Greece Flails About, Troika Inspectors Paint “Awful Picture,” Merkel Draws A Line, German Industry & Voters Back Her

Wolf Richter's picture

Wolf Richter

The new Greek finance minister, Yannis Stournaras, until recently a professor of economics at the University of Athens, hasn’t learned yet the art of extortion that is required to accomplish anything at all during negotiations with the Eurozone. And so, when he went to the meeting of Eurozone finance ministers earlier this week at the Eurogroup—which serves as political control over the common currency—he accomplished absolutely nothing. He wasn’t even able, unlike his predecessors, to get himself into the media with some wild threat about a “disorderly default” or destroying the entire Eurozone if he didn’t get what he wanted.

He had two big jobs to do: one, promote Greece’s efforts to renegotiate (“water down” is the technical term) the structural reforms that the prior government had agreed to in writing by signing the bailout memorandum; and two, push for a two-year delay of these watered-down conditions. At the same time, he’d have to make sure Greece would continue to receive the flow of bailout billions from taxpayers elsewhere.

But roundly ignored at the Eurogroup meeting, he returned empty handed to Greece. A fiasco for him. In a meeting with leaders of the three-party coalition government—the conservative New Democracy, the socialist PASOK, and the small Democratic Left— Evangelos Venizelos, PASOK leader, former finance minister, and extortionist par excellence, was apparently furious with him and hollowed out his power. The infighting begins.

Time is running out for Greece. Completely dependent on bailout payments to keep its finances from collapsing, Greece is losing ever more support where it counts the most: in Germany. According to the latest poll, 61% of Germans reject giving Greece and other bailed out countries more time to solve their problems. They’ve had enough of the broken promises. They’ve become so bitter about the whole process that, according to another poll, 58% of Germans want their Deutsche Mark back, up from 39% in 2010.

And what had to happen, finally happened: for the first time, an important component of German industry, the German Engineering Federation (VDMA) demanded that Greece leave the Eurozone “if it cannot, or does not want to, stick to its agreements.” German industry, which has benefitted from the euro and what amounted to a bailout of its customers in other countries, had been a staunch supporter of the euro, the bailouts, and keeping the Eurozone intact. But bailout funds, such as the European Stability Mechanism (ESM), should not be used to fund structural deficits, the organization said. And so it stepped up its support for Chancellor Angela Merkel and encouraged her to hold the line on Greece.

Merkel came out swinging. She would not tolerate that the bailout memorandum that contained the agreed-upon structural reforms would be watered down though she might be willing to delay implementation by “a few weeks”—not the two years the Greek government is seeking. Her spokesman Steffen Seibert was even firmer: “Neither the content nor the time frame of the memorandum is up for debate,” he said. Greece must “make great exertions.”

But that’s precisely what has not been happening. Inspectors of the “Troika”—the EU Commission, the European Central Bank, and the International Monetary Fund, the entities that have agreed to bail out Greece under certain “conditions”—were back in Athens earlier in July to review Greece’s books, check on progress of the agreed-upon structural reforms, and meet with government officials, all in order to determine if these certain “conditions” have been met. The inspectors already expected the worst, after a three-month hiatus while Greece was embroiled in political turmoil and two elections, an interregnum during which nothing was implemented.

Apparently, it was even worse. Elements of their preliminary and still unpublished report due by the end of July seeped out: it painted an “awful picture”; of the 300 specific measures to be implemented by now, 210 were completely ignored and left by the wayside. This is the report that the Troika will use in deciding whether or not to send the next bailout tranche to Greece. And without this money, Greece will have to default and most likely exit the Eurozone.

Germany itself is embroiled in disagreement over the endless bailouts, and their two crucial future mechanisms: the ESM bailout fund and the fiscal union pact. Cobbled together after hectic summits with dog and pony shows designed to soothe edgy markets, they’re now in the hands of the German Constitutional Court—and these are the options. Read.... Will the Euro Survive This Year?

Double-checking as euro miasma leaks into the rest of the world.... What Is Copper Telling Us about the Global Economy?

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jack stephan's picture

"Back in London…one more person started in on the Stars and Stripes. Eventually he got, as the Europeans always do, to the part about 'Your country's never been invaded.' (This fellow had been two during the Blitz, you see.) 'You don't know the horror, the suffering. You think that war is…'

"I snapped.

"A John Wayne movie' I said. 'That's what you were going to say, isn't it? We think war is a John Wayne movie-with good guys and bad guys, as simple as that. Well, you know something, Mister Limey Poofter? You're right. And let me tell you who those bad guys are. They're us. WE BE BAD.'

