfy either a foolish need to try to make accounts sum up when they won’t or now, sheer vindictiveness.

I’m taking the liberty of quoting Wolfgang Munchau’s new article at some length, since it articulates what a horrorshow this deal is for Greece and for Europe (hat tip Swedish Lex):

A few things that many of us took for granted, and that some of us believed in, ended in a single weekend. By forcing Alexis Tsipras into a humiliating defeat, Greece’s creditors have done a lot more than bring about regime change in Greece or endanger its relations with the eurozone. They destroyed the eurozone as we know it. They demolished the idea of a monetary union as a step towards a democratic political union and reverted to the nationalist European power struggles of the 19th and early 20th century. They demoted the eurozone into a toxic fixed exchange-rate system, with a shared single currency, run in the interests of Germany, held together by the threat of absolute destitution for those who challenge the prevailing order. The best thing that can be said of the weekend is the brutal honesty of those perpetrating this regime change.

But it was not just the brutality that stood out, nor even the total capitulation of Greece. The material shift is that Germany has formally proposed an exit mechanism. On Saturday, Wolfgang Schäuble, finance minister, insisted on a time-limited exit — a “timeout” as he called it. I have heard quite a few crazy proposals in my time, and this one is right up there. A member state pushed for the expulsion of another. This was the real coup over the weekend: regime change in the eurozone.

The fact that a formal Grexit may have been avoided for the moment is immaterial. Grexit will be back on the table when you have the slightest political accident — and there are still many things that could go wrong….

What should the Greeks do now? Forget for a moment the economic debate of the last few months, over issues such as the impact of austerity or economic reforms on growth, and ask yourself this simple question: do you really think that an economic reform programme, for which a government has no political mandate, which has been explicitly rejected in a referendum, that has been forced through by sheer political blackmail, can conceivably work?

Needless to say, as Munchau stressed, this puts all of the Eurozone on a blood and claw footing, with the strongest making it clear they will inflict their will on the weaker. How can Italy, who Munchau points out has lost considerably by joining the Eurozone, continue to participate in what is now clearly a Greater German Co-Propserity Sphere? The Eurozone’s days are numbered. While this plan to occupy Greece economically might, by virtue of sheer brute force, buy the Eurozone a few years it might not otherwise have, with the benefit of hindsight, historians may flag the fatal decisions as coming much earlier, when Merkel (and Sarkozy) went for incremental, inadequate, domestic-interest-serving fixes, when the EU and Eurozone architects had expected, indeed required, bold European integrative step when deliberately unresolved issue would produce predictable crises.

But the pillorying of Greece now occupies center stage. In a literary flourish, we titled a late May post The Persecution and Assassination of the People of Greece as Performed by the Inmates of the Troika, Under the Direction of the Eurogroup. We lacked the imagination to see that it would turn out to be a literal description. And as Swedish Lex suggests, this will be a date that will live in infamy.

Update 7:30 AM: Apparently the Greek parliament is prepared to accept the German/creditor occupation:

Update 9:00 AM: NT: apparently complete capitulation was not enough for the ECB:


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  1. Bill Smith

    How can a Grexit now be worse?

    And in my opinion, since this does nothing about the debt, there will have to be another ‘rescue’ down the road.

    Given the open borders, maybe the old should leave as the young have been doing.

    1. Bobbo

      Exactly. If you’ve decided to play the role of the sacrificial lamb, at least give yourself a chance to recover when the dust settles. Tspiras has betrayed all of the trust the voters put in him … for nothing.

      1. jabawocky

        And the fact that Tsipras agreed should tell you that the alternative was far worse, as Yves, Nathan and Clive have carefully outlined ad nauseam, and as Yanis Varoufakis outlined in his recent opinion piece in the UK’s Guardian.

        There are some people on this forum who remind me of climate change deniers. They refuse to accept the evidence put before them on the realities of a Grexit, no matter how compelling. If you are rational you must be prepared to believe that Tsipras and Yves are right, no matter how unpalatable it seems, no matter how much you wish for it not to be true. I take my hat off to the contributors on here for their patience in explaining it over and over.

        No currency, no cash (clive)
        No central bank (Nathan)
        No payments system (clive and nathan)
        No cashpoints, distribution system (clive)
        No plan to implement the above (Yves)
        No time to implement the above (everyone).
        No imports, food, pharmaceuticals, dependent on humanitarian aid (Yves).
        Apologies for any mistakes in attributions or anything I missed.

        1. Garrett Pace

          They have also pointed out over and over that the Greek government COULD have made provision for many of those things but did not.

        2. CSTH

          This list of ‘what would be lost’ is essential to understanding the enormous challenge of a ‘zero day’ Grexit.

          Certainly – certainly – a Grexit would be much more than Argentina with some logistical details.

          It seems to me though that it is equally improbable that ‘the day after the Euro’ would mean a complete currency vacuum that would remain until the day that a replica of today’s euro apparatus became operational, 12-18 months from now. (And I have an appreciation of just what a daunting challenge ‘full system recovery’ would be).

          But it seems to me that undestanding the implications of Grexit must mean trying to anticipate how the ‘Day 0’ vacuum would be filled – because i don’t think it’s likely that a total vacuum would remain for years – or even longer than a few days.

          What might emerge? Let’s start by adding a list of what would survive Grexit day 0, as a complement to Jabawocky’s list here of what would be lost:

          What would remain:

          1. A monoploy on the legitimate use of political violence: Clearly this is delicate, given Greece’s history, but I expect that you’d see some form of martial law, curfews etc. Hopefully it could be underwritten by some form a national unity government, perhaps with endorsement (tacit or explicit) by a respected outside entity – NATO, UN, USA, etc…. TIMEFRAME – <24 hours

          2. Tradeable 'currency-esque' tokens. There will still be Euro-bills in circulation. Many will continue to come in from outside, some through illicit channels. In addition, some form of 'ration card' for humanitarian goods will likely be established (maybe old-school punchcards, maybe electronic credits tied to ATM cards or to nationalID barcodes, maybe both) and these will likely become tradeable. for comparison….In the 'meth districts' of the US, 2-liter bottles of coca-cola trade like currency, because you can buy them with foodstamps. Bottom-line … some form(s) of quasi-currency would fill the vacuum (they already are…), and the closer some of these are linked to the underwriter of the legitimacy in point 1, the better for political and social stability. Timeframe: days to weeks

          3. Goods would begin crossing the beaches and borders very rapidly, though not necessarily as 'imports'. There's a de-facto standard for duty-free cash-less imports that applies globally, as long as the point of embarkation is the deck of a supercarrier in time of crisis. I expect that this standard would be modified and extended to other means of transport in the interest of efficiency. Timeframe – <1 week

          4. The greek government can pledge some of its assets as the equity stake in a progressively more formal currency system. Apparently some people believe there's 50B or so lying arround that can be turned into cash quickly. Its one thing to burn all your cash before declaring BK – but to liquidate first too is just idiocy. Why not pledge these as collateral to some hegemon or another (see also: the supercarrier SEZ standard) in exchange for help stabilizing a new formal currency (timeframe: 1-3 months).

          5. Rebuild a formal banking and payments system. This is the really hard part. I expect that no single person is capabale of comprehending all that would have to be done – this is an evolutionary process, and its probably best to think in terms of a 'maturity model'. timeframe: rudimentary system adequate for re-entering international transactions- 18-24 months. Fully mature 'first world finance' systems – 5-10 years…or maybe never….

          Look, I'm a dilletante, and I expect that most of the commenters here could improve this list dramatically. But I know enough about the world to know that a political and financial vacuum can't last more than a few days, and we owe it to ourselves to anticipate how it could be filled.

          After all – if a port-au-prince level earthquake struck athens tomorrow morning, with an Aceh-level tsunami (god forbid…), would all political and economic activity freeze solid until we were ready to reactivate the status quo ante? Obviously not…

          I am very open to the possibility that Grexit would be worse than this deal. But I am also very skeptical of the expectation that chaos need reign for more than a few hours,if even that, and even in the (inexcusable) absence of prior planning.

          1. Clive

            You’re not describing some future, theoretical outcome for Greece. You are describing what has actually happened in similar circumstances, economically speaking, with failed states such as Iraq, Afghanistan or Somalia. I’ve never been to any of those places myself so I certainly can’t speak from first hand experience. But I certainly don’t think any of those countries are muddling through happily. Nor do I think they have returned or will ever return to being some kind of agrarian paradises.

            Modern societies are closely coupled with long supply chains, small inventories and limited capacity for resiliency. They are not good at handing big, sudden changes gracefully.

            1. jim

              How you can compare Greece with countries that have a decades long history of foreign military intervention and occupation–and say “see it didn’t work in Iraq”–is beyond a stretch.

              1. Clive

                No, it’s never been tried before, collapsing an entire nation’s monetary system outside of a war zone. All we know is what happens after a war and a country ends up with a collapsed monetary system, you’re absolutely right, we lack empirical data on this.

                Okay then, what we need to do is run a science club project using Greece and its population as a lab rat and see what happens. Perhaps I’m wrong, you certainly seem pretty sure it’ll all work out fine so what could possibly go wrong ?

                1. Stelios Theoharidis

                  So I am quite aware that a Grexit would be very painful for the Greek people and no plan is in place by the Tsipras government. However, why under the circumstances is this is not going to become a perennial issue for future democratically elected political leaders of the Greek state or for political leaders of other countries in similar circumstances under austerity. And, if that is the case, it provides precedent for future negotiating positions of the various parties involved, diminishing political capital and trust between them. I think that is the intention of the 50 billion EUR fund, to extend leverage over Greece in consideration of changing political climes in the future. However, it is quite evident to any student reviewing the history of similar circumstances that physical industrial, ports, rail systems, water and energy companies as well as other assets can be seized. To their benefit both the Greeks and other highly leveraged states within the European Union now have a valuable lesson that the troika partners cannot be trusted, as the Russians learned that sorry fact about American economists, as Latin American states learned about the IMF. We must remember that several economies within the EU are in a precarious state and a severe economic crisis, which seem to occur more frequently these days, could put them over the edge into similar circumstances that the Greeks have endured. Similarly a political crisis of legitimacy of one of the major parties within any of these states could certainly have the same effect.

                  We are certainly not absent political analogies for these circumstances. The conditions of the Treaty of Versailles eventually lead to the emergence of the Nazi party, serious leftists emerged in Latin America to challenge the IMF SAPs, or Putin’s dominance over the Russian state as a clear result over the humiliation it endured due to a poorly conceived privatization plans. I don’t anticipate that democratically elected political power in Greece will take on the character of National Socialism. But, with a deteriorating economic situation in the country, it is to be expected that political parties will continue to emerge to challenge this status quo in circumstances similar to challenges surrounding IMF privatizations in Latin American countries. What would be most problematic if some sort of Golden Dawn nationalism led directly to harming minorities within Greece, or even worse threatening neighboring states over historic bad blood / boundaries. A regional conflict with Turkey would count amongst the most problematic.

