Wall Street Journal article argues Greece planned a Grexit from the beginning

An article by Simon Nixon in the Wall Street Journal suggests senior Greek officials such as prime minister Tsipras and economy minister Yanis Varoufakis had from the beginning decided creditors would never extend reasonable terms to Greece.

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According to this narrative Greece could not simply proclaim this aim outright and work for a Grexit, since a considerable majority of Greeks wanted to remain in the euro zone. Nixon notes that Tsipras himself denies he had a deliberate plan for a Grexit and describes such accusations as lies. Politicians have been known to lie too. Nixon says if Tsipras had planned to take Greece out of the euro zone from the start of negotiations in January, he can hardly imagine what he might have done differently:He won the election on a pledge to respect the overwhelming desire of voters to remain in the eurozone, which meant he had no choice but to go through the motions of negotiating with Greece’s creditors for as along as they were willing to indulge him. If Grexit was always his goal, then his only challenge was to ensure the talks dragged on until the bailout expired, capital controls were introduced and the country defaulted, making a euro exit hard to avoid. The only risk to such a strategy was a bank run before the bailout expired, in which case politics may have intervened.

Note that Mr. Nixon's description of Tsipras' election campaign pledge leaves out a significant aspect, namely the strong anti-austerity platform that was also crucial to his campaign and consequent election of Syriza. What Tsipras and others could have done differently is to have from the very beginning of negotiations stressed that if a reasonable compromise deal was not forthcoming, Syriza had a Plan B of default and Grexit. At the same time they could have elaborated policies for a Grexit and informed Greek citizens what would be involved so that they would be prepared should no reasonable deal be possible. Instead, Varoufakis and Tsipras both said they would do whatever was necessary to reach a deal, a tactic that tells the creditors that they can demand all they want and Greece will not leave the negotiations.

Tsipras could have explained ages ago that the negotiations were going nowhere and at that point called for a referendum asking whether Greeks wanted to continue negotiations or default and return to the drachma. If a referendum had been called then it would give time for debate and have some legitimacy. The present referendum is regarded as not legitimate by many analysts and is based on a deal that is no longer even on offer since the present bailout ran out and Greece went into default at the end of June. Jim Yardley in the New York Times notes:

"Imagine the fate of your country hangs on a yes-or-no question.The question is drafted in cryptic, bureaucratic language and asks you to decide on an economic program that no longer exists. Leaders in neighboring countries are begging you to vote yes. Your government is begging you to vote no. Now you can understand what it feels like to live in Greece, land of debt, sunshine and, these days, profound political weirdness. The country is approaching one of the most important votes in its modern history on Sunday — one that could redefine its place in Europe — yet many people acknowledge they barely have a clue as to what, exactly, they are voting on."

From the first, Tsipras and Varoufakis have tried to mislead the Greek voters. For example, claiming a victory over the Troika when their only real victory was to convince officials to refer to the Troika as "the institutions." There were numerous "red lines" drawn, almost all of which were eventually withdrawn — often with a positive spin that a deal was now close. Optimism alternated with harsh criticism of creditor proposals that poisoned the negotiating atmosphere. Through all of this there is no hint of an alternative or any attempt to educate the Greek public as to what a Grexit would look like or mean for them. There was no attempt to counter those who claimed that a Grexit would be a disaster for Greece and was not a reasonable alternative.

Even when Tsipras rejected the final offer from creditors and called for a referendum, he still made last-minute attempts to broker a deal that would have made any referendum irrelevant after praising it as an exercise in democracy. Surely these actions show Tsipras still wants a deal even though Merkel and others have made it clear there will be no negotiations until after the referendum. Given the facts, evidence seems to point to many on the creditor side wishing for Greece to depart from the euro zone, while Tsipras and the Greek government are doing everything possible to remain in the zone. Those who want Greece out of the zone are playing their cards cleverly. Tsipras has created a situation where the banks closed and capital controls have been introduced before the referendum showing how Greeks will suffer from lack of a deal and no doubt encouraging a "Yes" vote.

Tsipras maintains that even if there is a "No" vote this will mean that he will have a stronger hand in dealing with creditors. This appears to indicate that he still would try again to negotiate a deal not exit from the eurozone. Nixon claims that the creditors would simply refuse to negotiate with Tsipras. That remains to be seen. The Greeks could always sideline him as they did with Varoufakis when his style appeared to be a hindrance to negotiations.

After months of promising to meet its debt obligations in full, today Tsipras said that he hoped the coming referendum on Sunday will reset bailout negotiations. He also presented new proposals that demand creditors forgive a third of Greek debt. IMF documents actually support the view that the present Greek debt load is unsustainable, but this latest proposal by Greece will no doubt be rejected. Tsipras seems to be flailing about without having any clear policy direction at all. If this is part of a strategy for a Grexit, it is badly planned and an insult to the Greek people since they have been constantly misled about what is happening, faced with conflicting statements from government officials and been kept in the dark about the planned Grexit. They have been told nothing about what a Grexit would involve. Whatever Tsipras and the Greek government planned the results are a disaster for the Greek economy and its people. Whether this results in a Grexit remains to be determined.

The latest polls show that Greeks are almost evenly split on the referendum issue. Here is the result of one of two polls quoted in the Wall Street Journal:The survey by polling institute Alco for the newspaper Ethnos found that 44.8% of respondents plan to vote “yes” in Sunday’s referendum, while 43.4% plan to vote “no.” One thousand people were surveyed between Jun 30 and July 1.This result is within the margin of error and there was a similar result in a second poll.

Greece caves on some of its anti-austerity plans in order to reach deal with creditors

Athens May 31st--The Greek government is signaling that it will compromise on some of its anti-austerity demands in order to reach a deal with its creditors.

