Cartoonist Klaus Stuttmann illustrated the results of the new eurozone deal with Greece this way:
Harry Lambert has an interview with former Greek Finance Minister Yanis Varoufakis (Yanis Varoufakis full transcript: our battle to save Greece New Statesman 07/13/2015) in which Mr. V gives us one reason Tsipras wound up capitualting: he had decided against making real contingency plans for introducing an alternative currency in case Angela Merkel remained as intransigent as she actually did:
HL: You must have been thinking about a Grexit from day one...So now there's a deal. The Troika returns to Athens. They will discuss debt relief only after the neoliberal reforms demanded are enacted. And those have to be enacted by Wednesday. (Griechenland-Kompromiss: Was beschlossen wurde APA/Salzburger Nachrichten 13.07.2015)
YV: Yes, absolutely.
HL: ...have preparations been made?
YV: The answer is yes and no. We had a small group, a ‘war cabinet’ within the ministry, of about five people that were doing this: so we worked out in theory, on paper, everything that had to be done [to prepare for/in the event of a Grexit]. But it’s one thing to do that at the level of 4-5 people, it’s quite another to prepare the country for it. To prepare the country an executive decision had to be taken, and that decision was never taken.
HL: And in the past week, was that a decision you felt you were leaning towards [preparing for Grexit]?
YV: My view was, we should be very careful not to activate it. I didn’t want this to become a self-fulfilling prophecy. I didn’t want this to be like Nietzsche’s famous dictum that if you stare into the abyss long enough, the abyss will stare back at you. But I also believed that at the moment the Eurogroup shut out banks down, we should energise this process.
HL: Right. So there were two options as far as I can see – an immediate Grexit, or printing IOUs and taking bank control of the Bank of Greece [potentially but not necessarily precipitating a Grexit]?
YV: Sure, sure. I never believed we should go straight to a new currency. My view was – and I put this to the government – that if they dared shut our banks down, which I considered to be an aggressive move of incredible potency, we should respond aggressively but without crossing the point of no return.
We should issue our own IOUs, or even at least announce that we’re going to issue our own euro-denominated liquidity; we should haircut the Greek 2012 bonds that the ECB held, or announce we were going to do it; and we should take control of the Bank of Greece. This was the triptych, the three things, which I thought we should respond with if the ECB shut down our banks.
... I was warning the Cabinet this was going to happen [the ECB shut our banks] for a month, in order to drag us into a humiliating agreement. When it happened – and many of my colleagues couldn’t believe it happened – my recommendation for responding “energetically”, let’s say, was voted down.
HL: And how close was it to happening?
YV: Well let me say that out of six people we were in a minority of two. … Once it didn’t happen I got my orders to close down the banks consensually with the ECB and the Bank of Greece, which I was against, but I did because I’m a team player, I believe in collective responsibility.
And then the referendum happened, and the referendum gave us an amazing boost, one that would have justified this type of energetic response [his plan] against the ECB, but then that very night the government decided that the will of the people, this resounding ‘No’, should not be what energised the energetic approach [his plan].
Instead it should lead to major concessions to the other side: the meeting of the council of political leaders, with our Prime Minister accepting the premise that whatever happens, whatever the other side does, we will never respond in any way that challenges them. And essentially that means folding. … You cease to negotiate.
This Reuters article summarizes the major features of the deal (Paul Taylor and Renee Maltezou, Greek PM Tspiras faces party revolt over bailout deal 07/13/2015):
Just hours after a deal that saw Greece surrender much of its sovereignty to outside supervision in return for agreeing to talks on an 86 billion euro ($95 billion) bailout, doubts were already emerging about whether [Greek Prime Minister Alexis] Tsipras would be able to hold his government together.See also Euro Zone Leaders Reach Agreement To Rescue Greece Reuters/The World Post 07/13/2015 by the same authors.
The terms imposed by international lenders led by Germany in all-night talks at an emergency summit obliged Tsipras to abandon promises of ending austerity.
Instead he must pass legislation to cut pensions, increase value added tax, clamp down on collective bargaining agreements and put in place quasi-automatic spending constraints. In addition, he must set 50 billion euros of public sector assets aside to be sold off under the supervision of foreign lenders and get the whole package through parliament by Wednesday.
