Tsipras Accepts Most Creditor Terms as Merkel Insists on Referendum

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Post-bailout expiration dynamics are likely to produce even worse outcomes for Greece than it had on offer from the creditors last month. It isn’t just that the bailout funds of €7.2 billion are gone; it’s that Greece has gone over an event horizon with stringent capital controls on and the ECB ready and able to push the Greek banking system over the brink.

Greece’s weak negotiating position is even weaker now. Even with a boost via a “no” vote on the referendum this Sunday, if the Greek government were to take a firmer stance, the creditors have the means and the incentives to keep crushing the economy via financial strangulation. The ruling coalition would not be able to hold on to power for more than a month or two as the economy continued to decay at an accelerating rate.

This is a ruthless, brutal power play in progress. Too many key actors are driven by their own narrow imperatives, most important of all, their domestic politics, as well as institutional rigidities. Those constraints work against taking a broader view and recognizing that the immolation of Greece will blow back and damage the European project and their own economies. But that would require much bolder, visionary thinking and action. The current crop of leaders has instead become habituated to incremental patches even though it is widely recognized that the architecture of the Eurozone is incomplete and wobbly. But no one is willing to move to a higher level of integration, in large measure because, particularly for Germany, that entails the loss of power and privilege at the national level.

Tsipras has recognized the weakness of his position too late. Yesterday, he tried making a desperate, last-minute deal to ward off an IMF default and secure the bailout funds before the program expired. But that clearly could never happen. It would require approval from all of the other 18 states in the Eurozone, including parliamentary approval in Germany. There was no way that would occur without German legislators having had Greece pass legislation before they voted on the release of funds; the Greek government had been told that that was a requirement and that needed to be done by the end of last weekend, June 28.*

Moreover, Germany wasn’t even the most hardline country; Portugal, Spain, and Latvia are more hostile to cutting Greece any slack since their leaders had their citizens wear the austerity hairshirt. Given that it was obviously impossible at that late juncture for the other Eurogroup members to release the bailout funds before they went poof (at a bare minimum, there was no way the Germany MPs would approve it), the Tsipras appeal was a sign of utter desperation or delusion. And that in turn was an admission of tremendous weakness. Less than two days of capital controls and a bank holiday, and the ruling coalition was folding.

Press reports confirmed Tsipras’ near total capitulation. For instance, per the New York Times account, Tsipras May Accept Creditors’ Terms:

Prime Minister Alexis Tsipras said Greece was “prepared to accept” a deal set out publicly over the weekend by the creditors, with small modifications to some of the central points of contention on issues like pension cuts and tax increases. Mr. Tsipras linked Greece’s acceptance of the terms to a new package of bailout aid that would need to be negotiated.

One can try to argue this move as less terrible than it appears, since the so-called “third bailout” was always expected to include debt relief from the creditors. Both financial analysts and the German press, before the negotiation dynamics became so poisoned, were confident that the lender side would extend maturities and lower interest rates further. That does amount to an economic reduction in the value of the debt.

However, making that offer before the referendum had taken place revealed that Tsipras either did not want to take the risk of loss given that the strain and uncertainty of the capital controls and de facto bank holiday was already starting to work against the government and would only get worse as the week wore on and/or was eager not to lose a day in getting the banks back on a more normal footing. Pensioners, one of the groups that the ruling coalition professed to be fighting to protect, are at risk of coming up short on the current month’s pension payment. As the Financial Times reported:

Greek banks struggled on Tuesday to arrange payments to hundreds of thousands of cash-strapped pensioners amid mounting fears that capital controls imposed this week may not be sufficient to prevent a financial meltdown….

Angry pensioners protested outside the offices of OAEE, the state pension fund for self-employed workers, which was unable to transfer funds to retirees’ bank accounts overnight.

Tasos Petropoulos, OAEE’s director, said the fund’s 350,000 pensioners would receive half the monthly amount due by the end of the day and the remainder next week, provided the lossmaking fund can raise another €130m in the interim.

The finance ministry said 850 bank branches would open on Wednesday where pensioners would be the only customers. The ministry website then crashed as pensioners tried to log on to find the nearest cash machine.

Several other state pension funds, among them TAP-OTE, the main telecoms operator’s fund, and OGA, which covers more than 1m Greek farmers, said they were delaying disbursements normally made at the end of the month.

And this did not help either:

Queues lengthened at ATMs outside closed bank branches across the country. Many cash machines dispensed only €50 even though the daily limit is €60 because of a growing shortage of €20 banknotes.

And the ECB may tighten the screws further on Greece today. The ECB is meeting to consider, among other things, whether to increase collateral haircuts on Greek banks in light of the government default on the IMF, a move that could push some of even all of the banks over the edge. And even if the ECB stands pat, the banks will continue to bleed. From a later Financial Times story:

Doubts abound in Frankfurt and Brussels about whether all of Greece’s four biggest banks can survive the week. Even with bank branches closed until next Tuesday and ATM withdrawals limited to €60, officials fear some of the country’s lenders are so weak that they will struggle to honour their customers until Sunday’s referendum, when Greeks will decide whether to accept the terms offered by international creditors.

But despite Tsipras doing the negotiation analogue to rolling over and showing his belly, Merkel did not attempt to fake magnanimity. From the Sydney Morning Herald:

“We’ll negotiate about absolutely nothing before the planned referendum is held,” Merkel told reporters in Berlin.

Even if the “absolutely nothing” was less caustic in German, the message to Tsipras was clear: you pulled your little referendum stunt. You live with the consequences. The Financial Times confirms, not surprisingly, that support for a “no” vote has eroded:

Several private opinion polls seen by the FT since the weekend showed the Yes vote rapidly gaining ground..

One poll conducted on Wednesday showed the Yes vote narrowly ahead after more than 20,000 pro-euro demonstrators gathered outside parliament on Tuesday evening.

“Polls are trending towards a reversal of the strong No vote that we saw when the referendum was first announced,” said a pollster who declined to be identified.

Consider how this might play out. An op-ed in Reuters by Hugo Dixon titled, Tsipras looks like he is crumbling, describes what happens if the referendum delivers an anti-Syriza “yes” vote:

Still, it would be wrong to think that a “Yes” vote would lead to a quick or straightforward solution, because of the complexities of Greek politics.

One might think that opposition parties and SYRIZA could form a national salvation government. Something similar happened in 2011. But creditors would have little confidence that any government relying on SYRIZA would do what it promised. As a result, it would struggle to reach a new deal with its lenders and get the banks open.

Knowing all this, the Greek political parties might conclude that it would be best to clear the air by calling new elections. But there’s no guarantee that the opposition would win such a vote because it is fragmented. It has not yet managed to rally behind a single figure and a common program.

Even if the opposition won such an election, it would not be ready to start talks with its creditors until August. By then, the banks would have long run out of cash unless the ECB supplied more emergency liquidity, and the economy would be in a terrible state.

Benoit Coeure, the ECB executive director responsible for negotiations with Athens, said this week that if Greeks vote “Yes” in the referendum, he had “no doubt” euro zone authorities would find ways to meet commitments towards the country. The snag is that it may struggle to find a legal route to provide more liquidity until a new agreement is reached.

So even if voters cry “uncle,” it will take time to sort out a new coalition or worse, have an election, and in the meantime, conditions in Greece will become more desperate. Bank holidays are a form of strangulation. As Nathan Tankus wrote last month:

Two years ago in Cyprus, an emergency bank holiday was declared and capital controls installed. The bank holiday only lasted for twelve days yet supply chains started drying up instantly. An ex-Cyprus central bank governor told the Guardian:

Supplies of food are being exhausted and there are cases of raw materials like iron and timber being held up in customs because importers don’t have the cash to pay for them … No one expected, myself included, that the EU, ECB md IMF, would behave like this. Cyprus has been treated very badly … Where is the solidarity principle that is supposed to underline Europe?

Even 6 months later after the banks had reopened and capital controls were loosened, businesses were still having trouble getting basic supplies.

And remember, Cyprus was in vastly better shape than Greece is now.

If voters deliver a “no”, the game will become more complicated and potentially destructive. Even if Tsipras does not try to retrade his offer of Tuesday, which some view as an effort to curry favor with the ECB and forestall the imposition of haircuts, the lenders are in a sour mood. From the Financial Times:

But a European official cautioned: “The question now is not whether Greece agrees to certain measures. It’s the political will to reach a deal among the other eurozone partners. And this is very difficult to predict given all the bad will.”

Even with Tsipras conceding on almost all conditions demanded of last weekend, his counterparties still saw his offer as coming up short and requiring more adjustments. And sadly, they have a defense: conditions have changed and the economy is in worse shape now thanks to the bank holiday. And if the ruling coalition were to use voter approval in the referendum to try move back from its offer yesterday, it would be seen as yet another retrade. The ECB would be certain to keep asphyxiating the banks until the economy was in such distress that the government failed. To change metaphors, the ECB has now laid siege to the Greek economy. There is no scenario under which it will not prevail. If it shows any mercy, it is because it is to the ECB’s benefit, not Greece’s. The open question is whether the ECB breaks more banks than it intends to or forces a Grexit by accident.

The ECB’s incentives are to get a government that the Eurozone leaders deem to be workable in place. That means one with Syriza out or in a very diminished position, while keeping Greece in the Eurozone, since a Grexit entails unnecessary risks and complications and would therefor be best avoided. But the European politicians have had it with Syriza and it appears, particularly since the ECB was able to keep periphery bond spreads reasonably under control on Monday after the shock referendum announcement, that the Eurocrats will let Greece fail into a Grexit if that’s what it takes to get a more tractable government.

A must-read article from Deutsche Wirtschafts Nachrichten from last month (hat tip guurst) described how the EU could use its “panic provision” to discipline Greece. Key sections, via Google Translate (emphasis theirs):

Therefore, there is now the possibility that the EU presses on the so-called panic button, so enabled a panic paragraphs. This hides under the number 352 in the EU Treaties . It reads:

Article 352 TFEU

(1) If there is any action by the Union under the conditions laid down in the Treaties policies needed to attain one of the objectives of the Treaties, and the Treaties the necessary powers not provided, the Council shall, acting unanimously on a proposal from the Commission and after assent of the European Parliament take the appropriate measures. If these provisions are adopted by the Council in accordance with a special legislative procedure, it shall also act unanimously on a proposal from the Commission and after approval by the Euro-pean Parliament.

This article puts the EU in a position to carry out coercive measures against Member States without legal basis. The scheme is roughly equivalent to what we know from the national legislation as emergency legislation. The only restriction in paragraphs is that it must not be used as a basis for attaining objectives pertaining to the common foreign and security policy. So it’s almost a paragraph in order to maintain the EU’s internal order…

What coercive measures, the EU can now impose on Greece, is unclear. It is conceivable, for example, the establishment of a debt Commissioner. This could, sent from Brussels, see in Athens after things. In the history of such debt commissioners are well known. So Germany had to accept such an inspector in Berlin after World War II, many years. Curiously, this man had the Allies warned in good time before the oppressive debt burden and the risk of a social explosion in Germany. They did not listen to him.

This line of thinking is troublingly consistent with the saying of the so-called crown jurist of the Third Reich, Carl Schimtt: “Sovereign is he who decides on the exception.” And the bureaucratically justifiable but inhumane and politically reckless tightening of the banking choke chain looks too close to the Nixonian “make the economy scream” approach for comfort.

The eighteen nations of the Eurozone united against Greece are caught in a modern-day version of the dynamic described in Karl Polanyi’s The Great Transformation: that the foundation of the self-regulating market, namely the gold standard, the liberal state, and in his day, the balance of power system, which today would be the Eurozone government. Polanyi’s insight was that despite the ability to operate with an appearance of stability over long periods of time, this order was destined to fail catastrophically, since it eroded the underlying social order by treating things like labor, meaning human beings, and land as market goods. The destructiveness of letting market forces loose on those two commodities led to pushback and curbs on market activity, which ultimately undermined the operation of the entire system.

Polanyi wrote The Great Transformation in 1944, and hoped that the ravages of the two world wars would lead to a new and truly more durable and humane order. Instead, with only some modifications, the old system was restored. The Eurozone has instituted a particularly poor version, with a gold standard type system even worse than its predecessor. The classical gold system allowed cheating by resetting one’s currency price in gold terms; the accommodation for an overpriced “currency” in the Eurozone system is crushing wages, which even in the case of Greece hasn’t produced a commensurate level of trade benefits.

By siding with the preservation of the system, Greece’s opponents have no latitude to do anything other than continue to pommel uncooperative social orders, meaning communities and people. What we are seeing in Greece is thus no surprise, even though that does not make it any less a tragedy.

* Some pundits have depicted these deadlines as artificial. They weren’t. There are many areas where the lenders’ conduct can correctly be called unreasonable, but the hard deadlines were the result of past agreements and Eurozone procedures make them extremely difficult to change. This is one reason for the current creditor hostility. Greece consumed an enormous amount of time, running up against deadlines in what the other side saw as brinksmanship, which was a bizarre strategy given that Greece had a weak bargaining position. But the lenders felt compelled to accommodate Greece on that front as much as possible because the optics would be terrible if they didn’t, particularly if the situation were to devolve into a Grexit. Compounding that problem, an lawyer with considerable knowledge of European practice pointed out by e-mail: “Europeans have a very hidebound and literal view about their EU rules and documents. Americans see a contract as a basis for negotiation.”

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  1. FedUpPleb

    > But despite Tsipras doing the negotiation analogue to rolling over and showing his belly, Merkel did not attempt to fake magnanimity.
    > “We’ll negotiate about absolutely nothing before the planned referendum is held,” Merkel told reporters in Berlin.”

    That’s it. I give up. This whole thing is a farce beyond all creduility. An editor wouldn’t accept it as a fictional political comedy. The media commentary is mostly on par. I can’t pretend everyone, from the bank clerks to fund managers to the ministers of state, aren’t just flaiing out directionlessly anymore.

    Despressing as it may be, the reality is that the “best” dicussions on this crisis currently available are to be had in internet gutters like SomethingAwful and 4chan. Mostly because the “commentators” there are able to see the farce for what it is and laugh at it.

    I say this in seriousness because I have come to the conclusion that satire and laughter are the major missing ingredient in our modern day crises. If more people were laughting, loudly and jeeringly at these assorted elites and their absurd policies, things would change and improve faster. For a class of people who rely on their social status for all, satire and ridicule are the most potent weapons of influence.

    Anyone have any good political cartoons?

    1. IsabelPS

      I can think of 2 I like, one in French, the other one in Portuguese :-)
      I’m sure there must be loads in Greek!

      1. which is worse - bankers or terrorists

        This is a beta test for when they do Italy and France.

        1. Stelios Theoharidis

          If you work under the premise that the technocrats and politicians in the EU have ideologically been co-opted by the interests of the corporate and banker class, it is difficult to suggest that the outcome of remaining within the EU is going to be beneficial for the Greek public (or quite honestly the Spanish, Irish, Portuguese). Quite honestly, at every turn they will continue to sacrifice public well-being at the altar of austerity and neoliberalism. Unless, of course, the better aspects of their nature manifest at some point through the public will or otherwise.

          It is even more clear when the solution to the respective problem is not predicted by its own adherents to actually resolve the problem. Even the IMF doesn’t believe that it is going to lead Greece into sustainable levels of debt. I’d contend that their baseline scenario won’t even be accurate in the future.


          What that suggests is that they are going to continue to push the populace into a downward spiral via austerity measures and loot the country via privatization. It seems like they will continue to bleed them in order to get as much of the debt paid back as possible due to each EU government’s own domestic political realities. It would be political suicide to admit that they were just bailing out their own financial institutions via lending more money to the Greeks.

          The basic assumption in all contexts is that some sort of good governance will befall the Greek people to lead them into positive economic growth and depletion of their debts. I have a hard time believing that good governance will be something that descends upon them from above via coercion. Even with capitulation to the demands of the Troika by the current leadership, the Greek people will continue to struggle, and you will likely have an endless succession of politicians of all stripes promising their populace that they will be able to ameliorate the situation. Faced with a stoic opposition by their European counterparts, it is possible that the ball will just get kicked down the road and we will have a perennial reemergence of this contest. That is certainly not a scenario that suggests stability for the Greek populace and could worsen matters as their situation deteriorates.