                  The only reality I suspect that can ameliorate these conditions is the ability of Greek youth and professionals to emigrate and work in other European countries and send back remittances as occurred en mass in Latvia. This is more in the sense that it may lessen the large populations of unemployed youth and young professionals available to disrupt the state imposed austerity via protests. Even significant expatriation will be a double-edged sword for the Greek economy. Otherwise if popular sentiment over this humiliation continues to simmer, we can anticipate this political contest to reoccur. Maybe someone will have a better plan at that point or maybe circumstances will worsen. Regardless, it seems to be likely

                  So I think the most important things here are the many takeaways from these circumstances. 1) As is clear above the European ‘partners’ obviously aren’t going to negotiate in good faith but rather as their internal politics would predict; 2) It is quite more likely to incur haircuts on debts owned by financial institutions rather than sovereign states; 3) You better be making plans or constructing a parallel strategy / infrastructure for Euro exit if that is your negotiating fallback; 4) Be willing to pull that trigger in short order if the parties you are negotiating with attempt to disrupt your economic system as they are likely to do; 5) The parties in control during negotiation are incredibly important, for civil society it is important to avoid allowing corporatist leaning political parties to dictate these circumstances; 6) It really hasn’t been considered what punitive ‘nuclear’ option would have been adopted by the Germans / Troika if a Grexit had actually occurred, what tools did they have at their disposal in order to thwart their counterparties further, I seem to recall the British utilizing terrorism laws to seize Icelandic funds, that is certainly something that requires investigation 7)………? You generally seem like an astute bunch for a long time reader, I’d really enjoy hearing something prescriptive.

          1. wbgonne

            Indeed. There is no alternative. . . . Until suddenly there is.

            To the neoliberal dead-enders I say:

            There are more things in heaven and earth, Horatio,
            Than are dreamt of in your philosophy.

            — Hamlet (1.5.167-8), Hamlet to Horatio

        3. meads

          these items overstate the problems and are in any event are only short term inconveniences .

          No currency, no cash (clive)- not true. The Euros that were in the Banks did not vanish into thin air. As capital controls were telegraphed long in advance, the Euros are in the hands of the shadow banking system, businesses and the people.

          No central bank (Nathan)- the Central bank can issue IOUs until they start printing Drachmas

          No payments system (clive and nathan)- Once the Government makes the IOUs legal tender , vendors will accept payment electronically

          No cashpoints, distribution system (clive)– Once the Government makes the IOUs legal tender, the banks will be able to distribute thru their branches and ultimately ATMs

          No plan to implement the above (Yves)– Today is day 1- if the above steps are taken, implementation should be doable within 6 months

          No time to implement the above (everyone).– see above

          No imports, food, pharmaceuticals, dependent on humanitarian aid (Yves).– deals can be cut with Russia for oil, and the US for food, medicines and aid

          1. Nathan Tankus

            A) decent deals being cut with bot U.S. AND Russia is just pure fantasy. If you want to write about such fantasies along with ponies and rainbows, I’m sure there is some fan fiction site that will indulge you. This is not that site

            B) you seem to think that declaring a drachma payable in payment of debts will just make all the IT systems transform. You are wrong. as Lambert says, code is law and until that transition happens they basically don’t have a currency in the sense of government liabilities that vary in value relative to other currencies. cash exchange rates a global FX market is not.

        4. Crazy Horse

          What I find most incredible in this entire episode is the fact that that Syriza choose to play out a poker hand consisting of little more than Obama’s “hopeie changie thingie” instead of utilizing an infallible, time proven means of obtaining unlimited funding. Tsiprias must indeed be as incompetent as he seems.

          All Greece need to do was send a clandestine team of Gladiators to attack the Kremlin building on a suicide mission and then formally declare war. The US would have 100 billion in military aid and the entire Mediterranean fleet on the way to it’s new ally within hours. After all, it has been trying to provoke regime change in Russia for several years by expanding NATO, ratcheting up economic sanctions, engineering the neo-Nazi coup in Ukraine and complicity in shooting down an airliner and blaming it on Putin.

          If Putin behaved with the diplomatic restraint and sophistication he showed by maneuvering Obama out of attacking Syria and limiting his response to the Ukrainian coup provocation there would be little danger to Greece from such an action and it would open the taps to the world’s largest money fountain– the War Party perpetual geyser.

      2. Eric377

        He betrayed no one. He had an incorrect vision of the world that he communicated to the Greek electorate who responded by electing his party. But the election of his party did not change the reality of the world. It is no betrayal to wake up from a dream.

    2. Clive

      It may seem scarely believable but an exit from the euro by Greece could quite easily be worse. That’s why it submitted to these punative, draconian (my normally sufficient adjectives list is failing even me here, that is how bad these terms are) demands.

      By agreeing to these terms, Greece gets to keep a currency. That currency is the euro. As we have been trying to point out, at some length with detailed arguments and facts, absent the euro Greece simply does not have a functioning currency. Literally. There is no money. At all. Some limited cash transactions would be possible based on the presence of notes and coins already in circulation and whatever remittances people with access to funds outside of Greece would remit inwardly. In case you’d not noticed there is a currently a bank holiday in Greece with ATM limits set at 60 euros per person per day, 120 euros per pensioner couple. Even this meagre stipend was due to run out within days or a week at the most.

      The Greek government had made no serious plans to establish a new currency. Even if they had, a realistic re-drachma-isation schedule would take a year to 18 months minimum.

      No money for food imports, medicines, energy. Suffering and chaos on a scale it is difficult for any of us to imagine anywhere in the world, let alone “modern, civilised’ Europe. Of course, some humanitarian relief would have started to trickle in and would inevitably have grown in the face of an unfolding disaster. But not until misery had been endured by those who would be least able to deal with it.

      We will all look back in 10 years or so when history has been written and settled on this matter and appreciate how close we came to the edge in Europe. The fact that we’re here at all shows what a masterpiece of failure the EU has become.

      What worries me though is that here, today, right now, people are still seemingly not getting what an apocalypse a disorderly Greek exit from the euro would be and suggest it might not be worse than what Greece is having to accept. That scares me most of all. It was the — genuine — belief on the outbreak of WW1 that it “would all be over by Christmas” (ie a gross underestimation of the risks being run) that led to so many mistakes being made.

      I never used to get how so many could be so foolish as to not see what was so predictable. I get it now.

      1. Bobbo

        Well, Clive, perhaps I am a little biased here, and perhaps that bias gives me a blind spot. But I refuse to acknowledge that all we need is a smoothly functioning centralized efficient payment system and our banker overlords to get along in this world. I refuse to drink that Koolaid. The real abyss, the real horror, is war. Not the confusion of economic collapse. War is the real horror, the real end of the road. If Greeks were to say %$#@ the banks, %$#@ the Troika, %$#@ the EU, %$#@ the oligarchs, AND declare a debt jubilee, they would be well on their way to recovery. But that would force a retreat to a barter economy, a cash economy, something that the diehard central planners at NC will never accept.

        1. rusti

          I’m not sure it’s terribly brave to assert from afar that the appropriate path for Greek diabetics in need of insulin is for them to retreat to a barter economy to minimally inconvenience greedy bankers.

          1. Bobbo

            That’s right, Rusti, debt servitude is the preferable course for Greek diabetics. For everyone else, the answer is resilience, sovereignty, dignity, democracy, humanity, mutual reliance and local community.

            1. Eric377

              A fine list of words. To bad no Greek government tried to be elected on such a basis in 1998 or so with a pledge to get there without much external debt. It is sad indeed.

          2. Dr. Luny

            The insulin scare trope needs to die. Modern insulin production methods have been well understood since the 80’s. More primitive methods would be available within weeks if necessary. What is needed for Greece to survive the chaos of an exit from the Eurozone and EU is a government that is focused on planning and managing that exit rather than negotiating and implementing austerity. There needs to be an actual socialist revolution in the country in order to manage the situation effectively and win back economic sovereignty. Such a country would initially be poorer, and plagued by all sorts of political and economic problems, but it might have full employment and a healthy society in ten years. The question here is whether the country has the possibility of a future other than the one proscribed by the neoliberal elite. We have a pretty good idea of what that future looks like. We know what that present looks like. The only other hope is the pie-in-the-sky eurocommunist salvation people like Varoufakis dream about. That’s just not in the cards. The faultlines in Europe are deep enough that the elite will always be able to manipulate them to prevent that kind of revolutionary change. A European system in which there are clear winners and clear losers is the new political reality, and it actually gives the elite more power by buying the loyalty of the ‘winning’ constituencies. If there ever were a threat of a left-wing takeover in Brussels, the ‘winning’ countries would leave and destroy the viability of a European Union as such.

            So I firmly believe that a grexit is absolutely necessary. What is clear, however, is that the current government is totally incapable of effectively managing one. This means Greece needs new elections and SYRIZA needs a new platform and leadership or it needs to get out of the way and let someone else handle the task. Maybe it could be accomplished with a leadership reshuffle and a coalition with the KKE, but that doesn’t seem politically viable.

            The writing is on the wall for Tsipras and the current government. Of course he’s fighting to save his own skin and that means paying any price to the troika to keep the country afloat within the eurozone. It’s even the responsible thing to do at the moment. What is needed now is to buy time for a political reorganization of the left around preparing for a grexit. Then the government can be brought down by SYRIZA’s left wing and new elections called. This is a high-risk strategy, but it’s the only one that offers an actual alternative.

            1. Yves Smith Post author

              Huh? How many actual diabetics on insulin do you know? I suspect you wouldn’t be so cavalier if this was YOUR insulin supply at risk.

              And do you have the foggiest idea how long it takes to start manufacturing a new product, let alone one that is made to pharmaceutical grade standards? In the US, that includes tight labeling and tracking of every lot.

              This is even worse than the usual “assume a can opener” joke about economists.

              The concern about insulin was so serious that there was discussion earlier among Eurocrats of making sure that Greece had enough insulin when supplies were getting stretched during IIRC the 2012 negotiations.

              If you think a country that already has 26% unemployment can survive losing another 18% of its GDP (pretty much all its export sector), have its population at just above starvation level (Greece is not self sufficient in food and it would take a minimum to get there, and the “barely above starvation level” assumes equal distribution of calories, which is hard to see happening except by force, which also uses up scarce resources), you are smoking something strong. And your assumption of a broad based socialist impulse in Greek society has thin support in evidence. Honestly, this reads as another “assume a can opener”.

              1. keith hussein

                Depressing stuff Yves. So ‘There is no alternative’ after all?

                Is there any hope for progressive change – anywhere, as things are pretty desperate now? Eight years ago we could have wound up the corrupt private banking system and missed a huge opportunity to, at least, recalibrate our failed economic model.

                Where to now?

          1. Bobbo

            Humanity will do what it always does . . . adapt to changing circumstances. If imports are too expensive, Greeks will stop importing — so what? I live in Korea so I have a front line perspective you ivory tower dweller lack. Guess what happened during the IMF crisis in 1997? Korean imports ground to a halt. Guess what happened in 2008 when the Korean Won lost 50% of its value? Imports ground to a halt. Guess what? Life went on. People did not die. It was not the end of the world. People adapt. The only thing we have to fear is fear itself. Believe it and live it.

              1. Bobbo

                Your are right Nathan. Korea did keep importing. But imports dropped by 50% from 1997 to 1998. My point, however, was not that imports dropped to zero. Did you really think that was what I was trying to say? My point was that people adapted to a shock to the economy and found a way to get by. People are more resilient than people in the USA seem to believe is possible.

                I think the Greeks would be better off going back to using seashells as currency rather than accept this deal.

                1. Nathan Tankus

                  and there’s a huge difference between imports dropping by a large percentage (fyi the data doesn’t support your “by 50 per cent” assertion) and dropping to nearly nothing. stop handwaving please.

