Collapse: Greece + Yemen

The situation for Greece seems hopeless this morning. Reports over at Naked Capitalism highlight 1) that Tsipras never expected, never wanted to win the referendum and now has no idea what to do, that is why apparently Varoufakis' replacement, new finance minister Euclid Tsakalotos, showed up in Brussels without any proposal to present; and 2) complete capitulation by Syriza is coming fast. A proposal must be submitted by tomorrow and final agreement reached by Sunday. The new D-Day is now July 12, not July 20.

Though Yves Smith is reporting that Tsipras is already signalling his intention to accept most parts of the austerity package that was overwhelming rejected by Greeks at the polls this past Sunday, this might not be enough to satisfy the hardliners in the eurogroup, who are now rallying for even more austerity.

I think we have arrived at the point of Grexident. I suppose Tsipras can abjectly surrender to the eurogroup, that might have been the point of convening all parliamentary parties in a show of solidarity heading into negotiations. But then how does Syriza survive politically after receiving that 61% "Oxi" vote? It can't.

So it looks like drachmas it is. A lot of chaos is coming.

Which brings us to what I wanted to mention this morning -- Yemen. Yemen is infrequently covered in the "newspaper of record." Whether because its "Mad Max" landscape prevents Times' reporters from being dispatched to a war zone, or the more malign reason that the Gray Lady shares the foreign policy goals of the Obama administration, and the Obama administration is actively involved in the Saudi-led genocidal campaign against the poorest Arab country, New York Times readers are not receiving daily coverage of the ongoing slaughter in Yemen.

The numbers of dead as reported by CNN are as follows:

In total, more than 3,260 people have been killed in Yemen since March, [Stephen O'Brien, the top U.N. humanitarian affairs official, said Tuesday] and close to 1.3 million people have been displaced.

Of the dead, more than 1,500 are civilians, according to the U.N. human rights office.

The Gray Lady did publish a topnotch unsigned editorial yesterday, "As Yemen Collapses":

Yemen has now been added to the United Nations’ list of most severe humanitarian emergencies, along with South Sudan, Syria and Iraq. It is a tragic distinction, highlighting the peril to 80 percent of the country’s 25 million citizens. The international community, including the United States, is not doing enough to push for an immediate cease-fire in the war that is ravaging the country to make it possible to deliver aid.

Yemen, a poor country, was deeply unstable even before a coalition, led by Saudi Arabia and backed by the United States, started bombing the Houthi rebel movement in late March. Last week, Ban Ki-moon, the United Nations secretary general, declared the situation a “catastrophe.”

The coalition is seeking to reinstate the government of President Abdu Rabbu Mansour Hadi, who is now in exile in Riyadh. Mr. Hadi was ousted by the Houthis, an indigenous Shiite group allied with Iran. Most Yemenis are Sunnis, and Saudi Arabia, a leading Sunni country, has feared that a Houthi takeover would extend the influence of Iran, its regional rival.

The statistics are staggering. Over the past three months, the conflict has forced over a million Yemenis to flee their homes, and 21 million are in need of immediate help. Close to 13 million people are hungry and nearly half the provinces are “one step away” from famine, the United Nations said. Some 15 million people have no health care, and outbreaks of dengue fever and malaria are raging unchecked, in part because a fuel shortage has cut the electricity that keeps water pumps functioning.

The armed conflict is the biggest obstacle for United Nations relief agencies and private groups that are trying to reach desperate Yemenis, but a Saudi-imposed blockade along the coastline is also impeding crucial supplies from getting to those in need.

Mr. Ban and his special envoy, Ismail Ould Cheikh Ahmed, have been working to arrange a pause in the fighting so humanitarian aid can be delivered, and late last week aid groups were told that a cease-fire lasting about five days could begin soon. But the Saudi-led coalition may have hurt that goal by unleashing more airstrikes in the past few days against the Houthis and causing scores of new civilian casualties. One attack, on a marketplace near the city of Aden on Monday, killed more than 45 civilians, The Associated Press reported. In all, the United Nations has said 3,000 Yemenis have died since March, half of them civilians.

