STAFF NEWS & ANALYSIS
Despite Controlling Factors, Greek Negotiations Remain Fraught
By Staff News & Analysis - February 06, 2015

Greece pleads with Berlin for time and money to re-write debt deal … Finance Minister Yanis Varoufakis evokes fears of Nazism in Greece in a bid to end his country's "ritual humiliation" at the hands of its creditors. – UK Telegraph

Dominant Social Theme: Negotiations with Greece are necessary but perilous.

Free-Market Analysis: Is this a dance between the EU and Greece, designed to yield tension, headlines and ultimately resolution? Or is it a legitimate unraveling of the EU's program?

Once again, the world waits and watches while powerful government officials bargain over national and banking solvency. The larger meme here is that only the bureaucracy can figure out a legitimate solution.

But if we confine our analysis to the negotiations themselves, we can observe a practical dialectic at work. The dialectic places a controlled Syrizan team at the negotiating table – one more reasonable than its rhetoric might suggest. Alternative journo Wayne Madsen has commented on this in a column focused on globalist forces inside the new Greek government.

As Greece celebrates the inauguration of its anti-austerity government, the euphoria should be tempered with a bit of realism. Although new Prime Minister Alexis Tsipras, who named his son "Ernesto" after Cuban revolutionary Ernesto "Ché" Guevara, and the vast majority of his new Coalition of the Radical Left (SYRIZA) government have good left-wing and pro-labor credentials, the same cannot be necessarily said of the man Tsipras chose to be Greece's new finance minister.

Yanis Varoufakis a citizen of Australia who was educated in Britain and worked as a professor at the University of Texas. Europe has witnessed such dual nationals with conflicting loyalties take power in countries in Eastern Europe, most notably in Ukraine, where American Natalie Jaresko became finance minister in order to deliver International MonetaryFund (IMF) and European Central Bank (ECB) austerity "poison pills" to Ukraine … Varoufakis has had a past close relationship with the global entities with which he is expected to battle.

Madsen goes on to point out that Varoufakis was an economic adviser to PASOK's Prime Minister George Papandreou. Under Papandreous, Greece first acquiesced to "austerity." Nonetheless, it is Varoufakis that is apparently leading negotiations between Greece and the EU. These negotiations recently have been reported in dire terms. There is said to be little or no give between the two sides.

The Telegraph article reports it this way:

Greece's finance minister pleaded for his country to be given time and money to negotiate a new debt deal with its creditors, after the European Central Bank sought to pull the carpet from under the feet of the country's stricken banks.

Following an uneasy two-hour showdown with his German counterpart in Berlin, Yanis Varoufakis admitted he had failed to "agree to disagree" with Wolfgang Schauble over his government's demands to re-write its €240bn bailout agreement.

The meeting was the last leg of Syriza's tour of Europe's capitals, where Prime Minister Alexis Tsipras and his number two hoped to drum up support for an alleviation of the bailout terms imposed by the Troika.

Varoufakis is arguing for an "emergency bridging loan" that will help Greece continue to function during current negotiations. But Schauble and the Germans have proven to be resistant. Schauble apparently wouldn't give Varoufakis his cell phone number at recent negotiations.

The European Central Bank has also decided not to accept Greek "junk bonds" as loan collateral. Greek banks now only have the European Central bank emergency liquidity programme (ELA) to depend on, according to reports. The ELA program charges high interest rates.

Tsipras is taking a tough stance, however. "Greece won't take orders any more, especially orders through emails," Mr Tsipras reportedly said. "Greece has its own voice. Greece cannot be blackmailed because democracy in Europe cannot be blackmailed."

Greece may or may not be subject to "blackmail," but it seems obvious that lines have been drawn and positions set. The conversation has changed and Greece's position has become more assertive, but perhaps once again – as before – there is an outcome waiting in the wings that will reconfigure the EU's position regarding austerity and Greece in particular.

If so, the Greece negotiations are a kind of formal dance leading to an outcome that is at least roughly available – and ready to be implemented. Our position would be that these talks could lead to significant changes in the relationship between the EU and Greece, perhaps even a kind of controlled expulsion of Greece from the EU.

Any such solution would be carefully "calibrated" to ensure damage to the EU is minimized – though such an outcome is probably not ideal from the standpoint of Brussels. Even with a good deal of talk about how these negotiations are more collegial than reported, their presence cannot be especially pleasant for either side.

After Thoughts

The dialectic may be controlled but it is also a necessary one … one that could easily spin out of control, with ramifications that could be felt worldwide. The outcome is certainly not preordained, and markets will watch nervously.

Posted in STAFF NEWS & ANALYSIS
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