            1. Clive

              Comparisons with the Asian Financial Crisis are not applicable because the countries affected were sovereign currency issuers. As you rightly point out, they could “fix” the problem of private sector over indebtedness by devaluations. The chaebols could and did default and/or had their debts written off/rescheduled. Initial illiquidity showed the true underlying issues of private sector insolvency. The insolvency was resolved and liquidity eventually returned. At no point was The Bank of Korea unable to issue South Korean won or sovereign debt. Imports could still be purchased because, while more expensive (dramatically so for a time) there was at least still a functioning financial system to process the transactions to pay for them.

              Unless the ECB relents and expands the ELA to Greek banks, the Greek banks have no money. This is beyond illiquidity and even insolvency. It is staring financial evisceration in the face.

            2. Yves Smith Post author

              Irrelevant. S. Korea had its own currency. Not at all comparable to a Grexit. And S. Korea was actually not badly hit by the direct impact of the crisis. Even now, they call the downturn “the IMF shock”. 1997 is also an eternity ago in banking system terms. American still got physical checks back with their bank statements back then! The speed of clearing and volume of international payments was vastly lower then too.

              1. James Levy

                So TINA is really true, and we might as well love out masters and worship their wisdom and probity like a battered wife who thinks that he husband must really care about her to want to correct her bad behavior.

                When is the time to stand and fight? When comes the day to stop surrendering? You ridicule anyone who says nationalize everything and fight like men. We are fools. We are naves. Well, OK, but you are cowards and don’t stand behind a load of facts and tell us otherwise.

                1. Goldcap

                  James, “stand up and fight” means nothing when we’re talking about financial nukes. IMHO the cost of Grexit would be actual deaths (maybe lots?), huge populations of seniors suffering a life savings lost, a generation of poverty and anger, and the political and social repricussions of all of that totalling something at least as dangerous as years of austerity.

                  Now, there is an argument to be made for the prerequisite YEARS of planning and tactics, backroom deals, and an actual Grexit under the noses of the EU Overlords, but holy crap, from all evidence, Tsipras can’t even figure out if he wants sugar in his coffee, let alone orchestrate the ONLY instance of mass covert state subterfuge on an international financial stage ever seen by humans. No hyperbole. So, uh, whoa there cowboy.

                  But while I appreciate your anger and obvious frustration, and sympathize, it was Patton who said:

                  “The object of war is not to die for your country, but to make the other bastard die for his.”

                  National Immolation to NeoCon ideology would be true cowardice, IMHO. The EU would just stand back and laugh at the smoke, and the lesson for anyone else in contemplation would be “See, the Troka was right all along”. Bad, no?

                  Thanks Yves for allowing comments on this thread, BTW.

                  1. Norm de plume

                    Yes, thanks from me too. The thrust and parry helps to create more informed opinion, with cool heads modifying hot hearts, and you would hope, vice versa.

                    Intrigung to wonder what George S would have done in Alex T’s shoes.

                2. flora

                  When is the time to stand and fight?

                  When the populace agrees that fighting is right and necessary. A democratically elected govt and all that. When there is a “war” plan in place.

                  There’s been no physical preparation to leave the Euro. More importantly, there’s been no mental preparation of the populace to leave the Euro, or to even consider the question.

                  As it is, Syriza promised its electorate they could stay in the Euro and reduce austerity by means of talk alone. They could wrangle a better deal without any leverage. Syriza didn’t modified that approach even as it became clear talk wouldn’t change anything.

        2. alex morfesis

          you have to have cash to have a cash economy…

          the victory is in the details…

          perhaps you are a person who has a roof over your head, family with a job to help support you, so that you can barter…but you still got those from a medium of commerce tied to the federal reserve note legal tender dollar or “now” the frankfurt based circulating legal tender euro…even china and russia live off the dollar…petrodollars or exporting for dollars

          most people lived stretched out lives, spending tomorrows paycheck today…

          have you ever tried to get a junkie to slow down enough to get their life in some type of order…

          most people are economic junkies…never putting aside anything for a rainy day, and being afraid they might “miss out”

          mellon (when treasury secretary under hoover) caused the bank holidays of 1933 when fdr refused to join with hoover after the election to force all the state banking institutions to join the federal reserve system…that is where the wooden nickels in america came from…mellon refused to deliver hard currency…local communities were forced to create their own medium of commerce..

      2. Snow

        “No money for food imports, medicines, energy.” I guess Greece would be paid in for instance euro for its exports. My impression is that last year exports balanced imports. Therefore it makes no sense to me that there would be no money for imports.

        1. Yves Smith Post author

          Paying for exports has nothing to do with macro flows. Tell me how a food distributor or a pharmaceutical wholesaler pays for imports when he cannot send money to his foreign suppliers with capital controls on. The only way he can do it, even assuming he drained his bank account and has piles of cash on hand, is trucking cash to the border, opening a foreign bank account, and wiring it from there, or bringing the cash directly to the foreign premises of the foreign supplier.

      3. Doug Terpstra

        I too was very surprised, astonished really, early on, that many people here were snookered by hopium, especially on the heels of the hope-and-shaft Obama regime. My criticism of Syriza was rebuked as cynicism by some. The left is a credulous group, and is often intolerant of skeptics. Thankfully Yves is not…credulous, that is :-)

        1. Jerry Denim

          “The left is a credulous group, and is often intolerant of skeptics. ”

          True enough, I just got banned from an acquaintance’s Facebook page for skewering his patently false Obot propaganda at this incredibly late date in 2015. Some people would just rather stay blissfully ignorant and happy members of a cult than face reality. Don’t let hard facts get in the way of my Obama buzz man!

          Concerning non-greek Syriza fan boys and girls; It’ much harder to form intelligent opinions on the quality of leadership in foreign countries you have no familiarity with when you don’t read or speak the language, the reportage is bad or contradictory and the subject matter technical and obtuse. It doesn’t bother me at all (well maybe a little, but I shrug) when non-american citizens think Obama is awesome. They don’t vote and they don’t have a responsibility as non-citizens to stay informed on American politics and police the actions of our elected officials. When I hear Americans fawning over the greatness of our dear leader my blood boils.

      4. vidimi

        the thing is, with this deal, those who need insulin and other life-saving drugs will still die from deprivation, except maybe in nine months and not three. suicides will continue for years, rather than months, or decades instead of years. the country can keep the euro but most people will not have enough euros for anything. i can see see how this deal is worse than grexit for a lot of people. perhaps not for the old or those who work abroad, but it kills hope where a grexit would have at least given the opportunity for greece to rebuild. greece: abandon all hope ye who enter here.

        1. wbgonne

          Exactly. The destruction of hope is the key and an overlooked component. Look at the damage Obama has done here in the U.S. by making it so obvious that Big Money rules everything and what people want is irrelevant. As it sinks in that democracy is a sham, the results will be toxic indeed.

      5. wbgonne

        What worries me though is that here, today, right now, people are still seemingly not getting what an apocalypse a disorderly Greek exit from the euro would be and suggest it might not be worse than what Greece is having to accept. That scares me most of all. It was the — genuine — belief on the outbreak of WW1 that it “would all be over by Christmas” (ie a gross underestimation of the risks being run) that led to so many mistakes being made.

        I never used to get how so many could be so foolish as to not see what was so predictable. I get it now.

        Nonsense. At least no less nonsensical than the opposite. Which is to say that no one knows what would happen after Grexit, particularly since much depends on how it is done. Further, I think what is happening now — sacrificing European democracy at the altar of neoliberal capitalism — is MORE likely to lead to a WWI scenario that Grexit ever could. An “apocalypse” from Grexit? Good grief. It’s a freaking economic system, no more, and a failed and miserable one at that, with the chosen alternative being permanent and hopeless debt-slavery. When an economic system becomes a suicide pact it is has lost its purpose and, in a sane world, would be utterly rejected. We are not in a sane world.

        And I’ll add one final point regarding NC’s coverage, which certainly proved prescient in its vilification of Syriza. From all I have seen, no one ever proposed a course other than Greek capitulation, which is exactly what Syriza is doing. The criticism seems to be in how Syria capitulated, not that it did so.

        1. Clive

          I’m not sure of your locality, but I’ll assume it is the United States. Please put yourself in the following position. You have for almost two weeks now had no banking system. You can write checks but you can’t pay them in anywhere. You can get $50 a day from the ATM and that is all. You can’t use your credit cards. If you were preescient and took a lump sum of cash out the bank before it closed, you can spend that. But you don’t know what will happen when that has gone — and that is if you were lucky enough to have savings in the first place.

          If you work, you haven’t been paid, unless your employer gives you some cash (if they can spare it, assuming your in a business which takes the bulk of its sales in cash). The power is still on, and there’s still a potable water supply but you can’t pay for these and so you’re beginning to wonder how they will stay on next month if, like you, no one is paying for them.

          Then you learn that even the small amounts you can draw from the ATM each day might not be obtainable this time next week.

          And this, you say, is merely some economic system ? What would be happening in your country, your town, if such events were unfolding ?

          And I’ll also presume that you’re young (-ish), fit and reasonably healthy. You don’t need regular medication to survive or care workers to look after you in some way. You possibly too have transport and are capable of using it plus maybe a place to go to that should be fairly safe should things get ugly on the streets. What about the people who can’t do that?

          Surely one thing we can draw from the aftermath of hurricane Katrina was, when things break down and governments don’t govern and assist their citizens, it is the old and the sick who suffer first and suffer the most.

          But, well, like you say, what is the problem here? It’s just some bits of paper in people’s purses and a load of banks everyone hates anyway. Yes, I’m sure we can get along fine if they disappear more or less overnight.

          1. wbgonne

            Those problems are real and they are serious but they can be fixed. It will be painful, probably very painful in the short term, and some people will suffer gravely, but there are possible solutions to those problems so long as self-rule is maintained. But there is no solution to hopelessness, servitude and permanent debt-slavery. None, at least, that doesn’t amount to revolution. This is the course that has been set.

          2. CSTH

            Natural disaster seems to be an illuminating analogy here.

            Many people weren’t as passive and helpless after Katrina as the ‘breaking news’ style coverage might have led some observers to conclude.

            And New Orleans looked a lot different on day 5 than it did on day 0.

            But to extend the analogy – imagine you’re an independent fisherman, and you depend on the bounty of the sea for your livelihood. You have to choose between:

            a) live in New Orleans, have the sea rise up against you for one awful night, then struggle for years to rebuild.

            b) live on the coast of the Aral Sea, and watch the water recede steadily year after year, until nothing is left but the taste of dry toxic dust blasting your nostrils until the end of time.

            which do you choose…? An an awful tempest isn’t obviously the best answer…but its not obviously worse, either….

            1. Clive

              My abiding memory of Katrina was watching how a group of over 50 seniors were struggling for survival in a care home. They had water, luckily, and basic nutrition. But with no power they had no A/C and death through something as simple as heatstroke was a real risk. I think, unfortunately, there were some fatalities amongst them. Eventually, after nearly a week, they got bussed out. But by then the damage was done. And that was only after a week.

              One thing’s for sure — they weren’t doing no fishing. But what the heck, they weren’t me or anyone in my family or even anyone I cared about… Perhaps a better reaction from me would have been to utter a big, fat, “so what?”

              1. wbgonne

                This argumentation is manipulative and borderline disingenuous. Portraying capitulation opponents as heartless and heedless of “old folks” is nothing less the pot calling the kettle black. Yes, some Greek people would suffer with Grexit. Yes, some would suffer greatly. But the alternative is that all the Greek people suffer forever, like Sisyphus forever rolling the debt-stone up endless hills while, meanwhile, youth unemployment is at 50%, the old folks’ pensions are being slashed, the country is in permanent depression, the common national treasures are auctioned, and the Greeks lose their sovereignty to boot. That is the “compassionate” approach? I think not.