"We're the baddest-assed sons of bitches that ever jogged in Reeboks. We're three-quarters grizzly bear and two-thirds car wreck and descended from a stock market crash on our mother's side. You take your Germany, France and Spain, roll them all together and it won't give us room to park our cars. We're the big boys, Jack, the original, giant, economy-sized, new and improved butt kickers of all time. When we snort coke in Houston, people lose their hats in Cap d'Antibes. And we've got an American Express credit card limit higher than your piss-ant metric numbers go.'

"You say our country's never been invaded? You're right, little buddy. Because I'd like to see the needle-dicked foreigners who'd have the guts to try. We drink napalm to get our hearts started in the morning. A rape and a mugging is our way of saying 'Cheerio'. Hell can't hold our sock-hops. We walk taller, talk louder, spit further, fuck longer, and buy more things than you know the names of. I'd rather be a junkie in a New York City jail than the king, queen, and jack of all you Europeans. We eat little counties like this for breakfast and shit them out before lunch.'

"Of course, the guy should have punched me. But this was Europe. He just smiled his shabby, superior European smile."

Sorry my uncontrollable Tourette's is rough hahaha

Winston of Oceania's picture

"Turkey To Purchase Greece In Shortsale From EU". Mocking false dichotomy since 1980...

tom's picture

Greece will not leave the euro so long as the Greek central bank can still print euros.

chogopogo's picture

Oooo, that's indeed surprising! Greece cannot fullfil its promises? Astonishing! It is only the x-th time!

On the other hand, I keep reading "Germany benefited from Euro". 

Let us have a clear understanding of this: Germany benefited from the structural reforms in the context of Euro, and not vice versa!

How much did for example UK benefited from the Euro and EU?

Or Spain, the economic wonder in 2005-2007, the "European tiger" (when Germany was the "ill of the Europe"). 

Ah, and not to forget: some european leaders want to impose the same growth model that Spain had (growth on debt). And that suppose to solve the debt problem!

TheObsoleteMan's picture

In the end, this will all be papered over by the IMF, World Bank, and the Stablization Fund. Who do you suppose holds all of those PIIGS bonds? American investment banks: JPM, Goldman, Citi, BOA and others. Throw in some pension funds into the mix. And you can bet the Fed is holding plenty too. China and Japan have bought their share. This is what they mean when they talk about an intergrated global economy. There is more can kicking yet to come. Common bonds WILL be demanded and produced as the price for the bailout. If it means the end of Merkel, then that is what it will take, unless she changes her mind, AND WE ALL KNOW THAT WOMEN NEVER CHANGE THEIR MIND, DON'T WE?

BraveSirRobin's picture

Gird your loins, Obama is here!

User 3461's picture

I heard a funny commentary on NPR/Marketplace a while back. Basically, the guy claimed that the west - at large - owes Greece a lot, more than enough to square their debts, for having benefited immensely from Greek thought [REASON, Aristotle].

Unfortunately, modern Greece has about as much in common w/ Aristotle as they do with thrift.

graneros's picture

Well now there is one helluva an oxymoron: NPR/Marketplace.  Undoubtedly "funny commentary" is all anyone could possibly expect from such an August institution.

working class dog's picture


The solution is very clear, GERMANY LEAVES THE EUROZONE along with other northern country members, and dump the southern countries , who will gladly accept this solution.

Reason the southern countries can than print money till it comes out of thier ears and mouth and keep the southern ponzi scheme going, and the Northern countries can have their own Northern Zone with more austerity like ECB.

Buck Johnson's picture

They are just delaying the inevitable.

Peter Pan's picture

Exactly, each nation or like minded group of nations must pursue their own solutions and in the prcess either reap their own rewards or their own punishment. If Greece was cast adrift it might actually galvanize her efforts to reform.

Gimp's picture

Greek yogurt is pretty good.

Bobportlandor's picture

I'll take a gyros please.

Peter Pan's picture

Greek society is dysfunctional in all contexts......politically, economically, financially and demographically. There is nothing in place that will allow Greece to gain traction. Greece lost her big chance to lead the world out of its catch 22 when she could have unexpectedly defulted two years ago and caused a wholesale unravelling of the system and therefore an opportunity for a reset.

Unfortunately when you have politicians beholden to power and paypacket, this is what you get.

SAT 800's picture

Anyone who's not aware that Greece has purchased large numbers of German main battle tanks and submarines; yes(submarines); should look that up. I'm prepared to be compassionate towards Greece; after they give all this stupid shit back to Germany; as in repo'd.

epwpixieq-1's picture

I am sure that Greece "needs" these tanks and submarines, otherwise why would have paid for them, it is that without having these "goodies" Turkey, that has US made weapons, would have invaded them. 