          It is certainly not guaranteed that good governance will suddenly rise up from Greek discontent either.

          If we contend that it is the countries that denied the tenants of the Washington Consensus even in this modern European manifestation that have performed with greater success in economic growth and wealth distribution than those that have adhered to the ‘golden straightjacket’, then it appears that it would be to the benefit of the Greek people to exit the European project.

          1. WorldBLee

            Hear, hear!

            There is no negotiating position that Syriza can take absent absolute, total capitulation that the Troika will agree to. Even almost total surrender has been rejected by the Troika a couple times now. The Troika wants any democratic government removed so it doesn’t set an example others might wish to emulate.

            Which is why it would have been better all along to be preparing a Grexit plan–and clear rationale–for the Greek people. The EU is a banker’s union, run for and by the financial elite to the detriment of working people. Without the groundwork in place, a Grexit now will be even more painful–but not less painful than the cumulative effects from the death spiral of remaining in the EU.

    2. Benedict@Large

      So once again, by not accepting the power that a sovereign currency provides, we will have yet another ostensibly-liberal government fall on its sword, providing yet more fodder for the fascists to convince the very people they are demolishing that they are actually their best buddies,

      Here’s the deal, all you Luddites who can’t fit your brain about what MMT is telling you. You either bring MMT into your attempts at liberal government, or those attempts will fail. Every single one of them. You cannot promise what you can’t deliver and expect to hold power, and you cannot deliver with an archaic currency. Not against these people.

      Your grandchildren will be worshiping the god Capitalism against a background of blue encircled by stars, while you will still be saying, “MMT can’t possibly be true, because I don’t understand it.”

      1. MyLessThanPrimeBeef

        What do we do when the people of a nation want a currency of which they are not the sovereign ?

        1. yeahsoitseems

          I have a friend who imagines all the people of the world living in peace under one government. I tell him that’s what Hitler wanted. Blank stare.

          1. MyLessThanPrimeBeef

            Also John Lennon:

            You may say I’m a dreamer, but I’m not the only one. I hope someday you’ll join us, and the world will be as one.”

            As for the Axis’ dream – that would be three governments, including one from Italy and one from Japan.

    3. bob the builder

      Greece has leverage. If they leave and pull an Iceland, its game over for the Euro.

      Greece has an ace, tourism is a huge percentage of gdp. Tourists bring in foreign currencies.

      Does the eu feel lucky punk?

      1. yeahsoitseems

        if Greece has that kind of leverage over the Euro does that mean the currency is already toast?

        1. bob the builder

          I am not saying Greece is in good shape. And things will get worse before they get better, especially if they leave the Euro.

          The thing is, because they can ramp up tourism, they will have a steady stream of foreign currency coming into the country which they can use to build from.

          More important than that. Those in power want to make an example of Greece, IE pay your debts, you can’t escape your debts. However, if you push someone too far, what do they have left to lose?

          The EU has to punish Greece, but if they leave, and if Greece can recover like Iceland, that will be the end of the Euro. Do you think people in Spain and Italy aren’t on the edge as well?

          The negotiations aren’t as one sided as they seem. Forcing Greece out, may start a domino chain. Is it worth the gamble?

    4. yeahsoitseems

      i think more than laughter the Greeks need to gain strength from past. I mean Socrates AND his foes would probably tell the troika to pound

  2. fajensen

    I wonder if the European Commission is actually willing (assuming that it is able, which I highly doubt it is) to go all kinetic over this, because it seems like the Greek Army could (once again) take it upon itself to organize the nation and they certainly got enough hardware to make a good stand off it too (DB probably have bonds secured on the tanks so they cant be shot at).

    The main missions of the Hellenic Army are the defence of the state’s independence and integrity, the safeguarding of national territory, and the decisive contribution to the achievement of the country’s policy objectives.[4]

    During peacetime, the Army has the following main objectives:

    – The maintenance of high operational readiness for the prevention and effective confrontation of dangers and threats, as well as the ensuring of rapid response capability.
    – The contribution to international security and peace.
    – The contribution to activities of social aid and the support of state services for the confrontation of emergency situations.

    If I was running Greece, I think now would be a good time to get the army out to set up their “soup-cannons” to feed the pensioners; to show it’s around, to show that the government is not totally lame, incompetent and dominated by foreigners, and to help people. In that order.

    1. Oldeguy

      Back in the 90’s , Lester Thurow, an American Economist/Writer said that he had come to believe that, ultimately, globalized Capitalism would prove to be incompatible with Democracy. It was thought to be a grossly pessimistic statement at the time, but this crisis will prove him correct.
      What most commentators critical of Syriza ignore is that NO faction in Greece is coming forward to actually implement further turning of the screws in Greece- participate in great signing on and handshakes all around photo op with the Troika, you bet. Be the collaborators during the actual pain infliction- no thanks.

      1. MyLessThanPrimeBeef

        You are likely to find that many would agree with that.

        Here, though, the problem seems to be, to me anyway, that monetary union needs to go hand in hand with cultural-identity union (We are Serbian or Fijian Americans and proud of that, or we are Sorbian or Catalan (or Scottish) Europeans and proud of it), and fiscal union.

      2. Cugel

        This is a critical point that Yves and other bloggers here tend to ignore. The only reason Syriza is in power now is because the center parties were unable to implement the Memorandum. The Troika’s position for the last 6 months has been that Greek elections don’t matter, that they set the rules and the Memorandum must be implemented in full – no matter how impossible it is or how much suffering it needlessly inflicts on Greece.

        Well, they’re not going to get their way because no party that succeeds Syriza will be able to toe the line, and there’s really no way to maintain fiat rule by bureaucrats in the face of a complete breakdown in the economy, any more than Heinrich Bruning the “Hunger Chancellor” was able to do in Germany in 1932.

        The only thing the referendum will settle will be that voters want to keep Greece in the EU. But, they still want debt relief, which isn’t coming and they expect that somehow a “yes” vote will lead to a compromise that will somehow make things better. Only things are going to get radically worse and there is absolutely no end to the Austerity program – ever.

        The whole political structure is absolutely going to break down and Greece will exit the eurozone regardless of any negotiations. And it’s all going to blow-back badly on the Eurocrats.

        The situation in Greece today is as if in 1933 a bunch of bankers had been able to insist that FDR impose another 4 years of Hoover’s economic Austerity policies. There would have been a total revolution in the US. The only reason that can’t happen in Greece is that Greece is a tiny country with not that many people instead of the world’s leading economy.

        But the social order can break down amid chaos and violence and the unrest and economic turmoil can spread to other countries. And it will do so, despite all the imbecilic chortling of the EU about how they have everything “contained.”

        Meanwhile Goldman Sachs has warned its investors that things might not be as “contained” as Obama blithely seems to think they will be:

        Goldman Sachs cited these fears in a client note warning that the impact of a Greek exit may not in fact be “factored in,” as Obama suggested.

        “Spillovers through financial conditions … could potentially be much more sizable,” Goldman analysts wrote. “We estimated in 2012, for example, that the euro area sovereign crisis at its peak shaved as much as a percentage point off US real GDP growth through its adverse effect on US financial conditions.”

        1. Yves Smith Post author

          I’m quite aware of the history here and have referred to the Samaras government refusal to implement the memorandum. But that was before the ECB pulled out its implements of torture. The public has now gotten a taste of the high cost of defiance.

          And did you read the post carefully? It appears not. This is what it said, quoting :

          What coercive measures, the EU can now impose on Greece, is unclear. It is conceivable, for example, the establishment of a debt Commissioner. This could, sent from Brussels, see in Athens after things. In the history of such debt commissioners are well known. So Germany had to accept such an inspector in Berlin after World War II, many years. Curiously, this man had the Allies warned in good time before the oppressive debt burden and the risk of a social explosion in Germany. They did not listen to him.

          See this from Anatole Kaletsky at Project Syndicate earlier this year:

          The Cyprus experience suggests that, with the credibility of the government’s default threat in tatters, the EU is likely to force Greece to stay in the euro and put it through an American-style municipal bankruptcy, like that of Detroit.

          The legal and political mechanisms for treating Greece like a municipal bankruptcy are clear. The European treaties state unequivocally that euro membership is irreversible unless a country decides to exit not just from the single currency but from the entire EU. That is also the political message that EU governments want to instill in their own citizens and financial investors.

          If Greece defaults, the EU will be legally justified and politically motivated to insist that the euro remains its only legal tender. Even if the Greek government decides to pay wages and pensions by printing its own IOUs or “new drachmas,” the European Court of Justice will rule that all domestic debts and bank deposits must be repaid in euros. That, in turn, will force a default against Greek citizens, as well as foreign creditors, because the government will be unable to honor the euro value of insured deposits in Greek banks.

          Tell me how Greece pays pensions if it has no money. A couple of months of non-payment or payment in scrip that trades at 70 cents on the euro or lower (Califoria’s scrip traded at that level and they paid interest and have a bond rating WAY higher than Greece’s) and the citizens will accept a reduced stipend.

          The Detroit reference is significant. In Detroit, the city had sent shutoff notice to people who are behind on its bills. If it’s now deemed reasonable to cut off water to people in a US city, one can image the measures that will be deemed to be legitimate in Greece.

          1. financial matters

            Except Greece has somebody in government who is interested in the problem.

          2. nncardoso

            Dear Yves,
            A Detroit-like solution is simply not sustainable in Europe, because of how nationalisms work in the continent. In the current environment, any Greek who would assume a debt commissioner position (or any such kind of job), would justifiably be accused of serving foreign interests against Greece’s and seriously risk his/her own life. And let’s not even think of how quickly bad things could/would happen to a foreigner…
            Besides, the only path towards the suspension of a member in the EU is through Article 7, and justified only with the repeated violation of EU values (which would be applicable to Haider’s Austria, in 2000). Article 352 (aka the panic button) cannot be used either for the suspension of a member, or its’ expulsion, and would be exceedingly inadvisable to use it to discipline Greece (would only make things worse).
            Any such attempts from the EU would be resisted at all costs (including military) by a patriotic Greek government (which would certainly be the case in the first place, were the situation to reach the point where either article is invoked).
            But hey, right now anyone’s free to be creative, given how uncertain the near future is…

            1. MaroonBulldog

              Why do you assume the debt commissioner has to be Greek? As I understand it, the debt commissioner only has to be properly armed. Any other attribute is merely incidental.

              1. JTMcPhee

                …and Jesus of Nazareth reportedly extended his love and forgiveness to tax collectors for the Romans, and admitted them to his company. And reportedly told the faithful to render unto Caesar, and all that. Though he reportedly got seriously pissed at money changers in the Temple. So it is written, so it is said…

          3. pebird

            Back in 2009, when California paid vendors with scrip – could not be used to pay state taxes.

            1. MaroonBulldog

              California scrip could not be used to pay taxes. Right, because under the U.S. federal constitution, only the federal government, not the state government, has the sovereign power to issue money.

              If Greece proposes to pay in scrip that can in turn be used to pay Greek taxes, then Greece will violate the conditions of euro membership. And why would Greece even risk that? Conditions in Greece’s near future are likely to be such that paying taxes will not be the first thing, or even the last thing, the Greeks will think of doing with their scrip. I doubt very much that those pensioners lining up at the bank branches are doing so because they feel a compelling urge to pay some tax.

                1. MaroonBulldog

                  I didn’t see where the linked article says anything about whether the IRS will accept California tax anticipation warrants or any other form of state or municipal scrip in payment of federal taxes. If it’s there, and I missed it, that goes on me. My impression is, it won’t. Nor would I expect the State of Nevada to accept a California tax warrant in payment of Nevada property taxes. That also matters.
                  But I do believe pebird is correct in saying that that the 2009 California tax anticipation warrants could not be used to pay taxes. As I remember it, national bank branches in California have no obligation to accept those warrants even as deposits, and they assume an additional credit risk if they do.

                  Pebird was trying to controvert Yves’s point–arguing instead that California warrants are not an instructive precedent for what might happen with Greek warrants. I wanted to controvert that controversion..

                  1. Nathan Tankus

                    I wasn’t linking about that hyper specific issue. you made a claim about what the constitution prevented which is clearly and obviously false.

                    The link clearly lays out the precedent and the legal basis for tax anticipation notes being accepted in payment of state taxes.

                  2. Nathan Tankus

                    no one said anything about TAN being accepted in payment of federal taxes. we’re talking about state taxes. taxes can and have driven value of scrip just from state taxes alone.

  3. CDT

    So the EU is going to turn a strategically located NATO member into a failed state? While most of the NATO members have failed to meet their common defense obligations? Brilliant.

    1. fajensen

      Failed states are good for liberating all those natural resources from local government control and getting them into “The Market” with a minimum of “friction”. On seeing that we could occupy Afghanistan and murder Iraq with fewer casualties than we have from Saturday night fistfights and drunks falling off bar-stools, …. it’s what we do for “humanitarian interventions” these days!

      1. myshkin

        Yes, Yves posits at the top, “There is a ruthless, brutal power play in progress,” the only brake being, “recognizing that the immolation of Greece will blow back and damage the European project and their own economies.”
        Given the rewards of destroying the current Greek government, restraint does seem unlikely.

        “The European Central Bank wants to get paid, but the debts can’t be paid. So the central bank says, okay Greece: Sell us your islands. Sell us your ports. Sell us your lands. Sell us your raw materials. This is foreclosure time.”
        From the CounterPunch link:

    2. bh2

      The behavior of the Troika is no more than a salt-the-earth Carthagenian “solution”. Certainly Stiglitz clearly sees the EU for what it is: “the antithesis of democracy“.

      Purely economic arguments for or against EU membership distract from noticing the EU mailed fist which is a growing mortal threat to the most fundamental institutions of European civilization. It is likewise a distraction by those who bang on about whether national movements promoting an end membership are politically “left” or “right”.

      Regardless of the outcome of this one-sided struggle, one can only be reminded of the villainy of major powers who crushed democracy in the Greek Civil War in order to restore a dictatorship. This won’t be the first time Greeks resisted overwhelming power.

    3. Demeter

      We might get a two-fer: the end of the eurozone and NATO in rapid succession. Which brings relief to Ukraine as its coup collapses, and Russia wins, big time.

      At which point, the USA will have to either officially occupy Europe, or fold its tents and go home. Not a good place to be, in an election year. I don’t think the voters will stand for occupation.

  4. Kurt Sperry

    I’m left wondering if in the end, given the vast asymmetries in the power of the sides in the negotiations and unwavering troika hardline intransigence, anything Syriza might have done differently would or could really have made any substantive difference. The resulting defeat for Greece may have essentially been preordained from the beginning by the starting conditions.

    1. Yves Smith Post author

      Intransigence was the worst possible strategy that they could have chosen. They will either Grexit, which will be even worse the implementing structural reform, or they will have to swallow accepting even worse term than offered in the hostile negotiations of last month.

      Literally, any course that kept them from defaulting and letting the politicians turn the ECB loose would have been better. That’s why I have been so hard on Syriza. It was obvious to anyone who understood an iota about banking that the ECB had the power to bring the Greek government to its knees, quickly. And the Greek government created the circumstances that gave the politicians and the ECB the cover they needed.

      1. Roquentin

        Perhaps it would have, but this current setup isn’t sustainable. The people of Greece have put up with this misery for what, eight years now? How much more were they supposed to stomach before the whole thing broke down? As the current economic/political setup in the EU becomes increasingly decayed, worse and worse things will be demanded for “business as usual.” That’s what’s really going on. The ECB and the EU on the whole has made it clear they don’t give half a shit about what happens to the people in Greece and will throw them all into the furnace just to keep the train running just a little bit longer.

        Admittedly, my knowledge of finance doesn’t run that deep, but it seems to me like a Grexit was the only real option from the jump. Everyone wants to pretend they can keep patching the holes in the ship with duct tape, but those days are gone. It’s over.