                1. MyLessThanPrimeBeef

                  Democracy isn’t perfect and people as a group make regrettable choices more often than we like to see, but it’s up to the Greek people what they want to do with the bitter choices they see in front of them.

                  What is being ignored is that no other nations have stepped forward with real money and few countries with moral support.

        1. Susan Pizzo

          Worse? They get to keep the IDEA of a currency. Reading the terms of surrender, it would seem any actual money will remain out of the reach of most Greeks for as long as the debt slavery lasts…

      6. Purple Library Guy

        The problem is, there have been plenty of these “deals” before over the last few years. We can expect there to be plenty more “deals” in the future. Exit is a huge disaster, but it’s one disaster.
        Once a blackmailer has you in their clutches, once you’ve accepted that paying them off is a lesser evil than whatever they can do to you, it doesn’t end there. They come back for more, and more, and more until you’re sucked dry of everything you had. At what point do you realize that the long run cost of giving in is greater than the single thing they can do to you if you don’t?

        1. Jon Hooper

          Bill has a 600 page book on the subject. I think he might be doing more than hand waving.

          1. MyLessThanPrimeBeef

            Many people feel economics is a not an exact science.

            There may be similar cases he can cite. But he can’t say, a Grexit is not worse, with X%, say, 99%, accuracy. There have not been a few repeated experiments under the same conditions meeting a theory’s prediction.

            Instead, he is reduced to say, a Grexit could not be more costly.

            Maybe, or maybe not.

    3. susan the other

      That’s insightful Bill. The old do leave. We retire, after all, and that is a kind of leaving. We all agree it’s pretty hard to do 9 to 5 when you are 65. Besides which, the young generation needs those jobs. We need to rethink retirement as passing on a job to the younger generation. Retirement benefits should include a big discount on the basics of food, housing, and should enhance Medicare to pay for all medical costs. Retirement should be better organized to get more value per dollar. Retirement should be a giant co-op, worldwide even. If Pensions have become the enemy then Capitalism is the culprit. Or fake capitalism. If pensioners leave, there needs to be a secure place to go. In exchange for subsidies for basic living, a good majority of pensioners could do volunteer work. It would be worth it for society. But capitalism does not consider the humane possibilities because they do not make a profit in money.

    4. Southern European

      Hello to the deceived believers in the Messias Varoufakis.

      A couple of years ago I tried to explain you, “barbarian americans”, that you are all a bunch of dreamers. And you never undestood the real problems inside the EZ. But I was censored an treated like a troll by the clever owner of this blog. lol

      I am smiling a lot because you refused to know that leaving the EZ it could cost until 70% of the GDP. And that explains why being member of the EZ is like to be in one financial and economical cage. But you refused to believe and rather believed in the Messias.

      But the owner of this blog beloved Varoufakis, a mere charlatan and pretense gambler. He bankrupted his own country. lol

      Now I laugh of you and of Varoufakis and all of te bunch of “revolutionaires by proxy”. You do not know anything about these subjects. Only “revolutions” by proxy.

      Congrats to you all. lol

      PS I know that Yves will cut this clapcrap but she can read as I laugh a lot of her. ;)

  2. El Guapo

    They have not “destroyed the Eurozone as we know it” because it never existed other than as a figment in the minds of deluded fools. The actual Eurozone is and always was an instrument of German hegemony. At least the number of people believing otherwise will be diminished as a result of this atrocity.

    I expect that Golden Dawn in Greece will be followed by the National Front in France. Here come the Fascists once again.

    1. rusti

      I expect that Golden Dawn in Greece will be followed by the National Front in France. Here come the Fascists once again.

      There was a Greek poster several months ago who contended that Golden Dawn was never going to capture much more of the vote than they do now, but I often read people in comment sections asserting that they’re going to reap the benefits of Syriza’s failures, and Noam Chomsky said that in a recent Democracy Now interview.

      Are they really better poised to succeed than KKE or some other far-right party that stops short of holocaust denial?

      1. NotTimothyGeithner

        Golden Dawn is likely a catch-all term. Multi-party systems are usually less complex than branding, so it doesn’t matter if it’s Golden Dawn or even a new outfit. I would bet on a “New Dignity” brand developing to bridge the left-wing divide.

    2. washunate

      It is interesting to me how successful the Anglo-Americans have been at portraying the Germans as unique bad guys.

      European integration was about increasing the interdependence between Berlin and Paris. The National Front has had decades to break Paris away from Berlin, and they have repeatedly failed. That could change of course in the future, but only then can the story be about German hegemony specifically. And in that kind of light, the story will really be about decentralization, not German hegemony. What you will see is separatist movements at the regional level, from Scotland to Basque to Catalonia. Even a small country like Belgium has had trouble forming governments in the recent past. This is what stands out about the Germans. In a world of regional cultures reasserting themselves – there are far more nations today on the planet than a century ago – the Germans have managed to essentially complete an integration project forming the most populous western nation between Russia and the US. Germanic peoples are seeking the value of direct cooperation even as many other nations are fracturing.

      When the US pulls out of NATO, then we can talk about German hegemony. In the meantime, it is borderline absurd. USUK calls the shots, not the Germans.

      More broadly, the fact that the Franco-German world is much more massive than individual nations like Greece is not some kind of unjustifiable oppression. It is simple math. Germany, France, and the Benelux nations by themselves comprise a region more populous than Japan or Russia. Finland, Austria, and Denmark are certainly closer culturally to the Franco-Germans than the Greeks. And what is most glaring about the whole Greek tragedy of the past five years is that the other two larger nations on the continent – Italy and Spain – have to date agreed with those evil Germans(!). The head of the ECB himself is Italian, not German, an economist who received his PhD in the good ‘ole US of A.

      1. jrs

        Also yes there’s NATO, but also NATO or not, so long as the IMF is involved … the U.S. government is involved. It has influence. And the IMF is openly part of the Troika, not some institution in the background like NATO.

        So Americans hating the Germans all day long might look in the mirror. But truthfully I know U.S. citizens have pretty much no power over the IMF (it’s the U.S. government not them who do), but how much do German citizens have over the EC and ECB?

      2. El Guapo

        The German elites are indeed the bad guys (as is clear to anyone who is actually paying attention) but there is nothing “uniquely” bad about them. The fact that corrupt elites in other countries support neo-liberal policies is not surprising at all. The dominant power in the Eurozone is Germany. Suggesting otherwise is absurd.

        1. washunate

          I continue to find that mindset fascinating. Germans are doing what many leftists in America claim to want America to be doing. Renewable energy. Comprehensive multi modal transit. Universal healthcare. Strong emphasis on formal education. Mandatory paid vacation days. Mandatory paid holidays. Fully paid maternity leave. Partially paid longer term parental leave. If you’re into Gini coefficients, the Germans have less wealth inequality than Israel, Canada, the UK, France, Sweden, Switzerland, and Denmark. “Neoliberals” in Germany are “pinko-commie-tree-huggers” in the US.

          But at any rate, the key attribute of hegemony I would say is about projecting power when those subject to your influence have no alternative. When people have a legitimate choice and are actively participating with you, it’s not a hegemonic relationship. It’s international cooperation. The fact that there are a lot more people in Germany than the Netherlands doesn’t mean that Germany is bullying them. It just means more people live within the national borders of Germany. Hegemony would be forcing other nations to tie their currency to the Deutsche Mark. Cooperation is when countries voluntarily do so. Neither Denmark nor the UK use the euro today, yet both are original NATO founding members going back to 1949. France made waves in the 1960s by leaving the unified military command. They returned in 2009.

          I would counter that to minimize the American influence is to miss the bigger picture, the actual hegemonic force in global affairs, but of course we can each have our own perspectives on that. If you are worried about the rise of 21st century style fascism, it really is DC where you should focus most of your attention.

          You might like this overview in particular. Very thought provoking reading (as long as you’re okay wading through the establishment filter at a place like CFR).

          There is no risk of an invasion today … but on the other hand we need to be able deploy forces to participate in the stabilization of regions or zones in crisis

          –Then French President Sarkozy, describing how European integration has moved so far along that rather than viewing Germany as an oppressive hegemon, they view relations being so close that there is essentially no risk of war. That is a monumental shift in European politics after almost constant tension and warfare between France and Germany since before ‘Germany’ even existed as a modern nation state. Note that the key partnership France is talking about to be able to project power is not Germany. It is the US.


  3. Robert dudek

    There is no rational way that I can see that anyone can argue that Greece will be better off in 5 years accepting this deal rather than rejecting it and taking immediate steps to retake control of its financial system.

  4. Swedish Lex

    The proposal to create a legal entity controlling 50 bn euro of Greek assets (approx. 27% of GDP) is clearly simply a new tool for the creditors (i.e. Germany) to directly control the Greek economy and, hence, Greece.

    How much worse could a “bail-out” by Putin have been? Free gas, hard currency, leave the EU altogether. That is how far the EU has sunk.

    1. Sally

      I just don’t think the Greek people want to align with Russia. People talk about the Greek Christian orthodox church and the Russian orthodox church having so much in common, but I think the Greek people fear Russia. And even if they did want to align I’m not sure the Greek Militry would allow it, and certainly the Americans would do everything to stop it.

      Remember a few years ago the Greeks tried to sell off some gas rights and Gazpon was the highest bidder. But the west scuppered the deal because it was Russia. The so called bidding process is a rigged system.

      In the end the Greek people just seem to want to stay in Europe above all else. I think they will pay a huge price over the next 10 years , but this is clearly what they prefer. As the consequences begin to sink in that may change, but the damage will have been done. I hope Portugal, Italy and Spain and France are watching this because this is what happens if you dare to resist. I also hope it will encourage liberals and the left to vote to get out of the EC in Cameron’s referendum in the UK. The EU has absolutely nothing that can now be seen as progressive. And it is going to get a whole lot worse.

      1. OIFVet

        It doesn’t matter one bit what the little people want and think. It is simply not important. Everything else you mentioned is.

      2. jrs

        If Greece can’t plan to exit well at this time, surely those other countries can. And it would be only logical if they did.

    2. Nick

      Except of course, making a deal with Putin would entail a whole lot more. For example, being overrun by Russian mafia, Russian oligarchs getting preferential contracts, and port access to Greek harbors. As Greece is a member of NATO, a deal with Russia was probably no more than a fantasy.

      1. OIFVet

        Oh wow, it would be such a shame to deprive the western organized criminal elites of their just spoils in Greece! Apres nous, le deluge, say I.

    3. susan the other

      My understanding of the 50Bn Privatization Fund is that it is 5 or more state assets (ports, trains, airports, utilities, etc.) posted as collateral (demanded by Schaeuble) in order for Germany to give Greece humanitarian aid, mostly pharmaceuticals. I’ve never heard anything so disgusting.

    1. nobody

      Regarding Grexit preparations:

      “We had a small group, a ‘war cabinet’ within the ministry, of about five people that were doing this: so we worked out in theory, on paper, everything that had to be done [to prepare for/in the event of a Grexit]. But it’s one thing to do that at the level of 4-5 people, it’s quite another to prepare the country for it. To prepare the country an executive decision had to be taken, and that decision was never taken… My view was, we should be very careful not to activate it. I didn’t want this to become a self-fulfilling prophecy. I didn’t want this to be like Nietzsche’s famous dictum that if you stare into the abyss long enough, the abyss will stare back at you. But I also believed that at the moment the Eurogroup shut out banks down, we should energise this process.