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Greek Interior Minister, Nikos Voutsis, said he was confident a deal could be reached within a week. To reach a deal the government would be willing to push back parts of its anti-austerity program. Greece and the "institutions" or Troika of the International Monetary Fund (IMF), European Commission, and European Central Bank have been negotiating for months as Greece has tried to no avail to convince creditors that austerity provisions that are part of the condition for releasing funds from the bailout loan should be cut back considerably. The Greek government has already given way on two of its former "red lines" of privatization and taxation reforms. The main remaining red lines are pension and labor market reforms that would entail pension and wage cuts. The creditors probably will grant the Greek government a lower surplus target since a higher target was probably unreachable in any event. Voutsis said on TV: "We believe that we can and we must have a solution and a deal within the week,Some parts of our programme could be pushed back by six months or maybe by a year, so that there is some balance."Voutsis did not indicate what aspects of the program could be pushed back. There was no mention of any "red lines."

Earlier in the week the government suggested there could be a deal by Sunday May 31 but lenders were less optimistic. The lenders cited the Greek government's continued refusal to address the labor and pension reforms demanded by creditors. Voutsis claimed a powerful majority of those involved in negotiations realized there could be no further austerity strategies imposed as a way of solving the Greek problem. Nevertheless, it seems clear that a powerful group of creditors is insisting that the austerity conditions in the original bailout deal must be honored. The bailout deal terminates at the end of June and a deal to release the remaining funds must be reached before then.

Many critics of the ruling Syriza party argue that it should develop a Plan B to deal with a situation where no acceptable deal can be reached. You would think that this would be done even as a negotiating strategy. So far the narrative usually is that the Greek government will do whatever is necessary to reach a deal, although statements from Greek officials are sometimes inconsistent. This stance provides absolutely no leverage to force creditors to compromise to achieve a deal. Today, Economy Minister George Stathakis told a newspaper:"The idea of a Plan B doesn't exist. Our country needs to stay in the eurozone but on a better organised aid programme, Otherwise, mainly Greece but the European Union as well will step into unchartered waters and no-one wants that."Stathakis was confident of an agreement being reached and also claimed that Greece will be able to make its next payment to the IMF in early June.

Stock markets were lower in Europe and in North America on Friday partly on worries about Greece but the US Dow Jones index gained almost a full percentage point for May. The S & P 500 gained over one per cent and the NASDAQ 2.6 per cent.

Greece manages to scrape up funds for another payment to the IMF

The Greek government managed to scrape together enough cash to pay off $222 million that was due to the International Monetary Fund yesterday.

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To raise the cash, the government has been borrowing from pension funds and also from the reserves of local governments. The government is also placing a surcharge on withdrawals of cash and financial transactions. This surcharge will not only raise revenue but also discourage capital flight. Greece is also considering a special levy on the country's 500 richest families to collect more cash.

Next Tuesday, Greece faces an even larger payment of 770 million euros to the IMF. Greece also is required to pay salaries and pensions later next week. Greek officials have been talking with their creditors and EU officials to help push for a release of funds from their bailout loan, but so far creditors have insisted Greece must present and implement reforms that have been demanded as part of the original bail-out agreement. The reforms include changes to pensions and in the labor market that so far the government has refused to countenance and would go completely counter to their election pledges. Alexis Tsipras, the Greek Prime Minister, discussed with French President Francois Hollande how negotiations could be fast forwarded.

Greek officials are meeting with members of the Troika, the European Commission(EC), European Central Bank(ECB), and International Monetary Fund(IMF) or as they are now called "The Institutions" before a meeting of the Eurozone's 19 finance ministers next Monday at which the group could decide whether Greece has done enough to merit release of the remaining 7.2 billion euros of their bailout loan. In Brussels, technical talks had been extended beyond yesterday. An unidentified Eurozone official claimed that there had been visible progress after weeks of stalemate. The Greek Finance Minister Yanis Varoufakis was in Rome to discuss issues with the Italian Finance Minister, Pier Padoan and was then to talk with Spanish finance minister Luis de Guindos. Prime Minister Tsipras consulted with EC president Jean-Claude Juncker yesterday and they both affirmed that "constructive talks should continue."

Tsipras and Juncker issued a joint statement that seems to indicate that Greece may be reconsidering its opposition to demands for pension reform. The two spoke of the remaining reforms Greece needed to implement. These included modernizing the pension system "so that it is fair, fiscally sustainable, and effective in averting old-age poverty". The EC will no doubt stress the fiscally sustainable aspect aspect. The Troika have been demanding pension reforms that Greece has so far resisted. The other main issue was labor market reform and that also the two agreed must be addressed and they said they had discussed "the need for wage developments and labor market institutions to be supportive of job creation, competitiveness and social cohesion."

While the statements sound optimistic, there are reports members of the Governing Council of the ECB are growing impatient at Greece's reluctance to agree to and implement reforms demanded. They also worry about their exposure to Greek bank debt and are reluctant to bend the rules any further to help Greece out of its cash difficulties. German Finance Minister, Wolfgang Schaeuble, who has taken a hard line against Greece said that it was in Germany's interest to help Greece but not at any cost and that just giving more aid without changing the conditions under which Greece was operating made no sense. He also said that Greek demands for World War II reparations were nonsense. We should find out next week whether there is any breakthrough in negotiations. If there is a breakthrough, it would appear that is because Greece has basically caved in to the demands of the Troika.

Greece shuffles negotiating team with Varoufakis moving to the sidelines

Feisty Greek Finance Minister Yanis Varoufakis has reportedly been relegated to the sidelines in negotiations with EU and IMF creditors for a deal that would release more funds from the bailout loan.

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Varoufakis was unable to strike a deal at a recent meeting of the Eurogroup of finance ministers in Riga, Latvia. There was considerable criticism of his performance by some ministers. However, Greek Prime Minister, Alexis Tsipras, voiced support for Varoufakis and said that he would supervise a new team negotiating with the institutions responsible for the loan. At the same time, Deputy Foreign Minister Euclid Tsakalotos, another economist more acceptable to creditors, and soft-spoken, has been appointed coordinator of the group. A Reuters' article suggests this move pushes Varoufakis to the sidelines.

