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Scape goating Greece

by Frank Schnittger Mon Jul 13th, 2015 at 06:38:45 AM EST

Killing the European Project - The New York Times

Suppose you consider Tsipras an incompetent twerp. Suppose you dearly want to see Syriza out of power. Suppose, even, that you welcome the prospect of pushing those annoying Greeks out of the euro.

Even if all of that is true, this Eurogroup list of demands is madness. The trending hashtag ThisIsACoup is exactly right. This goes beyond harsh into pure vindictiveness, complete destruction of national sovereignty, and no hope of relief. It is, presumably, meant to be an offer Greece canít accept; but even so, itís a grotesque betrayal of everything the European project was supposed to stand for.

Can anything pull Europe back from the brink? Word is that Mario Draghi is trying to reintroduce some sanity, that Hollande is finally showing a bit of the pushback against German morality-play economics that he so signally failed to supply in the past. But much of the damage has already been done. Who will ever trust Germanyís good intentions after this?

In a way, the economics have almost become secondary. But still, letís be clear: what weíve learned these past couple of weeks is that being a member of the eurozone means that the creditors can destroy your economy if you step out of line. This has no bearing at all on the underlying economics of austerity. Itís as true as ever that imposing harsh austerity without debt relief is a doomed policy no matter how willing the country is to accept suffering. And this in turn means that even a complete Greek capitulation would be a dead end.

Can Greece pull off a successful exit? Will Germany try to block a recovery? (Sorry, but thatís the kind of thing we must now ask.)

The European project ó a project I have always praised and supported ó has just been dealt a terrible, perhaps fatal blow. And whatever you think of Syriza, or Greece, it wasnít the Greeks who did it.

Krugman is right.  This has got nothing to do with Economics and is all about the various right wing and centre right governments in the other member states crushing their domestic left wing political opposition.  It is the ultimate demonstration of the TINA doctrine - There Is No Alternative - and if you propose one, you will be crushed. I doubt the other Eurozone leaders even considered, in any detail, what the proposed measures would do to the Greek economy. That wasn't the point.  The point was to humiliate Syriza and the Greek people and to crush left wing oppositions at home.  

Government parties in Ireland have lost no time in stitching it into Sinn Fein and left-wing independents at home.  "You see, there was no alternative, we merely did what we had to do to get th country out of the bail-out programme".  Expect the next general election, due next year, to be brought forward to this Autumn, probably just after an October budget which will contain a few goodies for the electorate to heighten the contrast with Greece.

In Greek Crisis to Transform EU? I set out the four key points of what could constitute an agreement between Greece and the EU.  It was a description of what I thought would happen, rather than necessarily what I thought should happen; a position I more clearly outlined in Greece: The next step; introducing the Euriou. So what does the proposed new agreement contain, and how does it differ from my prediction?

First of all, although it has been portrayed in the gullible media as an agreement, it is nothing of the sort.  It is merely an agreement to begin negotiations on a third bail-out provided the Greek Parliament, almost without debate, pass a series of draconian measures designed to split and destroy the Syriza Government by Wednesday evening.

Greece deal: `Unanimous agreement' reached on €86bn bailout

Mr Tsipras will now have to rush swathes of legislation through parliament this week to convince his 18 partners to release bridging funds to avert a state bankruptcy and just to begin negotiations on a three-year loan.

If the summit had failed, Greece would have be staring into an economic abyss with its shuttered banks on the brink of collapse and the prospect of having to print a parallel currency and in time exit the European monetary union.

Six sweeping measures including spending cuts, tax hikes and pension reforms must be enacted by Wednesday night and the entire package endorsed by parliament before talks can start, the leaders decided.

In almost the only concession after imposing a tough set of terms on Mr Tsipras, Germany dropped a proposal to make Greece take a "time-out" from the euro zone that many said resembled a forced ejection if it failed to meet the conditions.

The draft document for talks on a third bailout had made IMF participation a precondition.

Another sticking point had been a proposal to transfer €50 billion worth of assets to an external, independent fund to allow for future privatisations. It is understood Mr Tsipras suggested a maximum of €17 billion in assets could be identified. It is unclear how this issue has been resolved.

Other proposed measures included: a streamlined VAT-collection system and broader tax base; cuts to improve the pension system's sustainability; a civil code overhaul to speed up trials and cut costs of legal action.

To prevent a repeat of previous stand-offs, a new programme would oblige Athens to submit draft legislation to its creditors before parliament.

In a final, provisional, line an earlier draft document said failure to reach agreement would see Greece offered "swift negotiations on a time-out from the euro area".