Some aid groups say five days is not enough time to resupply the millions of civilians caught in the fighting. And even if there is a pause, the conflict could grow worse unless all sides pledge not to use it to seize more territory. The Houthis did exactly that in the last brief break in the fighting.

What is needed is a permanent political solution that will ensure the Houthis, who have some legitimate grievances and are unlikely to give up, get a significant role in any new government. Negotiations should be started without preconditions. But Saudi Arabia and its allies have appeared intent on forcing the Houthis to surrender, no matter what the cost to civilians and Yemen’s cities and villages.

Yemen has been a breeding ground for extremists, including Al Qaeda in the Arabian Peninsula, the most lethal Qaeda affiliate. Its further unraveling will make it impossible to contain those threats, and that is a consequence all sides should fear.

Add to this the two Islamic State in Yemen car bombs that struck Sana yesterday, and you have a picture of superpower backed states bombing from above while its takfiri proxies Islamic State and AQAP bomb from down below.

At this point it is obvious that even if all Houthis were to spontaneously combust, Yemen would remain a cracked, failed state, a staging ground for takfiri jihad for the foreseeable future.

We have entered that stage of the dialectic where state powers in order to maintain their hegemony are destroying the possibility of any peace.

Deadlines: Greek Debt Negotiations & P5+1 Talks

So we're back to deadline watch in the Greek debt drama. The new make-or-break deadline we're supposed to stay focused on is July 20. That is when 3.5 billion euros that Greece owes to the European Central Bank comes due. If Greece fails to make repayment by July 20, the ECB will be hard pressed to find a way around cutting off liquidity to already cash-strapped Greek banks.

James Kanter publishes a helpful story this morning, "Greece Expected to Offer Proposals as Eurozone Leaders Prepare to Meet," that precedes yet another emergency summit of eurozone leaders in Brussels today. Kanter tilts towards the neoliberal consensus. So his writing is a helpful prism to understand how the U.S./EU elite view recalcitrant Greece:

BRUSSELS — The Greek government was expected to make proposals to eurozone leaders on Tuesday to support its battered economy and keep the country in the single currency area, as Athens and its creditors resume their struggle over an elusive solution to Greece’s long-running economic crisis. 

But a quick fix for Athens looked extremely difficult to achieve. The stakes were rising on Tuesday ahead of the latest emergency summit meeting of European leaders. None of them wants to take the blame for a possible sudden, chaotic departure from the eurozone by Greece. That means that all sides could agree to keep talking even as the crisis reaches new levels of intensity, and even as Greece hurtles toward a deadline — a payment of 3.5 billion euros, or about $3.9 billion, to the European Central Bank on July 20 — that most observers think it cannot miss without leaving the eurozone.

The Eurogroup of finance ministers is scheduled to convene at 1 p.m. in Brussels, followed by an emergency summit meeting of the 19 leaders of eurozone countries at 7 p.m. that is expected to include Mario Draghi, the president of the European Central Bank, and Jeroen Dijsselbloem, the president of the Eurogroup.

*** 

A failure to make good on the July 20 bailout payment to the European Central Bank would make it almost inevitable that Greece would have to cut a lifeline for the country’s cash-drained banks. And that could force the country to print a parallel currency that would hasten its departure from the currency bloc. 

That prospect could add pressure on the Greeks this week to commit to a number of short-term changes for bridge financing to avoid defaulting on the European Central Bank, and then conclude a wider program, with debt relief, later in the year. 

But one analyst emphasized on Tuesday that the track record of the government in Athens would make it extremely difficult to take any of its commitments at face value. 

“It remains very unclear whether the Greek government is really trying to avoid an exit from the euro area, or whether it only wants to avoid being held responsible for it by its domestic public opinion,” said Nicolas Véron, a senior fellow at Bruegel, a research organization in Brussels.

