Shocks to the European Union

The European Union is facing a wide array of challenges, and not just the blow back from the cracking apart of the Middle East. Several developments this past week point to a series of shocks ahead for the continental union.

First, I should say that I think that the EU is an institution that serves the United States. The way it works is that you create a political union that is subordinate to the economic union, and the economic union answers to Germany. Germany answers to the United States in foreign policy matters. So in a series of short steps you have a huge continent-sized economy that eclipses the U.S. but is politically supine at its feet.

The left has to give up for the time being on its European Dream of progressive government in Brussels. It is not going to happen before several shocks shake the shack.

Shock #1: Anti-austerity government is coming to Portugal.  Despite headlines early last month touting the first-place finish of the coalition of Portuguese prime minister Pedro Passos Coelho as a great vindication of austerity, the conservatives were unable to form a government. Now it will be up to the left anti-austerity bloc, led by the Socialists but also including the long-resistant-to-left-leaning-coalitions Communist Party, to form a government, assuming that conservative president, Aníbal Cavaco Silva, allows them to. He might ask Passos Coelho to remain at the head of a caretaker government until new elections can be held next year.

Waiting until new elections is likely the preferred outcome for the elites who preside over governance in Brussels. Despite the object lesson that Greece was supposed to provide for all the restless natives who didn't wanted to accept a pauperized future of ever-increasing austerity, it is apparent the citizens of another European nation are ready to tilt again at the neoliberal consensus.

As Raphael Minder pointed out last week, "Rising Left Bloc in Portugal Could Threaten Austerity Drive," if the left bloc is successful at forming a government in Portugal, this points the way to a fall of the conservative, pro-austerity Popular Party in Spain:

Prime Minister Mariano Rajoy of Spain, who champions austerity, hopes to get re-elected, but most polls show his Popular Party falling short of keeping its parliamentary majority. That raises the possibility that the Spanish could end up in a similar situation to that of the Portuguese. 

“The Iberian left is forming alliances against those in power and trying to create governments of losers,” said Pablo Casado, a conservative lawmaker who is spokesman for Mr. Rajoy’s Popular Party. “This could also happen in Spain.” 

At the very least, Portugal’s political deadlock has signaled the deep divisions the austerity debate continues to generate. 

“You can have an election where there is no winner, only losers,” said Mr. Cabral, the economics professor. “Which is an odd situation in a democracy.”

Shock #2: Spain Splits Over Catalan Independence. Despite a ruling from the Spanish constitutional court, the parliament of Catalonia is moving full speed to independence. How is that for a shock to the system?

Shock #3: Greece Burns. Today the first general strike directed at the once "great leftist hope" Syriza government shows that Alexis Tsipras' capitulation to the troika bought Brussels maybe six months.

Shock #4: Brexit. Cameron published the list of demands that Conservatives need met in order to support remaining in the EU. Wishy washy and ready-made for fudging is how I would characterize them. The main item garnering attention is reduced welfare payments for immigrants. I don't see how the referendum on remaining in the EU passes.

Shock #5: Walls Go Up. Slovenia is the latest country to erect a border wall in Europe. So much for the promise of an "ever closer union."

The Global Minotaur and National Elections in Portugal

Having just finished reading Yanis Varoufakis' The Global Minotaur (while watching non-stop 14-hours of the National Football League on television, games from London to Buffalo and Cincinnati, out to the Silicon Valley in California, before ending the evening in sudden-death overtime in the Big Easy), I have the former Greek finance minister's thesis on my mind (which is captured in the subtitle of his blog, "Thoughts for the post-2008 world").

Varoufakis argues that the post-WWII global economic order created by the United States, a system where the U.S. ran large trade surpluses which it then recycled by investing in its former enemies Germany and Japan, was turned upside down in 1971 when the Nixon administration withdrew the dollar from its gold peg and let the currency float. Trade surpluses had by this time begun to turn into trade deficits twinned with a government spending deficit. The second post-WWII global economic order, where trade surpluses from Germany, Japan and the rest of the world were recycled through Wall Street, maintaining the dollar's global hegemony, Varoufakis names the Global Minotaur, a.k.a., financialization, or neoliberalism.

According to Varoufakis, the financial meltdown of 2008 destroyed the Global Minotaur system of surplus recycling. Since then we've staggered along in an ad hoc fashion that Varoufakis describes as "bankruptocracy": the control of the political system by bankers who are presiding over institutions stuffed with worthless paper and bad loans; the Global Minotaur is dead, but the bankers and their captive governing elites are trying to resuscitate the beast Frankenstein-like.

I think Varoufakis is on the money. The solution to this problem of "bankruptocracy," a.k.a., late-stage post-meltdown neoliberalism, has to be a political awakening.

Varoufakis' Syriza in Greece offered great hope that this awakening was underway, and then its prime minister, Alexis Tsipras, capitulated.

The significance of this setback can be found in two informative stories by Raphael Minder: "Pedro Passos Coelho, Who Led Austerity Plan in Portugal, Nears Re-Election" and "Center-Right Coalition That Applied Austerity Measures Is Re-elected in Portugal." Greece's Syriza was held up as an object lesson as to why not to support the anti-austerity left demanding a reopening of negotiations with the troika. This is from the first piece by Minder:

LISBON — For most of his four years in office, Prime Minister Pedro Passos Coelho has been the unpopular flag-bearer of austerity in Portugal. In the face of street protests and strikes, he stuck rigidly to the spending cuts and tax increases that the country’s creditors demanded.

And on Sunday, he could become the first national leader in Europe to win re-election after overseeing a painful international bailout of his country.

A year ago that outcome seemed highly unlikely, but now it appears within reach: The latest opinion polls show Mr. Passos Coelho’s center-right coalition with a wafer-thin lead over the Socialists and other left-leaning parties.

His chances have improved along with a consumer-driven economic recovery that has finally started to improve the job market in Portugal. The unemployment rate has fallen to 12 percent from a peak of 17.5 percent in early 2013. [!]

The recent turmoil in Greece has also helped Mr. Passos Coelho by raising tensions among Portugal’s already fragmented left. Even if the main opposition party, the Socialists, wins the most votes on Sunday, it could struggle to form a viable governing coalition with the Communists and other left-wing parties, some of which are demanding a restructuring of Portugal’s debt. 

Mr. Passos Coelho, 51, has campaigned largely on the argument that the country needs continuity in government to avoid derailing the economic recovery or risking another bruising confrontation with its creditors. 

“The images of people queuing to get their money out of Greek banks was used over and over again by the ruling coalition, and it has probably made people here more afraid about not respecting European rules,” said Maria de Belém, a Socialist lawmaker and former minister. “So people are now going to vote with a bit of fear, and a lack of hope.”