An article in the New York Times also suggests that although Varoufakis remains the leader of the negotiating team, that Tsakalotos would co-ordinate the day-to-day discussions of the group. Giorgos Houliarakis will lead the discussions at the technical level. He had already been involved in negotiations. Both Tsakalotos and Houliarakis are said to be closer to Tsipras than Varoufakis.

These moves are seen as an attempt by Tsipras to lessen tensions with creditors and create an atmosphere more conducive to a deal. There was even an interview with the new Greek president, Prokopis Pavlopoulos, with the German news source Spiegel Online who assured creditors that there was no possibility of a Grexit and who promised that loans would be paid back. However, other leaders including Varoufakis have also promised this continually. In spite of the fact that he is not from Syriza, the ruling coalition, but the conservative Nea Dimokratia party, his criticism of the austerity provisions of the loan echoed those of the ruling party. The international law professor supported Syriza objections to the creditors' criticism of minimum wages and other labour rights, noting that Germany guaranteed its citizens a minimum standard of living:"Some of the measures imposed on us go beyond EU law. We want to be equal members of Europe.We are not asking for anything more than for the Greek people to enjoy what Germany's Constitutional Court considers as an established social right for the German people."He also claimed that parts of the austerity program demanded measures that would stunt Greece's growth , making it even more difficult to pay its debt. According to a Guardian article insiders say that Varoufakis still has a lot of say in negotiations.

The new team appears to be using the same narrative as the old team and Varoufakis. So far the creditors have not been willing to yield at all to any anti-austerity demands. Cosmetic changes of this sort and a change in tone are hardly likely to produce a deal. Perhaps it is the other side that needs a change in tone and in players. While Varoufakis has been abrasive, the other side is adamant that it will continue to impose austerity conditions that it must know the Greek government cannot accept. So unyielding have the creditors been, that analysts are beginning to speculate that the aim is to destroy the Syriza government and produce regime change or alternatively force Greece out of the eurozone.

Eurogroup demands its reforms before it releases cash to Greece

The Eurogroup of finance minister meeting in Riga Latvia had harsh words for Greek Finance Minister Yanis Varoufakis as they refused his bid to find a shortcut to get badly need financial aid.

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Jeroen Dijsselbloem, the chair of the euro-zone finance ministers, ruled out any partial aid payment, such as Varoufakis has requested, in exchange for fewer and narrower reforms:“It was a very critical discussion and it showed a great sense of urgency around the room,” Dijsselbloem said at a press conference after the meeting. Asked if there was any chance of a partial disbursement, he said, “The answer can be very short: No.”Also, Dijsselbloem told reporters at the end of the Riga meeting: "I'll be quite frank - it was a very critical discussion. We had hoped to hear a positive result..we are still far from that."Varoufakis was severely criticized for not bringing forward and implementing the "reforms" demanded of creditors including to pensions and the labor market even though such changes are termed by the Greek government as "red lines" that cannot be crossed. Perhaps the government is intending to show the Greek public that any reform is impossible within the EU. However, there seems to be little or no planning by the government for a possible Grexit or exit from Greece. Given the situation, and the positions of each side, it is hardly surprising that no agreement was reached at the meeting in Riga Latvia yesterday. The discussion on Greece at the meeting lasted little more than an hour. Dijsselbloem made it crystal clear that no funds were forthcoming unless Greece delivered on the reforms demanded: "A comprehensive and detailed list of reforms is needed. A comprehensive deal is necessary before any disbursement can take place ... We are all aware that time is running out."He also warned that if there were no deal completed by the end of June, the 7.2 billion euros in the loan would no longer be available and that creditors would not talk about longer term funding until a full interim agreement was reached.

An anonymous person familiar with the talks said that the finance ministers described Varoufakis as behaving irresponsibly in the talks, and being a gambler, time-waster, and amateur. In spite of this, Varoufakis himself said the two sides were now "much closer together" and that Greece was intending to achieve a deal as soon as possible. The president of the European Central Bank(ECB), Mario Draghi, threatened to even increase the pressure on Greece and warned that ECB policy makers might review the conditions set for emergency funding of Greek banks. The council governing the regulations is said to meet as early as May 6.Some ministers accused Varoufakis of backtracking on commitments he had made and failing to understand the deep differences that divide the Greek government from the position of Greece's creditors. Many eurozone officials believe that without new funds, Greece could default on debt by the middle of May. However, no one seems to know for sure.

The finance ministers were angry that the Greek Prime Minister Alexis Tsipras had met with German Chancellor Angela Merkel on Thursday a day before their meeting in an attempt to get her to approve financial aid and bypass them. He also met with French President Francois Hollande as well. Merkel said that she is not prepared to override the controls requiring that the finance ministers approve any release of funds. Greek Finance Minister Varoufakis also irritates the finance ministers by sending contradictory messages and little detail about the Greek financial situation. Varoufakis described the Friday talks as "intense" and told reporters after the meeting: “The cost of no solution would be enormous, not only for us but also for all."

The situation is becoming so critical that some finance ministers including from Germany and Slovenia have said that the group is considering plans as to what should be done if no deal can be reached with Greece by the end of June when the present bailout loan expires but large Greek debt repayments become due over the summer.

Greece made payment to IMF on time but cash shortage remains

The Managing Director of the International Monetary Fund(IMF), Christine Lagarde, has confirmed that the Greek government made a 459 million euro payment due on April 9.

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Lagarde was confirming a statement by a source in the Greek finance ministry that the payment had been ordered. The crucial payment will help Greece move closer to receiving more funds from an extended bailout loan that will help Greece stay in the euro zone. The Greek government had threatened not to make the payment on time if it would not be able to pay pensions and a government payroll a few days later. Greece will still need to make interest payments of 400 million euros and roll over 2.4 billion euros in short-term treasury bills on April 14 and 17. Even yesterday, Greece issued 1.14 billion euros in six month term treasury bills. The Greek unemployment rate declined marginally in January to 25.7 percent in January versus 25.9 percent the previous month. After a long recession, the Greek economy grew 0.7 percent last year.