      1. blowncue

        Thanks for the excerpt.

        Can you imagine a vascular surgeon stating “I don’t want to concretize the contingency of bypass lest it invite actual arterial failure?”

        I may not be Yves Smith with all of her education and contacts, but rather a theater major with years of event management and IT experience, but his reasoning is daft.

        Having fire exits in a theater doesn’t mean one wishes the theater to be reduced to ashes.

        1. Ulysses

          “Having fire exits in a theater doesn’t mean one wishes the theater to be reduced to ashes.”

          Kudos for a great analogy!

        2. El Guapo

          Calling it merely “daft” is being charitable. It is criminally stupid to a farcical degree. And this was supposed to be one of the smartest guys in the room.

    2. Amir S

      Yanis was prepared to issue IOUs, but was blocked by others in the Cabinet, was the real reason of his resignation:

      YV: Sure, sure. I never believed we should go straight to a new currency. My view was – and I put this to the government – that if they dared shut our banks down, which I considered to be an aggressive move of incredible potency, we should respond aggressively but without crossing the point of no return.

      We should issue our own IOUs, or even at least announce that we’re going to issue our own euro-denominated liquidity; we should haircut the Greek 2012 bonds that the ECB held, or announce we were going to do it; and we should take control of the Bank of Greece. This was the triptych, the three things, which I thought we should respond with if the ECB shut down our banks.

      … I was warning the Cabinet this was going to happen [the ECB shut our banks] for a month, in order to drag us into a humiliating agreement. When it happened – and many of my colleagues couldn’t believe it happened – my recommendation for responding “energetically”, let’s say, was voted down.

      1. Alphonse Elric

        If Varoufakis is telling the truth and his counsel had been followed, those three things (issuing IOUs, haircutting the 2012 bonds, seizing the Bank of Greece) would have almost certainly led to Grexit.

        The saddest part of these Varoufakis interviews is that I think he might actually be telling the truth (or part of it). It’s easy for me to believe that Varoufakis figured out pretty quickly how hopeless the negotiations were, but felt more of an obligation to stand by Tsipras than to resign and/or explain to the Greek people what their real options were.

    3. shash

      A small piece of meta-analysis from this:

      I no longer have to live through this hectic timetable, which was absolutely inhuman, just unbelievable. I was on 2 hours sleep every day for five months. … I’m also relieved I don’t have to sustain any longer this incredible pressure to negotiate for a position I find difficult to defend, even if I managed to force the other side to acquiesce, if you know what I mean.

      I’ve wondered for a very long time, based on what we know today about the physiological functions of sleep, how many bad decisions in these thousands of years of human civilization were caused by cranky, sleep-deprived leaders who just couldn’t think straight anymore…

      And as round-the-clock as negotiations these days have become, it just gets more and more scary…

      1. IsabelPS

        Well, I’ve always wondered about the number of articles he wrote, interviews he gave, conferences he attended during those 5 months…

  5. yan

    I would pass the measures swiftly and organize for what they should have been prepared for: grexit. They’ll be ready in a year or so and can show the middle finger then.

  6. Eric

    If this involved politicians and their soldiers instead of bankers and their politicians, there would be international discussion about military intervention. At the very least, observers would be sent to document war crimes.

    But the deaths and the destruction in Greece — and in whatever country is next — won’t involve big explosions, so …

  7. wbgonne

    Greece: where democracy was born and where it died.

    Syriza is a collection of cowardly deceivers, who deserve infamy.

    Grexit would have been far better for the Greeks than permanent debt-slavery. But all the serious people said that was ridiculous. Just as all the serious people said there was no choice but to bail out the banks in 2008. The problem is that the serious people are fools.

    So long and thanks for all the fish!

    1. Paul Hirschman

      One: “serious people” are not fools; they’re out to destroy all who might oppose their power.

      Two: China has an opening here by which they could challenge rule by such “serious people”:

      China State Official Hints Beijing May Bailout Greece

      By: Zero Hedge | Thursday, July 2, 2015 at 12:55 pm EST

      On Monday, after Greek PM Alexis Tsipras’ dramatic referendum call sparked a run on Greek ATMs, grocery stores, and gas stations, we did our part to help ameliorate the situation by sending a subtle message to Athens:

      Indeed, now may be an opportune time to tap Beijing for a few billion given that China officially launched the AIIB this week. As a reminder, the success of China’s AIIB membership drive was a political disaster for The White House, which expended considerable effort to discourage US allies from supporting the new China-led venture.

      As such, it would be difficult to imagine a more fitting pilot program for the world’s newest supranational lender than a rescue package for the birthplace of Western democracy which has been brought to its knees by that most Western of all multilateral institutions, the IMF.

      And while any funding to Greece from China would likely be channeled through the Silk Road fund (at least for now, given that the AIIB is just a few days old, officially), any aid from Xi Jingping’s deep pockets to Athens would represent a spectacular coup on both an economic and political level.

      While the world is by now likely incredulous about the prospects for a Greek “Eastern” pivot (around a half dozen Russian headfakes have made us somewhat numb to the idea), Chinese assistance might be more likely than Europe cares to admit. Sputnik News has more:

      China may help Greece directly through its new financial instruments, director of the Quantitative Finance Department at China’s Institute of Quantitative and Technical Economics told Sputnik China.

      Goldman Sachs predicted in a report published on Wednesday that in a worst-case scenaria China’s exports would decline 2.2 percent as a result of Greece’s economic crisis. Other than exports to Greece itself, the crisis could also hurt the economies of nearby countries, where Chinese businessmen have also made considerable investments.

      “The Greek crisis has an undoubtedly seriously influence on China’s trade with Greece and investment into the country. But I think that European countries together with China can help Greece overcome the problems that arose,” Fan Mingtao said.

      “I believe there are two ways to give Greece Chinese aid. First, within the framework of the international aid through EU countries. Second, China could aid Greece directly. Especially considering the Silk Road Economic Belt and the Asian Infrastructure Investment Bank. China has this ability,” Fan added.

      Better a new path with China, perhaps, who at least would be a distant superior, than the old, tried and true route to despoliation at the hands of Germany.

    2. norm de plume

      ‘Syriza is a collection of cowardly deceivers, who deserve infamy’

      A certain Mr Shedlock agrees

      ‘Breathtaking Political Capitulation; Tsipras Should Resign; Tsipras Trades Royal Flush for Draw at Inside Straight’

      He is no longer asserting that Tsipras and co have played the Eurocrats like a violin, that’s for sure.

    3. jrs

      They will lose a life worth living to be sure, a life with anything of value to it, beyond people as beasts of burden to slave and die for the master race … er I meant master Class … uh slave masters … uh what have you. And it is and die isn’t it, if there are no old age pensions even? But gain life for insulin dependent diabetics for the time being I guess. Cancer patients will still die from lack of medical care.

  8. JohnB

    Uh oh – ECB is keeping ELA at its current level. Banks are due to run out of cash today?

  9. Blue Meme

    I have tended to think of current events as a recycling of 1914. But perhaps Greece is the new Sudetenland…and the Wayback Machine is set for 1938.

    1. The Insider

      It rather has the feel of July of 1914 to it – only this time, the Serbians have agreed to Austria-Hungary’s demands. That won’t change the larger dynamics, though, or of the sense of tragedy unfolding in real time before our eyes.

  10. dsp

    This is brazen cruelty of the highest order. In my opinion there is no option. Let Golden Dawn stop these neo-liberal predators. Nothing can be worse than this torment.

  11. alex morfesis

    finland surrenders to russia

    six months after putin died of a sudden heart attack and was replaced by hard line nationalist alexiev gerasimov, russian forces drove across the northern half of finland to the swedish border, taking territory just north of oulu and establishing a new naval base in the gulf of bothnia. Russia had slowly increased its economic presence in finland over the last few years after it concluded its joint venture agreement with norway over artic oil and gas exploration.

    timo better make russian a mandatory language if he (foolishly) imagines greek soldiers will be very motivated to handle the details of any orders given to defend a “fellow” NATO country against the russian horde that angela merkle spoke about a few weeks ago when her cdu held their 70th anniv convention in a building which she described as being where one of the last ” valient” efforts were made to defend against the “russian” invasion…

    russian invasion…

    now That is a way to rewrite history…

    then again, timo could be one of those 2700 “special people” described in the stazi 1986 plan with schlaff and company…

    either way…sad to see the knee capping of greece done so loudly and in public…but maybe this will stop the various factions in greece from fighting and they might wake up and accept the fact none of them has any friends in northern europe willing to stand up to muti and her pit bull..nobody…

    1. RandomFinnishGeek

      Finland isn’t member of Nato. Greek soldiers are not in anyway part of national defense plans, nor any other foreign troops.

      And Finland has so far given about 6 billion to Greece. About billion more coming soon. 6 – 7 billion from about 5 million people. Our banks had almost no liabilities in Greece. It wasn’t about bailing out finnish banks.

      You’re wellcome.

      1. alex morfesis

        that was a scenario in the future

        finland has been poking around nato…

        the issue is you might want to be nicer to
        the army with the most tanks on mainland europe

        which would be greece…

        or you can go online and learn russian…

        and while you are crying about spending about 1250 dollars per person (total) to help
        greece, which would work out to about 8 Cents per day per person in Finland
        based on your current costs of funds…

        we americans pay 750 per person per Year to keep your underfunded militaries in europe
        from having to worry about russia…that would be closer to 4000 dollars Per American since you had to be bothered with helping your fellow southern europeans…

        that works out to about 2 dollars per day Per American…

        so…americans are spending 25 Times what you are
        complaining about in the same last 5 years…

        think you might send us a refund on those expenses…???

        seriously, who are the real lazy moochers in europe…

  12. EoinW

    Bravo to NC for the most accurate Greece coverage. We can’t be surprised by this disaster as we were warned well in advance that no one was going to “live happily ever after”

    The Greek referendum simply reinforces what we all should realize by now: that we are living in a post-democratic world.

    1. Jim Haygood

      To reprise a couple of themes from NC discussions of the past week:

      “When forecasting what eurocrats will do, the safest bet is always ‘another squalid fudge.'” DONE.

      “The Euro Summit stresses that nominal haircuts on the debt cannot be undertaken.” So depending on how much of the €85 billion Bailout III package is actually new money, Greece’s debt-to-GDP could soar to 210 percent (actually more, as its austerity-ravaged economy carries on shrinking).

      This is not sustainable, and never was. Greece will be back in crisis within three years, and perhaps as soon as next year.

      Insane euro clowns have opened Pandora’s box. Wall Street’s logic is to identify “the next Greece” and slag it. As a humiliated Greece looks for solace in the arms of Russia, Iran and China, American-exceptionalist NATO looks ripe for a long-overdue collapse.

      Let it bleed.

      1. EmilianoZ

        Once you’ve eliminated the imposible, if it was written in your contract, you must still do it.

        Herr Schaubbie

  13. P. Peterovich

    Statement from Tsipras : http://www.primeminister.gov.gr/english/2015/07/13/prime-minister-alexis-tsipras-statement-following-the-conclusion-of-the-eurozone-summit/

    I quote : “The agreement calls for tough measures. However, we prevented the transfer of public property abroad, we prevented the financial asphyxiation and the collapse of the financial system—this was planned to the last detail – having recently been designed to perfection, and in the process of being implemented.”