Passos Coehlo's coalition  ended up on top yesterday in national elections but with a reduced number of seats in parliament. This is from Minder's second piece:

LISBON — Portugal’s governing center-right coalition won re-election on Sunday in national elections that were seen as a bellwether for the austerity measures that creditors have imposed on Portugal and other countries during the euro debt crisis. 

But even though Prime Minister Pedro Passos Coelho is set to stay in office, he is likely to lead a weaker and less change-minded government after his center-right coalition failed to keep its parliamentary majority. 

Mr. Passos Coelho’s two-party coalition won almost 39 percent of the vote, according to preliminary results, ahead of the main opposition Socialist party, which got 32 percent.
With the votes of overseas Portuguese still to be counted, the coalition held 104 of the 230 seats in Parliament, down from the 129 seats that it won in 2011 and also short of the 116 seats needed for a majority. The Socialists got 85 seats.

Though Passos Coelho's win is being trumpeted as a substantial victory, a way forward, a ray of sunshine for the governing elites in service of a bankrupted neoliberalism, it is nothing of the sort. As Minder goes on to explain, turnout was low, like in Greece a few weeks back with Tsipras' post-capitulation reelection, and Passos Coelho will have difficulty continuing his fire sale of state assets:

But with a fragmented Portuguese Parliament, “political stability could become a challenge very soon, possibly as early as next year as the government tries to get support in Parliament for the 2017 budget,” said Antonio Barroso, an analyst at Teneo Intelligence, a London think tank, in a note that was based on the preliminary results.
During the campaign, Mr. Passos Coelho argued that this recovery could be jeopardized if voters switched to a left-wing government that would turn its back on fiscal discipline and irk international creditors. 

Yet even if the electorate heard his call for government continuity, the turnout of 57 percent also showed a high level of apathy and despondency among voters. 

“Our politicians haven’t properly explained or justified austerity, so this election has just come down to a battle between those who are so angry that they want change for change’s sake and those who are now extremely cautious or worried about the cost of making any kind of change,” Amália Silva said after she cast her vote on Sunday in the Lapa neighborhood of Lisbon. 

After meeting the different party leaders over the coming days, President Aníbal Cavaco Silva is expected to ask Mr. Passos Coelho to try and form the next government. 

Diogo Costa, 28, said he voted for the radical Left Bloc, but without holding any genuine hope that a different government could change tack and unwind austerity. 

“I think the rules of Europe don’t give anybody the chance to opt for an alternative, as we have just seen in Greece,” Mr. Costa said. 

The recent debt haggling and political turmoil in Greece also helped Mr. Passos Coelho by increasing the friction among Portugal’s already fragmented left, which includes parties that want Portugal to restructure its debt. On Sunday, the Left Bloc emerged as the main party of the radical left, ahead of the Communists, according to preliminary results.

Mr. Passos Coelho took office in 2011, shortly after Portugal requested an international bailout. Going into Sunday’s election, he was already the first prime minister to lead a coalition through a full term in office here since 1974, when a revolution toppled Portugal’s dictatorship. 

Sunday’s result was a major turnaround for a prime minister whose popularity plummeted during the first years of his mandate, as his government enforced a bailout program despite street protest and strikes. 

Even as the recovery has gathered pace, left-wing parties have also highlighted studies showing that Portugal has one of Europe’s highest levels of income inequality and poverty. Mr. Costa, the Left Bloc voter who is an assistant topographer, said his monthly salary of 600 euros, or about $672, forced him to live with his parents. “I don’t think it’s normal to have a salary that doesn’t even allow you to leave home,” he said.

The Socialists are likely “to harden their stance towards the government,” according to Mr. Barroso, the political analyst, because of pressure from the strengthened Left Bloc and other more radical parties. 

On Sunday, Mr. Passos Coelho called on the Socialists to support him in his efforts to make further economic changes. 

Without a parliamentary majority, however, the next center-right government will have less room to put privatizations and other controversial measures in place than during its first mandate. 

Even as Portugal has won plaudits from creditors, its level of public debt — about 125 percent of gross domestic product — is among the highest in Europe. The country’s deficit was also recently hit by the near-collapse of the Espírito Santo family conglomerate. The cost of rescuing the conglomerate’s bank ballooned the country’s 2014 budget deficit to 7.2 percent of G.D.P., from a projected 4.5 percent.

Looking at elections in Europe illuminates the path ahead in the United States. And what do we see? Low turnout, zombified neoliberal elites claiming a loss -- a reduced number of seats in parliament -- as a great victory, while a hard-shell revivified left is on the rise. In other words, bad news for establishment Democrats and Republicans, but not a robust enough radical left to take advantage of the situation. More woe to come.

Castrated Tsipras Triumphs in Greek Elections: Big Win for Neoliberalism

Elections in Greece this past Sunday, despite polls which showed a neck-and-neck race between New Democracy and Syriza, returned Alexis Tsipras as prime minister with basically the same numbers his party posted last January, a time when Syriza was the idol of most of the left in the West.

There are a number of takeaways here. Foremost, certainly neoliberals, who, back in January and February when Tsipras and Varoufakis were strutting their stuff tieless in Brussels and Berlin, counseled that the best possible outcome for all -- creditors and debtors alike -- would be for a young popular new leader like Tsipras to guide his flock into acceptance of austerity and acquiescence to the diktats of the troika, are feeling vindicated.

A sample of this feeling of vindication as registered on high is expressed in a Gray Lady editorial this morning, "Greek Voters Give Alexis Tsipras Another Go as Prime Minister." I quote it in its entirety because we have to give the neoliberal power brokers their due. They ended being spot on about Tsipras. Furthermore, while it is tempting to consign neoliberalism to the dust bin of history as an exhausted paradigm thoroughly discredited as the "dung of the devil" by no less a august personality than Pope Francis, it still has marrow left in its bones.

Eight months after electing a left-wing political outlier, Alexis Tsipras, to reject more austerity, Greek voters have resoundingly re-elected the selfsame Alexis Tsipras, only this time with a mandate to manage austerity. That could prove to be a sage choice. 

Everything depends on how Mr. Tsipras, 41, plays his newly strengthened hand. After fighting fiercely against the harsh measures sought by Greece’s creditors in exchange for another bailout, he finally caved in August. The alternative, basically to abandon the euro currency, was too frightening. That led the hard-liners in Mr. Tsipras’s Syriza party to defect, and persuaded him to call a quick election. 

