Greece Looks To Trade Concessions For Writedowns As Standoff Continues

Tyler Durden's picture

Things took a turn for the worst in talks between Greece and creditors two Fridays ago, when Alexis Tsipras delivered a speech to parliament that, in the eyes of European Commission President Jean-Claude Juncker, did not fairly represent creditors’ position. Juncker took the speech as something of a personal insult given that he had spoken with Tsipras earlier in the week in what was billed as a cordial and productive meeting. Juncker refused to take a phone call from the Greek PM the following day.

A G-7 meeting in Germany last Sunday produced a few token comments from various world leaders and Greece responded by submitting a half-hearted set of counterproposals midway through the week — EU officials called the proposals “not serious.” Juncker then proposed a deal that would have allowed Greece to defer pension cuts if it agreed to implement offsetting reductions in military spending, but the IMF did not agree to the compromise. A day later, Christine Lagarde sent her negotiating team back to Washington and Europe gave Greece 24 hours to come back with a draft agreement that included pension cuts and a VAT hike. 

A little more than 24 hours has now passed and although there have certainly been no breakthroughs, Tsipras and his negotiating team are in Brussels this weekend to try and secure some manner of funding that will allow the country to avoid a default to the IMF on June 30. Preliminary reports suggest Tsipras may be set to make painful concessions if it means creditors will agree to write down some of their existing Greek debt. Reuters has more:

Greek Prime Minister Alexis Tsipras said he was willing to accept unpalatable compromises to secure a deal with international creditors, provided he gets debt relief in return, something that Germany refuses to countenance.


With Greece heading towards possible default and bankruptcy, he told his negotiating team before it took a counter-proposal to Brussels that without debt relief he would say "no" to any settlement with the EU and IMF that isolate his country from the rest of Europe..


Greek ministers arrived in Brussels on Saturday to resume negotiations with international creditors on a cash-for-reforms deal that ended in stalemate on Thursday.


The counter-proposal offering concessions on budget issues is designed to break the deadlock that is threatening Greece's future in the euro zone..

If this proves to be accurate, it looks as though Tsipras may be planning to deflect criticism from party hardliners and voters by claiming that Athens only conceded to creditors’ demands once it was promised debt relief. It’s also possible that Tsipras will be able to convince the European Commission and the ECB that without writedowns, the IMF will be unwilling to participate, something that Angela Merkel views as a serious impediment to a workable deal. 

"If we have a sustainable solution, regardless of how difficult the compromise is, we will bear the burden because the only criteria are exiting the crisis and the bailouts," a government official quoted Tsipras as telling the ministers on Friday night before they headed to Brussels.


Tsipras used the term "sustainable solution" to refer to a long-standing demand for large parts of Greece's mountainous debts to be written off - something he believes is vital if the Greek economy is to start getting back on its feet after a five-year depression.

At the same time, Greece effectively owes some €64 billion to Germany, and any suggestion that the money won’t be paid back will serve to further incense FinMin Wolfgang Schaeuble and lawmakers loyal to his position on Greece. Further, the German public, three-quarters of which oppose extending more aid to Greece, would likely be staunchly opposed to taking a multibillion euro loss. 

Much of that debt is owed to Germany, the biggest contributor to Greece's 240 billion euro bailouts. Any acceptance by Merkel that the money might never be paid back would almost certainly create uproar among the country's politicians and taxpayers.

Merkel is thus facing a lose-lose scenario. The Chancellor views keeping Greece in the euro as critical to maintaining the balance of power between Russia and Europe, even if a ‘Russian pivot’ on the part of Greece would be more symbolic than anything else.

However, if preserving the idea of euro indissolubility ends up requiring debt forgiveness, lawmakers and the public alike could turn against the Chancellery. In short, Merkel may be forced to choose between two outcomes that each have the potential to negatively impact how history remembers her tenure as Europe’s most important political figure.

As for the chances of a messy EMU exit, Varoufakis figures that's about as likely as armegeddon:

"As a former statistician, I will never consent to the notion that there is a zero probability event. It is also possible that a comet will hit planet Earth ... (but) I don’t believe that any sensible European bureaucrat or politician will go down that road.”