          1. hemeantwell

            A key question here is to identify the locus of pretending and to realize that what can appear in hindsight to be a lack of realism resulted from both political inertias and misrepresentation . A majority of the Greek electorate didn’t want to leave the euro, and I think that meant that if Syriza had come into the negotiations saying some form of Grexit was a possibility, they would have been seen as ignoring their mandate. That would have begun to mobilize the right, who are apparently as willing as the Communists to orient to Cold War political framings. Previous regimes had lied Greece into the euro and then been forced to accept the 2011 agreement (or, lacked the political guts and muscled to stand up to the Germans when they were more vulnerable) and yet were unwilling to contribute to clarity by saying that they had been wrong. Varoufakis and Tsipras thought that they could appeal to political forces in the core states to come to their aid under the banner of a more viable macroeconomic foundation for the EU. (It really would be good if the failure of the SPD was given more notice, although Mark Blyth and the writers of the Delphi declaration of a few days ago ((Hudson is one of them)) have been doing that.)

            On the other hand, the Lapavitsas-oriented section of Syriza had been saying all along that the only option was a Grexit.

        1. MyLessThanPrimeBeef

          Unfortunately, peoples of other nations have gone through the same 8 years, or more, of misery, in a zone of some kind, or not in any zone at all.

          That is, the world is divided into the frying pan and the fire.

          1. ambrit

            Don’t forget the hand holding the handle of the frying pan. It seems to be controlling how much heat gets to the frying pan people. (People of the Pan? Too Pagan for Peoria.)

      2. ennui

        Your criticism of Syriza seems to be that they capitulated, but didn’t capitulate hard enough. You can’t label the Greek strategy as “instrangience” while claiming they have capitulated on all of the major points. If Tsipiras, in fact, capitulated on all the major points (which seems to have been the case early on as you have reported) then the fact that we are where we are now has much more to do with the willingness of the Troika to force a crisis to achieve their own aims… whatever they may be, than Greek instransigence.

        1. Lambert Strether

          ” You can’t label the Greek strategy as “instrangience” while claiming they have capitulated on all of the major points. ”

          Er, you’re leaving out the time dimension. Had Yves wished to write “successfully intransigent,” she would have done so.

      3. Ben Johannson

        Tsipras and Varoufakis appear not to have believed the ECB would so far exceed its mandate in applying political pressure (or blackmail.)

      4. blowncue

        Lanford Wilson wrote a play called Balm in Gilead decades ago. Joe meets Darlene. Joe decides to sell heroin for Chuckles. Joe changes his mind. Chuckles has Joe killed with a horse needle full of smack. Darlene is sad. The end.

        I’m paraphrasing but at the end:

        DOPEY: “…see, you don’t mess with Chuckles. Chuckles don’t like that. And Joe didn’t let him KNOW.”

        FICK: “And now?”

        DOPEY: “Now? Now he’s gonna kill him.”

        FICK: “We ain’t seen this before, have we?”

        DOPEY: [Pauses. Shakes his head: no.]

        Study all the macroeconomics, banking and game theory you want. This play still breaks it all down decades after Wilson wrote it.

      5. Cugel

        The ECB has the power to “make the Greek economy scream” to paraphrase Nixon’s infamous order about Chile, but the blowback will be severe. They have now stated that the first thing that’s going to happen is that they will force Tsipras and Syriza out of power. But, then the left is in opposition and the center right parties that barely have any credibility at all will have to attempt to shoulder the burden of implementing the Memorandum amid even more horrific economic collapse. Staving off default for a few more months while the economy crashes won’t make it any easier to continue on course.

        Grexit is still going to happen. And the blame will not all be on Greece. Of course, Syriza may not benefit from the fallout, but they will still be a lot more popular than the center right. The real beneficiaries are going to be the Nazi Golden Dawn party and the National Front in France.

    2. DanB

      I suspect you are correct. Also, as the modern world economy has hit the limits to growth, of which the Greek crisis is a reflection -coupled to and worsened by the depredations of neoliberalism, there are a lot more preordained outcomes to emerge.

    3. wendy davis

      You might like to read: ‘IMF: austerity measures would still leave Greece with unsustainable debt; Secret documents show creditors’ baseline estimate puts debt at 118% of GDP in 2030, even if it signs up to all tax and spending reforms demanded by troika’

      Well, sure, most Greeks get it: permanent debt peonage; how attractive.

      …and read or watch Michael Hudson and Bill Black talk about the history of the baked-in fact that almost all bailout funds went to the banks, and more (on TRNN). Neither would vote Yes.

      Joe Stiglitz would vote No, and has an internal link that *might* speak to Yves’ concerns.

      One of these days these guys might just come a anti-capitalists. ;-)

      1. Yves Smith Post author

        This is no longer about getting Greece to a sustainable position. Greece has gone too far in trying to defy the creditors and Eurozone club rules. Discipling Greece is more important to the Eurocrats than getting the most optimal outcome in terms of money. Politics was always more important than maximizing creditor returns. These are governments, and the short-sighted political calculus is what is driving their actions.

        1. MaroonBulldog

          Hypotheses to consider:

          1. Greece’s debt to the IMF will be brought current and eventually be paid in full, even if it takes 100 years. Because, no future Greek government will be able to borrow even one euro cent, or any other currency, in any international market, until Greece gets its accounts square with the IMF.
          1.A. However, Greece might have an escape from paying some of the IMF debt denominated in euros, because the euro conceivably could fail before the debt is paid in full. Such a result would do no credit to Alexis Tsipras or SYRIZA, because they did not acknowledge an objective to crash the euro.
          2. Greece’s sovereign debt to the ECB and European sovereign creditors will get written down or written off, since the IMF will eventually insist on it, and this is the price the ECB and Europe will will have to pay to the IMF to get Greece admitted back into the comity nataions able to borrow.
          3. The court of history may credit Alexis Tsipras and SYRIZA for a partial victory in getting the part of Greece’s sovereign debt written down or written off, but this will come too late to do them any good, because the Tsipras’s career and SYRIZA’s prospects will have been ruined long before any write down occurs.

    4. EmilianoZ

      That’s actually the definition of a tragedy. A catastrophe is preordained from the start and everything the protagonists do to avoid it only precipitate it.

    5. Heliopause

      “I’m left wondering if in the end, given the vast asymmetries in the power of the sides in the negotiations and unwavering troika hardline intransigence, anything Syriza might have done differently would or could really have made any substantive difference”

      If, as we’ve been told, the Institutions are “thugs”. and not only “thugs” but brutish and irrational ones who don’t even recognize their own self-interest, then the answer is obvious. “Thugs” don’t negotiate, period, with parties in vastly inferior positions of power. Hence, in such a case Syriza did neither the right nor the wrong thing; the only course possible was to either fold quickly (not what they were elected to do, needless to say) or extend the game as long as possible, hoping for a change in terrain or a deus ex machina.

      If the Institutions are to some extent amenable to reason then we can open the floor to arguments over how best they could have been approached. But you can’t have it both ways.

      The discussion on Greece here contains a great deal of valuable information, but too often reminds one more of blogs or Usenet groups devoted to a favorite sports team. If only they’d traded for players X, Y, and Z, why doesn’t the general manager listen to me, etc. While the general manager might indeed be an idiot, and we’re certainly entitled to our opinions as fans, we also need to recognize that the GM operates under a complex set of constraints. Syriza are an expansion team (arguably in a far worse position than even that) who are being expected to be playoff contenders in less than six months. Strange.

      1. MaroonBulldog

        If you expected SYRIZA to be playoff contenders, then you expected too much.

        As far as advice goes, SYRIZA could use the help, and his site is one place where they might even find it.

  5. Link

    Dear Yves,

    I enjoy reading your articles and I am aware that you think Grexit will be far worse than staying in EU, even with these abysmal conditions.

    Would you agree, though, that a Grexit is inevitable anyway at some point? Economy in Greece will deteriorate even further due to austerity policies and Greece would be in a far worse position than now. Wouldn’t that mean that Greece should get out as soon as possible? Even though it will be catastrophic now, it would be even more so in the future.

    1. Yves Smith Post author

      As horrible as things will become, a Grexit will only be worse. None of the economists blithely recommending a Grexit have bothered to examine payment systems issues, what it takes to do software development in a mission critical setting (which payment systems are), how hard, time consuming and costly it is to resolve banks and introduce a new currency, and how an economy goes into free fall when you can’t import due to banking system failures and/or payment system issues. And that means you need to look at imports in detail and what happens if you don’t get them or can’t buy much/enough of them. Greece will have trouble fending off starvation for at least a year, for starters.

      In other words, there’s a reason the Greek government says “no Grexit”. It’s not just to appease the voters. It’s also that some of the officials, particularly Varoufakis, understand or at least have a sense of what a catastrophe it would be.

      1. bh2

        I don’t believe you answered the question, Yves: “Would you agree, though, that a Grexit is inevitable anyway at some point?”

        Yes? Or no?

        1. Bobbo

          bh2, you hit the nail on the head. That is the 7 billion Euro question.

          All of this reminds me of how Minyanville framed the policy decisions back in 2008. I recall Todd explained it as a choice of two alternatives: cancer vs the car crash. Which would you prefer? Which is more terrifying? The thought of your forehead hitting the windshield? Or something killing your more slowly? The fear of Paulson’s abyss and the greed of the bankers led us to choose the cancer option back in 2008.

          Greece has had enough, I think.

          Yves fears the power of the bankers. So do I. But someone needs to stand up to the playground bully. And here’s the thing: Once someone does that, there is a possibility that the whole dynamic might change. Yves seems to consider the consequences of Grexit as if the world freezes and Greece remains the only country in the penalty box, crushed from the outside, isolated and cut off. And in the short term that is exactly what will happen. But there is a chance that will also set into motion a series of events that starts to break the power of the almighty bankers.

          I think something needs to change. Greece has figured out something needs to change.

          1. Linus Huber

            @ Bobbo

            You definitely hit the nail on the head.

            It is the incentive structure that allows to transfer risk from the banking sector and risk takers to governments and which is based on a faulty economic doctrine which corrupted the system and increasingly endangers democracy. Would you provide a beggar with a very limited set of skills with lots of credit, knowing that the chances of getting repaid are rather slim? Of course not, except you set up the rules of the game that you will be made whole by transferring any losses via governments (incl. central banks) to the general public. Greece like many other governments are basically financing part of their well-fare system with ever more debt and the central banks, following wrong economic theories, enable this farce by enhancing an ever greater credit bubble. It becomes ever more clear that the economic capabilities to expand this bubble further reaches its limits and thereby proves its lack of sustainability and will lead to societal distortions and chaos of ever higher order as longer the game is going on. The idea that one basically is indebted (his share of the government’s debt) at the time of birth in the range of e.g. $20k or 40k is simply hilarious and a joke; we have all been conditioned that yearly deficits and increasing debt is normal. It is not but a Ponzi scheme that redistributes from those with modest means to the 0,1%.

        2. MyLessThanPrimeBeef

          Good question.

          I don’t think anything lasts forever, even great marriages.

          More specifically, I would also ask Tsipras that question with the follow up – if it will break up eventually, why not now?

      2. Link

        Thank you for your answer.

        I take as a premise your conclusion that a Grexit now would be catastrophic.

        But my question is: Based on the assumption that a Grexit is inevitable anyway (would you agree with that), if it doesn’t happen now, it will happen a bit later. Greece will never get better, merely in a limbo state due large surpluses imposed and EU showing no economic rationality.

        From that perspective, wouldn’t it be worse if a Grexit happened in a further depressed economy 2 years later than now? If that is so, shouldn’t Greece get out now since Grexit would be less catastrophic (albeit catastrophic) than the inevitable Grexit in the future?

        1. backwardsevolution

          Link – of course you are right. Grexit is inevitable. Might as well get it over with now rather than later because it’s not going to get better.

      3. kemal erdogan

        I am a software engineer with experience in developing a large banking system for a bank with almost a thousand branches spread over the whole country (admittedly not inter-bank payment system but clearing balances between branches of a bank is conceptually the same). And I disagree with your assessment.

        It is true that even the adjustment of existing systems for a new currency is very difficult due to a lot of interconnected systems which are “made to work” with a lot of patch work here and there over time. Therefore any change in the systems is indeed dangerous and require careful testing.

        However,as I mentioned before, the software issues are overrated because existing systems can be used without change. The new currency would assume the code “EUR” internally when systems talking to each other, the REAL EURO would get a new code. This ensures that absolutely no change would be necessary for handling domestic payment system transactions. The foreign transactions would potentially be a problem but external connections would be cut anyway thus no need for handling that in the first few weeks. However, even that can be solved in short order (again don’t want to go in detail but a simple message transforming agent can be inserted between the domestic and foreign connection)

        The only software problem that I see which needs solution in short to medium term is the receipts printed by the special printers the bank tellers use, the cashier machines, ATM machines, etc. But this is not critical and such systems can be adjusted in few weeks gradually as there is no need for central coordination and there is no need for synchronized deployment on all systems at the same time (which is by the way a major reason for the complexity of replacing a system as a whole).

        1. Clive

          You’re making an assumption which is entirely wrong. Namely that, to quote, “receipts printed by the special printers the bank tellers use, the cashier machines” are not – you imply — an immediate problem. They most certainly are. A receipt isn’t just some chaff which is given by the bank teller, the ATM or the merchant at the end of transition as a nicety. It is a vital document establishing the new position in law (primarily contract law) of the parties involved in the transaction.

          If the receipt (for example from the ATM, the merchant EPoS terminal in a credit card transaction or suchlike) says that the transaction was denominated in – as would be the case in Greece – euros, that is what the transaction is denominated in. You cannot issue a receipt as a culmination of a transaction which says “€X.XX” but then have any party to the transaction left in ambiguity about what currency the transaction was actually denominated in. No party can be allowed (if any sort of payments system isn’t to degenerate into chaos) to say later “oh, well, I know it says euros on your documentation, but actually, it was in drachma (or dollars, or sterling or whatever)”.

          If the receipt says euros, then any party is, legally, entitled to either pay in — or receive – euros. Sooner or later, someone would brandish documentation showing a transaction denominated in euros but which both the recipient and the payee of the funds ended up remitting drachmas and challenging it. It would have to be resolved in the courts, even if the courts eventually handed down a judgement saying that the transaction was indeed denominated in drachma despite what the documentation said, it would only be after years and years of legal uncertainty. Great. Greece gets to add commercial transactions being in legal in limbo to its list of problems.

          There’s another wrong assumption implied in your suggestion, which is that only Greek banks will need to make any changes. This is not true. Worked example: Let’s says we have a U.S. citizen on a vacation in Greece. S/he settles a hotel bill by credit card, for instance, a MASTERCARD. Greece has re-drachma-ised. As per our your scenario, the merchant’s EPoS terminal hasn’t been updated (updating EPoS terminals is a major undertaking in terms of development, testing and roll out, I’ve known projects requiring new EPoS firmware mandated by the card licencing networks such as VISA \ MASTERCARD \ AMEX, these have 18 month+ delivery schedules) and so produces a receipt in euro denomination but the hotel is working in “new drachma” in its accounting as it its bank.

          But how on earth are the card networks supposed to process this transaction unless they have made the appropriate system changes to recognise that the hotel’s EPoS terminal, even though it is denominated in euros is now actually not transacting in euros at all but “new drachma” and that it needs to get the card issuer’s bank in the U.S. to convert and settle the transaction into dollars not from euros, but from “new drachma” ? The card networks will of course have to make system changes for this to fly. They certainly can do so. But it is network’s liability to make the changes, test them and then underwrite their operations. That is months or years of work. In the meantime, from my example, U.S. citizens (and anyone else outside of Greece) will have to settle their bills in cash (“new drachma”) if they want to go to Greece. That will not be helpful at all to the Greek tourist industry. Or any other industry which relies on card payments from cards issued outside of Greece.

      4. Demon Cat

        And in the end the fear of all those things will probably prevail, However, coming from a country which went through all of that and much worse (Serbia), I think you’d be surprised at how quickly markets and alternative currencies can be set up, and how resilient an economy can actually be. Given that Greece wouldn’t be bombed and face international sanctions, I think the fear of what might happen is worse than what would actually happen in that scenario. In any case, I hope they pull through the best they can.

      5. pebird

        The problem was less that of a Grexit, it was that the political leadership wanted their cake (sovereignty) and eat it too (Euro). If they were committed to an exit, it would have been painful, but it’s not like no one has setup a banking system before. Compare what the next 2 years are going to look like vs. if they went through a crazy 18 months of financial transition.