I used to be of the opinion that what Tsipras was up to was transforming consciousness in Greece -- enlightening the Greek voter -- to accept the reintroduction of the drachma. But I no longer believe that. I think that Syriza, true to what Tsipras and Varoufakis have long said in public, has no intention of leaving the eurozone. The strategy of Tsipras has been to wear down the members of the troika, and in this he has been successful. France has moved away somewhat from Germany. The IMF has broken with other members of the troika and issued a report declaring Greece's debt load unsustainable.

The problem for Tsipras is that despite the landslide "Oxi" win, the July 20 ECB repayment deadline looms large. For the hardliners in the Eurogroup who want to collapse Greek banks and be done with it, two weeks is a short time to wait. There is no need for Schauble and Dijsselbloem to offer any concessions, particularly on debt forgiveness. It appears that Tsipras will run out of time and no cavalry will ride over the hill to the rescue.

And not one but two deadlines have now been breached in the P5+1 talks in Vienna: first, the June 30 deadline, and today's July 7 deadline. The significant one for Kerry and Obama is Thursday July 9. If no agreement is reached with Iran on its nuclear program in two days then the U.S. Congress will get an additional 30 days to skewer the agreement. USG scribe Michael Gordon reports in "Iran Nuclear Talks Are Extended Once Again":

VIENNA — The talks to complete a landmark accord limiting Iran’s nuclear program have been extended for several days after negotiators acknowledged that they would be unable to meet a Tuesday deadline.

To give negotiators more time to pursue a final accord, the diplomats agreed to extend through Friday an interim nuclear accord called the Joint Plan of Action. That interim agreement, which had been set to expire on Tuesday, freezes much of Iran’s nuclear program in return for modest sanctions relief.

“We are continuing to negotiate for the next couple of days,” Federica Mogherini, the foreign policy chief for the European Union, told reporters here.

This is the second time the talks have been extended since Secretary of State John Kerry arrived here in late June. The original goal was to complete a final accord by June 30.

Ms. Mogherini said that the negotiations had entered “a difficult and sensitive” phase, but she did not discuss the remaining issues.

The unresolved issues in recent days have included what limits would be placed on the development of more efficient types of centrifuges after the first decade of an accord, what steps would be taken to address suspicions about Iran’s past nuclear activities, and the timeline for removing sanctions.

The Obama administration hoped to finish the accord by Thursday, so that it could be submitted to Congress for a 30-day review. If the agreement is finished this summer, the duration of the review period will double.

I don't see Obama walking away from the table. He wants an agreement, not only for his "legacy"
but for the future electoral viability of the Democratic Party. Not much is made of it in the media, but the Democrats' nominal association with a less bellicose foreign-policy perspective is a huge vote-getting advantage. A Democratic administration does not want to squander this.

But give the media monopoly and a Saudi- and Israeli-dominated Congress two months to inveigh and fear-monger, and the chances are high any agreement will be scuttled, which puts the feckless Obama in the difficult position of having to veto a Congressional override to protect his "legacy" agreement. 

It is hard to say at this point which is a stronger character trait in Obama: his desire to go-along-to-get-along or his lust to be inscribed in the history books. Probably the latter. So maybe there is hope for a Iranian nuclear accord after all.

Huge Win for Greece, Varoufakis Sacked, Troika Unlikely to be Placated

Greek Prime Minister Alexis Tsipras' first move following the landslide anti-austerity "Oxi" vote in yesterday's referendum was to toss his finance minister and chief troika critic, Yanis Varoufakis, on the pyre. Varoufakis announced his resignation today with the blog post, "Minister No More":

Soon after the announcement of the referendum results, I was made aware of a certain preference by some Eurogroup participants, and assorted ‘partners’, for my… ‘absence’ from its meetings; an idea that the Prime Minister judged to be potentially helpful to him in reaching an agreement. For this reason I am leaving the Ministry of Finance today. 