However, it is understood other countries, including Ireland, were against this line being included in any final agreed document.

The whole purpose of this "agreement" is to force Greece to surrender all sovereignty to its creditors.  Not only must they pass a serious of Draconian measures by Wednesday, but all subsequent draft legislation must be approved by its creditors first.  The Hellenic Republic is being effectively liquidated, and Tsipras is being asked to commit Hara-kiri. To fully appreciate the extent of the capitulation required of Greece, it is necessary to read the full text of the "agreement" here (PDF).

The only "concession" to Greece, is that a German proposal to force a "time-out" from the Eurozone in the event of a lack of full implementation of the programme demanded by the Eurogroup has been dropped from the final draft.  Given that a Greek default is an inevitable consequence of leaving the Eurozone, it is not clear what advantage such a "negotiated exit" would have for Greece in any case. Presumably it would have averted the threat of a trade embargo, if not an outright venture into gunboat diplomacy.

The tragedy of all this is that there are many elements of the programme that Tsipras might have wanted to implement in any case - measures to reduce corruption and legals costs and delays, for instance, and which would be far easier for him to implement, politically, if he could sell them as part of a larger rescue package.   But to legislate for them now, in this context, would be seen as part of a plan for Greece to abdicate all claim to Sovereignty and due democratic and Parliamentary process.

There is no attempt in the "agreement" to include any sweeteners which might make the overall package more politically possible for Tsipras. Basically a gun is being held to Greece's head, and the only benefit of the package is that the Executioners might, in due course, and subject to satisfactory negotiations, but the gun away and replace it with a whip. The "agreement" does not even include the "humanitarian measures" I suggested in Greek Crisis to Transform EU? although there is some mention of the investment programme I suggested there.

So where to, now, for Tsipras and Greece?  The nearest historical analogy I can think of is the 1921//22 Treaty negotiations between what was to become the Irish Government and the British Government which split the island of Ireland into two states, one nominally independent and the other (N. Ireland) remaining as part of the UK. The Treaty negotiations were to lead to the death of the lead Irish negotiator, Michael Collins, and a civil war in Ireland which has echoes in our political system to this day.

Tsipras probably has two options: he can try to sell the proposals to the Greek Parliament, lose his own Governmental majority, and perhaps become an interim Prime Minister of a National Unity Government for a time. At some stage he will then be replaced by genuinely right wing Government led by quasi fascist or at least very right wing parties. Violence may or may not erupt, and a military coup is a possibility.

Alternatively he can go down the Euriou route with or without some tacit assistance from the ECB, a route made more plausible and possible by the fact it has been openly discussed in other capitals. I don't want to minimize, for a moment, the difficulties, in the short term, that this could pose for Greece, particularly if Greece's "partners" in the EU continue to play hard ball. But the alternative is a complete capitulation of Sovereignty by Greece.  It will, effectively, become a colony of the EU.

Greece deal: `Unanimous agreement' reached on €86bn bailout

Asked about criticism of the approach taken by the lenders over the last twenty-four hours, European Commission president Jean-Claude Juncker said there were "no winners and losers" in the deal.

"I said before the referendum that the situation would be worse after the referendum, this has proven to be true," he said, noting that a compromise had been reached.

He was half right.  There are no winners in this debacle, only losers.

If Greece does decide to go its own way, I see this "agreement" as a Pyrrhic victory for centre right Eurozone Governments.  Germany will come to be seen as having over-reached itself, and a split in the EU as much on East-West as much as North South may emerge.  The days of unanimous consensual decision making may well be over.

I don't think European electorates will thank their governments either, with voters drifting either to the left or far right bu dissociating themselves form this debacle. Schäuble's days as German Finance Minister may well be numbered, and the grand coalition may become unstable.  Ultimately this may also be Merkels last throw of the dice unless her remarkable skills as a political survivor enable her to recover.

Index of Frank's Diaries

by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Mon Jul 13th, 2015 at 07:38:09 AM EST
I think people focus to much on the 'colony of the EU' part. The problem is that the policies that are forced on Greece will not improve the economic situation. Not even in the long run.
by rz on Mon Jul 13th, 2015 at 09:17:22 AM EST
[ Parent ]
There are two conceptually distinct problems.  One is, as you say, that the economic "reforms" will in many cases make things worse.  But the second is perhaps even more profound and has ramifications for all member states - basically the EU is taking over the running of the Greek state - right down to quite a low level of detail.  Greece will be giving up virtually all Sovereignty if it accepts the deal and whatever comes down the track as part of the third bail-out negotiations.  This would be the case even if the proposals became more  benign than expected.