        The only thing to really fear is whether Europe would have imposed military force in Greece upon an Grexit – seeing what we have seen to date, not an impossibility.

        They didn’t have to worry about resolving banks, the banks are the ECB’s problem – let em go bust, you can’t trust those guys anyway. Should have never imposed capital controls, without foreign exchange it makes no sense – stupid stupid stupid.

        They wanted to show what great Euro-citizens they were – I can’t believe how naive they were. You think after the first couple of betrayals right after the election they would have gotten a clue who they were dealing with.

    2. The Insider

      The problem with a lot of the cheerleading for an exit (see the comments section of Joseph Stiglitz’s piece in the Guardian for some good examples) is that they conflate the idea of an exit in theory with the reality of an exit in the current real-world case. The two are not the same.

      I see exit as being the equivalent of surgery. The patient may be very ill, but it matters a great deal who performs the surgery and under what conditions. In this particular case, the surgeon is inexperienced if not downright naive, the timetable is too short, and the conditions are precarious. With a competent government, significant lead-time, and an economy not on the brink of collapse, exit may be net beneficial; under the current circumstances, though, it could turn out to be a total catastrophe.

      1. backwardsevolution

        The Insider – “With a competent government, significant lead-time, and an economy not on the brink of collapse…” Well, in that case there probably would be no need to exit.

      2. MaroonBulldog

        Also, the surgery is experimental. In fact, it has never been performed before.

  6. Swedish Lex

    Article 352 requires unanimity. Greece could veto. No-go.
    Also, 352 not carte blanche. EU not great, at all, but not quite Mad Max either.
    Merkel will continue to bully, politically. Not with article 352.

    1. Yves Smith Post author

      Read the article in full. It argues that the precedent for exclusion for Greece has already been set. Separately,iIf Greece defaults on the ECB, it could also be argued as a basis for suspension, which I believe means it cannot vote, which would also allow for the use of Article 352.

      The European Court of Justice ruling on the OMT makes our US Supreme Court look good. The current group of ECJ jurists looks awfully willing to rationalize what the European institutions feel necessary to do to deal with emergencies. It really is Carl Schmitt in action.

      1. Swedish Lex

        Greece cannot be “suspended” or “excluded” from neither the EU or the euro. As simple as that.

        Greece can on the other hand be bulldozed politically, economically and humiliated. Again and again.

        Can Oregon be “excluded” or “suspended” from the United States? “Not the same”, some would say, the US is a State, while the EU is not. But from the perspective of EU Law, it is the same.

        1. Chris in Paris

          Not my original thought but one nuance: the US is a state and the EU is a supermarket.

          1. Dave in Austin

            At the end of the Civil War, after claiming states could not leave, the winners suddenly said they could not elect federal legislators. The northern Democrats and the southern states could form a majority, end Republican rule (with Lincoln dead) and overturn the battlefield verdict. The Republicans simply ruled that the south could not vote in 1866. So we do have a U.S. example

            1. MyLessThanPrimeBeef

              A lot of the ‘national identities’ we see today are the ‘gifts’ of earlier violent conquests.

              Take the Chinese Han people for example. There were a lot of culturally distinct states before the Han dynasty, and many different tribes before the dynasty (the Zhou dynasty), the one that came before the the Qin dynasty which frist united China. The Zhou people wrote of conquering the Yi people in the East and warring with the Rong to the north and west.

              So, one united nation, has fewer problems (not problem free) so that if Dust Bowl people went bust, they just moved to California, and even with man-made disasters, there is less acrimony.

              And if the bankers from New York are squeezing the homeowners of Las Vegas, it would be properly seen as financial looting by the elites, not some drama about one state punishing another state.

              That’s one legacy Europe doesn’t enjoy, and it probably has suffered more violent conflicts and destruction than many nations that went through forceful ‘union’ a long time ago.

        2. nncardoso

          Not true. EU members can be suspended, and may even lose their voting rights.
          However, this can only happen as a result of a breach of values, which article 7 of the Treaty of the European Union describes as “human dignity, freedom, democracy, equality, the rule of law and respect for human rights”. EU institutions have arguably breached all of them already with their behaviour with respect to both the ongoing migrant crisis or to the Greek people. It would be the ultimate dishonesty (and irony) to use this article to suspend Greece, towards disciplining it or even removing it from the Euro.

          1. Yves Smith Post author

            I hate to tell you but the creditors seem unmoved by the upset in some parts of the foreign media. My impression is that there is more than enough support among the voters of the 18 other Eurozone countries and like-minded bystanders in the EU that they would proceed if Greece gets seriously uppity again based on a “no” vote in the referendum. The US is massively hypocritical (lecturing the rest of the world about human rights when cops kill people way too casually and we have the highest imprisonment rate in the world). I don’t know if Europe has devolved to this state, but in the US, it’s almost impossible to shame the elites. For individual improprieties, yes, but their collective actions? Another matter entirely.

            1. nncardoso

              I entirely agree that there is thus far no indication that the elites regret any of what they’ve been doing to a country in severe depression and undergoing a human catastrophe, and I do not doubt Articles 7 or 352 may be on someone’s mind and for precisely the reasons stated in the article you point out.
              My concern, however, is that any political escalation from here onwards will quickly move towards a whole new level, and perhaps out of control, on both sides – especially if extraordinary measures ever come to pass. The intense nationalism, the personal and collective pride, and fundamental lack of understanding between the positions of both sides, which have been on display throughout the last week, are a very bad omen.
              To be honest I’m concerned Europe has chosen to follow a path that ends in a really bad place, and very soon.
              To think that all of this is because of a country representing 2% of the EU GDP is truly mindblowing…

              1. Gio Bruno

                …it’s financial importance is of little concern; the larger issue is the political message. Once the kids see the Bully isn’t impregnable the conditions of fear collapse.

          2. Swedish Lex

            Article 7 can not be used against Greece since Greece has not breached anything in thar article (human dignity = e.g. torture in Greece, rule of law = e.g. denying accused people the rights to legal defence, etc.)

            Article 7 also no-go.

            1. Yves Smith Post author

              And why does not “rule of law” apply to dealings with EU/Eurozone level institutions and treaty matters? For instance, let’s say Greece decides to start printing as many euros as it needs on the printing press located in Greece (this probably can’t happen enough in reality to make a difference, I suspect the Eurocrats control the amount of stock so that they couldn’t go hog-wild even if they wanted to). But let’s use that as a hypothetical since it would drive the Bundesbank and the ECB bonkers if Syriza started playing Helicopter Ben and basically screwed with the ECB control over the money supply and could be argued to be putting inflation targeting at risk. Why isn’t seizure of what amounted to an ECB asset and operation of it in defiance of treaties that Greece signed a rule of law violation?

              1. JRH

                Not sure that arguing a hypothetical is correct here. Swedish Lex was referring to now.

                We can construct any scenario saying …”For instance, let’s say”

              2. JTMcPhee

                The rule of law. Nice concept. Lots of parts to it. Are the arrangements regarding movement of “money” between Greek government with all its corrupt parts and the Troika and the rest of Europe in all their corrupt parts to be taken as a contract? It seems that’s the presumption: I loan you money, you promise to repay. I’m no civil law scholar, but a brief read is that there are similar defenses to enforcement. One seeking specific enforcement of terms must approach the court with “clean hands.” Impossibility of performance is a defense, as is failure of consideration, fraud in the inducement and a bunch of other substantive considerations including the formation of the “consent of the parties,” as the basis of the contract.

                Having played lawyer for 26 years, seeing how it all really works, I have to say I don’t see any hard and fast framework or “rules of law” that pin the Greeks to the ground without “legal” recourse or defenses. Of course this is about power and politics, not disinterested application of legal rules of decision and precedent. An action by the Greek government along the lines of the hypothetical does not seem to fall within the ambit of what would be a violation of “rule of law” in the Article 7 sense, but we are at sea in an ocean of words, where gunboats and submarines and surface to surface missiles count for more than niceties of textual interpretation…

  7. blub

    The German leadership is now openly calling for regime change. See the Times

    See also this interview in the leftwing “Der Freitag” with the former SPD candidate for the German presidency, Gesine Schwan:
    “Ein wichtiges Mitglied der SPD-Bundestagsfraktion hat mir gesagt, Angebote für eine Umschuldung lägen auf dem Tisch – wenn die Griechen ihre Regierung abwählten, indem sie beim Referendum für Ja stimmten, würden sie die Umschuldung bekommen.”

    “An important member of the SPD parliamentary groud has told me, that offers for a debt restruction are on the table – if the Greece population vote their government out of office, by choosing “Yes” in the referendum, then they would get a debt restruction.”

    1. Clive

      I disagree. The German government is quite happy to continue to put up with SYRIZA so long as it, from Germany’s perspective, gets with the programme and implements the austerity. We may think this is terrible, that the ECB, Germany (and whichever other bogeymen you want to add to this list) has no moral right let alone democratic mandate to impinge on Greek sovereignty in this fashion.

      But if you’re in the EU in general and in the eruozone in particular you have ceded a huge chunk of your sovereignty to the Commission, the ECB and the whole panoply of related — “un democratic” institutions. Germany — and they are not alone in the EU — simply cannot understand why Greece doesn’t understand.

      But the sham-a-rendum merely compounds an already complicated series of events because Merkel, whatever she may think of the matter, cannot come out and say publicly that Greece must just get on with it and take its medicine because she has to respect the result of the vote and not be seen to preempt it.

      1. blub

        Germany was ok with Syriza (and implementation by them) until the referendum. Now all trust is lost and they want regime change.

        Have you seen the speeches of Merkel and especially Gabriel and Schäbule? They have said quite frankly that they want regime change. This popular in Germany.

        1. EmilianoZ

          The pupils have been naughty. Schoolmasters Merkel and Schaubbie will see to it that they’re punished.

        2. Clive

          Yes, you’re probably right, they’d prefer not to have the hassle that is dealing with SYRIZA. But they are I suspect not that fussed — so long as the start towing the line. They really are that ambivalent.

          1. MyLessThanPrimeBeef

            Perhaps being short-term practical they will work with him, but they can also be long-term practical too.

            Merkel is being awfully short with words the last few days (the few times I have read about her in the news). I sense she had moved on.

      2. backwardsevolution

        Clive – “But if you’re in the EU in general and in the eruozone in particular you have ceded a huge chunk of your sovereignty to the Commission, the ECB and the whole panoply of related — “un democratic” institutions.”

        Everything seems wonderful at the time you sign up for things, doesn’t it? It’s all euphoria. “Yay, they’ve accepted us. We’re in!” When times are good, everything goes along well. You don’t see the noose around your neck until times get tough. That’s when you begin to feel the rope tighten.

        None of these countries should have entered this miserable circus, especially not Greece, especially when she wouldn’t have gotten in had it not been for the help of Goldman Sachs and their team of expert manipulators.

  8. Cugel

    “Greece will not get a cent in new eurozone bailout loans while Alexis Tsipras and Yanis Varoufakis remain in power, because Germany will block any such deal, one of Europe’s most influential politicians has told The Times.

    The German Parliament among others has determined that it will refuse to approve ANY deal if it has to make that deal with Tsipras, regardless of the outcome of the vote. Politically, it will be necessary for Syriza to go into opposition if “yes” on the referendum passses, which it now looks like it will, because the creditors, filled with glee will tell Tsipras that they will refuse to negotiate with him. But, the other parties do not have enough popularity to form a stable government, any more than PASOK or New Democracy did prior to the last elections.

    The entire basis of the “yes” campaign has been the lie that somehow voting “yes” would mean forming the basis of new negotiations on debt relief that would leave some money for recovering the Greek economy, whereas the creditors remain committed to squeezing Greece regardless of the economic consequences and will never voluntarily end Austerity. It will take about 15 minutes for that insane lie to be unraveled after the vote. In 3 months nobody will be able to argue for the “yes” position since things will only have gotten infinitely worse.

    So, it would be the conservative parties that step in to administer continuing Austerity that would suffer politically to the benefit of the Left opposition in Syriza and especially Golden Dawn and the Nazi racist right.

    Greece will immediately become ungovernable and the creditors will suddenly learn that having a failed state in the middle of Europe is not really a good thing. And all the blame for instituting and continuing Austerity will fall, not on Syriza, whose negotiation failures will immediately become ancient history compared with the ongoing crisis, but on those center right “traitors” who will be forced to eat the daily dish of humiliation.

    They are already having to endure violent attacks by arguing “we are not traitors to Greece.” How long can they govern under such circumstances? The opposition is already chanting “ELAS, EAM” in demonstrations (the Communist resistance to the Nazis in WWII).

    This is going to degenerate quickly into a quasi civil war. Desperate people are going to become violent and turn to the politics of violence, particularly the Nazis.

    “Today there is the question of do we trust Tsipras and Varoufakis? The answer is clear to all parties, no,” the senior German conservative said.

    He also lifted the lid on a European Union attempt to push Mr. Tsipras out of power regardless of the vote on July 5.”

    If the the referendum results in a “yes” vote the Troika will then insist that Tsipras step down. But, that will be a fatal political miscalculation because it will place the blame squarely on them and remove it from Syriza. And the resulting chaos, openly orchestrated from Brussels, will create a great surge in nationalism.

    The Germans seem to think that crushing all opposition with maximum force will make things go smoothly in the future. They’re about to learn that they are completely wrong. The political reaction will be the opposite of what they expect. They cannot continue to rule Europe by brute force and openly destroy all opposition, without utterly destroying the illusion of community that is the lynchpin for acceptance of the Eurozone.

    This is worst Pyrrhic “Victory” I’ve ever seen. Greece has a tiny economy and is very small beer in the overall picture of Europe. The bigger concerns have always been Spain, Portugal, Italy and especially France and Britain. In crushing the Greek economy in order to teach the Greeks a lesson, the Germans are going to lose Europe, and it’s going to happen a lot faster than they can imagine.

    1. Gio Bruno

      …yes, and now the BRIC’s have an object lesson on western business and political practice;. without having to say a word. While Greece may have to “capitulate” it is not going to be without substantial political consequence to the EU, going forward. Youth will win out in the end. (They will outlive you and me.)

    2. James Levy

      They’ve seen the Americans get away with crushing all opposition for decades and get away with it without generating a counter-hegemonic block as was seen in Great Power diplomacy from Charles V to Leonid Brezhnev. America has always made overseas elites “an offer you can’t refuse” and when it has been refused–in Guatemala, Vietnam, Nicaragua, Haiti, Grenada, Panama, Iraq, Afghanistan, and Libya, to name the most obvious off the top of my head–the Americans have destroyed whole societies and killed millions. Yet America is still considered a relative “benevolent” hegemon and most foreigners (certainly almost all Americans) never connect the obvious dots. I think the Germans feel that if the Americans can do it globally, Germany can do it regionally. But Germany is a tar baby and everything rotten it has ever done sticks to it in a way that Teflon American never seems to suffer. Also, people around the world seem to like Americans and love our propaganda, culture, and astonishing ability to generate optimism and dreams. Germans are not liked. Their culture does not carry with it anything like the buoyancy, fluff, and good feelings that America’s does. So I think the Germans are not trying anything that the Americans haven’t been doing for decades, but they lack the smile and a shoeshine to pull it off.

      1. NOTaREALmerican

        Re: Their culture does not carry with it anything like the buoyancy, fluff, and good feelings that America’s does.

        Which is exactly why they Germans started WW1. They couldn’t figure out why everybody was so pissed at them for not smiling enough. They just couldn’t take it anymore and decided to show everybody that you didn’t have to smile if you could kick their asses. But, turns out they were wrong. People want smiling conquerors.

        So, it just goes to show, the US civilization has perfected the art of bullshit to a greater extent than any other civilization. And, what it THEE key thing that separates the smart-n-savvy (adults) from the dumb-n-clueless(children): yup, the ability to create and manipulate with bullshit and the ability to live happy duplicitous lives.

        Bullshit: ask for it by name!

        1. hunkerdown

          In regards to duplicitous bullshitters:
          1. What value does “adulthood” (aka sociopathy) provide to citizens?
          2. Why shouldn’t soi-disant “adults” (aka sociopaths) be excluded from society?

