Greece-EU (aka, Greece-Germany) negotiations

The EuroGroup negotiation aimed at a new agreement with Greece that had set itself a deadline of today, Monday, failed to reach an agreement. (Stephanie Bodon and Radoslav Tomek, Greek Talks With Euro-Area Finance Ministers Break Up Bloomberg News 02/16/2015)

I had seen articles in the German press presenting Monday as Doomsday on the Greece-EU negotiations. Now this Süddeutsche Zeitung commentary from Cerstin Gammelin says that was just standard scare talk in negotiations over the euro crisis: Sie drohen doch nur 16.02.2015.

Handelsblatt is saying after Monday's failure to reach agreement that now Doomsday is a week away: Schuldengipfel mit Griechenland ist gescheitert 16.02.2015.

In any case, the new Greek government has changed the game in the euro crisis. And we will likely soon enough see if saving the eurozone and the EU is more important to Angela Merkel than imposing Herbert Hoover/Heinrich Brüning austerity policies on the eurozone.

Greek Finance Minister Yanis Varoufakis as Dr. Spock

Greek Finance Minister Yanis Varoufakis writes in a New York Times op-ed, No Time for Games in Europe 02/16/2015. He presents his position this way:

As finance minister of a small, fiscally stressed nation lacking its own central bank and seen by many of our partners as a problem debtor, I am convinced that we have one option only: to shun any temptation to treat this pivotal moment as an experiment in strategizing and, instead, to present honestly the facts concerning Greece’s social economy, table our proposals for regrowing Greece, explain why these are in Europe’s interest, and reveal the red lines beyond which logic and duty prevent us from going.

The great difference between this government and previous Greek governments is twofold: We are determined to clash with mighty vested interests in order to reboot Greece and gain our partners’ trust. We are also determined not to be treated as a debt colony that should suffer what it must. The principle of the greatest austerity for the most depressed economy would be quaint if it did not cause so much unnecessary suffering.

I am often asked: What if the only way you can secure funding is to cross your red lines and accept measures that you consider to be part of the problem, rather than of its solution? Faithful to the principle that I have no right to bluff, my answer is: The lines that we have presented as red will not be crossed. Otherwise, they would not be truly red, but merely a bluff.

Is he bluffing about not bluffing? That's actually the point of his article. People have expected because of his background in game theory he has some sophisticated negotiating strategy going. Which I also assume he does. Here he's saying, hey, I'm not bluffing. So am I ready to go the brink, or am I bluffing about not bluffing?

Taking this kind of hard line is necessary if Greece wants to produce a substantial change in Merkel's policies which dominate the eurozone. He's utilizing the strength of Greece's weakness. If Greece is forced out of the eurozone, Spain, Portugal and possibly Italy are likely to soon follow, as Wolfgang Münchau discusses in Finanzkrise in Europa: Das passiert, wenn Griechenland aus dem Euro austritt Spiegel Online 16.02.2015.

Varoufakis cites Kant to justify the following declaration:

We shall desist, whatever the consequences, from deals that are wrong for Greece and wrong for Europe. The “extend and pretend” game that began after Greece’s public debt became unserviceable in 2010 will end. No more loans — not until we have a credible plan for growing the economy in order to repay those loans, help the middle class get back on its feet and address the hideous humanitarian crisis. No more “reform” programs that target poor pensioners and family-owned pharmacies while leaving large-scale corruption untouched.

Our government is not asking our partners for a way out of repaying our debts. We are asking for a few months of financial stability that will allow us to embark upon the task of reforms that the broad Greek population can own and support, so we can bring back growth and end our inability to pay our dues.

Keep Talking Greece also notes an intriguing moment in the negotiations. Varoufakis claims that he received a "draft handed out to Varoufakis by the EU Monetary Affairs Commissioner Pierre Moscovici [which] was drafted by the EU Commission and it was an initiative by President Jean-Claude Juncker." (emphasis in original) But the EuroGroup later insisted on additional conditions not acceptable to Greece. (Varoufakis reveals: “Moscovici gave me a draft I could have signed” 02/16/2015)

Does this represent a difference in approach by Juncker and Merkel? Or was it what I believe negotiators call the Russian Gambit, in which one side agrees on some terms and then suddenly insists on tougher ones when the deal is almost concluded.