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JustObserving's picture

With the CEOs leaving Deutsche bank along with others, it seems that the bank's $50 trillion plus in dervatives may not survive Grexit.  Germany's GDP is only $3.64 trillion.

Maybe, Greece can better deal on the threat to the derivatives of European banks

Deutsche Bank CEOs “Shown Door” – World’s Largest Holder of Derivatives In Trouble?

Deutsche Bank’s derivatives position is truly enormous. It was recently estimated to be around $54 trillion. Germany’s GDP, the fourth largest in the world, was a mere $3.64 trillion in 2015. Were Deutsche Bank caught off-side in its derivatives positions there is not a government or institution on earth that could bail it out and it could lead to contagion in the German financial system and indeed in the global financial system.

Haus-Targaryen's picture

I don't buy it.  Merkel could get up and make a speech, and bleat on about Germany's "Special Relationship" with Europe, and if we want "peace and prosperity" to continue, Germany needs to eat losses.  

The problem would then be Spain next year, when Merkel has to explain why Germany needs to eat 5% of its GDP to be "Good Europeans." 

So in this game of chicken, I still bet that Germany caves -- for no other reason than its population is more brainwashed about the "European Expirment" than any other.  

The problem for the creditor countries lies with the countries that are net payers but have zero "Special Relationship" with Europe.  Such as Finland, the Netherlands and Austria.   

LawsofPhysics's picture

"Finland, the Netherlands and Austria" - who are all even more brianwashed about the Euro...

...what was the problem again?  Hell, give me a printer and I can be a "net payer" too.  this is the real issue, period, and it is a global problem.

Haus-Targaryen's picture

I disagree.  In all 3 of those countries, you have openly EU-EMZ hostile political parties taking 20% or more of the vote.  

In Germany you have a political party that is openly EU & EMZ hostile, and is less than a rounding error & another with loves the EU but hates the EMZ and is about 4%.  

The other 95.5% of the population votes for pro EU and pro EMZ political parties habitually. 

But apart from that -- yes, the Ctrl+P is strong here in Rainbow land.  

LawsofPhysics's picture

"The other 95.5% of the population votes for pro EU and pro EMZ political parties habitually." -- again, irrelevant, global Weimar.

accountability will be restored, it can be done in a managed way or not, but it's coming either way.

Haus-Targaryen's picture

Um, sure -- but the German population won't be the one to pull the plug.  

In many major political circles here, saying something like "Germany would be better outside of the EU and EMZ" is the political equivlant of saying "Lets put the Jews back in the oven, we didn't get them all the first time."

It is quite literally that nuts here.  

Germany is going down with the ship on this one.  The good news is Germany always bounces back, and normally quicker than everyone else around her.  

LawsofPhysics's picture

"The good news is Germany always bounces back, and normally quicker than everyone else around here."  --   Okay, that is nuts. Politically correct bullshit with the real goal to commit fraud...   ...yes, the germans are efficent and can innovate.  I guess we can look forward to the "Great Wall of Germany" in the near future.

Haus-Targaryen's picture

I'd like to point you back to the last few hundred years of Germanic history.  They get wiped out, and come back stronger than anticipated, and in most cases stronger than before. 


LawsofPhysics's picture

With respect to getting "wiped out" and coming back, you are aware of Russian history right?  Or history in Asia?

Come on dude, this is human history.

Haus-Targaryen's picture

There is no "human" history on a sociological level.  There is human history on a biological level, but that isn't the discussion.  We aren't talking about the extinction of humanity, but a stupid political union, thus biology is irrelevant and sociology is.  

Culture matters.  Some cultures are more productive/resilient than others.  Asserting otherwise is buying into this "we are all one people" crap the EU is based upon.    

LawsofPhysics's picture

So, demographics and genetics don't matter?  You might actually try and understand why some cultures are more productive than others.  LOL!!!  Good luck with that.

Haus-Targaryen's picture

Lots of things affect culture, genetics could be one -- I'm not convienced, but climate, language, demographics, religion, wealth, technology, competetion etc., etc., these all affect culture.