In his recent meeting with Russian president Vladimir Putin, Greek Prime Minister Alexis Tsipras did not request any economic aid. Putin suggested Russia might provide credits for large scale joint projects in the future. He said:"The Greek side has not addressed us with any requests for aid, We discussed cooperation in various sectors of the economy, including the possibility of developing major energy projects."

The recent list of reforms presented by the Greek government to its creditors is not regarded as enough by Greece's creditors. Euro zone deputy finance ministers have given Greece six working days to come up with revised reform proposals in order to allow a deal to be reached on April 24 at a Eurogroup meeting in Riga, Latvia. The earlier reform list was regarded as too optimistic about revenue projection and did not deal adequately with pensions and labor market reform. On these latter issues the Eurogroup demands are at odds with the promises of Syriza during their election campaign.

While the IMF payment may provide a short term sense of relief, Greece's top banks including the National Bank of Greece are bracing for a continuing battle as more payments become due. Reports indicate that a default and Grexit or exit from the euro zone, could create even more hardships for the Greeks and problems for the Greek economy. Even if Greece does get the remainder of the funds in this bailout extension after the meeting on April 24, within two months it will need more funds to cover its debt. The Greek government says it does not want another bailout but it is not clear how this can be avoided.

European Commission vetoes Greek government's humanitarian crisis bill

The European Commission has vetoed what the government calls a "humanitarian crisis bill." The bill was meant to address poverty among pensioners and homeless families.

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The bill said:

"The deep recession due to austerity policies and the economic crisis in the past six years had a dramatic social impact. This draft law aims at tackling the humanitarian crisis through measures which ensure access to basic goods."

Free electricity and food would be provided to some poorer households under the legislation. The Commission sent the notice just 24 hours before the bill was to go before the Greek parliament. Another bill that would have allowed tax arrears to be paid in installments was also vetoed. Of course the Greek parliament can still pass the bills, but if they do they can forget about more funds being released under the extension of the bailout program. The agreement with Greek creditors is that no policy that might impact the financial objectives that are part of the extension deal would be passed unilaterally, that is without the agreement of the creditors. I might add, that includes the Troika of the European Commission, IMF, and European Central Bank now called "the institutions."

According to a communication seen by Channel 4 News, Declan Costello, director of the EC's directorate for economic and financial affairs, ordered the Syriza government to kill the legislation. Costello's letter said:During our teleconference last night, you mentioned the planned parliament passage tomorrow of the ‘humanitarian crisis’ bill. We also understand that other policy initiatives, including the installment scheme law, are in train that are to go to parliament shortly.We would strongly urge having the proper policy consultations first, including consistency with reform efforts. There are several issues to be discussed and we need to do them as a coherent and comprehensive package. Doing otherwise would be proceeding unilaterally and in a piecemeal manner that is inconsistent with the commitments made, including to the Eurogroup as stated in the February 20 communiqué.”

In effect, the letter states that if the Greek government goes ahead with this legislation it will be in violation of the deal Greek Finance Minister Varoufakis signed on February 20. It should be clear that Greece simply cannot expect to pass its reform program as promised to the voters, but only such reforms as its creditors agree can be presented. The Syriza government has been carrying on with rhetoric that has no relationship to reality. There is no new deal that avoids the strictures of the Troika. It is the same deal with the Troika now called "the institutions." Legislating reforms that might use funds that could be sent to pay off loans will not be allowed, unless the debtors also agree. The Greek government thinks that it can assure creditors that the new measures will not burden the budget, but obviously the Commission does not see it that way.

Syriza MP and economist Costas Lapavistas in a joint interview with the German paper Der Tagesspiegel and The Press Project International said that Greece and its EU creditors were "flogging a dead horse" by trying to keep the bailout deal going. He suggests that the two sides should be working on "an exit that will be negotiated and consensual." Lapavistas points out that in 2011, the German Finance minister Schauble was in favour of a negotiated exit. A majority of Germans now also want to see Greece exit the euro zone:A poll by German broadcaster ZDF found that 52% of Germans think Greece should leave the eurozone, and only 40% think it should stay. In February, the figures were reversed — with a 52% majority wanting Greece to stay.

Even the business news outlet Bloomberg has an article by Mark Gilbert saying that a Greek exit from the Eurozone seems inevitable.

Greece short of cash to make March payments to International Monetary Fund(IMF)

 The first payment due is this Friday March 6th in the amount of 310 million euros but the total payments due this month are 1.5 billion($1.7 billion US) euros. The government may be forced into "borrowing"  state pension and social security funds or even European Union farming subsidies to meet its obligations to the IMF. While Greece will be able to meet it obligations over the short term, it faces even larger payments not long after the four month extension period of the present bailout ends in four months. In July and August 6.7 billion in European Central Bank bonds mature. 

  The Greek Finance Minister, Yanis Varoufakis, claimed he would "squeeze blood out of stone" to make the IMF payment. He also said: "It would be excellent if we could agree with out partners to smooth over this cash flow hump that we are facing over the next few months." Many experts believe that Greece will require a third bailout package after the extension period runs out in order to pay off the EU bonds maturing during the summer. Dr. Michael Arghyrou, of Cardiff Business School said that either Greece defaults on its loan payments and exits the euro zone, or it must agree to a third bailout package. While prime minister Tsipras says he does not want to leave the euro zone, he claims also that Greece will not request a third bailout. He will probably actually negotiate another bailout but call it by another name perhaps "new arrangements".  He pulled off a similar stunt after he refused to deal with the Troika (European Commission, European Central Bank, and International Monetary Fund). They are now always referred to as "the institutions" but are carrying out the same role as they did earlier of overseeing the bailout and determining whether the terms are being satisfied by Greece.

 Although Syriza promised during the election campaign that at least some Greek debt would be written off, since being election it has stressed that it would honour all its debt obligations. Jens Bastian, an analyst for Macropolis a provider of data and analysis on Greece said that it was not in the interest of Greece to default on any of its IMF obligations. If they did so, the government would face even greater difficulties borrowing money to pay off other debts. Bastian maintained:“The Greek government has identified IMF payment as an absolute political priority. You may be able to solve repayment obligations in March. The bigger problems are looming around the corner in July and August.”