It is like Saudi Royal Family is paying for the US made weapons, to prevent an invasion from whoever, oh well, wrong expression, to prevent revolution from its own people.

The only difference Greece does not have anything to sell back to the World or Germany, while the Saudis have oil ( for now ).

Son of Loki's picture

"of the 300 specific measures to be implemented by now, 210 were completely ignored"


...and the other 90 were lost in translation.....

Peter Pan's picture

I challenge you to examine those 300 measures and ask yourself whether the context and conditions within which they are imposed are designed to mend Greece or whether they are deigned to break her.

If the austerity measures are so necessary why isn't a similar package being imposed upon the USA's fiscal and societal train wreck?

minus dog's picture

Nobody is "imposing" anything on the States, because they weren't stupid enough to join a monetary union.

The US can and will print in damn near any amount they feel like as a result.

CompassionateFascist's picture

11 carrier battle groups iz Y. 

americanspirit's picture

Sorry - the records of all 300 of those specific measures have apparently been ???????????



i-dog's picture


"of the 300 specific measures to be implemented by now, 210 were completely ignored"

Sounds near enough to me! Give them the money, you tightwads!!

Winston of Oceania's picture

And I thought the Greeks were famous for 300... No Spartans in the Gub'ment I guess.

The Alarmist's picture

After six rounds of shake-down, can you blame Germans for wanting to "Go Galt" on the Euro?

Son of Loki's picture

Does anyone export anything to Greece anymore and expect to be paid? I mean peoplke even in the usa don't pay their bills anymore so why would the debt strapped Greeks?


just wondering....

CrashisOptimistic's picture

Greece burns 400,000 barrels of Brent price level ($100/barrel) oil every day.  It has to be paid for and pretty much nothing else matters.

epwpixieq-1's picture

They can go Biofuel, at least it will be good usage for all these olive plantations, not to speak that they will clearly save $40, 000, 000, that will stay in the local economy. The drawback, the cooking oil will not take it so lightly, and many people will have to give up these greasy meals. But hey this sound as health benefit, so US should learn from the Greeks and try something like this with sugar.

The Alarmist's picture

Yeah, I think of those "industrious" people in the good old USA and their intentions for what I apparently mistakenly believe to be my money each year when I fill in my FBAR. I understand how the Germans might feel when they hear what the Greeks et al expect of them.

steve from virginia's picture


Europe is subject to an Anglo-American credit embargo similar to those implemented in Latin America in the 1980s and in S. Asia in the 1990s. The US can gain more from Europe's bankruptcy than it can gain as return on new credit.

Europe consumes 15 million barrels of petroleum per day: by bankrupting the EU 10 millions of those barrels can be exported to the US instead. This is the equivalent to the production of Saudi Arabia, without all the drilling.

The 5% reduction in fuel availability in the West in 1973 resulted in what was the world's greatest recession post- WWII prior to the current recession. At issue is a reduction of 70%.

Richter blames the problems on corrupt Greeks but Greece did not make the loans to herself: it takes two corrupts to tango. The Eurozone was a pit of predatory lending under false pretense (of fake, USA-style 'prosperity'). The euro is an instrument similar to a sub-prime mortgage. 

No sovereign can repay finance-level debts, such a thing is impossible. Not only cannot Greece repay, Germany in full flower of industrial output cannot repay Greek debts. The demand for repayment is a charade and anyone bothering to look for more than five minutes can see that this is true.

The rate of change in GDP year over year is the surplus carried forward over the previous year's expenses. It is this margin from which a country's debts might be serviced -- not retired -- the annual increase in German GDP might be sufficient to partially service Greek debts for that year. Anyone who believes that Germany could repay Greek debts believes in unicorns and fairies.

The Germans object to the obligation to repay Greek debts, it is because such a thing is impossible regardless of intentions.

Greece is dependent upon external sources of (borrowed) capital: Germany genuflects in the direction of capital because Germany itself is just as dependent as Greece.

If Germany cannot repay Greek debts how can Greece be expected to do so, in the face of a credit embargo?

The embargo is effective because there is no European lender of last resort: what passes for one appears to offer unsecured loans to banking clients which themselves are insolvent. A lender of last resort cannot at the same time be insolvent: the one concept excludes the other. Because of system insolvency there are fatal bank runs underway right this minute.

Debts are intractable: they must either be re-financed with more debts or they must be repudiated, there is no other way. When debts are repudiated, the country must de-industrialize as it cannot import fuel, its money is unacceptable.