      2. Cugel

        There are so many differences between America and Germany that it’s almost ridiculous to have to point them out. USA is the world’s leading Super-Power and Germany is not. Dollar is the world’s fiat currency, and the Euro is a regional currency.

        But, the US has hardly had things all its own way as the recent history of South and Central America pulling away from US domination, unsuccessful wars in Iraq, Afghanistan, and Syria has amply demonstrated. One could go on for weeks. Bottom line, the US can do many things in the 3rd world that Germany cannot get away with in the heart of Europe.

    3. vteodorescu

      good post, well analysed!

      It occurs to me that it is not the debt payments that are killing Greece, it is the austerity imposed around them that is doing the damage.

      Even if the debt goes to zero tomorrow, and they continue with the austerity stranglehold, we are still in a bad place.

  9. Link

    Dear Yves,

    I enjoy reading your articles and I understand you believe a Grexit now is far worse for Greeks than staying in EU, even with this abysmal situation.

    But isn’t it fair to say that a Grexit is inevitable anyway? If that is so, Greece will be in an even worse position than now due to depressing policies implemented. So, even if Grexit is catastrophic now, it would be far more so in the future. Doesn’t that mean Greece should leave now? Or is your position more like Greece is doomed, might as well “freeload” in an depressed but not catastrophic state as long as possible?

    1. juliania

      Good points. It would be helpful to visit scenarios on this. The secret IMF documents state that even the ‘better’ plan which is now apparently going to get worse would have inevitably resulted in default for Greece less than a generation hence. So, we can imagine it is going to take even less time for that to happen now, even if a plan is agreed upon.

      How about no plan, but rather a soft landing to grexit in mutual coordination instead of bashing one another’s heads in? After all, as somebody once said, what’s in a name? Call it something else if you like, but please, shake hands on it. Greece is too beautiful (and too fragile) to do all this stomping around there.

      The quality of mercy is not strained.

      1. juliania

        I have rescinded this post below as it was based upon misinformation about the situation.

  10. NOTaREALmerican

    So, it looks like Wolf Ritcher was right. The top 10% want to keep the Euro because living in Greece without access to the rest of the world’s bling makes being in the top 10% kinda pointless.

    Looks like another case of “radical left” actually being limousine-liberals (or is that neo-limousine-liberals).

  11. Gregory Stokes

    Forgive my complete lack of grounding in the minutiae of the situation but I’m wondering even if Syriza had been more coherent in their approach, whether it would have made any difference. For instance, if they had a system of a parallel currency ready to go this week, would they be able to weather the not inconsiderable storm?

    1. MyLessThanPrimeBeef

      Maybe they could have moved to the 3rd bailout (and debt relief) sooner and started reforming the government (more efficient tax collection, reforming pension and safety net for the unemployed, encouraging foreign investment geared towards export).

      When one looks at all the successful Greeks around the world, it’s not too difficult to envision Greece as an export powerhouse, just like Germany.

  12. tegnost

    What I gather from reading these posts is not that this outcome was preordained, indeed this looks almost worst case humanitarian disaster to me, but it was asymmetrical as the power of the purse lays in other hands than Greece. Tspiris played some version of unitary exec. when he should have voted early and negotiated from the vote, the outcome of which would likely have given him more leverage than the upcoming vote by people who’s bank accounts have been shut down for a week.

  13. Sally

    Syriza Comes off as a bunch of clowns. Don’t play with fire, if you are not prepared to get burned. All this posturing and trips to Moscow, and threats of referendums were all for show. They really thought the EU would blink first. Even when the evidence was quite obvious to the contrary.

    Now they will get a worse deal, and be made to eat shit for their upity nature. Don’t call out a bully unless you are prepared to stand your ground. I know many will say that the Greek people made it clear they did not want to leave the Euro. Fine, but they have shown no leadership at all. They have not tried to change the Greek people’s mind. They have offered no real alternative.

    If the plan was to take the austerity all along then why the huge circus? You’ve just it made it worse. If the Greek people want their beloved Euro , so be it. They must now take the consequences. No more bleating about austerity. It’s part of the package. Put up or shut up.

    1. James Levy

      So, since they “should have known” the Troika would not blink first, they should have rolled over and taken it up the tush on Day 1? Is that what you are suggesting? And if not, and you are right that they “should have known” that the Troika would not blink, what other brilliant suggestion do you have for the Greeks, other than capitulating on Day 1?

      1. Yves Smith Post author

        In a word, yes. They should have done their best to tell the creditors that they got into power and the government apparatus was even worse than they had imagined and they felt getting onto the tax collection issue (which the prior governments out of clientism had refused to tackle at all) was the structural reform they needed to prioritize. The narrow tax base was why the austerity had to rely so heavily on spending cuts, which only made the economy plunge. They could argue that Greece’s pensions system wasn’t anywhere near as lavish as it was believed to be since it was the entirety of the social safety nets, while other countries have a multiplicity of other programs. Syriza understands fully the need for the appearance of pension cuts as well as tightening up on early retirements in a serious way. BTW the creditors clearly did get that issue and TOLD the government to implement a minimum annual income guarantee. Etc.

        You be nice, you admit privately that you are a bankrupt (the appearance of contrition is an important part of the ritual of negotiating with creditors) and you move into pragmatics. You take whatever you get cause you got ‘nuthing to fight with.

        That may not be emotionally satisfactory, but the government has a duty to the citizenry. Saving lives is more important than national ego. Syriza had its priorities ass backwards. Syriza was in no position to take on the Eurocrats and ECB. Only France or Italy could pull that off. Syriza was running a 21st century Charge of the Light Brigade playbook. We know how that movie ended.

        See this comment for more detail:


        1. IsabelPS

          Yves, all you are saying is extremely reasonable but it makes no sense in this political game. Syriza won the election BECAUSE they promised to take on the Eurocrats.
          The Portuguese followed very much the path you are advocating. They even picked up a FinMin virtually unknown inside the country because he was one of “them”:
          “Gaspar was the director-general for research at the European Central Bank for six years. Then he became an adviser to the Bank of Portugal, having been from 2007 director-general at the Bureau of European Policy Advisers (ERI) with the President of the European Commission.”
          And before resigning he took his “pupil” to every single meeting in Brussels so that she too became “one of them”.
          You have no idea how the Portuguese people (who are no Greeks!) hate all that. Personally, I think that pragmatic approach served the country well, but if you read the Portuguese press you would see how “playing nice” is seen by the populace. Tsipras wouldn’t have lasted a month.

        2. Watt4Bob


          I understand the how and why of the negotiating technique you’re explaining, I’ve used it myself when doing seat-of-the-pants negotiating with my creditors, but I wonder at what point in the process we reach a point where the predatory nature of past agreements is addressed.

          I’m thinking of the sort of finance deals that have been entered into by local governments in the USA, Jefferson County Alabama comes to mind.

          Isn’t there an element of predatory finance on the part of Greece’s creditors, both before the recession, and also during the ensuing crisis?

          If so, do you see any time in the future when Greece may find some additional relief?

        3. stefanos

          Your logic is flawed in Greek minds, even if they are afraid of losing their money and end up voting YES.

          Following your logic, Greece should not have resisted the Italians and Germans in 1940-41, given that they were undefeated and appeared more powerful than, not just Greece, but the rest of the Allies.

          1. MyLessThanPrimeBeef

            It depends on the situation.

            Sometimes, a leader should not drag a nation down with him/her in the bunker (‘the people are not worthy of me’). Maybe he/she should have surrendered earlier (except he/she couldn’t).

            Sometimes, it’s better to fight, to resist.

            Not to be judgmental, but It’s a judgment call.

        4. myshkin

          It is then the lesser of two evils choice which it can be argued is no choice and when faced with that choice in US politics, NC advocates voting Green, Socialist etc. damn the consequences of Supreme Court appointments, and whatever other modest differences supplied by Dems to Pubs that may gain gays some rights or perhaps spare some few children and families from poverty etc. ( doubtful as that has been under Clinton-Obama).

          You of course know Greece is at 25% unemployment, 60% young adult unemployment, conditions will only worsen under the new austerity. The country is emptying out and there is the revelation that Greece will likely never meet its debt obligations despite the new austerity, under the Troika hammer for the next foreseeable future. The clearance sale is on as well.

          Lives are at stake now and will continue to be under austerity. If not already failed, the state may still fail in those circumstances. It appears the only hope capitulation brings is that the Troika is out to destroy the left and once it does it will lighten the choke hold to avoid the messy demise of a failed state death spiral, even civil war.

          If that is the gamble, either path is murky and unknowable. Syriza has not done well but they were a party of factions to appease under impossible circumstances.

        5. Gregory Stokes

          Don’t forget the internal Greek politics of the whole thing. Accepting the creditors conditions at the start would have split Syriza. Plus if you are going to ‘do a Samaras’ them why bother running for office in the 1st place?

          1. MyLessThanPrimeBeef

            A lot of politicians are good actors/actresses (but not as good as they think they are though).

            Plus rule #1 is always to get elected first and use the state, all of it, as one’s new toy to get oneself out of any impossible situation.

        6. UGH

          You’re advocating for politicians to promise something to get elected and immediately renege on that promise. Isn’t that what everyone is disgusted with?

          What would the Greek economy look like after another year of austerity? Worse! What would the consequences be of an exit at that time? You criticize Syriza but any solution you suggest is worse.

          1. Yves Smith Post author

            You are not able to accept that Syriza was faced with only bad choices, and thanks to how they’ve taken a terrible approach they have now made things vastly worse for Greek citizens and have only even worse options open to them now. Life is not a Disney movie. Sometimes people have only awful options.

            FDR promised to run only balanced budgets and implemented the New Deal. The ruling coalition, instead of trying to tell voters honestly that its Plan A had failed, which the Left Platform saw and was saying clearly in March (see here), they lied for months to keep their popularity up: “Nothing to worry about, no way will we ever cross our red lines. And a deal is really really close!” The creditors would repeatedly say that the two sides were very far apart.

            Syriza lied about what it was doing (defying the creditors when it was draining every government coffer to satisfy them, INCLUDING borrowing against pension funds, which given how desperate Greece is, is tantamount to using them to make payments), actually agreeing to austerity (offering to run primary surpluses “always”), and grossly misrepresenting the state of play of the negotiations.

            1. kemal erdogan

              One can be caught off guard and tell a little lie about something not proud of. But Syriza repeatedly misrepresented state of affairs consistently as you have also noted. But this makes no sense at all because every time the opponents correct them.

              But, Yves don’t you think that none of these things add up unless you consider that Syriza leadership is composed of clueless idiots who are also liars with no guts?

              Given the fact that even an idiot can see that this cannot be sustained, one can only conclude that all are deliberate to appear erratic and aims to confuse the opponents.

              In any case, we’ll come to see soon if Syriza was well-prepared to handle a country in emergency if the voters say no.

              1. Yves Smith Post author

                1. They thought they had a nuclear weapon in the threat of default. They didn’t bother understanding whether this would actually be an issue with the European governments, as to when they’d have to recognize losses and have taxpayers cough up the difference. Doesn’t even begin till IIRC 2022 and then it is stretched out over many years. And Bild to day is using that issue to vilify Greece, not the German government: “We lent 88 billion euros to Greece and we won’t get any of it back.” This when Greece has asked for a THIRD bailout (this was part of what Tsipras sent in yesterday) as in MORE money!

                2. Greece has an obviously insolvent banking system. Varoufakis convinced himself that the ECB would never do what it is doing now. He even wrote contemptuously about people who made that suggestion. Oops.

                I can give PLENTY more examples

                If it walks like a duck, as we say here….or as Sun Tsu said, “Tactics without strategy is the noise before the defeat.”

            2. Fajensen

              ..:. Aand, they failed big time as a leftist party: It would have been the perfect opportunity to use the states resources to come after the “rich pig” tax fraud’s. Even rub some egg in the face of some German / Swiss financial institutions who no doubt enables the fraud.

              That would have been leftist core policy to start with and a popular move – perhaps even with the troika. Syriaza wasted that opportunity too.

              PS. It’s like everyone in Europe has lost their sense of history and their courage too – everything that was burning brigtly when I grew up in the 1980’s is becoming beige. Maybe Monsanto put something in the water.

            3. Robert Dudek

              I think you are not able to accept that Grexit is the only way out. Neither is Tsipras. That you share in common. Capitulation means continued austerity and a de facto destruction of the nation. How can you not see that Grexit is so much better in the long term? It really baffles me.

              If you disagree, please sketch a scenario, whereby, after capitulation, at some point Greece begins to rebuild.

              If I ran the Greek government, I would give the troika three weeks to start behaving as non-sociopaths. After that I would make all necessary preparations for Grexit, including leading the Greek population to accepting that result. If I had to I would pretend to negotiate in good faith to buy time to solidify preparations.

              As I have said before, the fundamental flaw of Tsipras and Varoufakis is that they believe in the euro and European integration. That’s a massive error given the current crop of sociopaths that run it.

        7. kemal erdogan

          I think, whatever the Greeks would have done matter an iota. After all, they had “quite nice” governments to deal with and still did not hesitate to impose ever harsher austerity.

          I appears that the Greeks indeed wanted a deal until April and behaved nicely despite all public posturing, which as all know means nothing. But after April Syriza visibly shifted gears. I think they follow Plan B since then which Ambrose-E P explans nicely in his column

          1. Yves Smith Post author

            The Samaras government was not willing to crack down on tax evasion and did not cut pensions as the memorandum required. That was the reason for what amounted to his ouster. With the current set of conditions, Greek pensioners can see this month that the price of defiance is that they might not get their pensions in full. Greece won’t be able to pay pensions next month in euros in the absence of a deal. The pensioners are getting the message that whether they get anything is in the hands of the creditors, since the government has no money left and the only source is whatever allowance the creditors wind up giving them. It is now being shown to them that by virtue of the banks being in such bad shape, the ECB has the whip hand.

            Conditions have changed radically now that a bank holiday is on.

            1. kemal erdogan

              But YV repeatedly told them Syriza is willing to catch all tax evaders. Instead they had to engage in an ever nastier fight with the troika. If they wanted to the taxes be collected they would have let Syriza to do its work for a while. By not releasing any of the remaining funds, they effectively wanted to suffocate the government as YV repeatedly said.

              I believe the only reason is that they consider Syriza not fit for government and therefore must be removed, which they now openly admit.

              One honest opinion piece was written by head of German SPD: he said Syriza wanted to change the ideology of the Eurozone (which is correct) and they are having none of it.

              1. Yves Smith Post author

                *Sigh*. The February Eurogroup memo contemplated that the negotiations over structural reforms would be done by the end of April. The way the process was set up, and the process was unfortunately rigid due to Eurozone rules that require approval of all Eurogroup nations for the funds disbursement, was that Greece needed to gets its complete reforms done before funds would be released. It was partly because approving and releasing funds line by line would have been a political and administrative nightmare, and partly because negotiating the budget as a whole allows for horse trading across items. Greece had agreed not to take any measures that would have an adverse fiscal impact prior to the bailout being approved.

                When the negotiations dragged out, Dijsselbloem and others said they could release the funds in tranches, that if Greece submitted a partial reform package they could agree on, they could disburse some funds faster. That seemed to be an acknowledgment of the Varoufakis’ remark, “We agree on 70% of the reforms” back in February. But Greece never followed up on the partial bailout offer.

            2. myshkin

              It is interesting that Lagarde and the IMF maintain that debt relief “must be part of any sustainable solution.” As Varoufakis put it, “the IMF, the United States’ government, many other governments around the globe, and most independent economists believe – along with us – that the debt must be restructured.”
              The Telegraph article suggests that Syriza intransigence is not perhaps just dithering but as others have suggested a strategy that might at last be having a sobering effect, exposing the corrupt extortionate game the ECB and Merkel have been imposing.

              If that is so, suggestions of a fissure or at least a less than uniform Troika front might be read into the IMF’s and Lagarde’s position. Also interesting that it was she when French finance minister, that turned what became known as ‘Lagarde’s list’ over to the Greek PASOK government in 2010. The Greek government Syriza replaced partially because PASOK was discredited because it would not legally process the ‘list.’ Syriza promised to deliver 1.5b eruos from the tax avoiders on that list by the end of June 2015, anyone know the result?