That he succeeded in getting roughly the same vote he had in January even after his surrender showed that Greeks believed in him, believed that he had given the negotiations his best shot, and still preferred his Syriza to the old-guard parties that got Greece into the mess it’s in. New Democracy, the party that according to the polls was neck and neck with Syriza, ended up a full seven percentage points behind, while the Syriza defectors, who formed their own party, failed to clear the 3 percent barrier for a single seat in Parliament. 

The good news — a relative concept in a country with very few good options in its future — is that Mr. Tsipras has the mandate and the popular trust to impose the economic measures he agreed to and to pursue the reforms Greece so sorely needs if it is to start reviving its battered economy. New Democracy would support Mr. Tsipras on austerity and reforms, giving him an insurmountable majority in Parliament. 

Mr. Tsipras himself declared that his mandate was “crystal clear” to get rid of the “wickedness and the regime of corruption and intertwined interests” embedded in Greek politics. That’s fine, but Greece also needs deregulation, privatization and further slimming of the bloated public sector, all of which runs counter to Mr. Tsipras’s left-wing ideology. 

The somewhat sardonic view among some of Greece’s creditors is that having Mr. Tsipras in the driver’s seat is still better than having the right-of-center New Democracy there, if only because he would be a far greater obstacle to reform as leader of the opposition. There is some truth to that; it was after he took charge that he realized that the realities of Greece’s [p]light trumped his ideology. 

The creditors — the European Commission, the European Central Bank and the International Monetary Fund — should now recognize that Mr. Tsipras is not a passing phenomenon, but the leader Greeks have seriously put their faith in. It would be in their best interest to set aside all the antipathy of the past eight months and to encourage him toward the difficult decisions he needs to make by seriously reducing the mountain of debt that is choking Greece. 

Many more trials, and many unknowns, lie ahead for the Greeks. But at least they’ve finally put some faith in a leader. It would be a shame if he and Greece’s creditors failed to take advantage of this trust.

For the left there is both good and bad in the Sunday vote. The good is that Tsipras' win was greatly diminished by it taking place during the lowest turnout election in Greek history. According to Suzanne Daley in "Alexis Tsipras Given a Second Chance by Greek Voters":

Many voters wondered whether, with the bailout deal in place giving huge oversight powers to the creditors, it really made any difference who would govern Greece. In the end, voter turnout was the lowest in Greece’s history, with only 56 percent compared with 63.6 in January.

The bad is that the Left Platform faction of Syriza, the group of lawmakers that split off from Syriza to form their own party, Popular Unity, which advocated for a return to the drachma, so underwhelmed at the polls that they will not even be represented in parliament. Turning to Suzanne Daley's latest dispatch, "Greece’s Leader Starts Big Economic Overhaul":

Perhaps the biggest losers in the election were the breakaway Syriza leftists, who formed their own party, Popular Unity, and campaigned urging a return to the drachma rather than an acceptance of new austerity measures. 

The party got so few votes that it will not even get into Parliament, leaving the former speaker of Parliament, Zoi Konstantopoulou, who is one of the country’s most ardent corruption fighters, on the sidelines.

Tsipras has recast Syriza's mission as one of fighting entrenched oligarchy and its corruption. This will prove to be more a campaign pitch than a reality. For a leader who buckled in negotiations with Brussels, there is little hope that he will be able to transform Greek society. Tsipras parliamentary majority is slimmer this go-round, and while Left Platform is gone, that does not mean that implementing the pension cuts, state asset fire sales and tax increases will be any easier for Syriza MPs to cast "Yea" votes. Daley again from "Greece’s Leader Starts Big Economic Overhaul":

[Tsipras] will need to move quickly, however, to keep the country’s creditors happy and aid flowing. In the next few months, Parliament will have to pass a mountain of legislation, in many cases measures that previous governments found too politically difficult to tackle, including higher taxes on farmers, further cuts to pensions and a stepped-up program to sell government assets. 

This alone will test anew Mr. Tsipras’s now slightly smaller majority in Parliament. But he also has to produce a budget in the next two weeks before Greece’s creditors — the other nations that use the euro, theEuropean Central Bank and the International Monetary Fund — will even consider the long-term debt relief that many experts say Greece needs to get on the road to recovery. 

There is also the need to recapitalize the banks and oversee the unwinding of capital controls.

And if Greece’s financial troubles were not enough, thousands of migrants and refugees are landing here on their way to other parts of Europe. 

Greek voters gave Mr. Tsipras a solid victory, handing him 35.5 percent of the vote and 145 seats in the 300-member Parliament. He quickly announced that he would again form a partnership with the right-wing Independent Greeks party, which won 10 seats. 

Some experts, including Mr. Bastian, said they worried about the sustainability of Syriza’s very slim majority. Past governments watched their majorities shrink over time as unpopular measures came up for votes. In the previous government, Mr. Tsipras’s coalition with the Independent Greeks controlled 162 seats, though more than two dozen of those were rebellious Syriza members on the far left who broke with Mr. Tsipras over the new bailout package. 

“There are still a lot of factions in his party,” Mr. Bastian said, “and it will be hard to keep them all in line.”

Syriza under Tsipras is a cautionary tale. Much like Occupy Wall Street, many of us projected grandiose expectations for the new Greek government. Transformation of the planet-killing neoliberal paradigm seemed to be aborning (before that, a vehicle for many fantasies of rebirth was Obama 2008). But the old, rancid, destructive paradigm keeps rolling on with barely a check on its speed, something to keep in mind as we celebrate Jeremy Corbyn's new leadership of Labour or Bernie Sanders' robust assault on the S.S. Clinton.

Snap Elections in Greece and Turkey

Snap elections have been called in Greece (September 20) and Turkey (November 1). The rival nations of the Aegean both tout wounded leaders trying to solidify a disintegrating base of support.

One can only hope that Tsipras and Erdogan suffer a huge defeat at the polls. If democracy is to work elections must matter. In the case of Greece, that huge "Oxi" vote against austerity must be matched by tossing Tsipras from power. The discussion now is what new party formations will appear in the run up to the election. Syriza's Left Platform is making noises that it will create a "Oxi" party, while Tsipras is considering a new PASOK-type "socialists who support neoliberal hegemony" grouping.

In Turkey, Erdogan's corruption and warmongering have led to a crisis in confidence. The Islamist president is playing the divide-and-conquer game by going after the Kurds, hoping that his Justice and Development Party will gain at the expense of the Kurdish bloc.

In both Greece and Turkey, may the people be granted the strength and wisdom to see through the bullshit.

****

I'm out of town for the next few days.