Index of Frank's Diaries
by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Mon Jul 13th, 2015 at 12:00:43 PM EST
[ Parent ]
I'm astonished Greece didn't simply leave. It's obvious the terms of the agreement are unsustainable economically, never mind politically.

So I can't help wondering if someone took Tsipras off to one side and made him a personal offer he couldn't refuse - of one kind or another. (Or possibly both.)

Longer term:

Greece will become less and less able to function economically as capital flows northwards.

Anyone who can move will leave and head north too - probably to Germany, which will be very popular with German voters.

The UK referendum is almost certain to be a clear NO to the EU now. That will piss off the landowning grandees making money from CAP payments, and the many businesses who have been relying on cheap EU labour to keep prices down.

I expect Cameron will try to finagle some kind of pseudo-Schengen special clause that allows cheap labour to continue. It's hard to see how, but he's going to have a tough time selling a YES to the electorate now.

The left will not be over. It may give up on conventional politics, and there may be a lot more underground organisation and action than we've been used to.

I can't imagine the end game, although it may look like a country full of starving pensioners who have second mortgages on their homes.

For me, it simply underlines the fact that it's impossible to overestimate just how psychotic the right is when it acts without democratic checks and balances. In the UK we've been starving cancer sufferers to death by denying them benefits because they're classed as "fit for work" even though they can't talk.

So this is more of the same. Once the old generation dies off, younger people will remember how this worked out for the rest of their lives, and will - if it's possible - agitate and vote accordingly.

by ThatBritGuy (thatbritguy (at) googlemail.com) on Mon Jul 13th, 2015 at 01:46:33 PM EST
[ Parent ]
Alternately, with a tame press, the centre-right will rule for decades, much like Japan...
by Metatone (metatone [a|t] gmail (dot) com) on Mon Jul 13th, 2015 at 09:22:47 AM EST
[ Parent ]
Agreed. Someone already commented that the Brussels journalists expressed shock at Spiegel's take and also comments from analysts, etc., on Twitter.
by Upstate NY on Mon Jul 13th, 2015 at 11:25:21 AM EST
[ Parent ]
I can't begin to guess why the 80 odd billion is needed, but it strikes me that, since the ECB issued a decree giving a haircut to the collateral of Greek banks last week, the money needed to recap the banks was thereby jacked up to a very high amount. This thing is so twisted, and I spend an hour or two daily trying to follow it, that no ordinary reader can possibly be expected to figure out where the money is going, where it's even coming from. One only knows that the economy is crashing, the debt to GDP is rising, even if the nominal amounts of debt are not growing by much at all. With 300+ billion pouring into Greece through bailouts, where the frig did all that money go? Only 8% was used for the gov't budget. That's about 15 billion over 5 years, or 3 billion a year.
by Upstate NY on Mon Jul 13th, 2015 at 11:29:03 AM EST
An estimated €53bn of funding is needed for the ESM to roll over IMF and ECB payments due in 2015-2018. €27bn is the right ballpark for an ESM bank recapitalization.

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Migeru (migeru at eurotrib dot com) on Mon Jul 13th, 2015 at 11:46:27 AM EST
[ Parent ]
Thanks. This makes sense. Wonder what the IMF will think when it gets all its money back.
by Upstate NY on Mon Jul 13th, 2015 at 11:51:16 AM EST
[ Parent ]
After all the blood's been squeezed out, the Grexit will come. Then Greece, as a third-world country, will be tossed over to the World Bank, UNICEF, and Doctors without Borders. They can deal with the misery. We will have a new world record in length of recession. Other Eurozone members wondering why they can't seem to escape their generational stagnation. It's the beginning of the end: the EU is crumbling like a high-class mould cheese.

Schengen is toast!
by epochepoque on Mon Jul 13th, 2015 at 03:18:25 PM EST
The Eurozone has been called "a doomsday device for turning recessions into depressions".
by das monde on Mon Jul 13th, 2015 at 10:53:08 PM EST
[ Parent ]

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Migeru (migeru at eurotrib dot com) on Tue Jul 14th, 2015 at 12:42:25 AM EST
I think Chris Hedges has it right, too.  

on truthdig

'tis strange I should be old and neither wise nor valiant. From "The Maid's Tragedy" by Beaumont & Fletcher

by Wife of Bath (kareninaustin at g mail dot com) on Tue Jul 14th, 2015 at 04:54:27 AM EST
Yanis Varoufakis implies Ireland was an "energetic enemy" of Greece

Yanis Varoufakis, the motorbike-riding, Noonan-riling, tie-eschewing former Greek finance minister gave an interesting interview published in yesterday's edition of the New Statesman, the left-of-centre British magazine.