              One other indication regarding the IMF; IMF economists in 2010 were apparently clear in advising Strauss Kahn that Greek debt was unsustainable and in a sane universe best forgiven. Kahn who had designs on the French Presidency consulted Sarkozy and French along with German bank interests trumped reasoned policy. Within the current IMF there is likely residual mid level institutional resistance to what is transpiring in the Eurozone.

              “It is an odd spectacle to watch a central bank (ECB) with a treaty duty to uphold financial stability take the deliberate decision to precipitate the collapse of banks that it regulates.”- Telegraph
              It is indeed and the Eurozone leaders must be wondering when the blatant and bloody malfeasance they have been perpetrating in plain sight becomes evident to all even the densest of observers of this particular Greek tragedy.

              1. Fajensen

                Coming after the tax frauds would have given Syriaza the opportunity to say “hey, we are doing something. See, France and Germany are being vindictive and unfair.”

              2. MaroonBulldog

                The IMF has a conflict of interest with the ECB and ESF, because IMF is the sovereign bankruptcy world’s lender of last resort, and lends on the condition that all other loans to the bankrupt sovereign be subordinated to IMF loans. The IMF often sees to it that other creditor’s loans get written down. IMF loans, however, do not get written down.

                ECB and ESF don’t want to see their loans, or loans assumed by other European governments written down. Their incentive in these negotiations was to delay that day of reckoning as long as possible. They got their way when Greece agreed that debt reduction and restructuring would not be on the agenda in the bailout negotiations. Then Greece poisoned the atmosphere by trying to force the issue back on the agenda.

                Everyone knows that the total burden of Greek debt is unsustainable. If it were sustainable, there would have been no justification for bringing the IMF into financing of this back in 2011. But just because everyone knew it, doesn’t mean that it was a good idea for Varoufakis to point it out. The ECB and ESF had a vested interest in not having it pointed out and made an issue. It turned out to be a very bad idea to approach the negotiations in the way that Varoufakis did.

        8. Robert Dudek

          Capitulation from day one -lol.

          Your suggestion would have immediately split the coalition, resulting in a vote of no confidence and new elections in Greece. There isn’t a government in the history of the Earth that would have chosen immediate self-immolation.

      2. Sally

        They shouldn’t have lead people to believe there was some mystical 3 rd way that some how they could stay in the Euro and end austerity. When it became clear there was no alternative, and the ECB would not back down they should have made the case for grexit or resigned and dissolved the govt.

        The Greek people must understand that if they won’t grexit then there is no alternative. If they are determined to stay in the euro then they will get austerity rammed down their throat. The geek govt led them to think they could forge a lesser deal that would not be so harsh.

        I thought they might really grexit at first, but I now think they never intended to go down that route or get Russian help. So why piss around with all the rhetoric for the last six months? It has achieved nothing.

        1. MyLessThanPrimeBeef

          A nation is not like a family, not a household, so this may not apply. But I see it as ‘We want to stay together, keep the marriage, and you have to change.’

          Most sane people would advice, if you love it so much, even if it pains you, you have to accept it.

          And if it hurts too much, maybe a divorce is better.

          But very few would suggest, change him (or her) and stay together.

      3. different clue

        Well . . . Ian Welsh ran a post over at his blog about what Greece should have done and/or prepared to do. Welsh mentioned things like visibly prepare to leave NATO and join the SCO, extend basing rights to Russia, open its borders to every kind of contraband smuggling into Europe, etc. Welsh’s logic was that Greece was facing a unified Enemy Europe planning to burn Greece down to the ground in order to poke around in the ashes for any gold . . . and Greece had to show its ability and credible willingness to use that ability to destroy substantial European interests and perhaps destabilize Europe very badly if it wanted to stop Europe from planning on destroying Greece to get “its” money back.

        In hindsight, would Welsh have been wrong?

  14. James Levy

    I, as much as anyone, needs to be reminded constantly of the following:

    All that is solid melts into air, all that is holy is profaned, and man is at last compelled to face with sober senses his real conditions of life, and his relations with his kind.

    If this crisis in Greece has done nothing, it has laid this truth out for us again. The system is evil. Resistance may be futile, but I will admire the Greeks more if they resist, because, as I said, the system is evil.

    1. NOTaREALmerican

      Re: the system is evil

      Perhaps, but there has to be some system where the smart-n-savvy people get to consume the dumb-n-clueless. How else would would the smart-n-savvy prove they are the higher evolved humans? At least the system allows for the competition to be done without smart-n-savvy people actually physically killing and eating the dumb-n-clueless. (That wouldn’t be very pleasant).

      So, overall, it’s a more refined system than the other animal on the planet have for proving where they are on the food-chain.

      1. backwardsevolution

        NOTaREALmerican – it might be more truthful if you changed “smart-n-savvy” to sociopathic. Sociopaths are more “highly evolved humans”? They have no guilt, empathy or shame, so are quicker to act, whereas those “dumb-n-clueless” people, who possess guilt, empathy or shame, probably would never even consider purposely screwing somebody else.

        These people are not smarter. They’re just empty.

  15. whirving

    Hello Yves, I just sent you a Dropbox link to a scan of a little picture book showing what starvation in Greece looked like the last time, compliments of Germany.

    1. bh2

      Human tragedy is of no consequence to faithful consiglieres who operate the levers of state on behalf of the banksters.

      Starving people may be an unpleasant consequence of global financial racketeering, but they are kept well out of sight and therefore out of mind.

  16. Felix

    As has been pointed out Greece has very little to export. It is a very small country with a very small population that is ageing. I would guess most Greeks already live in Germany or the US…..my wife being one of them. We are looking at a nation of pensioners who never worked much to start with. They benefited from the free money the Euro membership showered on them which provided no show make work government jobs. They could leave the farm…..making Greece no more independent for food. The rich in Greece made bank and their money (German taxpayers) is safely away from Greece and they have their lily pads in London, Cannes, New York and LA. The hedge funds and the American banks made money . Nothing is left but ageing pensioners and illegal immigrants to the EU and even they don’t stay in Greece and they move on to Germany. Why not just put the Greek pensioners in the German pension system? The Germans put asylanten in it and many of those come through Greece. What is the difference between a 50 year old unemployable Afghan and a 50 year old unemployable Greek? They both eat. They are both patriarchs of their respective families and they both come from misogynistic cultures as my wife points out. And since Germany is run from Washington (K Street to be exact) and Germans get no choice in the matter………why don’t we just give all Greeks a green card with the proviso that they settle in the Detroit area for at least ten years? It would certainly be a lot cheaper than what is being done now. Divide 11 million into the hundreds of billions spent already…….just give the Greeks a German pension or social security…..incredibly cheaper.

    1. NOTaREALmerican

      Your idea is too practical to work. With politics the winning sociopaths have to make sure the losers suffer enough to make being in politics fun.

      1. Felix

        No….it is putting the money where it is needed and cutting out the New York and Washington middle men. The “transactionalists” if you will.

        1. MyLessThanPrimeBeef

          It does cut out the middle men.

          This way, the Greeks can have more souvlaki. Let the banksters have cake.

    2. Phil Perspective

      We are looking at a nation of pensioners who never worked much to start with. They benefited from the free money the Euro membership showered on them which provided no show make work government jobs.

      So much horse manure packed into such a short sentence.

      1. MyLessThanPrimeBeef

        I like his next step though – to give the Greeks a German pension.

        One unified pension plan.

  17. Chen Dason

    Ironic that some on the left in Greece portrayed their choice between New Democracy and Syriza as living on their knees vs dying on your feet.

    6 months of Syriza rule and a Yes vote in Sunday’s referendum could lead them to dying on their knees.

  18. kevinearick

    Classic Human Behavior

    Greece. International trade is the means of extortion, surprise. Do you really think that everyone in Greece has such poor, arbitrary skills that they care whether the critters use the Euro or the Drachma?

    Donald Trump. One way to see Mr. Trump is beating the bank at its own game, bankruptcy. Another is as the rigged lottery winner sucking others into the ponzi.

    California Immunization. Forcing immunization on the leading edge to subsidize the trailing edge has no end. Science is used to defeat science, creating yet more superstition, religion. If you let the kids go play, they are going to be knee deep in bugs, which neither you nor the critters can see, with which to build their immune systems, and immunization is only going make the bug more virulent, on a quantum time scale.

    Jobs. No job keeps up with real estate inflation over time, so there is always real estate becoming worthless, which the empire cannot employ. The ‘winners’ get tokens for compliance, which can only fail, so enough is never enough, to assuage their so-masked insecurity.

    Up here, we have people with 3 or 4 pensions, collecting high 6 figures, with homes on the beach that they never visit, stepping on their own grandchildren’s heads to stay above water as long as possible

    Empire Economics. The critters just had another cattle call, over 2000, to replace me, in the 1%. You can guess the distribution: no women, mostly males with no real skills, some males with some skills subsidized by monopolies, and a handful ready to learn.

    Net, the system can’t keep up with its own stupidity, printing credit to replace equipment as fast as it is installed, employing rocket scientists using a dc computer to identify what is wrong with dc computers, becoming more derivative by the day, which the talking heads are betting on to collect tokens, which become increasingly worthless over time, in a rat race.

    Watch the sh-show on your break and then get back to work. Life wins, every time, or you wouldn’t be here.

    Whether Donald is actually a decent person playing an empire role, or not, really doesn’t have anything to do with whether you are going to get up in the morning with a good attitude, unless you let it. The irrational market hypothesis is true, but only fore the majority, which assumes that it is true and behaves accordingly. Assume that you are going to be successful and prepare accordingly.

    University. Going to school, to learn to employ credit, is a waste of human potential. Let the herd chase the professor, while you do something productive with your time, and otherwise be on your way. Don’t assume that everyone is a moron because the majority acts like morons. Everyone has something to teach you, whether they know it or not.

    If you look, you will see the connections, between what you see and what you don’t. The US Constitution didn’t make America great; people, like you, did. Let Marvin the Martian think otherwise.

    Family. Build your skills to employ your talent, keeping in mind that the majority, in civil marriage made to be broken and always at war, will want your children, and will always build a public education system for the purpose of taking them, with stupid laws begetting stupid laws.

    Unwrap the mythology, fix the crap, re-wrap the mythology, and go home to your family. If you want to help the critters, show them something during the process, but don’t be surprised when it shows up in a weapon system. Poverty isn’t an accident; it’s a threat.

    You can join the counterweight of History, or work with your spouse to employ it, adapting with shared priorities, to turn opposites into compliments, and raise your family. That is economics.

  19. craazyman

    Hans and Franz mean business. If you don’t work out, you don’t get PUMPED UP!

    Why is there so little empathy for Greece? There’s almost no empathy anywhere. The only place is here in the Peanut Gallery and most people here are foaming at the mouth wackos. All the other Europeanish countries that took the austerity pill, they don’t have empathy. They’re the most judgmental.

    It’s like a bunch of girls who all lost weight and parade around in skinny jeans showing off their butts. And then there’s a flabby girl who won’t diet or work out. Then she wants everybody to say she’s beautiful. Wow. It really gets catty. Really really mean stuff. Even her diet coach and personal trainer — event they’re pissed off at her. Everybody rolls their eyes. Everybody just throws up their hands and sighs.

    That’s how they see it. That’s what they think. Why do they think like that? Is it hypnosis or is it a form of mental savagery. Or is it tough love.

    I don’t know. It’s bad now. It was bad years ago. It was bad when Pericles was there. It was bad when Byron was there. It was bad Homer was there. It was probably bad when they were painting caves.

    It may not be this bad, that’s for sure. The only lesson here is: its bad when you have to rely on anybody you don’t know, who doesn’t love you for who you are, as you are, just the way you are. You gotta get lucky, that’s for sure.

    1. Clive

      Oh craazyman, it’s unfortunate that you can’t see the earnestness of my feelings on this, I have empathy for a huge, overwhelming section of Greece’s population. Just like I did for the Republic of Ireland (I knew personally people who were affected by the public bailing out the banks) and just like I did for Cyprus. I have empathy coming out my ears, for what it’s worth.

      But that’s the problem. It isn’t worth a single sodding thing. Not against embedded economic and political power structures, not in the short term (which is all Greece has, that’s the hand it ended up being asked to play). In the longer term I dare to hope that, worldwide, not least through things like Occupy and even dear old Naked Capitalism, we’re slowly — oh so very slowly — turning the tide. But it isn’t and never was going to be turned in the few months that SYRIZA and Greece had to play with. Put it this way, I’m 45 this year. What has to be rowed back is pretty much all my adult life’s established thinking, policy, institutions and vested interests. The rot set in here in England with Thatcher. I was 9 years old at the time her administration came to power. The ones which followed it have not been hugely dissimilar. It’ll take the remainder of my lifetime to even remotely put things back to any semblance of how they were before.

    2. craazyboy

      Yo, craazyman. I posted a vid from the quadcopter in the water cooler today. Went into moderation, but it’ll be there eventually. Still trying to find somewhere where they have the girls with the skinny butts.

    3. Lexington

      Why is there so little empathy for Greece? There’s almost no empathy anywhere.


      This is almost the exact opposite of the truth. If anything there has been far too much empathy for Greece, accompanied by much gnashing of the teeth and rending of the garments over the horrible unfairness of it all. Greece has a long history of dubious public accounting, massive tax evasion, universal corruption and obviously unsustainable fiscal policies that resulted in the country’s debt ballooning to 175% of GDP. One Hundred and Seventy Five Percent. Say it out loud, slowly, let it roll off the tongue as you contemplate the enormous implications of that singular factoid.

      To absolutely no one’s surprise this house of cards has now come crashing down – and who is to blame? Certainly not the Greeks themselves. They were just innocent bystanders when all those other things happened to be going on. It was all the EU’s doing, or the troika’s, or maybe really just Germany’s. Damn Krauts. I’ve seen Schindler’s List and I know what they did to the Jews. I bet they’re already secretly stockpiling schnapps and Quarkbällchen to celebrate when they get to do it all over again to the Greeks.

      So other EU countries now find themselves in the position of transferring wealth from their own citizens in order to keep Greece’s tottering public finances from finally imploding by funding the Greek government’s budget shortfalls. As a result Greece’s already unsustainable debts are getting larger, while the EU must continuously transfer wealth to an already insolvent government and banking system because the alternative is supposedly worse, even if in so doing they are almost certainly increasing the haircut they will ultimately be forced to take in order to resolve the crisis. Any way you look at it this situation is not sustainable.

      In spite of that the EU’s attempts to move toward a resolution by balancing the budget through asset sales, spending cuts and tax increases are met with howls of outrage: “The EU [or the troika, or Germany] is sticking it to the poor little Greeks! Oh the humanity!! Haven’t they suffered enough!!!” Clearly the only humane, sensible and fair thing to do is for the EU to continue to extend unlimited credit to Greece while the country contemplates how best to realize its full future potential, deals with unresolved feelings of anger and disappointment toward its parents, and has time to “find itself”.

      Yes, that would most obviously be the only right thing to do.

      1. James Levy

        You are missing something: the lenders lent that money knowing full well the corruption in Greek government and the failure to collect taxes. They lent it so that the Greeks could do two things: turn around and give kickbacks to foreign companies, and hire German firms and buy German goods with the money. The Greeks did not sock the money away under their mattresses (if they had they wouldn’t be in this bind). The Germans, Dutch, French, et al. lent the money because they saw it as a two-fer: they would get the money back with interest, and the Greeks would spend the money on their goods and services, thus employing their people and boosting their earnings. They did NOT lend it to the Greeks out of the goodness of their hearts or without knowing the risks.

        1. Lexington

          They did NOT lend it to the Greeks out of the goodness of their hearts or without knowing the risks.

          On that much we can agree. They made a bad investment and eventually the error will have to be acknowledged through at least a partial writedown of the debt. Everyone knows that Greece will never be able to repay its debts on the original terms and what we should be discussing now is how to apportion the losses.

          The idea that Greece was just borrowing money to “give kickbacks to foreign companies, and hire German firms and buy German goods” is however disingenuous, not only because it’s obviously false, but also because it’s an underhanded attempt to absolve Greece of responsibility for its actions by implying, in effect, that the Germans made them do it.