The Spectacular Failure of Syriza

The Associated Press has a succinct roundup of Syriza's abject failure in "Greece Gets First Batch of New Bailout Loans, Avoids Default," while the Gray Lady's Alison Smale provides a lifeless puff piece, "An Architect of the Latest Greek Bailout Navigates Germany’s Dual Roles," on Germany's victorious finance minister Wolfgang Schäuble.

Syriza's capitulation is complete now that the third bailout agreement has been finalized and the money from the creditors to the creditors is starting to flow. Nothing has changed, as the AP story makes clear. The chairs on the Titanic have been rearranged:

ATHENS, Greece — Greece received the first 13 billion euros ($14.5 billion) from its new bailout package on Thursday, allowing it to pay a debt of 3.2 billion euros to the European Central Bank and avoid a messy default.

Greece could not have afforded Thursday's debt repayment, which was confirmed by the debt management agency, without the rescue funds from 18 other European nations that share the euro currency. Missing the payment would have raised new questions about the country's ability to remain in the euro.

European bailout fund supervisors approved the release of the first batch of loans on Wednesday evening. Twelve billion euros are earmarked for repaying debts and the remainder for settling arrears to public sector suppliers.

The new three-year bailout package — Greece's third bailout in little more than five years — is worth a total of 86 billion euros ($96 billion), and the gradual disbursement of funds depends on the Greek government implementing a series of reforms, including steep tax hikes and spending cuts.

Accepting the conditions was a major reversal of policy for Prime Minister Alexis Tsipras and the coalition government between his radical left Syriza party and the small nationalist Independent Greeks. It has cost him a major rebellion within Syriza that threatens to split the party and could lead to an early election as soon as next month.

Tsipras has been contemplating his options after a parliament vote to approve the bailout conditions led to dozens of his own party lawmakers voting against him. Among the options being discussed are for him to call a vote of confidence in his government or to call an early election outright, potentially in September.

The government has said its main priority was to secure the bailout funding and to repay the ECB loan on Thursday, after which it would announce any further action.

The prime minister was holding meetings with his ministers, and there was speculation an announcement could come as soon as Thursday afternoon.

The political uncertainty took its toll on the market, with the Athens Stock Exchange down 2.8 percent in early afternoon trading.

Tsipras won general elections in January on promises to repeal similar austerity measures attached to Greece's two previous bailouts. But he has said accepting creditor demands for yet more reforms was the only way to ensure his country remains in the eurozone, which opinion polls have shown the vast majority of his population wants.

Hardliners within his party have accused him of capitulating to unreasonable demands that will plunge the Greek economy further into recession.

Hopefully Tsipras will be tossed from power. The dominant neoliberal paradigm survives because politicians say one thing to the electorate -- promising to tax the super-rich and invest money in social programs; economic justice, basically -- and then when they govern they refuse to do what they were elected to do. Tsipras is a prime example. Obama is another. It also explains why Hillary Clinton has a lot of name recognition but very shallow support. Voters know what they are going to get -- a lot of articulate remedies delivered at campaign events, but nothing or next to nothing once on the throne. It is why there has been a Trump boom. His pandering seems to have ruptured the conventional boundaries of neoliberal discourse. Trump is critical of free trade and by demonizing immigrants he is trying to frack what is left in the played-out well of white backlash. Maybe Greece will lurch rightward in a Trumpist direction after Syriza's spectacular failure.

Whither the dialectic? Can the dialectic, the engine of history, be stemmed? That is what we are seeing in our present history. The rulers are refusing to budge. They are trying to roll back the tide, whether it is the Arab Spring or Occupy Wall Street or Syriza. Neoliberalism will out.

The 2011 Arab Spring has been, at least temporarily, successfully subverted at the cost of destroying the Sykes-Picot Middle East. Instead of an efflorescence of democracy, the region now has a caliphate which has re-legalized slavery.

Occupy Wall Street was successfully razed and then co-opted by Obama 2012. But Obama in his second term was quickly a disappointment. By 2013 the faithful were deserting en masse.

Syriza following its election victory in January became the vehicle for change. Instead, it ended up implementing neoliberal austerity. More of the same, even though the people voiced support to break free of the paradigm in the historic "Oxi" vote.

The hubris of the power brokers is the belief that history can be mastered, toyed with, subverted -- that neoliberalism can be maintained, despite enormous costs, with a tweak here and there.

But it cannot.

The Big Lie: "Extend & Pretend" Debt in Greece & Iranian "Terrorism"

Syriza accomplished its U-turn on austerity last night in Parliament with modest defections. Only 32 of its 149 MPs voted against it. The total vote was 229 out of 300 for austerity. As Yves Smith comments in "Greek Parliament Passes Bailout Legislation":

[Y]ou can see members of Syriza, whose name translates as “Radical Left Coalition,” taking up neoliberal memes. This is a reflection of the success in organizing the economic and political order along neoliberal lines over the past 35 years.

Eventually there will be a price for Tsipras to pay. Defections will mount within his party as last night's protests continue and the government has to actually implement the pension reforms and VAT increases. But for the time being, since Tsipras managed to limit loses within Syriza to the Left Platform, Greece will muddle along and pass the remainder of the Eurogroup austerity diktats next week. Nonetheless, according to Suzanne Daley and James Kanter in "Greece, Its Back to the Wall, Adopts Austerity Steps," a unity government is likely in Greece's future:

Whether Mr. Tsipras will have to fashion a new coalition is unclear. Some party members suggested that with no one calling for a vote of confidence or a new election, he might be able to hang on. 

Other analysts said that he would no doubt eventually have to form a new unity government with other parties.

In the meantime, there is no indication that the European Central Bank is going to raise the liquidity cap on Greek banks, currently at 89 billion euros, until Greece makes bond payments owed the ECB. So says Jack Ewing this morning in "E.C.B. Weighs Whether to Throw Greek Banks a Lifeline":

Most analysts do not expect the central bank to provide more emergency loans to Greek banks, which the lenders need in order to reopen, at least until Monday. The European Central Bank will wait to see if the Greek government makes a payment of 4.25 billion euros, or about $4.7 billion, on bonds held by the central bank. No payment would mean no increase in emergency loans.

Separately, Greece’s eurozone creditors are weighing whether to give the country enough temporary financing to cover the payment to the central bank, as well as another that is due in August. The creditors could agree on a bridge loan on Friday as they continue negotiations on the latest bailout accord for Athens.