    I’m not really sure that collapse of the financial system has been prevented… ELA stays at its current level and the banks keep their doors closed…

    1. Yves Smith Post author

      Yes, re the ELA, I have yet to see anything to the contrary, and it’s now past the end of the business day in Greece.

      I think this means the banks are on utter lockdwown till Greece passes whatever is deemed to be enough legislation that meets the creditors’ demands. The ATMs get emptied of their last cash, which means even tourists cannot get money. Importers continue to bleed and pharmaceuticals get more scarce, and food supplies in Athens and other cities start to get strained.

      Even if Greece gets ELA funding on Wednesday, it has to be at least until Thursday or Friday that the banks begin to restore operations.

      1. vlade

        Potentially even worse, as the cash (actual EUR notes) would have to be shipped from somewhere, ATMs stocked (and then again, and possibly again, for I have little doubt that people will withdraw as much as they can) etc. etc. ELA lifted on Wed evening means IMO ATMs-as-usual on Monday best.

        Even longer for e-cash, because of capital controls – see Cyprus. Once put in, it’s nearly impossible to lift immediately, as that would mean anyone with cash who didn’t transfer outside of Greece would be likely to transfer right now.

      2. bjmaclac

        Can you imagine how raucous will be the debate in the Greek parliament in ratifying this piece of crap? We could be witnessing something in the order of a civil war in that chamber; necessitating the beginning of martial law throughout the entire country.

        Everything (so well articulated on this site) as well has been stated by other similarly sober-minded analysts, predicted a very bad outcome for the Greek people. The troika always held the the stronger hand; while Syriza performed like amateurs. If indeed Syriza was serious (which appears doubtful, judging from their deplorable performance all these past five or six months) about “negotiating” more favourable debt servicing terms, it is hard to imagine how they could have done any worse – unless it was never their intention in the first place to simply yield to the troika’s demands. As i said elsewhere, this is all reminiscent of the flowery rhetoric from B. Obama following his initial presidential win in 2008, which was quickly followed by one of the most memorable of political betrayals. Tsipras’ rhetoric similarly bears no resemblance to his actions.He was perhaps the most disappointed politician in Europe in response to the overwhelming “oxi” majority regarding austerity. Now he has to continue the farce convincing everyone as to what a “great” deal this “really” is.

  14. Kris

    I’ve followed this crisis closely and appreciate the coverage given by NC. I’m struck by Varoufakis’ point that, had they started actual preparation for a new currency and an organized Grexit, such action might have brought about the very thing it was trying to prevent – an immediate and disorganized Grexit. Reading the comments by Schauble and other northern FM’s during the “negotiations” makes me think this may well have happened: it’s possible that, even if Syriza had begun work on leaving the Euro from day one, the Troika would have immediately threatened expulsion and bank closure (or rather, bank starvation). And had Syriza taken this stance as part of their election platform, the threat may have been introduced at that point, possibly altering the election result. Clearly Syriza went in with “an unloaded latte” (the best summary I’ve read of the whole situation so far), but it’s also quite possible that nothing would work: once a country is so far in debt bondage and loss of soverignty, they have no hope of escape. It would be a good idea for whatever Greek government continues from here to start planning their exit, but it’s also quite likely, given the sheer vindictiveness shown, especially by Germany, that they will not be allowed to do so successfully.

    1. MyLessThanPrimeBeef

      If the threat to expel and starve banks was there all along, could they have let the people know and yielded then?

      Can that threat be countered effectively, with preparation?

      If yes, then prepare.

      If no, there is no ‘continues from here to start planning their exit.’

    1. MyLessThanPrimeBeef

      Perhaps, but the overlords on the other side are not always gentler.

      Beware of strangers bearing gifts of kindness. (It’s a very cynical view of human nature – with animals, you know what to expect, most of the time).

  15. craazyman

    does Greek GDP include all the unreported income hid away from taxes? And all the Greek oligarch money in Swiss banks? I certainly appreciate the reporting but I don’t believe a word I read anywhere about Greece.

    It’s like Marvine Gaye:

    People say believe half of what you see
    Son, and none of what you hear
    But I can’t help but being confused
    If it’s true, please tell me dear
    -Heard it Through the Grapevine

    There’s only one person I trust to cut through the hysteria, political hackery, narrative thuggery, journalistic jawboning and loud mouthed literarily licentious and lugubrious circumloucutions.

    But he’s long gone. That person happens to be Andrew Dittmer. Every time he explained something I could understand it perfectly and without the slightest bit of effort on my part. That’s the way I like it. Evidently he has better things to do than explain stuff to the peanut gallery. That seems hard to believe, but his absence is proof. Apparently. It’s not that I don’t trust Yves. But if a kitten was wandering lost on the slopes of Mt. Olympus there’s be a 1000 word post and a call for rescue choppers. Even though the kitten got lost viciiously chasing a defenseless mouse with the intent to murder. I appreciate that sentiment invoked at the sight of a kitten, but here I’d like the underlying reality, facts first.

    Where is Mr. Dittmer to explain this? I also need a lesson in stochastic calculus and will pay good money for that. So if explaining Greece isn’t his thing, expalining stochastic calculus to me might be. It can’t be that hard once you get past all the squiggly integration signs. Nothing is.

    1. craazyboy

      Yeah. I think Mr. Ditmar would be of great help in understanding Greece. What happens to the Greek Utility Maximizing Function? With all that debt to pay off, does it go negative or tend to infinity?? Now you’ll have a bunch of Greeks running around like chickens with their heads cut off that can’t escape the country. This sounds a lot like Brownian motion in a closed container. Someone who knows stochastic calculus really good could tell us what happens to the Greek Utility Maximizing Function.

      Why is Yves hiding the truth from us?

      1. Yata

        So tough to call that. Did the EU want Greece out, or in ? I think if you can answer that question the rest might fall in place. Either way the Greek people lose, the cards are stacked against them, and the line from The_300 keeps coming to mind..

        “This will not be over quickly. You will not enjoy this. I’m not your King.”

        1. Ben Johannson

          Germany needs Greece to suppress the value of the euro and make its exports outside the eurozone less expensive.

        2. Ben Johannson

          Looking at the numbers, out of Germany’s top fifteen trading partners, non-eurozone members make up 60% of Germany’s total trade surplus, so keeping the euro’s exchange rate down is a priority.

    2. Clive

      I’m the last person to try and explain anything without writing something akin to “War and Peace, the Unabridged Version”. Being born, as I was, with apparent congenital wordiness. Here’s the facts, though, can’t put them any simpler than this:

      1) Greek banks have no money left
      2) The Greek government gave up its sovereignty to issue its own currency when it joined the Eurozone
      3) This means that the Greek government cannot give the banks any money
      4) Only the ECB, though the ELA can give Greek banks any money
      5) They are only prepared to do this under the most excruciating conditions for Greece
      6) Greece has other options, but none of them are implementable in a timeframe of less than many months or years
      7) Greece must therefore take the deal on the table, gruesome though it is

      The kitten can either get rescued by the Evil Kitten Catcher and face a life of public humiliation being kept in a cage as a demonstration of what happens to kittens which dare to run away from Cute Kitten Ranch (Open Mondays to Saturdays, 9:00 ’til 6:00, some public holidays, check website for details. Minimum entry cover charge $20 per person, petting fees extra — ask your Petting Host for the current price list when you visit). Or it can die on the mountain.

      No, Disney probably won’t be checking if it can pick up the movie rights for this one.

      1. ambrit

        Lionsgate might be interested in the rights. I know right well that Lew Grade would have been. Then he’d hire Irwin Allen to do the film.

        1. Clive

          Yes, I think that might fly. Or how about “Carry On Greece”. Kenneth Williams could play Yanis Varoufakis, Sid James would be Alexis Tsipras and while I’ll be accused of typecasting, you’d have to have Hattie Jacques as Angela Merkel. But I’m torn between Barbara Windsor and Joan Sims as Christine Lagarde.

      2. Robert Dudek

        Of course Greece has options. It is never too late to start Plan B. Everyone agrees it will be tremendously harmful over the short term, but guess what – countries have been under military occupation and come out the other end and rebuilt.

        Everyone will say that Argentina was difference and it is, but everyone also said that defaulting would lead to catastrophe and bury Argentina for the foreseeable future. It didn’t happen that way.

        Nationalisation of the banks, parallel currency, some aid from abroad (especially countries outside the EU, humanitarian aid, Proper fiscal policy without the Euro straight jacket and you will see how fast this thing can turn around if Greek pride and solidarity is what they claim it is.

        1. Clive

          (Clive, groaning, and not for the first time today)

          Really, nationalise the banks? With what, exactly, magic beans? I’m sorry to be terse but this is at the core of the whole wrong thinking that we’ve seen so much of lately from so many sympathetic, obviously kindly people who clearly do not understand what has happened. Please note the verb and the tense. Greece has run out of money. Literally. It has no money, no cash currency and no legal power to monetise and create new money from fiat.

          It can either commit fraud and counterfeiting on a massive scale or it can take the Eurozone’s offer, one that it cannot really refuse. And as for some chaotic, rushed reintroduction of the drachma for which Greece cannot even print the paper currency or mint the coins for let alone transact electronically with as part of the global financial system, well, that is so awful to contemplate, even Greece stopped themselves from going over that particular cliff.

        2. MyLessThanPrimeBeef

          You have a good point.

          But it’s one thing for a leader of a nation already under occupation to exhort the people, ‘we can pull through this,’ and quite another for the same leader, when there is no existing occupation, to say, ‘Let’s go into hardship. Let’s be occupied. We can pull through.”

          It’s not impossible, and under certain conditions not improbable. But communication would be very important in that case.

        3. flora

          Leave aside for the moment the question of currency.
          For people to stand against an oppressive system they must understand that system, they must ‘see’ it in total, not simply its worst effects. Otherwise they will be fighting effects instead of the cause of those effects. So if you start on plan B what is your starting point politically? Do your citizens stand in solidarity with your political point? Neoliberalism works by stealth and deception. Witness the ALEC sponsored laws passed in US state legislatures. It is an invisible occupation. How do you make it visible?

          1. flora


            “When a government is dependent upon bankers for money, they and not the leaders of the government control the situation, since the hand that gives is above the hand that takes… Money has no motherland; financiers are without patriotism and without decency; their sole object is gain.” — Napoleon Bonaparte

  16. Edwardo

    The Marxists in charge were never, and I mean never, going to devise a plan that would have made Grexit not merely palatable but preferable. Their wrongheaded world view precluded them from considering how forging such a path was more than possible. Tspiras and his Fin Min, Varoufakis, played the entire process in a way that is an insult to incompetence. The idea that planning for a Grexit would have necessarily caused a Grexit is asinine. Yes, it would have needed to have been done with more than a modest amount of care, but to make this statement is nothing less than Yanis copping out in a massively self serving way. Syriza didn’t just drop the ball, they handed it off to the other side one foot from the end zone. Now they will attempt to cheer the result.

    1. Doug Terpstra

      Indeed, eerily reminiscent of Obama, who didn’t just hand off the ball but immeduately after inauguration began scoring three-pointers for the opposition — betrayal so fast and total that many people still can’t believe their lying eyes.

      1. norm de plume

        Tsipras is incompetent, Obama is corrupt, both are weak. Obama aspires to be his opponents and does their bidding against us with great skill, Tsipras feared his (and our) enemies and was destroyed by them.