 Greek's creditors are unlikely to provide Greece with any sort of financial break to help it out of its troubles. On the contrary, it will use them as leverage to force Syriza to enact reforms and follow policies that are in the interests of creditors and investors even though they bring even more hardships on the Greek populace. As Valdis Dombrovskis whose job is to monitor Greece's compliance with the conditions of the bailout program puts it: "In this case, they will need to speed up program implementation".  The Greek government can look forward to a long hot summer of negotiations with its creditors. The demands of creditors will ensure that Syriza will be able to carry out few if any of its campaign promises except to stay in the euro zone. Perhaps the party will come to realize that this is the promise they should break if they are ever going to keep their other campaign promises, even if in the near term Greeks will suffer even more.

Greece's proposed reforms for bailout deal accepted by Eurogroup but with reservations

The Greek Finance Minister Yanis Varoufakis sent a letter to Eurogroup President Jeroen Dijsselbloem just before the deadline of midnight Monday that outlines proposed reforms that Greece was willing to undertake to receive bailout funds.

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The complete text of the letter can be found here or here. Many of the reforms have to do with tax collection and the tax system, an area that both Syriza and its EU partners agree is in drastic need of reform. There is also an emphasis on tackling corruption. While there are sections that deal with tackling poverty and humanitarian issues, these are always treated as being addressed in a manner that does not impact negatively on the fiscal situation.

Under the final section entitled the Humanitarian Crisis there is a section that an article in the Business Insider considers could redefine how we view the modern welfare state. The proposal is for a guaranteed minimum income(GMI). While this is often supported by leftists, it is also supported by many on the right The libertarian right sees the system as a replacement for the many separate welfare schemes that have grown in advanced capitalist societies with a single payment that could be spent by the recipient at will and without bureaucrat intervention. This contrasts with other right wing groups who want to ensure that welfare is narrow and targeted and goes only to those who are "deserving". The idea has been supported by free market ideologues such as Milton Friedman and Friedrich Hayek.

Hayek said:There is no reason why in a free society government should not assure to all, protection against severe deprivation in the form of an assured minimum income, or a floor below which nobody need descend. To enter into such an insurance against extreme misfortune may well be in the interest of all; or it may be felt to be a clear moral duty of all to assist, within the organised community, those who cannot help themselves.Hayek's formulation for the GMI is much more idealistic than that presented in the Greek reform proposals. Here is part of the context of the Greek GMI reforms as set out in the letter: • Evaluate the pilot Minimum Guaranteed Income scheme with a view to extending it nationwide.• Ensure that its fight against the humanitarian crisis has no negative fiscal effect.So any expenditure on the GMI will presumably need to be revenue neutral or paid for by saving elsewhere. Another passage makes it clear that the GMI is actually intended to discourage early retirement which would cost the state more in pensions.The reforms promise to:"..provide targeted assistance to employees between 50 and 65, including through a Guaranteed Basic Income scheme, so as to eliminate the social and political pressure for early retirement which over-burdens the pension funds."

This would allow those between 50 and 65 who may become unemployed through becoming jobless, no doubt in some cases through the measures accepted for the bailout loan, to remain in the job market until conditions improve for them without opting for early retirement which would cost the government more.

Another supporter of the GMI is Sam Bowman, deputy director of the Adam Smith Institute who writes: "The ideal welfare system is a basic income, replacing the existing anti-poverty programmes the government carries out (tax credits and most of what the Department for Work and Pensions does besides pensions and child benefit)...Like the current benefits system, this would provide a safety net. But ‘benefits traps’, where people lose as much in benefits as they earn from work, would be eliminated."

The role of the GMI as presented in the Greek reforms is to save money not solve the humanitarian crisis. This may be a means by which Greece is trying to sell the program to its partners. For those who would earn more if they could choose early retirement when laid off the GMI would represent a decline in income. The GMI is hardly the revolutionary new program the Business Insider describes:In the First Muslim Caliph, Abu Bakr introduced a guaranteed minimum standard of income, granting each man, woman, and child ten dirhams annually; this was later increased to twenty dirhams.

While the EU and Troika or "institutions" have accepted the reforms listed--not surprising since they were developed through constant consultations--they have also demanded further elaboration of them. Christine Lagarde the manager of the International Monetary Fund(IMF) and Mario Draghi, the President of the European Central Bank expressed some reservations and objections to the list. The Eurogroup finance ministers in an official statement said: “We call on the Greek authorities to further develop and broaden the list of reform measures, based on the current arrangement, in close coordination with the institutions in order to allow for a speedy and successful conclusion of the review.”Greece is being presented with more and more hoops to jump through to receive further funds. In the end the Greek government may decide enough is enough and break free through an exit from the euro zone.

Syriza government in Greece tries to sell sell out as a success

Athens - After presenting proposals for a debt deal that reneged upon most of Syriza's campaign promises that were rejected by Germany, the Syriza Greek government claims it won the battle for the debt deal.

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In actuality, with Germany taking the lead, Greece was forced to accept extension of the original bailout deal that includes all the bailout conditions of the original memorandum of agreement. It did not receive a six-month loan period as it wanted but only four months. The loan period could not expire at a worse time since large debt repayments will be due shortly after. This will provide leverage for EU officials to press even more demands on the beleaguered Greek government. The Syriza government had insisted that it did not want an extension of the existing bailout agreement nor would it deal with the Troika of the European Commission, European Central Bank or the International Monetary Fund. It has agreed to an extension of the original bailout and supervision by the Troika but under a new name. They are now called simply "institutions." There will be no debt write off, one of Syriza's key campaign promises. Greece agrees to honor all its debt obligations.

