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<nettime> âGreece Brought a Latte to a Gunfightâ
Felix Stalder on Mon, 13 Jul 2015 16:09:29 +0200 (CEST)

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<nettime> âGreece Brought a Latte to a Gunfightâ

[So, Greece caved, it signed up to what even the German media called
"A list of cruelties" and "an offer designed to be refused". So why
didn't they go for an Grexit?

Basically, because they never prepared for one, and doing an
unprepared currency switch would have led to the immediate collapse of
the economy and, and given how dependent the country is on the import
of food, medicine and energy, to a collapse of society. In order
words, while Varafoukis talked about being willing to blow things up,
they did not prepare for it at all, and thus had no choice than
becoming the warning example of what it means not to toe the German
line. Form a purely short-term humanitarian view, and given the hand
they have been dealt (and dealt themselves), it was probably the right
thing to do. What it's unlikely to solve any problems in the medium or
long term. But for now, it's a long dark tunnel, not just for the
Greeks. Felix]

???Greece Brought a Latte to a Gunfight???
Posted on July 13, 2015 by Yves Smith


By David Llewellyn-Smith, founding publisher and former
editor-in-chief of The Diplomat magazine, now the Asia Pacific???s
leading geo-politics website. Originally posted at MacroBusiness

The weekend???s European news could not be more extraordinary. A superb
opinion piece by Yanis Varafoukas in The Guardian brought everything
to a head:

    In 2010, the Greek state became insolvent. Two options consistent
with continuing membership of the eurozone presented themselves: the
sensible one, that any decent banker would recommend ??? restructuring
the debt and reforming the economy; and the toxic option ??? extending
new loans to a bankrupt entity while pretending that it remains solvent.

    Official Europe chose the second option, putting the bailing out
of French and German banks exposed to Greek public debt above Greece???s
socioeconomic viability.

    ???Our government was elected on a mandate to end this doom loop; to
demand debt restructuring and an end to crippling austerity.
Negotiations have reached their much publicised impasse for a simple
reason: our creditors continue to rule out any tangible debt
restructuring while insisting that our unpayable debt be repaid
???parametrically??? by the weakest of Greeks, their children and their

    ???Greeks, rightly, shiver at the thought of amputation from
monetary union???To exit, we would have to create a new currency from
scratch. In occupied Iraq, the introduction of new paper money took
almost a year, 20 or so Boeing 747s, the mobilisation of the US
military???s might, three printing firms and hundreds of trucks. In the
absence of such support, Grexit would be the equivalent of announcing
a large devaluation more than 18 months in advance: a recipe for
liquidating all Greek capital stock and transferring it abroad by any
means available.

    ???After the crisis of 2008/9, Europe didn???t know how to respond.
Should it prepare the ground for at least one expulsion (that is,
Grexit) to strengthen discipline? Or move to a federation? So far it
has done neither, its existentialist angst forever rising. Sch??uble is
convinced that as things stand, he needs a Grexit to clear the air,
one way or another.

    What do I mean by that? Based on months of negotiation, my
conviction is that the German finance minister wants Greece to be
pushed out of the single currency to put the fear of God into the
French and have them accept his model of a disciplinarian eurozone.

This is a truly bizarre confession. Yanis can see with razor sharp
clarity the economics and politics at play. But at the same time he
sees them as somehow new, as if Sch??uble and German position has
???suddenly??? altered in some way in recent days. This is plain wrong, as
MB???s own Delusional Economics pointed out five months ago when Yanis
was first elected, he displayed an impressive grasp of economics and
political naivete in equal measure.