Absent liquidity from the ECB, Greek banks will continue to hemorrhage, even with capital controls in place. Yves Smith rails against the ECB maintaining its liquidity cap in "ECB Expected to Continue to Strangle Banks, Not Provide More ELA Funding Today, Despite Greek Parliament Passing Austerity Legislation":

If this comes to pass (the ECB is to make its decision later today), the refusal is utterly insane and horrifically destructive. Even if Greece were to get an ELA increase, it would take time for banks to begin restoring services. The economy will continue to decay at an ever-accelerating rate and the damage will become more and more permanent as businesses fail, which means workers will lose jobs and income.

The apparent rationale is that the ECB is not willing to take any more credit risk and wants its July 20 bond payment in hand first.

*** 

This is the madness the Eurozone has produced. National governments are held responsible for the performance of their economies when they do not control interest rates (and therefore are subject to overheating or unduly low growth via “one rate for all” not necessarily fitting them) and have tight deficit limits, which means they do much in the way of fiscal stimulus. And Greece is in deflation. Its widely-touted spot of growth in 2014 was the result of prices falling even faster than the rate of contraction in nominal GDP! That’s not a sign of improvement, that’s a disaster in progress. 

Yes, the insanity of the Greek debt crisis, now that a third bailout is in the works, is so obvious that the IMF, previously a active collaborator in perpetuating the "extend and pretend" big lie, is calling it out, which makes the politics of passing the new bailout through the various member-state parliaments tricky because hardliner austerian nations led by Germany categorically rule out any debt relief.

So the bottom line here is that with the ECB keeping the spigot shut and a split within the troika over the insanity of a small country like Greece, teetering on the brink of economic collapse, on the hook for what will be, after a third bailout package, nearly 400 billion euros in debt.

The big lie to match the "extend and pretend" big lie in Greece is one tossed about non-stop in Tom Friedman's interview with Obama after the P5+1 agreement on Iran's nuclear program was announced, and that is the one about Iran being a prime sponsor of terrorism in the Middle East. This claim is never substantiated, not a single case is mentioned. Hezbollah is tossed out. But Hezbollah is, among other things, a legitimate political party with representatives in Lebanon's parliament and cabinet. And some incendiary statements of former Iranian president Mahmoud Ahmadinejad are sprinkled on top to spice things up. But the Iranian people lost confidence in him and Ahmadinejad's candidate to replace him as president lost to the moderate Hassan Rouhani.

Basically ISIS and Al Qaeda go largely unmentioned in the interview. After watching the 47-minute lecture by Obama one could not be blamed for thinking that Iran might be behind jihadi terrorist groups. Of course, as everyone who follows the mainstream daily news should know by now, it is Saudi Arabia and its fellow despots in the GCC that support the takfiri jihadists.

"WikiLeaks Cables Show a Saudi Obsession With Iran" by Ben Hubbard and Mayy El Sheikh properly places the horse before the cart where it should be. It is the Kingdom of Saudi Arabia that is the "troublemaker" in the Middle East and beyond through its funding of Wahhabi fundamentalist arch-conservative Islam:

BEIRUT, Lebanon — For decades, Saudi Arabia has poured billions of its oil dollars into sympathetic Islamic organizations around the world, quietly practicing checkbook diplomacy to advance its agenda. 

But a trove of thousands of Saudi documents recently released by WikiLeaks reveals in surprising detail how the government’s goal in recent years was not just to spread its strict version of Sunni Islam — though that was a priority — but also to undermine its primary adversary: Shiite Iran. 

The documents from Saudi Arabia’s Foreign Ministry illustrate a near obsession with Iran, with diplomats in Africa, Asia and Europe monitoring Iranian activities in minute detail and top government agencies plotting moves to limit the spread of Shiite Islam.

The scope of this global oil-funded operation helps explain the kingdom’s alarm at the deal reached on Tuesday between world powers and Iran over its nuclear program. Saudi leaders worry that relief from sanctions will give Iran more money to strengthen its militant proxies. But the documents reveal a depth of competition that is far more comprehensive, with deep roots in the religious ideologies that underpin the two nations.

The documents indicate an extensive apparatus inside the Saudi government dedicated to missionary activity that brings in officials from the Foreign, Interior and Islamic Affairs Ministries; the intelligence service and the office of the king.

Recent initiatives have included putting foreign preachers on the Saudi payroll; building mosques, schools and study centers; and undermining foreign officials and news media deemed threatening to the kingdom’s agenda.

At times, the king got involved, ordering an Iranian television station off the air or granting $1 million to an Islamic association in India.

“We are talking about thousands and thousands of activist organizations and preachers who are in the Saudi sphere of influence because they are directly or indirectly funded by them,” said Usama Hasan, a senior researcher in Islamic studies at the Quilliam Foundation in London. “It has been a huge factor, and the Saudi influence is undeniable.”

While the documents do not show any Saudi support for militant activity, critics argue that the kingdom’s campaign against Shiites — and its promotion of a strict form of Islam — has eroded pluralism in the Muslim world and added to the tensions fueling conflicts in Iraq, Syria, Yemen and elsewhere.

Why do the Saudis always get a free pass from American officials? Because the U.S. government is a "pay-to-play" system that the Saudis (along with Israelis) have learned to wire over the decades. As long as the United States covers for the monarchs of the Gulf and blames their bad actions on Iran, there will be war in the region. That is why the deal on Iran's nuclear program is a helpful first step, but it in no way alters the underlying dynamic fueling war and instability in the Middle East.

Walker is Not the One After All + Grexit Still Predicted

I haven't had the opportunity to process much of the coverage regarding the nuclear deal with Iran. Republicans were fast out of the gate with promises to kill the accord. Hillary voiced her support. GOP presidential candidates pulled Neville Chamberlain comparisons off the shelf. Republicans are pissing in the wind on this one. They might be scoring points with hard-shell Zionists and various Bircher paranoid types who vote in GOP caucuses and primaries; but for every bit of alarmist militarist keening indulged in now, the possibility of winning a general election recedes farther into the temporal mists.

While on the topic of general election campaigns, I want to amend an earlier assessment that had Walker besting Hillary in the 2016 presidential race. Watching video clips of his official campaign kickoff it struck me -- I don't know why I didn't react this way to Walker before -- that he comes across as too much of a dullard, too much a low-watt middle-manager type to win the allegiance of your average voter. Your average voter, whomever that may be -- mythic suburban "soccer mom"; independent; Oprah acolyte -- wants more star power in her/his candidate for the White House. Walker is too plain (and, let's not be shy, too homely). Plus, he's staking out hard right positions, not just on collective bargaining rights, but now on Iran and Russia as well, that are out of step with the mainstream.

So at this moment it looks to me as if the early predictions of a dynastic clash of titans, Hillary vs. Jeb, for the 2016 presidential race are going to be proven accurate. This assumes that the Trump boom fades.

