The Greek crisis - reportage - 07/12/2015

I need some time to get my thoughts together on this. Blackmail seems almost a euphamism. 

The Guardian talked about the "mental waterboarding" of Mr. Tsipras.  Very apt.

Greek crisis: surrender fiscal sovereignty in return for bailout, Merkel tells Tsipras

German and French leaders press Greek leader for guarantees over austerity measures in what an EU official describes as ‘extensive mental waterboarding

the Guardian,

12 July, 2015

European leaders have confronted the Greek government with a draconian package of austerity measures entailing a surrender of fiscal sovereignty as the price of avoiding financial collapse and being ejected from the single currency bloc.

A weekend of high tension that threatened to break Europe in two climaxed on Sunday night at a summit of eurozone leaders in Brussels where the German chancellor, Angela Merkel, and President François Hollande of France presented Greece’s radical prime minister, Alexis Tsipras, with an ultimatum.

In what a senior EU official described as an “exercise in extensive mental waterboarding” to secure Greek acquiescence to talks on a third bailout in five years worth up to €86bn (£62bn), the two leaders pressed for absolute certainty from Tsipras that he would honour what was on offer.

Two days of high-stakes negotiations between the finance ministers of the currency bloc resulted in a four-page document that included controversial German elements leaked on Saturday. Those measures included Greece leaving the euro temporarily by taking a “time-out” from the currency bloc if it refuses terms for talks on the new bailout or, in the event of agreement, that Greece sets aside €50bn worth of assets as collateral for new loans and for eventual privatisation. Both passages, however, did not enjoy a consensus among eurozone leaders.

Under the terms set before Tsipras on Sunday night, the Greek parliament has to endorse the entire package on Monday and then pass several pieces of legislation by Wednesday, including on pensions reform and a new VAT regime, before the eurozone will agree to negotiate a new three-year rescue package.

The terms are much stiffer than those imposed by the creditors over the past five years. This, said the senior official, was payback for the emphatic no to the creditors’ terms delivered by the snap referendum that Tsipras staged a week ago.

“He was warned a yes vote would get better terms, that a no vote would be much harder,” said the senior official.

The Eurogroup document said experts from the troika of creditors – the International Monetary Fund, European Commission and European Central Bank– would be on the ground in Athens to monitor the proposed bailout programme. The trio would also have a say in all relevant Greek draft legislation before it is presented to parliament. Furthermore, the Greeks will have to amend all legislation already passed by the Syriza government this year that had not been agreed with the creditors.

While Greece’s fate was being debated in Brussels, in Athens the ruling leftwing Syriza party was showing signs of disintegration. Demands that the reforms be approved by the Greek government and put into law by Wednesday were described as “utter blackmail” by leading party members and met with disbelief.

Although sources close to Tsipras said the leader was determined to do whatever was needed to keep Grexit at bay, political tumult also beckoned. Insiders conceded that a cabinet reshuffle – removing ministers who had refused to vote the austerity package through parliament early on Saturday – could come as early as Monday.

By late Sunday night it had become clear that Tsipras’s U-turn on measures he had once spurned had produced a potentially far-reaching split. In addition to 17 MPs breaking ranks at the weekend – stripping his government of a working majority – 15 other lawmakers also indicated they would not approve the agreement in its entirety. The resistance raises the spectre of Tsipras being forced to call fresh elections – a move described as potentially catastrophic for the country.

“Greece can bend up to a point,” said Aristides Hatzis, a prominent political commentator. “But after that there is no bending, only breaking.”

Although billed as the last chance to secure “the ultimate agreement” on the Greek debt crisis, the prospects of a grand political bargain to keep Greece in the eurozone are far from assured.

Entering the leaders’ meeting, Tsipras said he was looking for compromise: “We can reach an agreement if all parties want it.”

But France and Germany are split on their approach to the Greek question, while Finland could refuse outright to sign up to a third bailout for Greece.

France’s Hollande vowed to do everything possible to get an agreement on Sunday night, but Merkel said there wouldn’t be an agreement at any cost.

Other eurozone countries urged Germany to drop its objections. “Grexit has to be prevented,” said Jean Asselborn, the Luxembourg foreign minister. “It would be fateful for Germany’s reputation in the EU and the world.

“Germany’s responsibility is great. It’s about not conjuring up the ghosts of the past,” he told German newspaper Süddeutsche Zeitung. “If Germany goes for Grexit, it will trigger a deep conflict with France. That would be a catastrophe for Europe.”

Italy’s prime minister, Matteo Renzi, was expected to tell Merkel at the leaders’ meeting that “enough is enough” and the eurozone should not humiliate Greecewhen it had already given up so much.

Earlier on Sunday, eurozone finance ministers said they had made some progress after 14 hours of talks over two days and failing to reach any agreement on Saturday. “We have come a long way, solved a lot of issues, but some big issues still remain,” said Jeroen Dijsselbloem, who chairs the Eurogroup of finance ministers.