In spite of all this Alexis Tsipras, the Greek prime minister, said in a TV interview: "Yesterday we took a decisive step, leaving austerity, the bailouts and the troika behind." Tsipras is wrong on every point. Even Reuters notes the discrepancy between what Tsipras claims and the reality:Tsipras declared Greece was "leaving austerity, the bailouts and the troika behind". Nevertheless, government plans must still be approved by the re-named troika, although Tsipras won election last month on a pledge to end the humiliation of foreigners dictating Greek economic policy.

The new loan is in effect a tranch of the old bailout and he has to present reforms the Greek government intends to implement — and these must be approved by his EU partners and the IMF, in effect the old Troika under a new description: Finance Minister Yanis Varoufakis said the reform promises would be ready on Sunday and submitted to Greece's EU and IMF partners in good time. "We are very confident that the list is going to be approved by the institutions and therefore we are embarking upon a new phase of stabilization and growth,"

It will be interesting to see what these new reforms will be. I expect that some will deal with fighting corruption but there will also probably be tax reform of some sort. Greece has always had trouble with tax collection and both the government and the EU would like to see tax revenues increase. One thing is certain the type of reforms that Syriz demanded in its campaign for the recent elections will not be on the table. Only reforms acceptable to the Troika — sorry I meant "institutions" — will be on the table. These will not include rehiring laid off public workers, increasing minimum wages, or stopping key privatizations. Even Tsipras remarked: "We won a battle, not the war.The difficulties, the real difficulties...are ahead of us."

The Irish finance minister, Michael Noonan, noted that the deal simply gives the Greek government a short reprieve even after reversing their electoral position and gaining virtually nothing from the EU in return. However, it did avoid bankruptcy and having to leave the euro zone.

One promise that Tsipras and his finance minister Vourafakis did keep and that was to do whatever was necessary to achieve a deal. Even though Tsipras kept abandoning campaign promises during negotiations he at the same along with his finance minister often spouted radical rhetoric completely at odds with what he was doing. About 80 percent of Greeks supported the tactics used by their government negotiators.

The vast majority of Greeks do not want to leave the euro zone and no doubt are relieved that at least a deal has been made to keep them in the zone for now. Tsipras said:"I want to say a heartfelt thanks to the majority of Greeks who stood by the Greek government ... That was our most powerful negotiating weapon. Greece achieved an important negotiating success in Europe.".One veteran leftist, Manolis Glezos, was critical of the deal. Glezos is a Syriza member of the European parliament. On his blog he wrote: "I apologize to the Greek people because I took part in this illusion. Syriza's friends and supporters ... should decide if they accept this situation."In contrast, Finance Minister Varoufakis was confident even about the reforms he was forced to submit on Monday: "We are very confident that the list is going to be approved by the institutions and therefore we are embarking upon a new phase of stabilization and growth." An anonymous official said that the reforms included a crackdown on tax evasion and corruption. There is no mention of reforming austerity conditions since the Greek government has already agreed those will continue for at least four months. After the four months many predict that Greece will need another rescue program. As the Irish Finance Minister Noonan put it: "Once you get them into the safe space for the next four months, there'll be another set of discussions which will effectively involve the negotiation of a third program for Greece."

Costa Panagopoulos, head of the polling firm Alco, said that the initial reaction to the deal was relief that Greece would remain in the euro zone. He thought that Greeks might even accept Tsipras' claim that the Troika was no more. After all, the term does not appear in documents. The appended video demonstrates Varoufakis' skill in portraying the reality as something completely different. Perhaps, Varoufakis could be featured in a new Monty Python comedy skit.

Syriza throws in the towel and stocks soar as deal on Greek bailout reached

Brussels - Even the proposals presented earlier that Germany rejected were a sell out of most of the campaign promises made by Syriza including the demand for writing off some debt and for a new agreement rather than an extension of the existing bailout.

The new agreement makes it even clearer that Syriza is definitely committed to repudiating those promises, but goes much further. During the four-month extension period of the present bailout, Greece will be subject to exactly the same austerity conditions that were agreed to in the original memorandum of agreement(MofA). The sellout set forth in the original Greek proposals did not satisfy Germany, which wanted even more ironclad guarantees that Greece would keep to the original terms of the agreement. In return Greece managed to convince the EU finance ministers that its target surplus should be tied to its economic situation in 2015. Germany wanted not just a Greek sellout but a super sellout, and got it. The full text of the agreement can be found here. 

 In this article I will analyze specific parts of the deal that show how Syriza has repudiated its campaign promises and agreed to do nothing that would be inconsistent with what the Eurogroup or even the old Troika think is inconsistent with obligations in the original bailout agreement. 

The agreement notes that the extension of the loan(MFFA) is within the framework of the existing arrangement. There is no new deal. The old bailout is back with a vengeance. So is the review "on the basis of conditions in the current arrangement": The Eurogroup notes, in the framework of the existing arrangement, the request from the Greek authorities for an extension of the Master Financial Assistance Facility Agreement (MFFA), which is underpinned by a set of commitments. The purpose of the extension is the successful completion of the review on the basis of the conditions in the current arrangement, making best use of the given flexibility which will be considered jointly with the Greek authorities and the institutions.  

 The Greek government must present a list of reform measures "based on the current arrangement." This means "reforms" consistent with the austerity policies that are part of the current arrangement. Syriza can forget about raising wages, rehiring workers, or any roll back of privatization. There may be some reform measures the Greek government could provide agreeable to the Eurogroup such as improving tax collection that would be consistent with campaign promises but certainly most of the reforms Syriza supported would be opposed to the "current arrangements". The document goes on: The institutions will provide a first view whether this is sufficiently comprehensive to be a valid starting point for a successful conclusion of the review. This list will be further specified and then agreed with the institutions by the end of April. This is a huge semantic victory. Instead of the Troika we now have " the institutions." Under the "current arrangements" the Troika are the "institutions." This renaming goes on throughout the document: Only approval of the conclusion of the review of the extended arrangement by the institutions in turn will allow for any disbursement of the outstanding tranche of the current EFSF programme and the transfer of the 2014 SMP profits. Both are again subject to approval by the Eurogroup. The Troika(institutions) must approve of the conclusions of the review to ascertain whether Greece is meeting the conditions of the bailout. The Eurogroup must also approve.

