Greece Abandons "Red Lines" As Troika Meets In Berlin To Craft "Deal"

Tyler Durden's picture

We’ve been saying for months that the troika’s ultimate goal in negotiations with Greek PM Alexis Tsipras is to use financial leverage to force Syriza into abandoning its campaign mandate, thus sending a strong message to the EU periphery’s other ascendant socialists that threatening to disprove the idea of ‘euro indissolubility’ is not a viable bargaining strategy when it comes to extracting austerity concessions from creditors. 

Over the past several days the political situation has come to a head with Tsipras expressing his extreme displeasure at the troika’s “coordinated leaks” and unwillingness to give even an inch on what the PM calls “absurd” demands.

Meanwhile, Syriza has splintered with the far-left faction demanding a return to the drachma and a default to the IMF. We’ve contended that Tsipras will not be willing to go that route and risk an economic meltdown that would likely see him lose power altogether. The more likely scenario, we have argued, is that Tsipras caves to the troika, compromises on the government’s ‘red lines’ (pension reform being the most critical) and risks a government reshuffle on the way to a third program, thus averting a euro exit and keeping Greece from descending into a drachma death spiral, even as the “solution” effectively strips the Greek people of their right to choose how they want to be governed — a tragically absurd outcome in what is the birthplace of democracy.

Sure enough, it appears as though this is precisely what will unfold over the coming weeks as Tsipras has now indicated he is willing to compromise on pension reform. Reuters has more:

Greek Prime Minister Alexis Tsipras is ready to discuss pension reforms in negotiations with international creditors over a cash-for-reforms deal, German newspaper Die Welt reported on Monday.

 

Labour and pension reforms are believed to be among the big sticking points with Athens.

 

Die Welt cited participants in the negotiations as saying the prime minister had signalled he was ready to discuss pension cuts and a higher retirement age.

 

The Greeks has not yet submitted a concrete proposal, the paper added in a preview of an article to run in its Tuesday print edition.

And with that it will be missioned accomplished for the troika. The Greeks will remain debt serfs, Germany will have made its point and sent a strong message to the rest of the EU periphery, and the IMF… well, that’s still up in the air because Christine Lagarde has made it abundantly clear that the Fund does not wish to participate in perpetuating this ponzi any further unless Greece’s EU debtors agree to a writedown of their Greek bonds. Largarde and Draghi reportedly met with Merkel and Hollande in Berlin today, perhaps sensing that the charade is finally coming to an end. 

Via Reuters again:

The chiefs of the European Central Bank and the International Monetary Funded headed to Berlin for talks late on Monday with the leaders of France and Germany on how to proceed with Greek debt negotiations.

 

EU officials said ECB chief Mario Draghi and Christine Lagarde of the IMF were joining the German and French leaders, and the president of the European Commission, with the aim of reaching a joint position on how to negotiate with Greece.

 

The unexpected development came after Greek Prime Minister Alexis Tsipras fired a broadside at international creditors that officials said bore little resemblance to his private talks with EU leaders.

Once again, here’s a flowchart which diagrams what comes next:

*  *  *

For those interested to know what these "absurd" demands from the troika are, we bring you the following from KeepTalkingGreece who has the story:

Creditors command and demand, Greece is willing but … some red lines cannot be set aside. Apart from that, creditors’ commands are anything but logical as their demands could be only described as crazy. Furthermore the creditors seem divided as to what they demand from Greece with the logical consequence that the negotiations talks have ended into a deadlock.

According to Greek media reports,

While the European Commissions wants austerity measures worth 4-5 billion euro for the second half of 2015 and the 2016, the International Monetary Fund raises the lot to 7 billion euro for 2016. The all-inclusive austerity package should include among others €2.7 billion cuts in pensions.

The Pensions Chapter is one of the thorns among the negotiation partners, and Greece would love to postpone it for after the provisional agreement with the creditors, call them: Institutions.

While it is not clear whether it is the IMF or the EC or both, it comes down to the command that

“Pensions should not be higher of 53% of the salary due to the financial situation of the social security funds.”

 

Pension for a civil servant (director, 37 years of work) should come down to €900 from €1,386 today after the pension cuts during the austerity years.

 

Pension for private sector – IKA insurer (37 years of work, 11,000 IKA stamps) and salary €2,300 should come down to €1,250 from €1,452 today after the austerity cuts. (examples* via here)

Of course, with the PSI in March 2012, Greece’s social security funds suffered a huge slap in their deposits in Greek bonds.