The fantasy of industrialization and so-called 'progress' is what various 'leaderships' are loathe to abandon, even as industrialization destroys the countries' economies and the countries themselves. Managements cling to the false promises that have been offered for 400 years, that have brought wealth to a handful in exchange for Napoleon, revolutions. Communism, Hitler, world wars and great depressions. This, then ... is the dividend of concentration and economies of scale, leaving out the complete destruction of the very air, land and water upon which we as living creatures absolutely depend ... for a few pieces of colored paper.

If the country does not repudiate its debts, its money is unacceptable anyway as the money is proxy for nothing but the debts.

This non-acceptance is the end of the road ... the end of all the roads.

By repudiating the debts all of the associated wealth is annihilated: wealth = debt. The problem is the foolish Europeans  want to get rid of the debt and keep the wealth. They do not realize a) this cannot be done, and b) there is really no such thing as wealth.

Keynes was wrong, in the short run we're all dead.

epwpixieq-1's picture

Some sense in the above said. But one major presumption is wrong "wealth = debt", it is WEALTH = ENERGY. If one can have substitute for oil as a source of burnable resource ( mostly transportation ) and sustain the same industrial development one is ahead of the curve.

Now think, in Europe the oil is on average $8-$9, and the most efficient economies are able to sustain it ( think about US on such price tag, per gallon ... ), for the build efficiency, the ones that are not efficient enough start to cripple.

The more oil goes up the more the push for efficiency ( or substitution ) magnifies. Ironically, although on short run this may be devastating for the inefficient economical systems, on the long run it benefits a lot ones that can most efficiently use the energy resources. Of course, the things are a lot more complex, especially when human hunger for power enters the picture.

Reptil's picture

You nailed it.

Your conclusion is different from mine though.

All around me I see small groups of people that are disconnecting from the system.

There'll be massive sudden shocks, in the system, or they'll slowly but surely run it into the ground. (frog boils in slow heated water)

But people have had enough. They see through the lies, and they see it's doomed. What incentive do they have now to participate? Violence?

CompassionateFascist's picture

Real wealth: an M1A and lotsa lead. Then we'll see who's dead, and who isn't. 

disabledvet's picture

The French "brought the Germans in" for a reason back in the 50's...and those reasons haven't changed. "They need to make this work." No one is denying the fight that has been waged to keep the EZ together has been "up to the task" relative to the intent of the original European "Coal and Steel Community"! Having said that it's hard to say who is properly explaining all this history to "folks of the Euro-zone." I'm not a member myself and certainly don't consider myself a good spokesperson but i've certainly studied the history and found it fascinating as a "bridge building exercise." (both literally and figuratively.) having said that there is a true Russian sytle "Time of Troubles" brewing (which were anything but of course) and when talking the "history of currency unions" the only way to hold them together by and large is with the brute force of a single sovereign.

The Monkey's picture

And, simultaneous with the deteriorating fundamentals in Europe and China, the Fed is fast closing in on action that will ramp asset prices even higher - with no coordinated fiscal action.

Talk about separating the floor from the ceiling. Bernanke talks a lot about being in uncharted waters. Actually, these waters were charted back in 1928 / 1929, when an overly active Fed stepped hard on the gas as the economy slowed. Speculators piled in and the stage was set for the greatest top of the 20th century.

This market looks a lot like that frothy market. Buy evey dip and lever up. We even have our own Irving Fisher advising participants to buy stocks, Alan Greenspan.

We have seen Bernanke pull out the punchbowl time and time again. Listen to what the FOMC players are saying: big open market purchases are just around the corner, so, lever up!

CrashisOptimistic's picture

He has no reason to further increase the balance sheet. 

What would be the point.  He's already done that extensively and has not achieved the desired results. 

You expand the balance sheet if there is growth in the economy and an absence of money would constrain it. There is no growth and money absence is no constraint.  So no balance sheet expansion is in the cards for a very long time to come.  If he was going to do it, it would have been done in June, to avoid political threats to Fed independence.

He didn't, so he won't.

JOYFUL's picture

He's been great alright!

..."Greece and other bailed out countries more time to solve their problems. They’ve had enough of the broken promises"....

Wolf, what a sweetheart yu are. So the Greeks have "broken their [sacred]promise"(made on their behalf by the resident Goldman alumni) to become a vassal state of the Khazarian financiers who run the show in Germantown...and after buying up all the manufacturies AND weapons systems of the sputtering German economic engine that they could [not]afford, now it's time to put the screws to em!

There's a comparable narrative that's true to yur bizarre rendition of historical facts....those damn Poles broke their promise to remain forever a hinterland of the Teutonic Knights...and deserved what they got when the mighty Werhmacht responded to their "incessant provocations" by turning on the engines and advancing to Warsaw.