Donald Tusk, the president of the European Council, cancelled an emergency full summit of the 28 countries that was to deal with the fallout from Greece’s ejection, in order to give eurozone leaders a last chance to reach an accord savingGreece and forestalling what would be a devastating schism, sowing deep resentment and division between Europe’s leaders.

The intractable problem is that many governments do not trust the Greek government to implement a €12bn (£8.6bn) programme of spending cuts and reforms that will be delivered as part of a bailout. Eurozone governments are seeking proof from Athens it can keep its promises, in exchange for agreeing to start talks on a deal.

“The main obstacle to an agreement is trust,” said Pier Carlo Padoan, finance minister of Italy, one of the countries most sympathetic to Greece.

The Irish taoiseach, Enda Kenny, urged his fellow leaders to “look at the bigger picture”. Kenny, who has been Ireland’s leader since the early days of its own bailout programme, said in his country’s case trust was built incrementally.

“We don’t want to look back in 10 years’ time and think this could have been saved, but wasn’t,” he said.

The German news magazine Der Spiegel called Sunday the biggest day of Merkel’s 10-year chancellorship and appealed to her to “show greatness” and save Europe.

If Der Spiegel was right about the momentousness of Merkel’s day, the same could be said for Hollande of France who, with his government and officials, has been campaigning tirelessly in recent weeks to keep Greece in the euro, helping Athens to draft its proposals.

A decision to go ahead with a so-called Grexit, which has never been closer, would be a shattering failure for Hollande and the resulting Franco-German recrimination would be deeply damaging, say observers.

This is the most appropriate approximation of the Herr Schaeuble - but, it seems, truth is stranger than fiction.

The Greek "Choice": Hand Over Sovereignty Or Take Five Year Euro "Time Out"

Zero Hedge,

12 July, 2015

For those who missed today's festivities in Brussels, here is the 30,000 foot summary: Europe has given Greece a "choice": hand over sovereignty to Germany Europe or undergo a 5 year Grexit "time out", which is a polite euphemism for get the hell out.

As noted earlier, here are the 12 conditions laid out as a result of the latest Eurogroup meeting, which are far more draconian than anything presented to Greece yet and which effectively require that Greece cede sovereignty to Europe, this time even without the implementation of a technocratic government.

1. Streamlining VAT
2. Broadening the tax base
3. Sustainability of pension system
4. Adopt a code of civil procedure
5. Safeguarding of legal independence for Greece ELSTAT - the statistics office
6. Full implementation of autmatic spending cuts
7. Meet bank recovery and resolution directive
8. Privatize electricity transmission grid
9. Take decisive action on non-performing loans
10. Ensure independence of privatization body TAIPED
11. De-Politicize the Greek administration
12. Return of the Troika to Athens (the paper calls them the institutions... for now)

One alternative, generously presented to Greece, is for the country to put some €50 billion of assets - the best ones - in escrow to creditors. A more polite was of putting would be a Greek secured loan. This is how the Luxembourg FinMin Pierre Gramegna laid it out:

"A few new ideas were added to the table, especially one which is very important for some member states, which is that Greece would put a portion of its assets into a company that would be more independent from Greece."

"More independent" from Greece and "more dependent" to Berlin.

Greece would place about €50 billion of state assets into an independent company. Those assets could serve as collateral against aid loans, Gramegna says. "It would act as a kind of guarantee. There is great hesitation from the Greek side and now the heads of state and government have to choose."

"It would be a company structure based in Luxembourg, which would be managed from Greece with supervision by the European Commission and by the European Investment Bank. It would remain in Greek hands but it would create more assurances if it was known that a lot of assets were in this company."

"If one knows that the third bailout package would cost more than EU80B, one understands that countries are urging for some guarantees from Greece."

In other words, Greece is told to set aside a quarter of its GDP for Europe to do as it sees fit, and which can be "seized" if Greece is seen as veering away from its third bailout promises again.

And since Greece has no option but to promise everything and the moon, it will surely comply hoping that it is once again allowed to promptly forget all the promises as soon as it pockets some of that €86 billion in new bailout funds just to unlock the €120 billion in deposits held hostage in Greek banks by the ECB,even if the resulting debt will push Greek debt/GDP well above 200%.

Why?

Because the alternative is, and we quote...

"In case no agreement could be reached, Greece should be offered swift negotiations on a time-out from the euro area, with possibly debt restructuring."

... from the Eurogroup document:

No wonder Tsipras looks like this at the moment:

Somehow we think that if the only "alternative" is ceding sovereignty to Merkel and the rest of the northern European state, the vast majority of the population - which now clearly understands there is little further upside from remaining in Europe - may just opt for the aptly named "time out" from the most destructive experiment in Greek history. And even beg to make it гermanent.

Sadly, RT coverage is uncharacteristically short of the mark and I am left wondering why

Bailout or time-out? Athens may be offered 'temporary' Grexit in case of no deal

The Telegraph is providing very good live coverage.

Greece news live: eurozone split over Grexit ultimatum plan as Greeks says they are being 'crushed' by Brussels

French president Francois Hollande dismisses idea of temporary Greek exit as Slovakia and Finland say little chance of a deal today after EU leaders summit is cancelled