According to the Bank of Greece report of 2012, social security funds were holding Greek bonds with nominal value €18.7 billion euro. The PSI gave them a new look with a nice hair cut of 53.5%. Guess, how many billions euros were left behind.

If one adds the loss of contributions due to high unemployment, part-time jobs, uninsured jobs and the disappearance of full time jobs in the last 3-4 years, the estimations concerning the money available at the Greek social insurance funds are … priceless!

Another thorn in the negotiations is the Value Added Tax rates.

Creditors reportedly want Value Added Tax hikes in the utility bills, electricity and water charged with 23% V.A.T. from 13% now.

Do I hear you say that the austerity recipe imposed to Greece is wrong? You’re totally right.

But creditors insist on it and then wonder why the soufflé dramatically sinks once it comes out of the oven in Brussels.

*examples: the pensions issue is a huge labyrinth as full or reduced (early retirement) pension calculation depends on several criteria in addition to the 37 years +11,000 IKA-stamps scheme. There is no average and therefore there can be no average cuts.

Before the crisis, pension was 80% of the salary of the last 5 work years. Now it has come down to 60% of either last salary after the salary & wages sharp cuts or of the best salary. And creditors want it down to 53%! Go figure…

What is fact is that pensions in private sector sank at 26% in the last 3 years.

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Paveway IV's picture

Fuck the Greek government and all the oligarchs that have been ass raping the Greeks.

Greek citizens have ZERO MORAL RESPONSIBILITY for the debt of their foreign corporation government.

All bets are OFF. Let the useless old Greek government fall. All hail the debt-free but broke NEW Greek government. The only legal money they have is the new taxes they collect - nothing else. All government debt anywhere on earth is illegal. Citizens are not responsible for it. I am not responsible for U.S. government debt - fuck you, oligarchs.

ZerOhead's picture

"In the modern economy, most money takes the form of bank deposits. But how those bank deposits are created is often misunderstood: the principal way is through commercial banks making loans.

Whenever a bank makes a loan, it simultaneously creates a matching deposit in the borrower’s bank account, thereby creating new money."

Bank of England Quarterly Bulletin 2014 Q1 - qb14q1prereleasemoneycreation.pdf

 

They are actually going to hand the country over to bankers who created the debt out of thin air.

Bankers 666  Sheep 0

indygo55's picture

What changed? Did they all of a sudden point a BIGGER gun at his head? DId they offer him a bigger bribe? Did they threaten his parents and well as his wife and kids? Really? I mean what could have possibly been thought up by now that was new? This is madness. 

phoolish's picture

I guess they forgot about iceland.  Oh, did the Kriegsmarine and Luftwaffe flatten iceland?

Tom Servo's picture

One thing I don't understand.  IMF loans are always super senior, and cannot be written off.  Says who?  Because they say so? LOL  Last time I checked, they don't have any armed forces ....

tarabel's picture

 

 

Wealthy people do not carry guns themselves.

ThirteenthFloor's picture

And very few elected officials have a set of balls.

Parsecs Taxi's picture
Parsecs Taxi (not verified) indygo55 Jun 1, 2015 6:56 PM

Maybe it was just a scam from the beginning.

CPL's picture

Yes, the euro has been a scam since the beginning.

mvsjcl's picture

Ghordie will be by to -1 you in just a bit.

CPL's picture

Good good, as long as he's consistent.  Might get worried otherwise.

Renfield's picture

<<What changed?>>

Nothing changed. As usual. This is just more MSM (Reuters) spin direct from Schauble, in a transparent attempt to keep up the media pressure. Notice there is no information representing the Greek negotiators (as opposed to "media") here. Another No Newsday report saying "There's another Very Important Meeting coming up!" and OMG the pressure's really on them NOW! (Or in a few more days when they have a meeting to come up with a deal -- for sure and for real this time honest-to-gosh). In other words, it's propaganda. Maybe Tyler should just ask Schaubles' secretary to send him the same meeting schedule that goes to the MSM, so people can keep hyperventilating on Reuters' say-so. Reporting scheduled meetings as News now? Pathetic.

According to this MSM stuff, the Greeks are always always sweatin' b/c they gonna LOSE. But not Schauble, man, b/c he have a powerful dick and ECB sittin' pretty with nuthin' to lose. It's annoying to see this level of credulity, based on NO NEWS (as usual).

Surprised Tyler is still this credulous. Most of the posters here have much better propaganda antennae. Wake me up when there's something to report, instead of yet another damn meeting.

sumo's picture

 "This is just more MSM (Reuters) spin direct from Schauble, in a transparent attempt to keep up the media pressure.."