          Btw, what percentage of Greek imports actually come from Germany anyway?

          1. Max Severis

            Welcome to the NC comment section, where every tacit mention of a Greek responsibility for their own misery is immediately wiped off the table by charges of “predatory lending”, like the Greek State was an impoverished African American single mom getting financially raped by payday loan sharks and just couldn’t help it.

            You see, it was all the Germans. They want to get Greece back under their control like in WW2, because… uh… um… they want to harvest the rich Greek resources of pensioners for Soylent Green, maybe?

            And, of course, Greece’s national debt of 270 billion Euros plus some 200 billion in private sector debt in 2008, totaling about 450 billion, was all used to pay for German imports and kickbacks. Can’t you see that?

            Wait, imports from Germany peaked at 8 billion / year in 2008, you say? And before a sharp increase starting in 2005 or so, it hovered around 5 billion per year, with the actual trade deficit being around 3.5 billion per year? How dare you suggesting that that doesn’t even begin to account for the gigantic pile of Greek debt!

            Just roll with the accepted NC narrative that it’s all the Germans’ fault! They have been the collective boogeyman ever since they did not take on EU periphery debt by agreeing to Eurobonds, so it’s ALL their fault, don’t you see?

      2. craazyman

        I’m not talking about handwringing save the whale types on the internet. Of course they have empathy. They’d throw a fit if a little kitten was wandering lost on Mount Olympus. They’d call for rescue choppers and medivac units. They’d never consider the kitten was chasing a defenseless mouse and almost caught and killed it. They’d never think of that.

        I’m talking about all the Europeanish countries nobody every goes to on vacation. Places I couuldn’t find on a map. All those small colorful countries between Asia and Italy. There’s too many to keep track of.

        I think some are in the euro and most want to be if they’re not. They all took austerity pills and they parade around with their skinny budget jeans showing off their butts and now they want Greece to diet and work out. They have no empathy at all. It’s jut a fact. It’s not my opinion.

        But I think your idea is good. Everybody needs vacation right about now — and therapy. They should go to Greece,, especially the Germans and anybody from those little countries with skinny butts! Hit the islands, drink some Ouzo, find a nice Jungian dream analyst and chill and say FUKK IT. If enough people went there and spent money, the whole problem could be solved! It’s weird how that works.

        1. MyLessThanPrimeBeef

          A very good idea.

          And this is not an insult at all, but given abused state (‘not my fault,’ shouts everyone) she is in, the tourist, sorry, the traveler is advised to bring his/her own medicine (or possible, his/her own doctor or medical team).

        2. vlade

          it’s hard to feel empathy when you are asked to bail out someone considerably richer than you.

          there’s hardly anyone on this blog who feels ok bailing out banks to provide more massive bonuses, and few feel any empathy whenthe selfsame bankers complain how hard it is to live on $200k per year in NYC.

          why should slovakia, latvia etc. feel different about bailing out greece, which is (still, based on things like average salary, levels of pensions etc.) richer than them?

          1. IsabelPS

            Precisely. Yesterday I checked comparative GDP numbers because of an argument I was having on the internet and was horrified (today I checked the Eurostat numbers per capita and up to 2014 and was less horrified, but I still recommend people to have a look). It actually made me think that it’s not unreasonable to imagine that those countries have a social security system as incipient as the Greek one, and that might be the reason we never heard much about the argument that Yves has been advocating Tsipras should have used: “we spend a lot in pensions because they are the mainstay of social security”.

            Incidentally, my argument on the internet was exactly about this perception of “playing nice”. There was recently an interview with the FR FinMin where he said that the harder stance in the negotiations was not from Germany but from the small countries that had made a lot of efforts, etc, and he mentioned Slovakia and Slovenia, which didn’t come out in the transcript. The Portuguese media assumed that he was thinking of Portugal and had a field day “accusing” the PT gov of lack of solidarity (a lackey of Merkel, in brief). Today they are backtracking a little but still not very convinced.

      3. Foy

        There is so much wrong with your argument:

        1. The Troika accepted Greece into the Eurozone knowing full well that Greece’s books were in no fit state to be accepted and were fudged by Goldman Sachs. They were not a worthy candidate to join but it suited Germany’s corporate interests and exports and it put downward pressure on the Euro helping Germany’s exports.

        2. A loan requires a debtor and a creditor. But the German and French banks have been bailed out by the Troika for their bad decisions in Greece, Spain, Ireland etc. They should have been wiped out using good bank/bad bank procedures. But they knew they would be backstopped when making the loans and did so recklessly – complete and utter moral hazard. The effect of wiping out the German and French banks on their economies would have been interesting to say the least. They privatise immediate profits but socialised subsequent losses on trade deficit publics.

        3. Much of those bad loans to the periphery funded purchases of German goods allowing Germany to run a large trade surplus within the Eurozone. It couldn’t have been done otherwise. Funny how that is forgotten. Once again privatise immediate profits, socialise losses on periphery publics.

        4. The Eurozone was designed with a fundamental but deliberately inserted flaw, it cannot recycle internally generated trade surpluses and deficits unlike say the AUD or USD. The balances build to breaking point, giving the means to force privatisations, lower wages, cut regulations through depression like conditions. That’s the purpose of the flaw. What is happening is completely expected, the Euro creators knew this (go look up Professor Mundell). This is psychopathic in itself in my view.

        5. Once any Eurozone country has an internal trade deficit and had a severe recession it is doomed due to the 3% budget deficit limit. It is depression conditions forever and ever as Greece are finding out after 5 years. Austerity in these conditions increases the downward spiral (see next…)

        5. One big reason the Greek debt/GDP % is so high is, as the IMF have admitted, that every Euro cut in spending has resulted in 1.7 Euro INCREASE in debt. Cutting spending increases debt when in a recession in Greece like conditions. Austerity, as the IMF agrees now, increases debt levels. To use your phrase “Say that out loud”. It’s circular and never ending.

        6. Greece has 25+% unemployment, 55% under 25yo unemployed with hundreds thousands more young people having left to work elsewhere, which would make the real under 25 unemployment rate even higher. After 5 years! I think anyone who thinks this is ok and should continue and in fact worsen as a result of policies inflicted has the mind of a psychopath in my view. If that was happening in Lexington’s country would he be yelling at the govt saying “Do Something!” or is there a superiority complex that they would never end up in this situation?

        I think its important to note opinions of those like Lexington. I think they view one death as a tragedy but a million as a statistic. 99.9% of the people suffering now had nothing to do with the decisions made originally, they were just strapped in for the ride by the Euro and Greek technocrats. There is plenty of blame to go around but from Lexington’s viewpoint it’s only one way, “those lazy Greeks”.

        Sadly I think there will be more opinions expressed like Lexingtons as the limits to growth are realised and the Great Squeeze marches up the middle class food chain and more countries are affected. It’s clear now it’s not a society, its a jungle

        1. Max Severis

          Let me just adresse a few points here:

          1. This is a accusation that no one was ever able to provide any evidence for other than shrugging and asserting that surely they must have known. The Greek government admitted in 2004 to cooking the books with the help of Goldman Sachs and I’ve yet to see anything that would convince me that everyone knew.

          2. I’m sorry, but in the real world, you cannot just wipe away the public and private debt of half a continent and rationalize it by saying: “Oh, well, these banks made bad choices by buying t-bills from advanced economies”. This is too convenient a solution and it’s utterly unrealistic, especially when a lot of the debt was taken on by these countries to save their own banking systems froms blowing up from the bad loans THEY made. Would that have been preferable?

          3. “Much of those bad loans to the periphery funded purchases of German goods”. Yes, some of them did but I feel that this issue is massively overstated in order to construe some sort of “predatory lending” narrative that completely exculpates the periphery countries from their own actions.

          For example, between 2004 and 2009 Greek state deficit ballooned by almost 100 billion Euros, while the trade deficit with Germany increase by about 7 billion Euros in total during the same 5 year period. So the increase in trade deficit with Germany can only account for 7% of the increase in Greek public debt. In fact, it’s even much less than that once you take private sector debt into consideration.

          5. Exemptions from the 3% rule are possible and have been possible under certain conditions, e.g. a contraction of more than 0,75% of GDP. Nice try, though.

          5. Hogwash. If that was true, the opposite must also be true and every EURO of additional spending must result in a debt reduction of 1.7 EURO. Cool, let’s spend away our public debt. It’s a miracle brought to you by the magic MMT fairy!

          6. So what would your solution for Greek unemployment be? That Germany and others transfer wealth from their populations to Greece until the end of time,so that every unemployed Greek can twiddle thumbs in a cosy public sector job?

          Let me be clear here: the problem for Greece is not the evil Germans forcing them to mistreat their populace. The problem is decades of compounding economic distortions brought about by corrupt policies and a cynical population that expected a payday from the state (salaries, pensions, contracts, servies, subsidies and other transfers) while making a sport out of dodging taxes at every opportunity. All this left the private sector economy in shambles and now, that the deficit spending bubble has popped, well, there is barely a real economy left to fall back to.

          And yes, it wasn’t just the “elites”, it was everyone who could get away with it. Everyone was in it, from middle class taxpayers who could make most of their taxes go away by hiring their tax official to be their tax consultant to the small business owner dodging VAT to Greece’s professional classes massively underreporting their income.

          And you’re expecting the Germans, or anyone for that matter, to fund THAT? Heavens, why? There are piss-poor countries in the EU, like Bulgaria and Romania. So why do the Greeks deserve special consideration? Because they ratcheted up their standard of living through decades of massive deficit spending?

          If the Greeks are not willing to fund their own state, why should anyone else?

          1. Foy

            The Greeks certainly aren’t blameless and wasn’t suggesting that, I said some of their technocrats knew what they were getting into and I acknowledge the tax issues. But the current solution is depression era conditions forever. They clearly cant pay the debt back but Germany and Troika are acting as if they can, it’s delusional. Its unsustainable. The end result will be pitchforks if people find they have no way out after a long period of time. And the contagion will spread to the next country with similar troubles in time. It’s now obvious the Eurozone apparatus is flawed but it’s being papered over. They wont address the main problem which is inability to internally recycle trade surpluses and deficits and so you will inevitably get more Greeces. But to fix that requires acknowledging there is a problem which affects the status quo and it’s clear that concept seems beyond some people.

            My problem is that Troika et al are taking zero responsibility for their role in situation and it was German and French banks that funded much of the mess (and much of it wasn’t T-Bills originally, the Troika held guns to the heads of Ireland etc telling the govt to take over the banks private bad debt or we shut your banking system). It takes two to tango.

            I was responding to a one sided argument and putting the other side. I said there was blame for both sides to be worn here, but only one side is wearing it at present.

            On #4 Not hogwash – Legarde admitted they got the multipier way wrong…FT also had an article on it but its behind the paywall.


            I can recommend Michael Pettis’s book: The Great Rebalancing to explain why the trade recycling mechanism is so important and how savings decisions in one country can automatically cause another country to run a trade deficit.

            We’ll have to agree to disagree…

          2. todde

            Goldman sachs produced a letter from eurostat saying everything they were going to do was legal.

            They knew about it before it was done.

            Risk.com has an article dated in 2003 discussing the currency swaps.
            ‘Controversial but brilliant” was how it was described.

        2. Lexington

          There is so much wrong with your argument

          I doubt it. But let’s take a look at your shotgun “throw everything at the argument and hope something sticks” polemic and find out:

          Point #1: Yeah, it’s obviously the EU’s (not the troika’s) fault for admitting Greece into the Eurozone in spite of the fact everyone knew Greece’s public accounting was a sham, not Greece’s fault for cooking the books. That relates to a point I’ve already made – everything is always anyone elses’ fault except for the Greeks.

          Point #2: What are these mysterious “good bank / bad bank” procedures? Are they the ones the Obama administration used to resolve the 2008 financial crisis? It seems to me that deciding how to resolve a banking crisis is ultimately the sovereign prerogative of public officials in the country in which the crisis has occurred. Except there has been no banking crisis in Germany or France, and I’m not aware of any evidence that exposure to Greek debt posed a systematic risk to the integrity of the banking systems of either country.

          Of course if you are in possession such evidence please provide it.

          Point #3: I’ll ask again: exactly what percentage of Greek imports actually come from Germany? It’s not hard to find out. This comes back to point #1: it’s not Greece’s fault that it borrowed money it couldn’t repay, it’s Germany’s fault for FORCING Greece to accept loans it did not want and then FORCING Greece to spend the loans on German goods. At least in the fevered imaginations of Greek partisans.

          Point #4: The Euro creators knew this but the Greek government didn’t when it made the decision to join the Euro zone? How did those dastardly Euro creators keep the Greeks innocent of this rather obvious issue? It seems to me this was widely discussed by critics of the Euro project even before the Euro was introduced.

          The idea that Greece’s parlous finances are solely due to being forced to accept loans from Germany and then forced to spend the loans on German imports is obviously nonsense. No one remembers the last time Greece’s budget was actually in surplus. Greece was rejected for Euro membership in 2009 because of it’s weak finances -in retrospect, you might have thought this would have been some kind of warning sign. It turns out Greek borrowing not only financed German imports, but (overwhelmingly) imports from countries other than Germany (with Russia being #1), chronic government deficits, and private consumption. Greece has been living beyond its means for years, not because the evil Germans forced them to buy German goods they didn’t want with borrowed money but because it allowed them to enjoy a higher standard of living than would have been possible without borrowing.

          Point #5 & #5: All very interesting, but beside the point. I didn’t defend austerian economics. Whether the specific policies advocated by the troika are optimal is open to debate. But the crucial question is political – optimal FOR WHOM? For Greece and its many apologists the optimal policy is for the EU to underwrite a New Deal for the country in which other EU members send cash to Greece in order to stimulate the economy and allow it to grow out of the current crisis with minimal additional disruption to the lives of the Greek people. For other EU members the optimal solution is one in which Greece’s finances stabilize (by running a primary surplus) ASAP so Greece stops being a leech on their own finances. Everything else aside the other EU members have legitimate concerns that given Greece’s structural problems in terms of corruption, tax evasion, etc. a New Deal program is unlikely to succeed even if they could convince their electorates to underwrite one, which they almost certainly can’t. The political risks of such an approach is therefore off the charts. That leaves the other alternative – get Greece to a primary surplus as quickly as possible, and damn the social, economic and political consequences.

          Point #6: You know I have a fairly keen interest in current affairs, and I do believe I’ve heard once or twice that Greece is hurting. I get that. My qualm isn’t with the people of Greece collectively but very much with people like yourself who insist against every dictate of fact and reason that Greece finds itself in its current predicament not primarily because of its own choices and policies but because it is the helpless victim of German (or EU, or Troika) aggression and is therefore ENTITLED to be rescued on the backs other EU members. Yeah, other EU members resent that behaviour, and probably Germany more than most because it is especially vulnerable to emotional blackmail – and Syriza has very openly and deliberately tried to exploit that vulnerability for all it is worth.

          NC’s links page on June 30 included a very interesting op ed piece from the Guardian by Daniel Howden that contained this very insightful comment:

          It has been clear that the choice awaiting Greece was a future that looked like Portugal, a degraded economy of the European south; or Serbia, a proud nation led into the international wilderness by populists’ lies and fantasies of Russian rescue. Neither are good choices, but one is incalculably worse than the other.

          By way of explanation Serbia is a small, poor country with a fiercely proud and independent people deeply steeped in a historical mythology of self victimization, which has often been exploited by nationalists and other mountebanks to lead the country to glorious tragedy. You Sir / Madam are creating the mythology that will take Greece down the very same path.

          1. Foy

            “That leaves the other alternative – get Greece to a primary surplus as quickly as possible, and damn the social, economic and political consequences

            Well there’s a declaration of war if I ever read one. Your true colours right there…

            A primary surplus wont solve anything in the current situation as much as you would like to think it will…Goodwin’s sectoral analysis shows that…anyways…

      4. Foy

        Really felt it was important to reply to this, as I feel there’s a lot wrong with it, but sadly my reply has twice disappeared into the wordpress ether, maybe it will turn up later… will try again later if it still hasn’t appeared

  20. alex morfesis

    I feel sorry for the german people…

    history will once again blame them for actions of the former electors

    “no one knows what it’s like to be the bad man…to be the sad man…behind blue eyes…

    no one knows what it’s like to be hated…to be fated…to telling lonely lies.

    but my dreeeeeeams they aren’t as empty…as my conscience seems to be…

    I have hours…only lonely….my love is vengance…that’s never free..”

