Zero Hour of European Union's Demise Has Arrived

Yesterday I opined that today would be a momentous one for the future of Europe. Two sets of negotiations begin: one in Brussels between Greece and the eurogroup on bailout terms; the other, in Minsk between Russia, Ukraine, LPR/DPR, Germany and France on a new ceasefire.

I haven't seen anything since yesterday that changes my opinion: in neither case is an agreement forthcoming.

Yves Smith's post this morning says it all -- "Eurogroup Ministers to Syriza: Drop Dead":

I have heard today from a source with knowledge of the US discussions with Germany that they see signs of movement, and that Greece has supporters in other Eurozone bureaucracies. This is not inconsistent with what we’ve said, that there is a contingent that recognizes that austerity has failed and might use the Greek negotiation to advance their cause, and they could ride in and help rescue Greece. But that was before so many parties staked out hard line positions against Syriza’s proposals. The sympathizers don’t appear to be close enough to the negotiations to push for a climbdown, even if the principals could find a way to finesse what would otherwise look like a big loss of face.

It would be better if I were wrong, but what I am hearing of the US reading sounds like a classic American projection of our worldview. First, the Administration contingent seems to believe if it can get Germany to agree to a deal, the rest of the Eurozone will follow. But that isn’t how its structure works. If Greece continues to reject the bailout framework, Germany would need to lead some sort of funds extension outside the Eurozone structure. That has far more moving parts that just trying to settle differences over, say, how much of a break if any Greece gets on its fiscal surplus requirement. The White House/Treasury assumption seems to be that the two sides will negotiate within the current bailout framework, when Varoufakis keeps insisting that that is not on. If he does not budge tomorrow, the basic premise of the US view that the two sides can be pushed to come to a deal would seem to be far from the mark.

Watch the equity markets today. I'm sure they will be quite roiled.

As for the Minsk talks, unless Poroshenko can transform himself Popeye-like with a can spinach, there is no way he will accept the bottom line of Novorossiya, acceptance of the territorial gains it has made since the last ceasefire.

Kiev, backed by the United States, is a pestilential fiction; it cannot exist without war; it has no steady state other than terror; it masquerades, thanks to the support of the West, as a democratic movement striving for a closer union with Europe, but it is really more akin to Islamic State, a terrorist predator that must feed on a civilian population to survive.

Since the Novorossiyan offensive that nearly took Mariupol last summer is what forced Poroshenko's hand in signing the original Minsk ceasefire, my guess is that the junta will be routed there once the current Minsk talks end in impasse. Rick Lyman writing in "Battered Ukrainian City of Mariupol Braces for Worst as Rebels Close In" outlines what is at stake:

Mariupol is a bustling port in a strategic location on the Sea of Azov, near the Russian border. The rebels control the territory to the north and east, and Russia controls the Crimean Peninsula to the southwest. Mariupol is the only major obstacle to their realizing a long-held goal of opening a land route between Russia and Crimea and taking complete control of the Sea of Azov and its rich industrial infrastructure. Russia, which denies playing any role in the conflict here, says it has no such intention.

Even so, Mariupol has been a target almost since the fighting began early last year. The rebels briefly took control of it in the spring, and it was the scene of fierce fighting in the late summer, when the rebels drove to within 10 miles of the city limits.

“In September, Mariupol was very weak and poorly defended,” said Andrey Dzyndzya, who was a prominent activist during the protests that toppled Ukraine’s previous, pro-Russia government and is now a fighter with the Azov Battalion. “There was a kind of panic in the city,” he recalled. “In September, we managed to stop them only by luck.”

But he and other local military and government leaders said the situation was different now, with a complete ring of defensive lines, rather than just positions on the main roads.

“I feel confident that we have enough troops and enough weaponry in place to successfully protect the city now,” Mr. Dzyndzya said.

If the junta is relying on the Azov Battalion to defend Mariupol it is good indication that Kiev is in dire straits. The Ukrainian Army can't fight. So neo-Nazi battalions are pieced together to do the dirty work, like shelling city centers.

Once Mariupol falls things are going to look very different.