I consider it my duty to help Alexis Tsipras exploit, as he sees fit, the capital that the Greek people granted us through yesterday’s referendum. 

And I shall wear the creditors’ loathing with pride. 

We of the Left know how to act collectively with no care for the privileges of office. I shall support fully Prime Minister Tsipras, the new Minister of Finance, and our government. 

The superhuman effort to honour the brave people of Greece, and the famous OXI (NO) that they granted to democrats the world over, is just beginning.

There is no indication at this point that the eurozone power brokers are feeling any change of heart after a super-majority of Greeks rejected their last proposal. Jack Ewing reports from the European Central Bank headquarters in Frankfurt that there is a wait-and-see attitude on Greece's access to emergency liquidity assistance (ELA):

The no vote by Greeks on Sunday makes it even more difficult for the European Central Bank to continue propping up Greece’s commercial banks, whose solvency is closely linked to that of the country’s government. 

But the central bank has so far avoided taking action that could force Greece out of the eurozone, a possible outcome if the banks fail. Without a banking system serving as a conduit for euros and a platform for transactions, Greece might have little choice but to begin printing its own currency.

“Pressure has increased further for the E.C.B. to revoke Greek banks’ access to central bank liquidity,” said Mujtaba Rahman, the Europe director for the Eurasia Group, a political risk consulting firm. “Still, the E.C.B. is very likely to keep its liquidity lifeline open for the time being.”

While the central bank probably will not cut off credit to the Greek banks on Monday, it is also unlikely to increase the amount available to them from its current level of 89 billion euros, or about $99 billion. The 25 members of the Governing Council will not want to increase the central bank’s exposure to Greece until there is tangible progress toward an accord with eurozone creditors and with the International Monetary Fund.

Without an increase in credit, Greek banks are in imminent danger of running out of cash to dispense to depositors. They are unlikely to open tomorrow, despite promises to the contrary by Athens.

“The Greek no puts the European Central Bank in a most difficult position,” Holger Schmieding, chief economist at Berenberg, a German bank, said in a note to clients. “We look for the E.C.B. to tread very cautiously, though, perhaps even seeing to it that small amounts of euro cash could still be withdrawn from Greek cash machines for a while until the political outlook becomes clearer.”

In other words, the historic "Oxi" vote by the Greek people means nothing to ECB apparatchiks. This attitude is also prevalent in Brussels where James Kanter quotes European Commission VP Valdis Dombrovskis saying "Oxi" will make things worse for Greece:

“The commission is ready to continue its work with Greece,” Mr. Dombrovskis told a daily news conference in Brussels. “But to be clear, the commission cannot negotiate a new program without a mandate from the Eurogroup.” 

Mr. Dombrovskis was referring to the name of the group of finance ministers from countries that use the euro.

The hurdles to a formal resumption of talks, including any official decision by the Eurogroup to begin negotiations on Greece’s third international bailout in five years, were high, Mr. Dombrovskis warned.

“The ‘no’ result unfortunately widens the gap between Greece and other eurozone countries,” he said. 

“There is no easy way out of this crisis,” he added. “Too much time and too many opportunities have been lost.”

Once again, to the eurozone power elite the "Oxi" vote means nothing; in fact, worse than nothing. The democratic referendum, we are told, has raised the costs of the any new bailout deal by tens of billions of euros.

What the "Oxi" vote reveals is the weakness of the "big lie." Greek voters saw clearly what was happening: Banks were shut because the European Central Bank capped ELA when Tsipras called the referendum. The ECB did this in an attempt to shock Greeks and stampede them in the direction of a Yes vote. It failed stupendously. Now, as Krugman outlines in his column, "Ending Greece’s Bleeding," for the ECB to increase ELA would be to acknowledge that the cap on lending was a political intervention meant to topple Greece's Syriza-led government:

The most immediate question involves Greek banks. In advance of the referendum, the European Central Bank cut off their access to additional funds, helping to precipitate panic and force the government to impose a bank holiday and capital controls. The central bank now faces an awkward choice: if it resumes normal financing it will as much as admit that the previous freeze was political, but if it doesn’t it will effectively force Greece into introducing a new currency. 