  21. George Phillies

    Unanimous? Mr. Cameron must have some consideration as to whether “see what the EU can do to its members; we should leave” or “We must belong to the EU to protect England from the Huns” is more convincing. Other countries have more tactful issues on the same line. Hungary comes immediately to mind. I have lost track of which countries get to vote, though.

  22. Jess

    There’s a piece in the Links section to a Guardian article that says an IMF analysis has shown that even if the Greeks accepted the Troika plan, the country would still have an unsustainable level of debt.

    My question is: Isn’t this the clearest evidence yet that Greece has no choice but to leave the Euro (if not the entire EU) and then slowly claw its way through the horrific mess that will result, simply because the horrific mess is coming either way and at least Grexit allows for eventual light at the end of the tunnel?

    1. MyLessThanPrimeBeef

      Debt relief with the 3rd bailout, that’s the promise, I believe.

      “If you cant afford this beautiful new car with a 3 year plan, we have a 10 year plan, which, admittedly, is not quite like Germany’s close-to-100 year plan to pay off her WWI debt.”

      “How about an interest-only plan, preferably negatively amortized. You have one like that?”

  23. Kalori

    It would appear the tactic is to hype the fear and use deception to make sure that the “un-payable public debt [is] repaid by the weakest members of [Greek] society, their children and their grandchildren”.

    Why we recommend a NO in the referendum – in 6 short bullet points

    1. Negotiations have stalled because Greece’s creditors (a) refused to reduce our un-payable public debt and (b) insisted that it should be repaid ‘parametrically’ by the weakest members of our society, their children and their grandchildren

    2. The IMF, the United States’ government, many other governments around the globe, and most independent economists believe — along with us — that the debt must be restructured.

    3. The Eurogroup had previously (November 2012) conceded that the debt ought to be restructured but is refusing to commit to a debt restructure

    4. Since the announcement of the referendum, official Europe has sent signals that they are ready to discuss debt restructuring. These signals show that official Europe too would vote NO on its own ‘final’ offer.

    5. Greece will stay in the euro. Deposits in Greece’s banks are safe. Creditors have chosen the strategy of blackmail based on bank closures. The current impasse is due to this choice by the creditors and not by the Greek government discontinuing the negotiations or any Greek thoughts of Grexit and devaluation. Greece’s place in the Eurozone and in the European Union is non-negotiable.

    6. The future demands a proud Greece within the Eurozone and at the heart of Europe. This future demands that Greeks say a big NO on Sunday, that we stay in the Euro Area, and that, with the power vested upon us by that NO, we renegotiate Greece’s public debt as well as the distribution of burdens between the haves and the have nots.

    There used to be more disapproval over extend and pretend, kicking the can down the road around here…

    1. Clive

      This is so bad I simply do not know where to start. I’ll take a few off the top but my strength wanes in the face of such brave, but mindblowingly foolish, chutzpah.

      Let’s start with deposits are safe. No, absent a deposit protection scheme underwritten by solvent counterparty, deposits in insolvent banks are most certainly not safe.

      Yes, restructuring could have been “discussed”. Discussing something isn’t the same as doing something. And rescheduling would have been after adherence to the terms of the current bailout deal, not as an alternative to it.

      I could go on. But it all has far too much of a sense of me arguing with my mother why I should be allowed to stay up late on a school night about it for me to take it seriously. Goodness knows what Rottweilers like Junker and Merkel made of it.

      1. IsabelPS

        I’m very much against personal insults in these things (mainly something that lots of people think it’s OK, calling Schauble a bitter cripple, etc), but this thing about Rottweilers is funny!

    2. MyLessThanPrimeBeef

      To weigh the two options

      1. the ‘final’ offer was close enough (apparently, as Tsipras has repeatedly said – we’re close) and can end the impasse

      2. Prolong the misery to improve a ‘close enough’ final offer.

    3. financial matters

      “Greece will stay in the euro.”

      This is an interesting gambit.

      Can Greece stay in the Euro and fend off austerity? I think there’s a good chance. And if they eventually agree to a bailout the Euros will keep flowing making the deposits good. And this will probably happen regardless of whether there is a yes or no vote.

      What’s on public display here is how punishing will the troika be. How badly do they want to be paid back for obviously unsound loans? How much pain do they want to inflict when they can easily turn on the Euro spigot? Do they want to give real labor reform a chance and help Greece create useful jobs?

      By staying put Greece forces all these issues.

        1. financial matters

          Some people would consider Grexit a scorched earth policy.

          Forcing the troikas hand so far has shown that hand to be what it is and I would say very damaging to the status quo.

          I would like to see Obama act as a president and dealing with the Detroit water issue would be a good place to start. This should be running in every newspaper and would be well spent Fed dollars rather than QE.

          But against the interests of privatization.

          1. MyLessThanPrimeBeef

            But the status quo also includes current pensions.

            It’s damaging to that as well.

            1. financial matters

              True. With a Grexit, Greece would be more in charge of pensions.

              I think pensions are subordinate to jobs but not in the sense of saving for them.

              Money is useless unless there are goods produced to buy.

              Jobs create these products and also the surplus which can be used for social services.

              The ECB is first strangling Greece and then will move on to the next victim. But the pushback is getting stronger.

              As others have said we are truly at a crossroads.

            2. financial matters

              True. With a Grexit, Greece would be more in charge of pensions.

              I think pensions are subordinate to jobs but not in the sense of saving for them.

              Money is useless unless there are goods produced to buy.

              Jobs create these products and also the surplus which can be used for social services.

              The ECB is first strangling Greece and then will move on to its next victim. But the pushback is getting stronger.

              As others have said we are truly at a crossroads.

      1. MaroonBulldog

        Whether Greece stays or goes, its debt to the IMF is going to be paid back. Reason explained above: Greece will not be able to do any sovereign borrowing internationally in any currency until it gets itself square with the IMF.

          1. MaroonBulldog

            The IMF can keep Greece from borrowing in the international sovereign bond market while Greece remains in arrears, so, if Greece ever wants to borrow again, it will have to find a way to get current with the IMF. If Greece can’t pay, it will have to live on a tax revenues and no debt. Forever. Given those incentives, I’ll think you’ll find that the debt to the IMF can be paid, and will be.

            Varoufakis never said agree could not pay any of its debt. He said that part of its debt had to be written down, or written off. That’s the part owed to the ECB and the ESF. The debt owed to the IMF is the other part, the part that can be paid. Because it has to be. Because if Greece is so bankrupt it can’t pay that, it really is game over for Greece.

    4. juliania

      Thank you, Kalori.

      There was much disinformation bruited about as fact this morning, meant I would now infer to disappoint and discourage the OXI vote.

      I have just been at the Guardian live blog of today’s events, and thank them for at least posting tweets from Tsipras himself on what he has said in his important speech today – which I haven’t been able to find anywhere, even though it happened some eight hours ago I believe. I am very grateful for his tweets, however and wish to rescind my earlier post on the likelihood of a grexit – this appears to be far from the intent of the referendum alternatives – as Tsipras tweets early on “After the referendum was announced, better proposals were received – especially as regards to restructuring the debt.”

      That was true, and posters here noted it.

      He also says “You’re being blackmailed and urged to vote Yes to all of institutions measures without any solution to exiting the crisis.”

      This is not about a grexit. It is about a CRexit.

      I think he did and does see a way forward. It will be a great pity if pejorative assessments doom this worthy approach to failure. I hope the Greeks at least were able to hear what he had to say.

      1. MyLessThanPrimeBeef

        …as Tsipras tweets early on “After the referendum was announced, better proposals were received – especially as regards to restructuring the debt.”

        That contrasts with this:

        “We’ll negotiate about absolutely nothing before the planned referendum is held,” Merkel told reporters in Berlin.

    1. MaroonBulldog

      Among the practitioners of the art of writing nasty legal letters, this sort of thing is admired as a masterpiece!

  24. Lambert Strether

    Good news, howerver: Greece’s solidarity movement: ‘it’s a whole new model – and it’s working’ . This is the co-operative network I kept asking about, and until now heard nothing about.

    On the optimistic side, it’s organizational capability to be factored in.

    On the realistic side, will it scale to the entire country, and can it function in the absence of a banking system and/or some imports?

    Occupy Sandy was great. The population of New York City is 8 million, and of Greece, 11 million. So if anybody has a back of the envelope calculation for how many Occupy Sandys can provision New York, maybe that would give us an idea of scale for Greece. (I grant that the hinterland of Athens and NYC are very different.)

    1. IsabelPS

      Except that it’s not really news, it’s from end of January. Let’s hope it has developed since then.

  25. ewmayer

    But, but, Mish still believes that “As pertains to game-playing, Greek leaders have run circles around the eurozone nannycrats.” Game-theoretic grandmasters, they are. While everyone else is focused on short-term silliness like “food, shelter, clothing and medical care for the people,” Tsipras, Varoufakis et al are already 7 moves ahead, mapping out the details of the 2020 annexation of Germany by the resurgent global superpower that is Syriza-led Greece.

    1. MyLessThanPrimeBeef

      There was no cave in, this is merely electioneering by Tsipras to counteract the nonstop meddling and electioneering by Germany, France, Spain, and European Commission president Jean-Claude Juncker.

      How is that counteracting, he doesn’t say.

      “I think that ‘final offer’ is close enough, so I am counter-proposing with small modifications?”

      “That ‘final offer’ is not so bad? We can work from there?”

      1. MyLessThanPrimeBeef

        Time will tell who is right.

        Right now, neither side is trustworthy. Everyone is a master game-theoretician…as well as great actor/actress.

  26. Waking Up

    If I were a member state of the European Union and not part of the Eurozone, I would do everything possible to keep my country from joining the Eurozone. Greece will always be a reminder of what could happen to your country if there are hard times. Privatization of the Greek islands and all the public property WILL be remembered. Eventually the dots will be connected to Wall Street and U.S. Hedge Funds.

    If I were a BRICS country, I would stay out of this battle to destroy Greece for now. Then after the bankers/sociopaths/Troika has shown what they are perfectly fine with destroying, the China-led Asian Infrastructure Investment Bank (AIIB) should consider coming in from a “humanitarian” perspective.

    1. MyLessThanPrimeBeef

      And yet, the Greek people don’t seem to be for, and, I believe for sure, Tsipras is not dumping the euro.

      Maybe it’s a case of ‘I don’t want to join, but once I join, I will never want to leave.”

      That’s a rarity that I can’t recall at this time another instance like it in life.

  27. Jim

    It is quite probable that the future may see increasing competition between the type of politics represented by “Solidarity for All” mentioned just above by Lambert and the type of politics described by Yves when she stated “What coercive measures, the EU can now impose on Greece is unclear…This line of thinking is troubling consistent with the crown jurist of the Third Reich Carl Schmitt “Sovereign is he who decides the exception.”

    In my opinion Schmitt was one of the most brilliant political thinkers of the 20th century and his critique of modern political liberalism is a direct challenge to some of my most cherished political assumptions.

    Schmitt argues above in Yves’ quote that what lies at the heart of sovereignty is the power to make a decision. This decision from Schmitts perspective is the pre-ethical ground for political action. Schmitt adds that our legal order rests not on norms but on the decision.

    For Schmitt politics is fundamentally decisionistic not normative.

    Schmitt also saw the rise of liberalism as the death of politics because he argued that the role of liberalism was to conceal the truth of politics–which is fundamentally based on what he called the friend/enemy distinction.

    Schmitt stated “the specific political distinction to which political actions and motives can be reduced is that between friend and enemy.” He further states that “the friend, enemy and combat concepts receive their real meaning precisely because they refer to the real possibility of physical killing.”

    How valid is Schmitts’ concept of politics?

    What is an alternative conception?

    1. norm de plume

      Schmitt is right as far he goes, but that’s not all the way. His ‘hard-headed realism’ is at base just ‘might is right’, he who pays the piper, etc. He would have approved of Stalin’s question about the number of divisions the Pope had.

      This is, while true for 99% of human history, essentially juvenile stuff, admitting of no potential for change, no room for idealism, no quarter basically. If you want the power to make the decisions, you have to kill those of us with out hands currently on the levers. Some philosophy. It is simply not enough to tell it like it is, or has been, there must be some room for what could be.

      It is telling that Schmitt, who cheered on and defended the Night of the Long Knives, had a little love fest with that misanthropic weasel Leo Strauss late in life. They deserved each other.

  28. backwardsevolution

    Ambrose Evans-Pritchard:

    “This default is doubly shameful given that the original IMF-Troika loan in 2010 was not intended to save Greece. The extra debt was imposed on an already bankrupt Greek state to buy time for the euro, against Greek interests.

    Leaked documents leave no doubt that the real purpose was to save monetary union and the European banking system – and to avert a “Euro-Lehman”, in the IMF’s own words – at a time when the eurozone had no defences against contagion. […]

    Such action implies a return to the drachma in short order. The Greeks would continue to insist that the country remains a member of the euro, with full legal rights – blaming the creditors and EU bodies for acting illegally. Only by doing so could they ensure that the full losses from Grexit fall on the ECB and the EMU bail-out funds, while the assets of Greek citizens remain legally protected in foreign accounts, free to return later to rebuild a new banking system.

    If you were of a suspicious mind, you might wonder whether Mr Tsipras has not in fact lured European leaders and officials into a legal trap, and that they have fallen for the bait.

    His Byzantine negotiating tactics may make perfect sense after all. Just a thought.”


  29. Jeremy Harrison

    Never waste a crisis. This man didn’t:


    The guy started a crowdfunding to try to collect enough for Greece not to default. Last I checked he’s gotten half a million Euros.

    The catch? If he doesn’t collect enough to pay off the IMF, he doesn’t have to give any of the money to Greece. He gets to keep it allllllllllllllll.

    Ethics aside, one has to admire the deviousness.

  30. bob goodwin

    I am way out of date on the machinations of this grand dance, but outside of the fact that all sides are locked into untenable positions, nothings seems to have changed over the last 5 years on Greek debt. There is an immovable object and an irresistible force… In the same category as the American civil war, but far less severe. There is too much debt in the world, and there is a need for consolidation of sovereigns. Yves seems to be betting the latter force shall dominate, and I have found her to be almost always right. If so, it would seem, we can expect the same to happen to Greece that happened to South Carolina. Of course Greece should exit the EU and repudiate debt as usually occurs in such situations. Substitute debt with slavery, and that is what South Carolina did. Markets and banks quickly forgive when a sovereign is allowed to do this.

    Lincoln was the first president to ignore the constitution, and he used constitutional grounds to accomplish this. If the EU wants to reduce Greece GDP by 50% and let it stagnate for two generations (as happened in south Carolina) – they will. But we should never call Greece short sighted or stupid. Nobody agrees casually to be shot dead by thugs, whether you sympathize with their motives or not.

  31. bob the builder

    No matter what happens to Greece, i believe the EU has already lost. While many in the EU may not love the Greeks, They have now seen the mailed fist. Do you really think common citizens in Italy and Spain are still in love with the EU?

    I don’t think Tsipras is as lame or dumb as many believe. If Greece goes, is Italy far behind? Tsipras has laid bare what the loss of sovereignty, democracy and currency means for the rest of the EU countries.

    The EU has to punish Greece, i get that, you can’t stiff the banks is the message. But if that means the suffering in Greece becomes so great that it begins to look like a 3rd world nation, what has the EU really won?

    1. John yard

      The EU may not have ‘already lost’ , but this economy is running out of runway, and can’t get airborne. A recession – just garden variety, not the crises of 2001 or 2008 – will thrust many states back into near-depression, and deal the credibility of the ECB and the EU Commission a severe blow. This year will be a relatively strong year, and we are talking perhaps 1% growth in the EU. I think a Europe that is stagnant economically , facing a declining role in the world, will see a regime change.
      Of course this is the challenge facing the entire developed world – Japan , US, and Europe to varying degrees.

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