I have a pretty good grasp on why some cultures are more productive than others.  Productivity has a lot more to do with climate than most other factors.  That being said -- it isn'T exclusive.  

Sometimes you have great posts.  Today you are completely off the mark.  

LawsofPhysics's picture

genetics=biology=culture=demographics.  You are just fooling yourself if you believe otherwise.  But then again, people really believe all kinds of crazy shit.

Haus-Targaryen's picture

I'd rather spend my entire life on an island with a black person born & raised in Germany than a white person born & raised in the middle of the Congo. 

forexskin's picture

guessing LOP hasn't learned what is necessary to survive a winter, especially without the conveniences of the modern era.

Haus-Targaryen's picture

I was about to get into my climate = culture speech, but then decided against it.  

I'm glad I wasn't the only one seeing the conversation going in that direction.  

bitterwolf's picture

Science is the answer and math is difficult to argue with....the Northern Europeans....the Nordic bloodlines out produce,out innovate and out fight and DOMINATE, ALL other cultures on this planet.History is a critical teacher and a decent predictor of probable future outcomes. Genetics....specifically bloodlines is the key.

snowlywhite's picture

well, it's very easy. Germany gained the most out of EZ. Or ok, German corps, because germans don't think gained much. You overproduce(that's why you have positive CA). Obviously, someone else has deficit, in order for you to have surplus. So you engage in some good old vendor financing.


While the going is good, corps/shareholders get enhanced profits. When it turns sour, losses are redistributed. Because I'm sure no German corp will be taxed retroactively for the profits they made in Greece 10 years ago. Leaving aside that 99% of the profits probably weren't even made in Greece; but they were the effect(among other things) of debased ccy and stuff.


so it's pretty safe to assume brainwishing will keep going full throttle.

Haus-Targaryen's picture

Germany did not gain the most out of the EZ.  Germany lost the least.  While similar these two concepts are not the same.  

The EUR is not good for anyone except Brussels and a few shitheads in Frankfurt.  

snowlywhite's picture

depends what you understand by Germany; if the people, yeah, you're right. If the "economy", it gained.

Haus-Targaryen's picture

Its gained at an average of 0.8% per year, whereas before the EUR it gains at an average of 2.3% per year.  

Opportunity cost & compounding.  How do they work?  

HungryPorkChop's picture

I'm really tired of hearing about Greece.  It's been way overplayed for the past 4 years and nothing more than a drama filled Debt Ceiling Argument the U.S. had back a couple years ago. 

Greece has been already been bailed about 100 times so doubt they will quit bailing the country out now.  Also, we've had about 200 stock market rallies off Greece.

The country is nothing more than a poster child for the masses to look and point.  Sort of like a bad wreck on the side of the road where everyone rubber necks.  Nothing more and nothing less.

Greece is just a distraction it's 99.9% guaranteed that Greece will get some type of deal again at the last stroke of midnight.  So please quit posting all these day-to-day Greece is gonna default articles.  Remember they've already re-written the rules of a default two or three times to save Greece and sure they will do it again if needed.

Bush Baby's picture

Agreed - The actual money involved is chump change.  keeping the masses sedated is the bigger issue.

Shropshire Lad's picture

Germany has been the main beneficiary of the European Experiment as its effectively undervalued currency through the Euro has resulted in the demolition of domestic manufacturing industry in the UK,Italy, etc.

two hoots's picture

Germany should annex or indenture Greece (like taking back East Germany), make it a temporary Bundesland.  Germany needs workers and Greece need work.  After Greece meets certain structual and social conditions and Germany is repaid they can choose to separate and return to independence.   That way the debt is not an issue, the EU would be stronger, both would benefit.

Haus-Targaryen's picture

This is quite literally the worst idea out there.  

Haus-Targaryen's picture

What benefit do I get as a German tax payer for putting the Greeks on our payroll with their rules/pension schemes?  We all see what a black hole Greek finances are.  Annexing Greece would not solve the problem, but make it worse.  