Yves Smith argues this morning that a Grexit is still the most likely outcome. The IMF's declaration that debt relief must be included in any new bailout package will make it difficult for the various euro nations -- Finland, Germany, Portugal, among others -- to approve any new deal in their respective legislatures. And there is no guarantee that Tsipras can pass four out six creditor demands out of the Greek Parliament today.

It seems odd to me that so many Greeks appear to be sticking with Tsipras. The explanation is that there is no one else to turn to. I guess an abused spouse will tend in the short term to stick with a lying, cheating mate for fear of the unknown, of being alone. Eventually though, as the lying continues, courage is plucked up and one moves on. This is what will happen in Greece.

As a Grexit chaotically unwinds the question will be asked, "How can Syriza  have bargained with the troika for half a year without making at least rudimentary plans for returning to the drachma?" Varoufakis has asserted that currency conversion takes a lot of time, which I am sure it does. But Syriza leads Greece. It was foolishly irresponsible given the obvious intention of Germany to force Greece out of the eurozone not to prepare for the possibility of a Grexit.

Greek Debt Deal Not Done + Agreement Reached on Iran's Nuclear Program, Get Ready for Plenty of Netanyahu

Everywhere there are deadlines. Deadlines come and deadlines go. Deadlines are breached; then deadlines reappear. There was a Sunday deadline for Greece to reach an agreement with her creditors. The deadline was extended until Monday morning at which time the government of Alexis Tsipras found it expedient to surrender the sovereignty of the Greek nation.

Now the new deadline is tomorrow. The Greek Parliament has to pass components of the new debt deal by July 15. Then the remainder by yet another deadline, next Wednesday, July 22.

Already obstacles are beginning to appear. Yves Smith reports ("Greeks Rebel Against Bailout, Risk Collapse") that Greek Speaker of Parliament, Zoi Konstantopoulou, on record opposing the austerity package that Tsipras schlepped to Brussels this past weekend, might not be willing to expedite voting on the new agreement, effectively upending the deadlines established at the Euro Summit.

Public-sector unions have called strikes; Syriza's coalition partner, Independent Greeks, sounds as if it might not support the latest bailout; and, last but not least, Greek banks, still waiting for the ECB to turn the spigot back on, are likely insolvent.

Yves Smith's post this morning features Wolf Richter's "It Starts: Greeks Rebel Against Bailout, Risk Collapse." It is definitely worth reading because it shows even if everything goes according to schedule and the Tsipras capitulation is legislatively solemnized by the Greek Parliament, Greek banks are insolvent and will require a Cyprus-type bail-in:

Greece’s union of civil servants, Adedly, called for a 24-hour strike on Wednesday, and for a series of demonstrations, the first one tonight at Syntagma Square, just below the Parliament, and another one on Wednesday evening, when Parliament is expected to vote on the new, even tougher, and immensely hated bailout package. 

The union for local government employees, Poe-Ota, also called for a 24-hour strike on Wednesday, the AFP reported. Two other demonstrations against austerity and the “euro” are planned for Monday night, one organized via social networks, the other by Antarsya, an anti-euro party that didn’t make it into Parliament.

It would be the first strike against the leftwing Syriza coalition since it came to power six months ago. An ironic plot twist in this tragedy.

Syriza was the big force in the demonstrations against the two prior bailout packages, totaling €240 billion from taxpayers in other countries, conditioned on economic reforms pushed through Parliament by the conservative governments at the time. Now Syriza is looking at having to pass even tougher measures, including an increase in the Value Added Tax and pension reform, in return for only €86 billion in new money from taxpayers in other countries.

Syriza’s junior coalition partner, the Independent Greeks, is already getting cold feet.

“The agreement speaks of €50 billion worth of guarantees concerning public property, of changes to the law including the confiscation of homes… We cannot agree to that,” explained Panos Kammenos, the party’s leader, adding that the party would nevertheless remain in the coalition. With “confiscation of homes” he probably meant foreclosing on homes with defaulted mortgages.

Prime Minister Alexis Tsipras is already struggling with strong dissent within Syriza. But ironically, the pro-euro opposition parties, those maligned creatures that ran the show before, may support him in getting these despised measures passed.

Just how bad is the financial situation? Greece will default on a €450-million loan repayment to the IMF today, two sources told Reuters, on top of the €1.6 billion in debt to the IMF it defaulted on in June. For July alone, Greece faces debt payments of €8 billion, including the IMF payment, none of which it can pay without new money.

And the banks are closed. At first, it was going to be for six days, to prevent them from collapsing on the spot when the ECB decided not to raise the Emergency Liquidity Assistance (ELA). They’re illiquid and insolvent. They’re toast, but complicated toast [read… The Biggest Greek Banks “Have Failed,” and “Resolving” Them Won’t Work: Fitch].

Now they’ve been closed for two weeks, and there is still no reliable indication when they might reopen, under what conditions they might reopen, and how much of their deposits people will get back.

The €25 billion to recapitalize the banks as part of the bailout is supposed to be guaranteed by privatizations. Good luck, given Greece’s history with privatizations. Even the prior conservative governments and technocrats had trouble privatizing these government-owned enterprises that have long provided reliable opportunities for corruption and vote-buying. And now the leftwing Syriza, which swore up and down it would never privatize any of them, is supposed to vote to privatize them and then actually follow through?

But they will have to be privatized to guarantee the recapitalization of the banks. If not….

Even if it works out, the holes in the banks’ balance sheets will be much larger by the time the banks reopen, if they reopen. About two-fifth of their loans were already bad before capital controls were imposed. But here’s the thing: given the capital controls and Greeks’ distrust in their own banking system, only an idiot would still make loan payments.

So the loans are now deteriorating at lightning speed. And that €25 billion won’t be enough. But don’t worry, depositors….

“The recapitalization is so secure that it fully safeguards deposits,” Economy Minister George Stathakis told his compatriots on Monday to soothe their nerves. The ELA would be increased once Parliament approves the reforms, he said, thus pointing his own gun at Parliament.

Alas, the Greeks themselves know better than anyone else to never believe anything that their government publicly says about Greek banks. Hence, the near incessant withdrawals that have now lasted for years and that have finally helpto ed topple the banks.

Turns out, one of the measures to be passed by the Greek parliament no later than July 22 is Europe’s new directive on the resolution of banks. It provides that even senior creditors, including depositors, get haircuts before taxpayers are called in to pick up the tab. The fact that the Greek Parliament has to pass this law in a hurry shows that the dreaded bail-ins of depositors may be part of what’s next.