Onwards to Athens, with the silk scarf of our lead tank commander waving gracefully in the breezes of the ZATOnic advance to Tartarus....from there, the road to Damacus be open! Wolf "Blitzer" Richter - Rommel Redux!

German peeples duped agin into following the pied pipers of sionist extortion into penury and torrents of blood sacrifice.


Greece? All down hill since Plato!

skipjack's picture

Fuck  Plato, that statist apologist.

Not Too Important's picture

He was also a eugenicist, but that's for another day.

Unless the financial crisis will eventually kill off all the 'those that aren't worth breeding' and the rich will be left with everything. Oh, wait . . .

At least Fukushima screwed that plan. Thank God for nuclear meltdowns. Oh, wait, not again . . .

bigkahuna's picture

statists and eugenicists go hand in hand.

ReactionToClosedMinds's picture

Wolfie R has been great lately.  This is a great assessment and, to invoke a now overused word, has a lot of 'granularity'.

bank guy in Brussels's picture

Actually Wolf Richter is, like many others, largely ignoring the German complicity and vulnerabilities in this dirty scheme ... even Angela Merkel herself has admitted in a few moments, she is mostly trying to protect the German banks, who made all those dodgy loans to other countries to help sell German goods.

ZeroHedge has been covering this well at points ... how the EU mess involves complicity and potential catastrophe for German banks, insurers and pension funds ... as Germans lent heavily to the Mediterranean so they could profit from export sales ... and as Germans manipulated euro-zone interest rates, and the euro value itself, to help their own economy while slamming the southern ones ... tho many ZH articles still carry this fake theme of 'good, strong, prudent Germany vs bad, lazy, sloppy other countries'.

Greece is certainly a mess and Spain etc. as well but Germany is deeply on the hook too in this farce and they are far from innocent.

Nachdenken's picture

Specialisation is the way Germany goes, does what it can do as best as it can, and quite rightly keeps its access to markets open.  How is this different from the USA, or the UK or France, or China. Self interest is the power play everywhere, including Greece. 

The global economy is mainlining on debt and and those highs must be paid for somewhere down the line.

FeralSerf's picture

Absolutely -- good post!

Too many people seem to ignore "Cause & Effect" and seem to believe (all of) the Germans are stupid.  I find it hard to believe that the Power Elite Germans could not see the consequences of offering easy credit and no down payment new BMWs and Mercs to their southern neighbors.  They needed a secure market for those fine german manufactured goods if they were to upgrade their plants to their (now) level of automation.  The problem was alway how to get their neighbors to pay.  Their solution seems to have been extorting their own taxpayers and confiscation of their workers' pensions and savings.  As the American Great Depression song goes: "The rich get richer and the poor get children" (German children to supply more consumers later).   Brilliant, if I say so myself!

When I first visited southern Europe in the 1980s, the Greeks, Portuguese and eastern Europeans were driving absolutely unbelievable junk, e.g. Merc taxis with over a million miles on them, Yugoslavian and Romanian made obsolete Fiats and Renaults, Ladas.  They clearly wanted and needed new transport machines, but had no way to acquire them.  German finance industry to the rescue!  Damn the torpedoes, full speed ahead!  Now those rusty Katrcas Renault Fours are only a bad memory or a collector's item.

Nick Jihad's picture

I only disagree to the extent that you imply there was a concious plan to do this. Lots of companies fall into the trap of growth via vendor-financing. It's one of those commercial vices that sneaks up on you, and it's always easier when vendor and financer are separate entities, a la GM and GMAC. This can be explained without resort to conspiracy theories.

disabledvet's picture

no Zero Hedge "accidental double post" on this one? What's going on clever internal controller types?

1000pips's picture

Who went long on the EURO/USD friday?  You can bet it was central banks, never doubt that they control the markets.  

There is no other good reason, except their agenda is completely unknown to the logical investor.

As Zero Hedge has continually pointed out for over 5 years-this is all a rigged scam.  Build up the shorts-knock out the shorts; build up the longs-knock out the longs.  As news regarding the EURO continues to seem worse-remember, the 'news' is totally manipulated, the technicals verify the news.  Yet, underlying the scam is the shadow banking agenda.  Wealth transferred through fear, unreliable news and false government reports.  

You see-when money is not Real-problems with money are not 'real'.  They will take the EURO/USD close to $1.30--then slam it down again.  Thus is the cycle, as those who follow become rich, while the rest sit on the sidelines and watch thier bankroll devalue through inflation and taxation.

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