Well said. I logged in just to upvote.

To put it another way, this piece is just a small shipment from the media factory that manufactures consent.

Syriza hasn't caved in, so the Troika are still using an old sales tactic: "assume the sell"  - talk as if the punishing deal is inevitable, frame it as a done deal, so all the media carpet stains breathlessly report it as such (honorable exception: AEP of the UK Telegraph).

julian_n's picture

The European press agrees with you - nothing has changed - so as you say Wolfie is spinning again!

Anyway, once Kerry is back in action I am sure he will see to it that Germany realises it needs to relax Greek loan terms to avoid Greece siding with Russia.

Pulq's picture

Problem is that the German demands for austerity have been so inflexible and dogmatic in the past that now, even if in a flash of illumination they realized that their policy obliterates economies, based on, I don't know, all statistics of the past 7 years, it would be extremely hard to cave in. I'm not sure the Portuguese, Italians and Spaniards would take it very well if Germany went like "well yeah we imposed a destructive policy on you for the past 7 years... WOOPS! sorry gaiz xD, kthxbye". This is way more geopolitical than it is economical, unfortunately.

Michail Barmpas's picture

You know what's wrong with the Germans Julian? They always underestimate the Greeks. They did it in WWII and they lost. Here is some evidence: 

 

Sir Robert Antony Eden, Minister of War and the Exterior of Britain 1940-1945, Prime Minister of Britain 1955-1957: 

"Regardless of what the future historians shall say, what we can say now, is that Greece gave Mussolini an unforgettable lesson, that she was the motive for the revolution in Yugoslavia, that she held the Germans in the mainland and in Crete for six weeks, that she upset the chronological order of all German High Command's plans and thus brought a general reversal of the entire course of the war and we won." (Paraphrased from a speech of his to the British parliament on 24/09/1942)

They do it now for a second time. You think Germans are so clever to win the Greeks? Well, I'll tell you, Germans may speak one language, perhaps two or three, or maybe four or five, but the Greeks understand every language. Here, like Russian for example: https://www.youtube.com/watch?v=OuGUCWc0Nqo

two hoots's picture

Greece must face itself and change.  What was is no more.

chokeNpuke's picture

The Greeks must love a good ass fuckin..because the bankers are sticking it up Greece's ass once more...the bankers shoot and score...kick the can up the Greece's ass a little bit more.

GoldSilverBitcoinBug's picture

Indeed, you are not responsible for your government debts but have you voted ?

If yes, then you are responsible, you are responsible of the retards that you put in power and being an idiot yourself for believing their promise...

Democracy doesn't work, if it worked you will have no debt, a Gold Standard, no Free Shit Army and a guy like Ron Paul as president and the Constitution back.

Democracy (mob rule) never worked and will never work so I usually don't even bother to vote.

Hedge Accordingly.

Paveway IV's picture

"...Indeed, you are not responsible for your government debts but have you voted ? If yes, then you are responsible..."

Bullshit. I've personally chosen to stop believing in that goddamn LIE. I am not responsible for debts without my personal signature. Fuck anyone and their convoluted logic about how I am responsible for the debts of a foreign corporation just because I participated (or did not participate) in their popularity contest. 

"...you are responsible of the retards that you put in power..."

Correction. The retards in power got there as a result of decades of bribes, a usurped voting process and corrupted justice. A process that started well before I was born. The only thing I am responsible for now is removing them from power and restoring the constitution

"...Democracy doesn't work, if it worked you will have no debt, a Gold Standard, no Free Shit Army and a guy like Ron Paul as president and the Constitution back..."

Fuck you and your academic definition of pure democracy. Go argue that on Reddit with the other knuckledraggers. Participatory democracy isn't an exclusive form of government anywhere, it's a part of an effective and fair government of a republic. Of course it doesn't work when a psychopathic, bottom and top third of the population tries to live off a relatively normal, moral middle third and all of them are uneducated and incapable of critical thought. Of course it doesn't work when a foreign corporation formed to do clerical work on behalf of a nation morphs into a super-class of oligarch rulers. That only proves a CORRUPTED democracy doesn't work. Gosh... ya think? 

"...Democracy (mob rule) never worked and will never work so I usually don't even bother to vote..."

You're reasoning is slightly skewed, but you have correctly observed on the futility of participating in a usurped voting process for an unrepresentative government, so forget everything I said above. Fuck the vote 2016 - let the oligarchs vote for themselves.