Specifically, if the money doesn’t start flowing from Frankfurt (the headquarters of the central bank), Greece will have no choice but to start paying wages and pensions with i.o.u.s, which will de facto be a parallel currency — and which might soon turn into the new drachma.

But the big lie must be protected. That is all neoliberalism is at this point. Krugman is not sanguine about the possibility of a new debt deal emerging quickly; and without this, Krugman sees no better alternative for Greece than abandoning the euro:

In the failed negotiations that led up to Sunday’s referendum, the central sticking point was Greece’s demand for permanent debt relief, to remove the cloud hanging over its economy. The troika — the institutions representing creditor interests — refused, even though we now know that one member of the troika, the International Monetary Fund, had concluded independently that Greece’s debt cannot be paid. But will they reconsider now that the attempt to drive the governing leftist coalition from office has failed?

I have no idea — and in any case there is now a strong argument that Greek exit from the euro is the best of bad options.

Of course, Greece no longer has its own currency, and many analysts used to claim that adopting the euro was an irreversible move — after all, any hint of euro exit would set off devastating bank runs and a financial crisis. But at this point that financial crisis has already happened, so that the biggest costs of euro exit have been paid. Why, then, not go for the benefits? 

Would Greek exit from the euro work as well as Iceland’s highly successful devaluation in 2008-09, or Argentina’s abandonment of its one-peso-one-dollar policy in 2001-02? Maybe not — but consider the alternatives. Unless Greece receives really major debt relief, and possibly even then, leaving the euro offers the only plausible escape route from its endless economic nightmare.

And let’s be clear: if Greece ends up leaving the euro, it won’t mean that the Greeks are bad Europeans. Greece’s debt problem reflected irresponsible lending as well as irresponsible borrowing, and in any case the Greeks have paid for their government’s sins many times over. If they can’t make a go of Europe’s common currency, it’s because that common currency offers no respite for countries in trouble. The important thing now is to do whatever it takes to end the bleeding.

Basically we are back to where we were when negotiations first started between Greece and the troika. Absent significant debt write-offs there appears to be no rational alternative to a Grexit.

But a Grexit doesn't appear to be Tsipras' goal; axing Varoufakis is proof of that (though the finance minister didn't seem too broken up about it; at the end of the day, a scholar prefers the quiet of the cloister). Why the troika doesn't grab at the offer Tsipras made last Wednesday after Greece failed to make its repayment to the IMF and be done with the crisis can only be explained by a perception in Brussels, Berlin, and other European capitals (not to mention Washington D.C.) that protecting the big lie of neoliberalism -- at all costs -- is paramount, and this demands that a leftist party like Syriza must go.

"Oxi" is Winning in Greece

Suzanne Daley in "Greeks Appear to Lean Toward Rejection of Bailout Deal" includes some very telling quotes from interviews with voters at Greek polling stations:

Ippolitos Papantoniou, 55, a businessman, said Greece was being made an example in case other Southern European nations tried to challenge the dictates of the eurozone. 

“We are a tiny part of the European Union’s G.D.P.,” Mr. Papantoniou said. “They don’t want to allow a government of the left.”

Athanasis Chryssochoidis, 76, a pensioner and a friend of Mr. Papantoniou’s, agreed. “Tsipras and all of them want to negotiate,” Mr. Chryssochoidis said. “But as soon as they said yes to something, the Europeans put up more demands. The issue is that Syriza is a left party and they don’t want such mischief.” 

“We’ve reached our limit,” Mr. Chryssochoidis said. “This is not a society of beggars.”

People can see what is happening. Exit polls show a strong No. Plus, No is coming in at 60% with 10% counted.

The courage of the Greek people must be celebrated if this holds up. To display such courage is the essence of our humanity, the whole point of being here now, always.