  17. Denis Drew

    Just an amateur (crackpot?) idea, but: I wonder if Greece could dollarize (as Argentina did) as practical transition back to its own currency — to give itself time design and distribute its new currency. Might fit (I don’t know how) with Greece’s number one import being crude oil and its number one export being refined petroleum — both being denominated in dollars. ???

    1. washunate

      Yeah, in theory, they could. In fact, Greece has already replaced a small national currency unit with a major global one.

      The question is whether Syriza actually wants Greece to run its own national currency or not. Every indication so far is that they do not.

  18. Praedor

    I believe Tsipras is the Obama of Greek politics. He came in all hopey and changey but when it came to actually doing what he promised, it was go running to the “solutions” offered only by neoliberals, ignore any other options. Don’t even start planning in secret and at low key a Plan B, but instead just go along with the Banksters. It’s always the Banksters that end up with the loyalty of the Hopey Changey clowns. They say nice things to get elected and then immediately and exclusively start the work of feathering their own nests. Obama has been setting himself up for a nice gig on the Board of Directors for any number of Wall Street syndicates and, so it seems, Tsipras is also setting himself up for a nice villa and yacht setup when he’s done helping foreigners loot his country. It is ALWAYS easy for those who see no struggle for themselves to say, “we need to suffer some pain before we can move ahead”. Of course, the ones saying that will feel NONE of the pain, and will be supping on caviar while the real people are living on the streets and begging foreign owners of THEIR land and resources for a crumb to eat.

    A lot of people need to be hung from lampposts, in the US, Europe, and Asia.

    1. vidimi

      nah, i don’t think tsipras is the greek obama, at least not exaclty. tsipras is stunningly incompetent, but i don’t think he’s evil. obama, however, is very competent and very evil.

  19. PQS

    From my (admittedly) very amateur perspective, here’s what I see happening in Greece:
    1. Asset stripping
    2. Debt loading
    3. Downsizing (cutting pensions and government spending)
    4. Hostile takeover by outside forces

    Merkel/EU = Gordon Gekko/Corporate Raiders

    No, I don’t have any answers, and yes, I feel like most of the participants have been either naive or bad actors. That’s what’s frightening.

    Thanks to Yves for staying on this story. It’s been utterly lost in the main news cycle over the past few months. Funny that. Every time the banksters get caught doing something crummy, their activities get airbrushed out of the media….and both quickly and thoroughly.

      1. MyLessThanPrimeBeef

        Never borrow from the Mafia.

        Debt that can’t be paid will still have to be paid, according tot he Mafia.

  20. Kurt Sperry

    Having broken Greece, the troika now own it. And with ownership and control come responsibility. It seems to me that it will no longer be possible going forward to blame the Greeks for the state of Greece as the Greeks clearly no longer control their political processes. To highlight this, perhaps the best course for Greece would be to dissolve its now pro forma government and ask the Germans in populate a colonial administration where all success or failure can thus be fairly assigned. Playing along with pretending sovereignty where none exists just provides undue cover for the people actually in charge.

    1. Praedor

      Don’t think it means the EU will take care of Greece/Greeks at all. The US broke Iraq, the US OWNS what it did to Iraq and owned Iraq. How did we do as far as being responsible? Same with NATO and Libya, the US and Syria. How’s all that being responsible going?

      Naw, the Western model is break the shit out of it, leave the debris for survivors, take the cake.

    2. Jim Haygood

      ‘ask the Germans to populate a colonial administration’

      If only Werner Klemperer were still around for a reprise role as Colonel Klink.

      He always wears a monocle on his left eye, usually carries a riding crop, and walks with a stoop. In a few episodes, Klink is seen wearing the Pour le Mérite (or The Blue Max), Iron Cross, Ground Assault Badge of the Luftwaffe, and the Parachutist Badge.

  21. HoarseWhisperer

    The irony in the official document is palpable – especially the part which requires Greece to

    adopt the necessary steps to strengthen the financial sector, including decisive action on
    non-performing loans and measures to strengthen governance of the HFSF and the banks, in
    particular by eliminating any possibility for political interference especially in appointment

    Perhaps the IMF should take decisive action on non-performing loans in their portfolio? Perhaps even write them off?

  22. Lexington

    Strips Greece of sovereignty? Really? Greek sovereignty was compromised when it joined the EU, compromised further when it joined the Euro zone, and finally largely negated when it became insolvent and hence completely dependent on repeated infusions of money from other EU members to keep its economy from collapsing completely. If Greece prizes it sovereignty above all else then there is a simple way to reclaim it: withdraw from the EU and the Euro zone. Or Greece’s parliament could just refuse to ratify the deal with the EU and let the chips fall where they may. Either gesture would be a powerful assertion of the sanctity of the country’s sovereignty.

    Accusing the EU of trampling on Greece’s sovereignty be placing conditions on a third bailout amounts to arguing that the EU has an open ended obligation to pump $100 billion euros or so into the country every couple of years to keep it afloat but has no right to demand reforms in exchange. Whether the “reforms” are actually constructive is highly debatable but that’s a question apart from the principle that in this world you don’t get something for nothing.

    1. Yves Smith Post author

      Greece ceded sovereignity only on certain elements of sovereignity to specific EU/Eurozone institutions. The key one, as we are seeing, is not being a monetary sovereign. That does not obviate the fact that Greece is now being reduced to a vassal state.

  23. Art Eclectic

    I would hazard a guess that the viciousness of the deal is to serve as a warning to other partners to get their houses in order.

    1. jrs

      Yea, it’s like Iran nukes. Now supposedly Iran is not building nukes, and that is good I suppose. But who could really truly blame them if they did, with country after country around them invaded, conquered, and destroyed for the lack of a truly effective defense. So warning to other countries who might exit the Euro: have a plan B for exit, begin working on that plan B now.

  24. plantman


    Since many of your readers find your intransigence frustrating, why don’t you tell us what it would take to convince you that Greece should leave the euro?

    1. Alphonse Elric

      Just a guess here but…


      Reading through the thread so far, I’ve seen no new arguments for immediate Grexit (nobody’s arguing here that Greece should stay in the Euro forever), and CSTH is the only person I’ve seen grapple with the long list of concerns (currency, banks, payment systems, pharmaceuticals, etc.) raised by Yves, Clive, Nathan, Lambert, et al.

  25. Synoia

    So Greece is to become the first recognized German Colony in its new Pan-European empire.

    The Germans have assumed much responsibility while gaining such authority, and have invented the European mechanism for recycling the German surpluses, buy the commons in Europe.

    All we need to do is add a layer of TTIP etc. treaties and we have a new neo-liberal supra-national aristocracy, an aristocracy Uber Alles.

    All singing:

    Deutschland, Deutschland über alles
    über alles in der Welt
    Wenn es steht zun Schutz und Trotze
    Brüderlich zusammen hält
    Von der Maas bis an die Memel
    Von der Etsch bis an den Belt
    Deutschland, Deutschland über alles
    über alles in der Welt.

    1. Jim Haygood

      The horrible irony for Germany is that it now occupies the same position that the Allies did after Versailles, when reparations amounting to 900 percent of GDP were imposed on a stricken Germany.

      ‘Le Boche paiera,’ crowed the French. But Maynard Keynes rudely pointed out that debts which can’t be paid, won’t be paid.

      Time to update Keynes’s observations for the benefit of Europe’s new Teutonic masters: The Economic Consequences of Greek Colonization.

      They ain’t gonna be pretty.

  26. David

    Some additional info on the 2012 pension reform

    Pension reform summary for monthly pension amounts:

    The cuts imposed 2012 to pensioners receiving main pension and supplementary pension totaling of more than 1,000 euro as were follows:

    cut 5% for pensions €1,001 – €1,500
    cut 10% for pensions €1,5001- €2,000
    cut 15% for pensions over €2,001

    Earlier this year, the Council of State ruled that the cuts were unconstitutional and the government must retroactively make the pensions whole.

    Repayment of sums retroactively from 2012 entitled over 2000 pensioners who had recourse to administrative courts as 15 retirees who participated in the pilot trial. For the payment of the increases to be applied from today, day of publication of the decision will require additional expenditure (of funds or budget) of EUR 1.022 bn. euro. The CoE underlined that pensions in the private sector must be brought back to 2012 levels and the state should assist the Funds for the payment of supplementary pensions if they have no funds, despite the clause zero deficit was legislated in 2010.

    1. vidimi

      these cuts show that they are clearly preferable to a grexit, on face value. people earning 2000€ per month on pensions may not be able to maintain their quality of life with a 15% cut, but they will still be relatively well off. with a loss of currency, they and everyone else would be screwed. the caveat, as i posted below, is whether there is any way of avoiding a grexit in the future? my position is no, but am open to arguments to the contrary. with that in mind, the 50bn privatisation will do the greatest damage as it will starve greece from being able to rebuild when it inevitably is kicked out.

  27. Jeremy Grimm

    At this juncture whether Greece exits or not the results are horrible for the Greeks and the Greek Nation.

    Are there any indications yet what impacts this treatment of Greece will have on the rest of Europe? I have the impression Greece is not the only weak sister in the European Union. Is this wanton destruction of Greece impacting planning and lessons learned in other Capitols?

    1. HoarseWhisperer

      Thank you for this link. The passage that struck me in it:

      Days before Varoufakis’s resignation on 6 July, when Tsipras called the referendum on the Eurogroup’s belated and effectively unchanged offer, the Eurogroup issued a communiqué without Greek consent. This was against Eurozone convention. The move was quietly criticised by some in the press before being overshadowed by the build-up to the referendum, but Varoufakis considered it pivotal.

      WhenJeroen Dijsselbloem, the European Council President, tried to issue the communiqué without him, Varoufakis consulted Eurogroup clerks – could Dijsselbloem exclude a member state? The meeting was briefly halted. After a handful of calls, a lawyer turned to him and said, “Well, the Eurogroup does not exist in law, there is no treaty which has convened this group.”

      Above the law — according to the law.

  28. vidimi

    that a grexit would have been a horrible ordeal, much worse than remaining in the euro, is a moot point. remaining in the euro is not possible in the medium term and this deal just kicks the can down the road while setting the stage for a much worse, much more painful grexit down the road. a grexit today would have been much more painful than one two years ago, but a grexit in two years will be much more painful than even one now.

    we know that as greece keeps submitting to punishment its economy shrinks and ability to pay off its debts diminishes. eventually, there will come a point that greece will have no assets left to be stripped and will be finally kicked out. at that point, the country will have nothing left to rebuild from.

    is there anyway that, shot of a deus ex machina miracle, a grexit can be thwarted in the future? short of a diktat from a bernie sanders administration in the US or a 180 reversal from all EU member states? accepting this deal is madness and anyone saying the alternative is worse is not looking beyond the tip of their nose, and it’s simply inexcusable that syriza has taken no steps towards an orderly grexit in their six months in power.

    1. vidimi

      to expand on this, i think that a chaotic grexit with no planning would be catastrophic and out of the question. my post was meant as an indictment of the syriza government for their shameful cowardice of not taking any steps to end the suffering that they have instead compounded upon and not a disagreement with the post which is spot on.

  29. Jesse

    Yves, it might be instructive to post some of the comments from last night’s German Spiegel story. Putting them through Google translate I was getting stuff like “why is it an atrocity to ask the Greeks to repay what they owe” and so forth. I would post them myself if I had a PC and not my phone in front of me.

  30. Ravi

    Never commented: since always got 3E’s at school, which Epitomised, the Etymology of my Education.
    Not politically or in any way affiliated.
    Could join conversation on numerous levels.
    Please do not be rude to each other.
    British born, Indian origin, Greek wife.
    For me simple sadness: in the loss of looking after elders, irrespective of mistakes made and hope for our kids.