Tsipras himself, elected five months ago to end five years of suffocating austerity, said he had "fought a tough battle" and "averted the plan for financial strangulation". [my emphasis]
Wolfgang Lieb, Griechenland: „Fiskalisches Waterboarding“ NachDenkSeiten 13.07.2015:
Deutschland wird von Sparkassenangestellten mit beschränkter Ein- und Weitsicht regiert, die sich allerdings für globale Fiskalgenies halten und auch Europa ihre intellektuelle fiskalische Beschränktheit oktroyieren. Zum absoluten Höhepunkt dieser politischen Verbohrt- und Kleinkariertheit wird nun der “griechische Treuhandfonds”, der in ähnlicher Weise als „Treuhandanstalt“ schon zum Desaster bei der Privatisierung der DDR-Wirtschaft zu Riesenverlusten, zu Korruption und einer beispiellosen Verschiebung gemeinnütziger Güter in Privathand geführt hat.This also is food for my idea that the unification of Germany is Merkel's most important model for managing the EU. Although I can't quite give up my sneaking suspicion that she actually sees herself in the role of Brezhnev running the Warsaw Pact.
[Germany is governed by savings bank employees with little insight and limited long-distance vision, who nevertheless hold themselves to be global fiscal geniuses and also impose their intellectual fiscal obtuseness onto Europe. The absolute high point of this political pigheadedness and pettiness, the "Greek Treuhandfonds {fiduciary funds} which have already in the same way as Treuhandanstalt {fiduciary agency, the privatization agency for selling off East German public property} in the disaster of the privatizing of the GDR economy to led to gigantic losses, to corruption and an unexampled shift of non-profit goods into private hands.]
Wolfgang Múnchau writes in the Financial Times, Greece’s brutal creditors have demolished the eurozone project 07/13/2015:
By forcing Alexis Tsipras into a humiliating defeat, Greece’s creditors have done a lot more than bring about regime change in Greece or endanger its relations with the eurozone. They have destroyed the eurozone as we know it and demolished the idea of a monetary union as a step towards a democratic political union. ...John Psaropoulos looks at some of the positive and the detrimental features of the latest agreement in Greece is thrown a life jacket containing significant amounts of lead shot The New Athenian 07/13/2015. He includes in the advantages, "The European Commission will disburse a €35bn development fund to Greece." But such an amount is already available to Greece if the government ponies up 15% of the costs of the projects, which it can't afford. Unless the new deal eliminates those requirements, that is effectively an empty propaganda offer.
The fact that a formal Grexit may have been avoided for the moment is immaterial. Grexit will be back on the table when you have the slightest political accident — and there are still many things that could go wrong, both in Greece and in other eurozone parliaments. Any other country that in future might challenge German economic orthodoxy will face similar problems.
But I am particular interested in what he says about the privatization trust sales that Tsipras has agreed to:
Immediately after the deal is sealed, Greece must “scale up” its privatisation programme from the current €11bn to €50bn euros. This is a massive undertaking, and both politically and practically difficult, and its success is highly doubtful.Angie was the darling of the boulevard press Bild-Zeitung on Monday: Wie hält Angela Merkel das bloß durch? 13.07.2015
Greece’s first bailout loan, in 2010, contained such a provision. The government was careful to keep it under wraps, rightly fearing outrage. When creditors made it public in a press conference in early 2011, then-finance minister Yiorgos Papakonstantinou was so outraged that he forbade them from ever holding another press conference on Greek soil again.
The objections came from both voters and politicians. Either the state would be denuded of regulatory bodies and infrastructure taxpayers had funded over decades, they opined, or such massive amounts of public land would have to be bundled, securitised and sold in the plan’s two-year period, that the sales would depress real estate prices and destroy the value of the collateral held by banks against mortgages. The banks had just suffered a collapse of the value of Greek government bonds they held at the time, and had required recapitalisation. The land selloff would repeat that trauma.
Other reports and analysis of the deal:
Grexit avoided as Greece reaches "humiliating" bailout deal with Eurozone creditors New Statesman 07/13/2015
Estas son las nuevas condiciones que la troika impone a Grecia Público 13.07.2015
#ThisIsACoup - Euroländer einigen sich mit Griechenland: Die Reaktionen im Netz Profil 13.07.2015)
Karl Stagno, et al, Tsipras Moves From Predator to Prey at Euro 'Torture' Summit Bloomberg Business 07/13/2015
Paul Mason, Greece wins euro debt deal – but democracy is the loser 4 News 07/13/2015
Stephan Schulmeister's Profil column of 04.07.2015 was from the weekend before the deal, but it gives an account of the stages that eurozone policy developed into what Greece encountered in a very ugly way this past weekend, Der Weg in die Depression.
Mohamed El-Erian, Hard-Won Greek Deal Was the Easy Part Bloomberg View 07/13/2015
And, in a wonkier vein: Silvia Merler, Preserving the Greek financial sector: options for recap and assistance 07/13/2015.
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