 The Syriza government faces many hoops to jump through before it gets any money. If it fails to adequately pursue the very austerity policies it campaigned against, it will not get a cent. Contrast what the Greek government agreed to with what Finance Minister Varoufakis said at the end of January: Varoufakis said Greece had no intention of cooperating with a mission from the lending "troika" of the European Union, European Central Bank and International Monetary Fund, which had been due to return to Athens. He said Greece would not seek an extension to a Feb. 28 deadline with euro zone lenders. 

 Now as part of the deal to get a loan, the government commits itself to working again with all three but consistent with the tacit agreement not to call a spade a spade, the Troika are no longer mentioned: In this light, we welcome the commitment by the Greek authorities to work in close agreement with European and international institutions and partners. Against this background we recall the independence of the European Central Bank. We also agreed that the IMF would continue to play its role.  

Although Syriza and Finance Minister Varoufakis several times indicated that they would honour their financial obligations rather than seek a debt write off, the document emphasizes the point: The Greek authorities reiterate their unequivocal commitment to honour their financial obligations to all their creditors fully and timely. During the four-month extension of the loan, the Greek government cannot hope to enact any policies that the "institutions" think would negatively impact what they see as the policies and structural reforms in the original bail out agreement. Forget trying to roll back austerity policies, privatizations, or layoffs:The Greek authorities commit to refrain from any rollback of measures and unilateral changes to the policies and structural reforms that would negatively impact fiscal targets, economic recovery or financial stability, as assessed by the institutions. 

 Varoufakis promised that he would do whatever was necessary to forge a deal that would keep Greece in the euro zone. His government kept that promise. Keeping it pleased the stock markets with the Dow reaching new highs after the announcement of the deal. The crisis is not over yet however. You might say the deal has kicked the crisis can down the road four months. The deal runs out just before a number of Greek debt repayments are due. Syriza will then play Super Sellout Part II. 

There is a slim chance that Syriza might have a surprise Monday. It could present as reforms all the policies it campaigned on. The Eurogroup would be outraged and the stage would be set for a Grexit. That is what Greece should have done long ago but there is no sign of any planning for that step by the Syriza government.

Alan Greenspan, former head of the US Federal Reserve, on the Greek crisis

The former head of the U.S. Federal Reserve, conservative economist Alan Greenspan argues, that the only way for Greece to get out of the present bailout terms is a Grexit — to exit the euro zone.

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Greenspan, was Chair of the US Federal Reserve from 1987 to 2006. He was a champion of free market capitalism and was part of the the inner circle of Ayn Rand and a supporter of the philosophy of Objectivism. After he became head of the Federal Reserve some objectivists criticized him for abandoning free market principles.Democrats often criticized him as having politicized his position as head of the Reserve. Greenspan argued strenuously for the privatization of social security. Although a Republican, Greenspan strongly supported President Bill Clinton in 1993 when Clinton introduced a deficit reduction plan that included tax increases and budget cuts. Greenspan's policies that shunned regulations are regarded by some as partly responsible for the recent recession. In a Congressional hearing n October of 2008, Greenspan admitted that his free-market ideology that led him not to adopt some types of regulation had been mistaken.

Greenspan has long been critical of the euro zone single currency. He believes that only a political union creates the conditions that can support a single currency. You need something like a United States of Europe. At this time, Greenspan claims the 19 sovereign countries of the euro zone are unwilling to create such an entity and hence the euro zone is doomed.

Greenspan believes that the EU will not be willing to put up even more loans that are necessary to bolster the Greek economy. German Finance Minister Wolfgang Schaeuble claims that the Greek bailout conditions were very generous and he saw no justification for relaxing them further. While Greek finance minister Yanis Vourafakis believes that he can negotiate a new deal that will allow Greek to escape from its debt trap, grow the economy, and spend on social programs, Greenspan thinks that the only way that Greece can resolve its situation is through a Grexit, or exiting the euro zone altogether. Greenspan says: "I believe [Greece] will eventually leave. I don't think it helps them or the rest of the eurozone - it is just a matter of time before everyone recognises that parting is the best strategy...The problem is that there there is no way that I can conceive of the euro of continuing, unless and until all of the members of eurozone become politically integrated - actually even just fiscally integrated won't do it."As for Varoufakis and Tsipras being able to negotiate a new deal, Greenspan claims that it is the euro zone officials who hold all the cards.

While Greece will be forced to leave the euro zone according to Greenspan, this will leave the euro intact. He agrees that the zone is readier now than earlier to survive the Grexit. However, the attempt to hold the euro zone together is putting strains on other countries as well such as Italy, Portugal, Spain, and even France. Greenspan thinks that in time other southern European countries may also choose to exit the zone.

Greenspan has been wrong in the past, particularly with respect to the ability of markets to act rationally without regulation and avoid a crash. In 2008 the financial crisis, many believe, prove Greenspan wrong and he himself appears to admit this. Nevertheless, Greenspan's analysis of the situation in Europe is well worth considering and may prove correct.

Yanis Vourafakis, the Greek finance minister, continues to insist that there is no plan for a Grexit and that any such move would bring down the entire euro zone "house of cards" :“Exit from the euro does not even enter into our plans, quite simply because the euro is fragile. It is like a house of cards. If you pull away the Greek card, they all come down. Do we really want Europe to break apart? Anybody who is tempted to think it possible to amputate Greece strategically from Europe should be careful. It is very dangerous. Who would be hit after us? Portugal? What would happen to Italy when it discovers that it is impossible to stay within the austerity straight-jacket?”

Euro zone officials believe that the zone can easily withstand a Grexit. They may be correct, but in the longer run, as Greenspan points out, the pressures will grow in several southern European countries and others will leave the zone.