It was full of his usual complaints about the creditor powers that held the Greek government's feet to the fire over the weekend in return for a bailout. From an Irish perspective, however, the interview was more interesting for his observations about the attitude of various European nations to Greece's plight.

Varoufakis complained that, when he was part of the Greek negotiating team, shortly after Syriza's election victory six months ago, he tried to talk economics to the other finance ministers at eurogroup meetings. It "didn't go down well" with his European peers, who displayed "point-blank refusal" to ease Greece's debts.

Yanis Varoufakis implies Ireland was an "energetic enemy" of Greece

The suggestion was that the Government was terrified a Greek debt writedown would highlight the paucity of Noonan's negotiating strategy on behalf of Ireland when he sought to burden-share the cost of our bank bailout. In the run-up to an Irish election, the theory went, Noonan did not want the Greeks to succeed where he had failed. In Varoufakis's view, it seems, the theory is correct.

Index of Frank's Diaries
by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Tue Jul 14th, 2015 at 07:17:33 AM EST

by Katrin on Tue Jul 14th, 2015 at 08:09:51 AM EST
There is no such thing, of course, but Rajoy talked about that last week. He must have gotten the talking point from Mutti.

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Migeru (migeru at eurotrib dot com) on Tue Jul 14th, 2015 at 08:47:05 AM EST
[ Parent ]
AKA "tough love"

Index of Frank's Diaries
by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Tue Jul 14th, 2015 at 04:46:57 PM EST
[ Parent ]
The spokesperson of the German government explains how he sees European solidarity. Greek subtitles.

by Katrin on Tue Jul 14th, 2015 at 08:11:34 AM EST
What's most offensive about this is the condescending joking around the table.

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Migeru (migeru at eurotrib dot com) on Tue Jul 14th, 2015 at 08:51:18 AM EST
[ Parent ]
John Worth: The CDU strict-father model for Greece (July 15, 2015)
All of this is classic conservative strict-father model rhetoric. Greece, the child, is errant and should be punished. It needs to do what the strict father - Germany and the Eurozone - tell it to do. It needs to respect the rules laid down for it (even if the father himself has erred). The ball remains in Greece's court for it to find its own solutions.

This stands in contrast to nurturant-parent model rhetoric, where the emphasis is on collaborative solutions for problems, and providing help and assistance in a mutually beneficial manner. The strict-father versus nurturant-parent models are explained in Lakoff's "Don't Think of an Elephant" and a summary of Lakoff's views is here, and a summary of the models here.

The problem - in rhetorical terms - is if you keep describing Greece and Tsipras as like an errant child, they behave as a teenager would - talking of blackmail, oppression, of a coup. It forces both camps to entrench their respective positions. Meanwhile within the German right, the chasm between the harsh rhetoric and the reality that a deal with Greece was actually done grows (the FDP's Alexander Graf Lambsdorff spoke of the "Weichspüler" (literally "Fabric softener" - aka `wets') having won). It also means that potential allies on Germany's side - the soft left in the rest of the Western Europe for example - find it hard to give Germany any credit it may be due because they are so repulsed by the harsh rhetoric.

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Migeru (migeru at eurotrib dot com) on Wed Jul 15th, 2015 at 05:25:43 AM EST
Jacob Soll: Germany's Destructive Anger (NY Times, July 15, 2015)
As an economic historian, I got a taste of this resentment during a conference on Greek sovereign debt held in Munich last week. It took place at the Center for Economic Studies and the Ifo Institute, which are headed by Hans-Werner Sinn, the German economist and longtime proponent of a Grexit. The conference included economists, accountants, journalists, investors and government officials from both Greece and Germany. Diverging views were aired by Mitu Gulati, the Duke law professor who helped devise an earlier Greek bailout; by Ashoka Mody, an economist, formerly of the International Monetary Fund, who preaches debt forgiveness; by accounting experts, who agreed that Greece's total debts seem to have been inflated; and by Mr. Sinn.

But when the German economists spoke at the final session, a completely different tone took over the room. Within the economic theories and numbers came a moral message: The Germans were honest dupes and the Greeks corrupt, unreliable and incompetent. Both parties were reduced to caricatures of themselves. We've heard this story throughout the negotiations, but in that room, it was clear how much resentment shapes the views of German economists.


When the panel split up, German attendees circled me to explain how the Greeks were robbing the Germans. They did not want to be victims anymore. While I certainly accepted their economic points and, indeed, the point that European Union member countries owe Germany so much money that more defaults could sink Germany, it was hard, in Munich at least, to see the Germans as true victims.