Germany has not changed its position recently, if at all throughout
the four year crisis. For Germany the euro is a simple national
interest weapon. It allows it to dominate Europe and global trade by
artificially suppressing its real exchange rate. For it to sustain
that position it cannot allow peripheral nations to successfully drop
out of the currency. They???d flood out and the more that left the
higher the euro would rise as the German weighting in the currency
increased. Anyone staying must adhere to German rules and anyone
leaving must be destroyed to deter others from doing do. The euro and
Europe are irrelevant to German real politik. They are in it for the

Yanis appears to have assumed that he could grasp the European light
on the hill and persuade with elegant reason all of Europe to embrace
enlightened super-national consciousness. He???s been genteelly sipping
lattes at a gunfight and by doing so has played right into realist
German hands by destroying his country???s economy as an example to all
other European ???dead beats???.

There is nothing new here. Yanis has simply been outplayed. When it
was elected, Syriza either had to sign up to new terms of austerity or
immediately leave the euro. It???s stylish five month congress with
Europe has ruined its economy to no purpose of its own given it will
either now buckle under to even deeper austerity or will still be
forced out of the euro, taking its economy from wrecked to destroyed.
By misreading power politics from the outset, Syriza has allowed
Greece to be turned into an open-necked sacrificial goat gutted to
keep the rest of Europe bowed to German will. That Yanis can see it
now changes nothing for the forgotten Greek national interest.

By Saturday the German game of cat mouse reached laughable
proportions, from Reuters:

    Germany???s Finance Ministry believes Greece???s latest reform
proposals do not go far enough and has suggested two alternative
courses for Athens including a ???timeout??? from the euro zone, the
Frankfurter Allgemeine Sonntagszeitung (FAS) reported.

    ???These proposals miss out important central reform areas to
modernise the country and to bring economic growth and sustainable
development over the long term,??? the FAS quoted the ministry as
writing in a position paper.

    Instead, the ministry set out two alternative courses for Greece.
Under the first, Athens would improve its proposals quickly and
transfer assets worth 50 billion euros ($56 billion) to a fund in
order to pay down its debt.

    Under the second scenario, Greece would take a ???timeout??? from the
euro zone of at least five years and restructure its debt, while
remaining a member of the European Union.

Sch??uble must be choking with laughter behind closed doors; playing
the good guy with a sympathetic Greek ???timeout???. Using what currency?
The proposal also included the generous offer of ???growth-enhancing,
humanitarian and technical assistance???. Food stamps for German
exports, no doubt.

Finally, when the Eurogroup did meet it was a mess with Finland
leading a Teutonic rebellion against even the bailout, let alone any
notion of debt forgiveness. By Sunday talks resumed and what surely
began as Sch??uble sniggering suddenly became reality as the terms of
the Greek bailout that were counter-offered by Eurogroup suddenly
became significantly more harsh that either the offer of two weeks ago
or the Greek???s bizarre referendum-betraying counter proposal. The list
included the politically impossible demand that Greece transfer $50
billion euros of state assets to a Luxembourg company so that the
Eurogroup can sell ???em when it pleases.

The offer was surely only made tongue in cheek as it came with what
appears to be the real idea, that Greece take a five year holiday from
Eurozone membership. Greece must enact key reforms this week before
any talks on any new financial rescue and the Greek parliament will
need to approve legislation by July 15. Once done, funds can be
released to avert Greek bankruptcy. An absurd timetable for ludicrous

So Greece will now walk, obviously. Except for this from the BBC:

    So the first rather chilling thing I???ve learned, from well-placed
bankers, is there have been no conversations between the Bank of
Greece, the government or regulators and Greece???s commercial banks
about the technicalities of leaving the euro and adopting a new currency.

    This is astonishing ??? and some would say pretty close to criminal
??? given that on Wednesday night the president of the European Union,
former Polish prime minister Donald Tusk, was explicit that this
weekend???s negotiations were all about whether Greece would stay in the

Greece has not even been negotiating with an armed latte.

And so, by burning its political capital with Brussels over five
months of polished debate, convincing the Greek people of the
righteousness of their cause of staying in the Euro but paying no
German price for doing so, and then flipping to outright panic as
their banking system collapsed, Greece has destroyed itself so that
Germany can rule the zone.

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