Talks between Greek and German finance ministers go nowhere

Talks Thursday between German Finance Minister Wofgang Schaeuble and Greek Finance Minister Yanis Varoufakis appeared to achieve little or nothing with the German side simply repeating its hard line on Greek debt reduction

German Finance Minister Schaeuble has been consistent in making it clear that he is completely against any "haircut" or writing off any Greek debt. At the same time, Schaeuble said that Greece belonged in the euro zone. German Chancellor Angela Merkel also made it clear that she is against any reduction of Greek debt. Surprisingly, Schaeuble said that although the two had agreed to disagree on renegotiating the terms of Greek debt repayment outside of the Troika process, the talks had "come much further than anyone had expected". Perhaps, Schaeuble was alluding to the fact that Varoufakis has already caved on the debt reduction issue by suggesting that present debt obligations could be met by a debt swap plan that would involve debt payments being tied to Greece's economic growth.

Varoufakis was even less upbeat about the meeting with Schaeuble: "As Mr Schaeuble said, we didn't reach an agreement. It was never on the cards. We didn't even agree to disagree, from where I'm standing." Greece's bailout loan amounts to $270 billion US. The economy has shrunk 25 percent since the bailout began. Unemployment in general is 25 percent with youth unemployment twice that. The debt as a ratio to GDP has increased to 175 percent of GDP now. Many liberal economists have agreed with Varoufakis that the present debt load is unsustainable and that austerity policies have made the situation worse. Varoufakis said that the situation in Greece was comparable to that in Germany after the First World War. The massive debts crippled the economy and helped the rise of the Nazis. In Greece, the Golden Dawn neo-Nazi movement is growing in popularity because of conditions imposed upon Greece. The group came third in recent elections even though many of its members are in jail. The leader and 72 others linked to Golden Dawn face a number of charges including murder.

 As mentioned in an earlier article, the ECB will soon refuse to accept Greek sovereign debt as collateral for loans. This will force the Greek central bank to provide emergency funds. The move caused Greek borrowing costs to increase and Greek bank shares to fall: The Athens Stock Exchange FTSE Banks Index .FTATBNK plunged 22.6 percent initially and ended 10 percent down. Three-year government borrowing costs leapt to nearly 20 percent, leaving Greece utterly shut out of the capital markets. Schaeuble, claimed that he had told Varoufakis that it was not realistic to make electoral promises that would burden other countries. Schaeuble also insisted that while he respected the choice made by Greek voters it was essential that the Syriza government keep to agreements reached by the previous government and work with the Troika. How can Schaeuble respect the Greek choice while not respecting the fact that they reject the previous agreement and the austerity conditions? Schaeuble has indicated how much he actually respects democracy when he said that elections change nothing.

The whole idea of the Troika with its conditions is to circumvent democratic choice. While Varoufakis has caved on the idea of a debt write off, the new government has claimed that it will halt some privatizations, raise the minimum wage, rehire some public sector workers, and restore a bonus to poor pensioners. All this is anathema to those holding Greek debt who want all those funds to be used to repay debt. Reuters describes a policy paper circulated by Germany to EU officials:In a policy paper circulated to EU officials and seen by Reuters, Germany said Greece had to stick to the terms of the 240 billion euro bailout negotiated by the previous government, and not roll back planned privatizations and cuts in the minimum wage, pensions and the public sector workforce. To sum it up, Germany is not prepared to grant any of the demands that Syriza campaigned on.

 Tsipras thought he had the support of French President Francois Hollande and Italian Prime Minister Renzi but both agreed with the ECB decision to no longer allow Greece to use sovereign debt as collateral. They both say this move makes a quick agreement more likely. Varoufakis had pleaded with ECB President Draghi to maintain normal funding for the banks, using sovereign debt as collateral, until a debt deal had been reached.

 A statement from the Greek Finance Ministry said that the government remained committed to its goal of social salvation and to “coming up with a European policy that will definitively put an end to the now self-perpetuating crisis of the Greek social economy.” Greece will be able to carry on for a while using emergency funding through the Bank of Greece. Even this credit line could be stopped if a two-thirds majority of the ECB Governing Council voted to do so. This would likely lead to the collapse of Greece's financial system and for now will probably remain only as another threat. The EC vice-president Valdis Dombrovskis said that Athens must extend the current bailout program in order to gain time to negotiate a longer-term agreement. This is precisely what Varoufakis vowed not to do.

 Tsipras and Varoufakis, as the saying goes, appear to be going nowhere fast. Some leftist groups such as the Communist Party of Greece claim that Syriza was a sell out party long before it even came to power: SYRIZA is an opportunist party which very rapidly is developing into a modern social-democratic party and is fostering illusions amongst the people that there can be a better form of management for the people, despite the dominance of the monopolies. It plays with the pain of the people, with the pressure for immediate solutions without radical changes.

 Support from other EU countries appears mostly rhetorical with clear indications given in the case of France that they actually support the EU and existing rules or as French President Hollande put it: “Dialog between Greece and its European partners must go forward so as to reach agreement,” he said, adding that Athens should “respect European rules which apply to all, France included, and engagements that were taken on debts that are of importance to governments.” So far the Troika far from being kicked out of the game have not given an inch whereas after a great deal of radical rhetoric Greek Prime Minister Tsipras and his finance minister Varoufakis have achieved almost nothing. They may not even establish a new dress code except among Syriza officials.

Perhaps, it is too early to know if the final result will be some sort of sell out agreement with a few cosmetic changes to save face. It may be that Varoufakis intends to show Greeks that it is impossible to negotiate a way out of the debt trap and relief from austerity provisions through EU institutions. Having shown that a way out through such negotiations is impossible he could then sell his electorate the idea of exiting the euro zone. One group within Syriza wants to leave the door open to exiting the euro zone, the Left Platform. The group has its own website. About 75 percent of Greeks want to remain in the euro zone. However, if remaining in the euro zone entails a continuation of EU austerity conditions and crippling debt repayments, then Syriza might very well be able to convince that the only way to retain any Greek dignity and sovereignty is to repudiate its debt and leave the euro zone.