Here lies a major cultural disconnect, and also a risk for the Germans. For it seems that their sense of victimization has made them lose their cool, both in negotiations and in their economic assessments. If the Germans are going to lead Europe, they can't do it as victims.

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Migeru (migeru at eurotrib dot com) on Wed Jul 15th, 2015 at 09:08:18 AM EST
The sad thing is that educated people should absolutely resist this kind of psychoanalysis, especially because it makes so much sense. This much and worse can also be applied to the Greek people.
by Upstate NY on Wed Jul 15th, 2015 at 11:17:33 AM EST
[ Parent ]
I should add that the Greek analysts I have found to be most reasonable, objective, etc., like Malkoutzis, Mouzakis, et al, are exhibiting Stockholm Syndrome, emphasizing personalities, and wondering what Greeks could have done better.

So little emphasis on the macro even from them.

From the outside, Mazzucato seems to be the only one who can consistently keep her eye on the ball.

Greeks have been put through the ringer, nerves are fried, I can't even contact my relatives anymore, been waiting for days for them to get back to us about what they need.

Tsipras scapegoated Varoufakis last night, but after Varoufakis has been goading him all week. Varoufakis also has no political contingency in Greece, having been outside the political system there. You can tell Syriza's Left Platform have natural affinities with Varoufakis (a surprise since they veto'd V's selection of Elena Panaritis for the Greek IMF post), but since he is not one of them, not dyed-in-the-wool, they can't make common cause. Tsakolotos, on the other hand, is one of them.

Tsipras is scapegoating Varoufakis for the good of the country. BUT, this is the eurozone's logic as well. Theya re trying to keep the whole thing together, and logically it makes sense that Greece would be made a scapegoat. I understand why people are lying.

by Upstate NY on Wed Jul 15th, 2015 at 11:23:55 AM EST
[ Parent ]
Tormenting Greece is about sending a message that we are now in a new EU

What's the difference between the Mafia and the current European leadership? The Mafia makes you an offer you can't refuse. The leaders of the European Union offer you a deal you can neither refuse nor accept without destroying yourself.

The European Union as we have known it ended over the weekend. That EU project was all about the gradual convergence of equal nations into an "ever closer union". That's finished now.

The whole notion was underpinned by three conditions. One was that the process of European integration was consensual - each member state would pool more and more of its sovereignty because it freely chose to do so. The second was that these incremental steps were, to use the terms applied to monetary union in the Maastricht treaty, "irreversible" and "irrevocable" - once they were taken, there could be no going back.

The third, unspoken but completely understood, was that Germany would restrain itself, accepting, in return for the immense gift of a new beginning that its fellow European countries had given it, that it must refrain from ever trying to be top dog again. Each of these fundamental conditions was torched over the weekend.

Index of Frank's Diaries
by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Wed Jul 15th, 2015 at 02:47:05 PM EST
This is what has Schauble's panties in a twist. No wonder they drafted a pitbull...

the unbalanced evolution of homo sapiens: Eurozone is ready to explode, but probably not for the reasons you think

Wolfgang Schäuble and the German leadership of the eurozone have good reasons to worry, maintaining an uncompromising attitude in the negotiations with Greece. But the repayment of Greek debt, which amounts to EUR 317 billion, is not one of the most important ones. The Greek debt is insignificant in comparison with the financial dynamite of the German (and other) banks, which in recent months gives more daily ignition signs.
Only Deutsche Bank, the largest bank in Germany, is significantly exposed, holding dubious financial products known as "derivatives", worth 67 trillion euros. This amount is similar to the GDP of the entire world and 20 times greater than the GDP of Germany. Any comparison with the situation of the bank Lehman Brothers in 2008 would not be irrelevant. Just when Lehman Brothers went bankrupt, had available derivatives of only 31.5 trillion. The crisis of 2008 confirmed the concise definition of derivatives as proposed by the American tycoon Warren Buffet: "financial weapons of mass destruction."
2008 may now be a past, but recent developments are particularly bleak for Deutsche Bank. The competent authorities of the US and Britain imposed on the bank in April a fine record (which, together with a previous fine, are EUR 2.2 billion in total) for fraudulent interbank rates. In early June, two co-CEOs suddenly resigned. Four former bank executives had been prosecuted by the German judicial authorities for false statements and misleading testimonies. A few days later, prosecutors raided the bank's offices in Frankfurt to collect customer data.


'The history of public debt is full of irony. It rarely follows our ideas of order and justice.' Thomas Piketty

by melo (melometa4(at)gmail.com) on Sun Jul 19th, 2015 at 08:19:54 PM EST

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