Eurozone officials like to lecture about a dearth of trust between Brussels and Athens. What about the lack of trust between voters and their elected representatives? Government heads don't seem to factor this into a calculation of how this all plays out. If an honest appraisal were to be made, one would have to conclude that the failure of Syriza is going to erode Greek institutions even more, and the crisis will deepen.

The P5+1 talks concluded today with an agreement. Obama has promised a veto of any Congressional override, which is likely in the next 60 days, putting it on a parallel track with the federal budget impasse and looming government shutdown in September.

The politics don't favor Netanyahu and the neocons on this one. Possibly in a world where people were not constantly reminded about the savagery of ISIS, Iran might be demonized and enough voters made afraid that Congress could muster veto-proof numbers to scuttle the nuclear deal. But we are on the runway to a presidential election year, and the most popular policy positions are the ones that embrace peace not war.

People are exhausted with open-ended war. They might not have a firm grasp on the various sects and takfiri groups or how to distinguish the GCC from Iran, but most know by now -- after Afghanistan, Iraq and Libya --  that bombing a country into submission does not create peace and prosperity; it just makes things incalculably worse.

Hillary will have to support the deal because to do otherwise within the Democratic Party with its ample peace wing would be extremely damaging to her standing in the polls.

As for Congress, we shall see the extent to which it is Israeli- and Saudi-occupied territory. Coming so soon after TPP and so close to a presidential election, I don't think it has the ability to override a veto. But it is still too early to say.

Syriza Crippled, Tsipras Proven a Bootlicker, Neoliberal Austerity Triumphant

My only question is how does Tsipras move his bootlicking surrender through the Greek Parliament.

But first a rundown of Tsipras' capitulation. From the lede story by James Kanter and Andrew Higgins in The New York Times this morning, "European Leaders Reach Agreement to Resolve Greek Debt Crisis":

The total commitment of money has not been disclosed. But a document by the eurozone leaders noted that experts had estimated that Greece might need from 82 billion to 86 billion euros more — $91 billion to $96 billion — to shore up its economy, rebuild its banks and meet its debt obligations over the next three years. The document said Greece and its creditors should seek to “reduce that financing envelope,” if possible.

As part of Greece’s commitments, Ms. Merkel said, a fund will be created to use the proceeds from selling off assets owned by the Greek government to help pay down the country’s debt. That fund would be “to the tune of” €50 billion, she said.

Greece will also be required to seek assistance from the International Monetary Fund and to agree to let the organization continue to monitor the country’s adherence to its bailout commitments. The Greek government had resisted a continued role for the I.M.F., seeing the fund’s involvement as unwanted meddling.

The Greek Parliament will also be required to approve the terms of the agreement “without delay,” according to the document released on Monday morning. One of the sticking points in the negotiations over the weekend had been a demand that the Parliament sign off on any deal by Wednesday, but that requirement appears to have been relaxed.

Yves Smith in a post this morning, "Tentative Deal Strips Greece of Sovereignty, Makes Debt Relief Dependent on Compliance," on Naked Capitalism where she quotes extensively from a Financial Times story provides a more detailed reckoning of Tsipras' failure:

Mr Tsipras has promised to pass tough new reform laws, including on tax and pensions, by Wednesday and prepare further rapid reforms, such as labour market liberalisation, opening up closed professions, deregulating Sunday trading and reinforcing the financial sector. In a particularly humbling move, the government has to reverse some of the extra spending measures it introduced earlier this year, when it trumpeted its ambitions to end five years of EU-imposed austerity.

The major terms include:

Increasing and simplify VAT

Cutting pensions. More on that shortly. The terms here look to be vastly worse than the cuts Greece fought a few weeks ago

“Requesting” continued IMF “support” (monitoring as well as financing)

“Introducing quasi-automatic spending cuts in case of deviations from ambitious primary surplus targets after seeking advice from the Fiscal Council and subject to prior approval of the Institutions”

Sequestering €50 billion of assets, nominally supervised by Greece but under strict oversight of the creditors. Half will go to recapitalizing the banking system

Implementing labor market “reforms” along the lines sought by the creditors

Not only is there no debt relief, there is no prospect of any debt relief unless Greece meets targets. And forget about principal reduction. From the letter:

…the Eurogroup stands ready to consider, if necessary, possible additional measures (possible longer grace and payment periods) aiming at ensuring that gross financing needs remain at a sustainable level. These measures will be conditional upon full implementation of the measures to be agreed in a possible new programme and will be considered after the first positive completion of a review. 

The Euro Summit stresses that nominal haircuts on the debt cannot be undertaken.

This is not just failure. To sign off on this agreement is an act of collaboration with a hostile power.

All Syriza's red lines have been crossed, not to mention the 11th-hour addition of the €50 billion privatization to be administered by the creditors.

On top of it all, the ECB will not release additional funds to Greek banks until Parliament approves all the measures contained in the agreement.

By signing this agreement Tsipras validates the European hardliner mantra about Syriza -- that the party was a collection of jejune poseurs more style than substance who had no business being in government and were just wasting everyone's time. This certainly appears to be the case.

The Wednesday in the run up to the "Oxi" referendum Tsipras forwarded a proposal that basically accepted bulk of the troika's austerity demands. The proposal was declined by Merkel in favor of letting the referendum play out. At the time I thought that was foolish of Merkel et al. because what better outcome for the Syriza-hostile troika than to have Tsipras administer the very policies he was elected to overturn. What better way to make the point to a recalcitrant public that "There Is No Alternative" to neoliberal austerity than by having the only anti-austerity party in power in Europe accept and oversee austerity?

The answer to the question of what is better is Syriza implementing even more austere fiscal policies after the public voted overwhelming against austerity. Merkel knew what she was doing. I assumed Tsipras meant what he said when rallied Greeks to vote No.

Syriza is now crippled. It will split, but Tsipras should be able to push the agreement, at least most of it, through Parliament with the help of To Potami, New Democracy and other parties in the opposition.

I don't see how Syriza can survive. Its rise to electoral power was based on a promise that it would not accept further austerity. Now that it has done so it has no rationale.

Nothing more than a youthful Pasok, Syriza will be remembered for its bluffing, its open collars and untucked shirts. What a disappointment. Syriza's spectacular failure will be a blow to the legitimacy of all non-centrist parties -- to Podemos in particular.