    1. MyLessThanPrimeBeef

      Democracy is messy.

      There is the tyranny of the majority.

      And unanimous consent has its weak moments.

      Then there is the popular vote vs. electoral vote thing (here – do we count populations or each nation, would 51% of all Eurozone voter population be considered unanimous consent of the whole?)

      And fascists criticize it as endless bickering.

      Will this be the end of the European Project? Do the would-be winners think they must subdue the rebels first, and can always reconstruct, pour asset-buying money it, and become more centralized in the process?

      We don’t have to look far, but only further back in time for an example.

  31. GnomeDigest

    At this point it seems the question is just when the Grexit will happen. If this deal falls through for whatever reason it will be soon. If it passes, we have already seen what a lesser degree of austerity did to Greece’s ability to meet its debt obligations. More extreme austerity wont magically reverse that trend. Greece will eventually default.

    So the Grexit is happening. The only question now really is whats better for the greek people? If it were possible to get this deal and then use the next year or two to prepare for a grexit then perhaps the deal would be better. But considering how little authority is sounds like Greece will have over its fiscal policy that seems an unrealistic thing to expect.

    Meanwhile there will have been a firesale of privatization that whole time which I assume would make it harder for Greece to recover once the Grexit comes. I havent seen any compelling arguments yet as to why running their economy further into the ground via more austerity before falling of the cliff is better.

  32. Jess

    This reminds of an old phrase I first heard in grade school: “When, in the course of human events…”

    Granted, we were food sufficient and there were very few medicines at that time, but I wonder how long the people will allow this to happen. How many old people will die on doorsteps before oldsters and young people — both with nothing left to lose — turn to insurrection? And watcha bet the military refuses to fire on its own people, ala the fall of the Kremlin?

  33. JB

    This deal reminds me of another episode: the bankruptcy of Tunisia, and subsequent loss of sovereignty. This eventually led to full scale colonization by France.

    From what I understand, Tunisia in the 1850s tried to modernize, borrowing heavily from European creditors. But the state kept a traditional ottoman structure, with a weak central administration, and weak tax collection.

    In 1867, Tunisia failed to gain new financing, and found itself bankrupt. In 1869, Britain, France and Italy set up a commission to sort out the external debt. As far as I understand, the beylical administration and the commission were relatively successful – so the next step required a pretext.

    It soon came : an unruly tribe made a raid in neighboring Algeria. France launched a punitive expedition, and forced the bay to sign the Bardo agreement in 1881. Tunisia becomes a French protectorate, with responsibility for foreign affairs, defense and administrative reform.

    In 1883, the La Marsa convention further stripped the bey of his powers, and turned Tunisia into an actual French colony.

    That’s what I can sum up, I lack sources and reliable info, especially on the period 1869-1881.

    1. just me

      loan to own

      Reminds me of US. Thomas Jefferson’s policy to assimilate/remove the Indians:

      Jefferson’s expectation was that by assimilating the natives into a market-based, agricultural society and stripping them of their self-sufficiency, they would become economically heavily dependent on trade with white Americans, and would thereby be willing to give up land that they would otherwise not part with, in exchange for trade goods or to resolve unpaid debts.[3][6][7][8]

      In an 1803 private letter to William Henry Harrison, Jefferson wrote:

      To promote this disposition to exchange lands, which they have to spare and we want, for necessaries, which we have to spare and they want, we shall push our trading uses, and be glad to see the good and influential individuals among them run in debt, because we observe that when these debts get beyond what the individuals can pay, they become willing to lop them off by a cession of lands…. In this way our settlements will gradually circumscribe and approach the Indians, and they will in time either incorporate with us as citizens of the United States, or remove beyond the Mississippi. The former is certainly the termination of their history most happy for themselves; but, in the whole course of this, it is essential to cultivate their love. As to their fear, we presume that our strength and their weakness is now so visible that they must see we have only to shut our hand to crush them, and that all our liberalities to them proceed from motives of pure humanity only. Should any tribe be foolhardy enough to take up the hatchet at any time, the seizing the whole country of that tribe, and driving them across the Mississippi, as the only condition of peace, would be an example to others, and a furtherance of our final consolidation.[8][9]

      Jefferson believed that this strategy would “get rid of this pest, without giving offence or umbrage to the Indians”.[10] He stated that Harrison was to keep the contents of the letter “sacred” and “kept within [Harrison’s] own breast, and especially how improper for the Indians to understand. For their interests and their tranquility, it is best they should see only the present age of their history.”[11]

      (kind of like TPP)



    2. JB

      In the late 19th century, Europeans were also investing in Tunisian infrastructure (railroads), with the clear objective of taking control. AFAIK, Greece must privatize the electricity – strategic infrastructure if there is one.

      Greece has already been put under international financial control in 1898. The International Financial Commission resided in Greece till 1978. Funny how history keep repeating itself – except that the 1898 deal included debt restructuring.

  34. Deloss Brown

    I don’t know if anybody has mentioned this, but apparently the deal transfers 50 billion euros of Greek assets to the Luxemburg “Institution for Growth.” Apparently it is a wholly-owned subsidiary of the German Development Bank, KfW.

    Chairman of the board of the “Institution for Growth” (my God, what a name) is Herr Schaeuble. See The Guardian:


    See the comment yesterday 6:07PM.

  35. john c. halasz

    This line fits in here somewhere, with respect to the self-righteous pseudo-moralism of the Germans.

    Adorno: “A German is someone who can not tell a lie without believing it himself”.

  36. djrichard

    I was kind of surprised that Germany went after taxes on the islands. Maybe there’s some way that the Greek oligarch’s elude that anyways? Otherwise, I don’t see anything in the deal that really harms the oligarchs. If it’s a loss for the little people, so what, no skin off their nose.

    If on the other hand, the Greek oligarchs aren’t on board, then I would imagine we’ll see them engineer a Grexit at some point later on. Maybe their window is closed for now and they’ll just have to grin and bear it and direct the Greek Gov to approve the deal.

    Vice versa, if the Greek oligarchs don’t press for a Grexit in the future, then I think that tells us everything we need to know. Because if the oligarchs want something to happen in gov, then by God, it will happen.

    And perhaps Tsipras saw this in the tea leaves. If he had two fields of battle engaged at the same time (one vs Germany, the other vs his own oligarchs), well that’s a lot to take on, right? So concede the fight against his own oligarchs (without even token attempts) and just hope for the best vis-a-vis Germany. In my book he still sold out. Still not as bad as Obama who will concede the fight when he doesn’t even have another adversary. Still he sold out; it’s not what the people elected him to do.

    By the way, props to NC for seeing this early on. I was a Tsipras-bot up til the end. I have to admit it was hard to bite my tongue seeing what Yves was posting on here.

  37. Jim

    Over the past few years James Galbraith, Michael Hudson and Yanis Varoufakis have been important contributors to posts on NC. They were certainly considered competent theorists on the Left.

    I believe Galbraith is/was quite tight with Tsipras and a buddy of Varoufakis when he taught down in Texas and Michael Hudson was quite confident that Syriza, at some point, would seriously consider creating public banks that would promote the economy and a national Treasury that would spend government money into the economy.

    Galbraith, I believe, was quite pro-Europe Union like Tsipras and Varoufakis while Hudson seemed to be more in favor of a Greek Exit.

    Has anyone seen any recent reflections by Hudson and Galbraith on this latest catastrophe of the Left.

        1. Nathan Tankus

          the deal is truly horrible but the Syriza government blocked resources from going into planning a Grexit and now it must push it’s population in the bed it’s made. Pritchard is a journalist, not a payments specialist/macroeconomist/Greek supply chain expert.

  38. susan the other

    This entire Greek saga has taken a toll on me. The EU has been so relentless. The US colluded. Greece really had no options when the great financial crisis hit. So wouldn’t it be Karma if Greece decided to just let Germany handle the whole thing. Knowing full well Germany would fail miserably. And maybe finally it will bring Deutsche Bank down, et.al.

  39. docg

    Yes, of course, I agree: Greece is being shafted big time, based on an agenda that was misconceived from the start and has (predictably) morphed into a formula for disaster.

    However: I find it more amusing at this point to contemplate the situation from the other side of the playing field. What current events tell me is that the Eurozone leaders are desperate beyond all measure to avoid at all costs that one magic word: default. I predicted some time ago that Greece would get its bailout because a default would represent a moment of truth the Eumenides cannot tolerate.

    So here it is. Only think what an absurdly shaky deal this is for them. And by “them” I don’t mean Greece, oh no. For Greece it’s an impossible deal, NOT a shaky one. Despite all the bluster about Greece “guaranteeing” compliance, in fact there is no way anyone can guarantee compliance. Even if the deal goes through the Greek parliament, which itself is very doubtful, just imagine what the future will hold. Demonstrations on the streets, no doubt violent, labor unrest, strikes, shutdowns, possibly even a military takeover.

    There is in fact NO way to be sure the elements of the current “memorandum” will be enforced. Tsipras may well sign on the dotted line and he may well get the votes he needs in parliament (though not from his own party), but compliance on the part of the Greek people is by no means assured.

    What this tells me is not so much about the “unreliability” of the Greeks, who are only trying to keep their dignity, but the sheer desperation of the Eurozone powers to make a deal, ANY sort of deal, that would forestall that inevitable word, “DEFAULT” from appearing on the Euro horizon, signed in blood — and fire.

  40. RBHoughton

    Economic serfdom for Greece today, Portugal and Ireland tomorrow and a few other countries soon after that. What a scintillating prospect to put before the moneymen.

    The Jubulee Debt people recently reported half the world’s countries are indebted as much as Greece so its nearly time to call-in the money whilst capitalism rules and the democrats are cowed by Greek failure.

    And there is another irresistible attraction – Greek islands were formerly unavailable for purchase only rent but now, under German control, they should all be up for sale. How much nicer than something in the West Indies or Caribbean eh?

    All the merchants have lacked is a bit of sovereignty but now with their increased power even that is likely. Forget about Social Democratic Republics we can now look forward to Orderly Capitalist Republics spreading like an infection over the surface of this planet.

  41. phil

    This was Tsirpas’ only choice, once he finally understood the reality. Remember, the more strongly held an incorrect opinion, the more liable one is to magnify that opinion and tenaciously hold that opinion in the face of opposing fact; this phenomenon is called “confirmation bias”. Tsirpas believed that he could force a decision and that his stubborn stance would hold; the EU principals kept pounding away at what the *reality* would be without ANY currency.

    The sheer strength of cognitive confirmation bias is easily seen in the Greek example.

    That said, and a little off topic: There is something wrong with the EU at present; it’s a weak institution. Hopefully, the EU will evolve to a TRUE cooperative, but that’s currently not the case. In some cases we have nations taking advantage of borrowers; in other cases we have borrowers taking advantage of nations. The EU *must* find a way beyond its political differences in order to create a truly stable EU, where resource sharing is equitable. I’m not sure that’s possible, but one can hope.

  42. ChrisPacific

    I am reminded of the Holocaust Education and Avoidance Pod (HEAP) from Cryptonomicon. Maybe someone should create a financial version (FHEAP).

  43. Mario Panziero

    It increasingly looks like Shylock is going to get his pound of flesh. Sadly, the right honorable judge that should decree not a drop a blood to be taken in the process, is either dead or in cahoots with Shylock.

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