GoldSilverBitcoinBug's picture

What an emotional post bro.

You are the example of why democracy doesn't work (ideally only a constitutional regime with rights defined and can't be removed/modified via democratic (mob rule) or corrupted leader.

For the corrupted leader: all leader get corrupted and yet you still vote for them, then you are responsible: at least in a democracy you get what you fucking deserve.

Better to go Galt.

tarabel's picture

 

 

I might be willing to concede that any Greek who has not profited from their "foreign corporation government" running up debts has no responsibility-- but I suspect that the gross number of such inhabitants of the Greek peninsula is very close to zero itself.

Everybody loves getting a check, especially if they don't have to work hard to obtain it.

Paveway IV's picture

That fails the 'reasonable person' test, tarabel.

Some nobody production-line worker for the former Solyndra shouldn't be responsible for the actions of that criminal enterprise or its theft of taxpayer dollars EVEN THOUGH that production-line worker arguably unfairly enriched themselves for a period of time while working at Solyndra.

Government workers are not responsible for the debt of the government EVEN THOUGH they arguably unfairly enriched themsleves from that government while working for them.

Some disabled Greek that is legitimately collecting disability coverage is not responsible for where the money came from or how much they should get. An old government pensioner isn't the problem despite their proported benefit from fucked-up financial and social policy.

The average person is capable of distinguishing the meager excess benefits a resonable person obtains from the millions the oligarchs vacuum up as a result of those same policies. That's part of the scam: citizens getting a few crumbs of benefit while bearing ALL the responsibility to the tune of millions, while the oligarchs orchestrating the scam walk with their pockets full. Fuck that.

Greeks have ZERO MORAL RESPONSIBILITY to pay back a dime. Foreign banks imagined unlimited authority for the Greek government to borrow money when NO SUCH AUTHORITY EXISTED. The banks get fucked good and hard like they should. I'm sick of bankrolling their stupidity and greed. Any bank that fails from lending to any government gets absolutely no fucking sympathy from me. I'll party on the news of that bank's death and piss on their grave. 

As a side note, recognizing that U.S. government debt IS NOT MY MORAL RESPONSIBILITY is actually quite liberating. It makes you see the criminal banking enterprise in a whole different light. The closest thing we have to pitchforks and torches today is

"The U.S. government is a foreign corporation - I am an American citizen and AM NOT RESPONSIBLE FOR IT'S DEBT. Stop lending money to it because I have no moral obligation and no fucking intention of paying it back. If ANYONE loans money to the U.S. government - FUCK YOU, you are my enemy and deserve to lose every last God damn dime." 

HungryPorkChop's picture

Everyone already knew the outcome.  This was nothing more than the U.S. Debt Limit Scare.  As long as the banks can push the CTRL ALT Print Button and Billion$ of Euro's or dollars are created out of thin air then you can bet you sweet arse' that Greece will get some type of deal.  This was nothin' but more drama for those who believe the media that Greece could really default. ha! ha!

The only way Greece could default would be to leave the Euro.  Then they could default which would be the equivelant of Argentina not paying its debt.  End of story folks.  So not sure why ZH and the others continue to print these stories which are a waste of time reading. Greece is the Grand Master of Can Kicking.  I fully expect we'll still be reading about a Greece default in another 3 to 5 years.  

zorba THE GREEK's picture

Alexis Tsipras knows what it means to be between a rock and a hard place.

Some of you here a ZH make light of what is going on in Greece, but the 

Greek people are no more responsible for what is happening to them than 

are all Euro nations, the USA, Great Briton and Japan. So pay attention to

their fate, because it is the fate of all of us.

HardAssets's picture

Zorba - " Greek people are no more responsible for what is happening to them than are all Euro nations, the USA, Great Britain and Japan. "

And this is why humanity is trapped in their own illusions; they never take responsibility for allowing the world to be as it is. They'll continue to childishly obey false 'authorities'. Theyll continue to fill their sons heads with garbage, so some will grow up as 'patriotic' soldiers and police who are manipulated to oppress their own families. The people provide the physical bodies to carry out their own enslavement.

They look for a 'Mommy' and 'Daddy' to protect them and provide for them. Many refuse to look at what's actually going on in the world. They remain children and they remain slaves.

asteroids's picture

I've been saying since the second bailout, it was mathematically impossible for Greece to dig its way out. Default is inevitable. Greece should default but stick with the Euro. There WILL be pain, but get it over with. In a year or two, things will get better. That's how life works.

tarabel's picture

 

 

Everything is always somebody else's fault.