Greek Capitulation Not Good Enough for Schäuble & Co. Grexit Unavoidable

Yves Smith for all the arrows she has absorbed for her pessimism about the bargaining positions of both Greece and her creditors has for the must part been reliably on the money. This morning she writes that "A Grexit Looks Almost Inescapable":

Despite my generally dour outlook, I never thought we’d arrive at the insane juncture we are at now, that of a Grexit being all but baked in. This would be a catastrophic outcome, most of all for the Greek 99%. If a Grexit comes to pass, it should deservedly blacken the names of everyone involved, most of all Merkel, whose incrementalism meant that all of the unresolved contradictions of the Eurozone produced intensifying pressure on its fault lines, and Greece proved to be the breaking point. But as we’ll see soon, her finance minister Wolfgang Schauble would also get a particularly large badge of dishonor. 

You don’t need to know much to know that the odds of Greece escaping a Grezit are becoming vanishingly small as time progresses, and there is perilously little time left. And mind you, this sorry trajectory is occurring even after the Greek government prostrated itself and offered to meet even more stringent conditions than its voters overwhelmingly rejected in a referendum less than a week ago.

The big development is that last night's meeting of eurozone finance ministers adjourned minus any resolution. As James Kanter reports in "Meeting on Greece Debt Breaks Up With No Deal" the hardliners -- Germany, Finland, Slovakia, et al. -- don't believe that Greece will implement its latest austerity proposal:

Despite Greece’s capitulation on those terms, many countries came into this weekend’s final round of negotiations skeptical of the Tsipras government’s commitment to seeing through the changes and putting his country on firmer financial footing — and weary of the constant brinkmanship that has characterized the months of negotiations over Greece’s latest crisis.

Instead of working through the night to hammer out a statement on requirements for Greece, as had been expected, the meeting was suddenly called off shortly before midnight, and ministers left without even holding a formal news conference.

“The issue of credibility and trust was discussed, and also of course the financial issues involved,” Jeroen Dijsselbloem of the Netherlands, the head of the so-called Eurogroup of ministers, told reporters. “It is still very difficult. but work is still in progress,” he said, adding that discussions would continue later Sunday morning.

From the start, it was clear that Mr. Tsipras’s gambit had not entirely won over Germany and other countries that have been skeptical about giving a new round of loans to Greece after years in which successive governments in Athens have struggled to carry out changes that creditors have demanded as a condition of the bailouts.

“We will have exceptionally difficult negotiations,” Wolfgang Schäuble, the hard-nosed German finance minister, said on Saturday before the meeting. “We won’t be able to rely on promises.”

His prediction proved accurate, as he and fellow ministers wrangled with little apparent progress, seeking more assurances from Greece that it was committed to changing its ways, and weighing the desires of France and Italy for a deal against the more skeptical stance of Germany and the possibility of outright opposition from Finland.

What Schäuble did do in the 11th hour was forward a proposal demanding that Greece essentially be placed in receivership and banned from the euro for five years. According to The Guardian's Ian Traynor in "Greece nears euro exit as bailout talks break up without agreement," who Yves Smith quotes at length in an update to her post,

With Greece on the edge of financial and social implosion, eurozone finance ministers met to decide on the country’s fate and on what to do about its debt crisis, after experts from the troika of creditors said that new fiscal rigour proposals from Athens were good enough to form “the basis for negotiations”.

But the German finance minister, Wolfgang Schäuble, dismissed that view, supported by a number of northern and eastern European states. “These proposals cannot build the basis for a completely new, three-year [bailout] programme, as requested by Greece,” said a German finance ministry paper. It called for Greece to be expelled from the eurozone for a minimum of five years and demanded that the Greek government transfer €50bn of state assets to an outside agency for sell-off.

Timo Soini, the nationalist True Finns leader, meanwhile, threatened to bring down the government in Helsinki if Alex Stubb, the finance minister, agreed to a new bailout for Greece. Stubb apparently came to the crunch meeting on a new bailout without a mandate to agree one.

“The hawks are very vocal,” said an EU diplomat. “It’s very tough.” Berlin also demanded stronger and more intrusive powers for outside monitors to police the economic and fiscal reforms that Alexis Tsipras, the leftist Greek prime minister, would need to commit to to secure the new bailout.

Saturday night’s talks were not to agree on a third bailout, but were negotiations on whether to launch more talks on Greece’s third rescue package in five years. The ministers faced formidable problems, said Schäuble, who argued debt relief for Greece, broadly seen as essential, was banned by the EU treaties: “Athens’s proposals are far from sufficient. The funding gaps are way beyond anything we’ve seen so far,” he said.

The hard line was echoed by Peter Kazimir, finance minister of Slovakia, who said that new austerity measures tabled by Athens were already past their sell-by date.

The eurozone has been united for five months in the negotiations with Tsipras, but with the stakes rising greatly in the last 10 days, major divisions have surfaced, with the French working tirelessly to save Greece and the hardliners now pushing Greece’s expulsion for the first time openly.

The European commission and the European Central Bank issued dire warnings that a failure to grant Greece new rescue funds of up to €78bn would put the country on a trajectory of complete banking and financial collapse.

The widening gulf between eurozone hawks and doves paves the way for an acrimonious summit on Sunday, with France and Italy lining up against Germany and the northern and eastern Europeans. Matteo Renzi, the Italian prime minister, is expected to tell chancellor Angela Merkel that enough is enough and that Greece should not have to put up with any more humiliation.

Merkel is under intense pressure from the Americans not to “lose” Greece and is worried about her own legacy. But Greece fatigue is becoming endemic in Germany, and she faces growing unrest in her party ranks where Schäuble’s hard line is popular. She was said to have endorsed Schäuble’s tough position.

Whether the U.S. can work its will once again on a reluctant Merkel, as it did in the case of Russian sanctions and the whole smorgasbord of riots, a coup and the downing of the MH17 passenger jet, seems a long shot to me.

The Obama administration has not been particularly assertive about securing an amicable resolution to the Greek debt crisis. Getting the IMF to release its report saying Greece's debt load was unsustainable and that debt relief must be considered was helpful to Syriza in the run up to last Sunday's referendum, but it was far from the kind of full-court press trotted out to get the EU to embrace sanctions on Russia.

The U.S. is allowed to run roughshod over Europe when it comes to NATO force projection. But when the question is Germany's economic hegemony over the continent, Uncle Sam apparently has to wear velvet slippers.

Schäuble's 11th-hour proposal, one that Traynor says Merkel has signed off on, at least clarifies the root of Germany's incessant demands for austerity. It is not about a belief that austerity will lead to growth; that has been debunked long ago. It is about taking possession of Greece lock, stock, and barrel. Likely in the private moments of hardliners among the Finns, Germans and Slovaks are thoughts about Greek women. Why not put the young fertile ones on the auction block too?

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.

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.