Germany needs workers in Germany -- not in Greece.  There are already avenues in place to allow Greek works into Germany without taking all their pensioners with them.

two hoots's picture

You change their rules/pension schemes, improve education, work ethic, government, have access to southern ports (think trade in Africa) to bring in business, hire Greek workers, give them opportunity.  It's that or live with this costly situation forever like we do for not bringing  the blacks into our society as soon as "they" freed them ("they" freed them but ostracized them).  "They" failed us and them both and we pay for that now and always will. 

Build your own EU Silk Road through Greece and keep Russia out (which will cost you)

Haus-Targaryen's picture

So let me get this straight - 

The Greeks tried to change the pension rules and schemes, which results in wide-spread rioting, the complete destruction of PASOK, formerally the largest party in Greece, and political choas for years.  To this day pension reform is the "breaking point" for the Greeks, with Greeks running the government.  

You think we we install Hans Schleimer as the leader of Greece, make these reforms, and the Greeks will go along with it?  You are nuts.  

How old are you? 14?  

two hoots's picture

You have boxed in your brain, probably cultural.   Right mix, right team, right programs, an honest and open approach. Give Greeks ownership in their better future.  Call it a constructive War. I'm done.

TwoHoot's picture

Imitation is the sincerest form of flattery.

Haus-Targaryen's picture

I literally have no idea what you are talking about now.  Literally none.  

TwoHoot's picture

Imitation is the sincerest form of flattery.

Bush Baby's picture

So the USA should annex Mexico and absorb their poor?   Oh wait - we already have.

TwoHoot's picture

Imitation is the sincerest form of flattery.

TwoHoot's picture

Imitation is the sincerest form of flattery.

Herodotus's picture

There is no reason to annex it.  Just make it a protectorate like Bohemia and Moravia.

jmc8888's picture


No, it's already lost.  The squabbling is over who has to recognize the losses and of course be blamed.


Al Gophilia's picture

Long lost.


JamaicaJim's picture

Greece is fucked.

So is the Euro.

Short the fuckers.

lunaticfringe's picture

I was looking at a chart of world debt the other day and noted that Germany, great fiscal conservatives that they claim to be, have more debt than the U.S. 

We're all circling the drain bitches. Greece has the point.

JustObserving's picture

America's debt numbers are all fake as Kotlikoff explains:

Kotlikoff says, “I told them the real (2014) deficit was $5 trillion, not the $500 billion or $300 billion or whatever it was announced to be this year. Almost all the liabilities of the government are being kept off the books by bogus accounting. . . . The government is 58% underfinanced . . . . Social Security is 33% underfinanced . . . . So, the entire government enterprise is in worse fiscal shape than Social Security is, but they are both in terrible shape.”  So, how much is America on the hook for in the future?  Kotlikoff contends, “If you take all the expenditures that the government is expected to make, as projected by the Congressional Budget Office (CBO), all the spending on defense, repairing the roads, paying for the Supreme Court Justices’ salaries, Social Security, Medicare, Medicaid, welfare, everything and take all those expenditures into the future . . . and compare that to all the taxes that are projected to come in, and the difference is $210 trillion.  That’s the fiscal gap.  That’s our true debt.”

Professor Kotlikoff goes on to say, “It will collapse.  It is just a matter of when.

USdebtclock shows US debt at around $18 trillion.

disabledvet's picture

The debt has to be written off.

The country cannot afford the interest rate even in a write down scenario.

Sorry but DB looks fine here. Not so sure about Germany proper.

Greece has played their cards about as good as it gets in my view.

"Keep those euro's coming."

Since Germany will not invade....

LawsofPhysics's picture

Define "invade"  By all accounts when I visit the Pacific Northwest I'd say that it is very safe to say that China has already "invaded."

lunaticfringe's picture

The debt has to be written off. Inflated away, fify.

Greece has them by the balls. Deutsch Bank, holder of ?? trillions in derivatives, is what they are saving. The bankers don't give two shits about Greece. When DB crumbles, I can only pray the rest of these cocksuckers follow suit.

Farmer Joe in Brooklyn's picture

If DB crumbles, life on this planet as we know it will be dramatically altered. 

I get a weird sort of fearful excitement when thinking about it. Not totally dissimilar to the tingly feeling in my nether regions when I fantasize about Michelle Obama.