The Greeks could choose to be honorably poor and free tomorrow, if they so desired.

Or they can choose to be the kept creatures they currently are and enjoy an undeserved and artificially-enhanced standard of living courtesy of the EU.

Hmmm, I wonder which one they are after?

cuttlefish's picture

Get it over allready you pussy greeks for fuck sakes I am so sick of this drama ...

 

fockewulf190's picture

Ironic isn´t it that the word "drama" originiated from Greece.  Unfortunately, this drama is no way near over.   It´s going to end up being long and tragic.

CPL's picture

Naw, played out like this last time as well, couple more steps and it starts.  People panic and all hell breaks loose.  Kikes fire the missles, automated dead man switches counter launch.  Gets very quiet and then ground-hog day March 2007.  All that's missing is NYC flooding and a monster storms off the Florida and California coast.

Anyone getting a sense of deja-vu like you've lived through this before?  lol!

Brooks_Orpington's picture

You, sir, are an assclown.

CPL's picture

Earth:  An exhibit in failure....how do you like it?  It's a best seller.  All this btw, not my issue and its not like anyone actually listens any ways.  Most of them are too busy polishing thrones, waiting for kings, hoarding bits of credit and covering their asses.  Most of them are barely cognizant of the situation, doubtful they ever will be and remain in the labyrinth.

HenryHall's picture

If true this is all the fault of KKE.

If true.

wendigo's picture
wendigo (not verified) Jun 1, 2015 4:57 PM

It occured to me that while I used to care about shit, I've now reached the status of total cynicism. Is that a form of enlightenment, or did I just miss the point? 

gatorengineer's picture

Enlightenment......  this is unfolding as its going to be the 2.0 social experiment with the Cyprus bail in being 1.0 (confiscation of assets).  A prelude to a 30%+ cut in social security here.  They are trialing the show on the road first.  Version 3.0 will be the attack on Private Pension (401k) plans.  4.0 will be the wealth tax.  Incrementalism at its best.... 

Consuelo's picture

They cannot let Greece fall into the hands of the Russians.   At least not that easily.

 

 

Bunga Bunga's picture

Right, the Eurozone would be fucked three times. First a loss in 100bln+ to be explained to the taxpayer, it would push the Euro closer to a break-up and Putin would win again. T&V can just poker high.

tarabel's picture

 

 

One Russian Empire already collapsed trying to maintain a cadre of economically-trashed dependencies that sucked it dry (drier).

As I have said before: Russia and China offer all sorts of moral support and promises of future help.

But the Greeks always fly home with empty pockets in real time.

If anyone truly wanted to "steal" the Greeks away from their current EU entanglements, it would have already happened.

Both Russia and China have serious economic problems on the home front and do not need the Old Man of the Sea perched on their shoulders.

pods's picture

This is just painful now.

Greece will be asset stripped like roadkill by buzzards.  Then they will default.

Going to be a long summer in Greece.

This is just like playing monopoly, where one guy owns enough of the good properties to slowly strangle everyone else.  Except that he is now loaning the others money to keep them going around the board, each time racking up more and more debt, but telling them they can get back into the game.

pods

FrankieGoesToHollywood's picture

Monopoly is fun but is missing a essential element: Armies.  I dont always play board games, but when I do, I choose Risk.

bonin006's picture

"The Bank never “goes broke.” If the Bank runs out of money, the
Banker may issue as much more as may be needed by writing on any
ordinary paper."

(I intended to reply to turnoffthewater below)

 

turnoffthewater's picture

In the Monopoly rules, if the bank runs out of money, they issue IOU's. How apropo.

Michail Barmpas's picture

It is is going to be a very lovely summer in Greece and it has started already. To conceive this better, I suggest you may line to learn some Russia?: https://www.youtube.com/watch?v=OuGUCWc0Nqo

NoDebt's picture

Your pension is safe in the US, though.  That could never happen here.  Because you were "promised".  By a politician.  Who won't even be in office any more by the time you go to collect.

orez65's picture

"Your pension is safe in the U.S. ..."

Of course, specially our Social Security pensions!

See we have this "Social Security TRUST FUND" with about $4 TRILLION.

Except, well, that "money" was spent by the Federal Government.

But they did leave these IOU's called Treasury Bonds in the TRUST FUND!!!

Seasmoke's picture

And the Greeks voted for this pussy and expected anything else ??

Fod's picture

Well, the alternative was fascists...