Crash-Out Brexit on the Way

Theresa May's "Chequers plan" for Brexit was rejected yesterday at a European Council meeting in Salzburg. As Yves Smith explains in "Crash Out Brexit Virtually Guaranteed as EU Leaders Talk Tough to Theresa May, Reject Chequers Plan, and Give Her October Deadline":

The EU has been clear from the get-go: no four freedoms (and that includes the free movement of people), no Single Market. And asking the EU to set up a whole new bureaucracy and legal arrangements to let the UK have its cake and eat it to was an obviously ludicrous demand, save to those inside the UK’s bubble.

Tusk told May she needs to deliver a new plan by October 18, and that also includes a “breakthrough” for the Irish border, and that the emergency EU summit set for November was on only if the European Council deemed there to be a realistic possibility of getting a deal done in its October meeting.

[snip]

[T]he EU leaders may have come, either intellectually or on gut instinct, to our conclusion that a crash out is close to inevitable. UK punters were putting the odds at 62% this week. We had them at 80% before today and we thought that was being too optimistic. With May digging in on Checkers even after the stern EU messages, there’s not even a credible path for the UK to escape a crash out. So if a disorderly Brexit is inevitable, better to make that clear as soon as possible to give businesses some chance to plan.

Sadly, but not surprisingly given the press spin, the public reaction seems to be to pump for a hard Brexit. One Financial Times reader says the “most recommended” comments in the BBC were of the “just leave” variety.

As for the deus ex machina of a second referendum, fuggedaboutit. May has ruled it out. If the Ultras oust her, they certainly won’t initiate one. The Tories will not vote themselves out of office and DUP is unlikely to play spoiler (they have power now as essential to the Tories majority that they stand to lose in a new General Election). It’s not even clear a new referendum would produce a different outcome. And in any event, it’s too late. A referendum that followed the procedures takes a minimum of eight months (the LibDem’s campaign site set forth the timetable) and the Ultras would be guaranteed to challenge any process that cut corners.

So if you are in the UK, start stockpiling. Or find a way to be out of the UK for at least six months starting shortly before the Brexit date. It won’t be pretty.

As I often mention, Smith's dour assessments of current affairs, which tack to the neoliberal center, are usually on the money. So if she says a crash-out Brexit is coming, that is the safe bet.

While Smith dismisses another referendum as unfeasible, she does not give enough attention to the possibility of snap elections. If a crash out comes, I don't see how May can just ignore the resulting hue and cry. Tories might leave her as a PM burning in effigy, but the demand for new elections will be unavoidable.

That inevitability, along with the likely triumph of a Momentum-led Labour, is what all the "Corbyn is an anti-Semite" stories have been about.

July 1 Mexican Elections a Plebiscite on Neoliberalism

There are reports of assassination in Mexico in the run up to the July 1 election. Polls show Andres Manuel Lopez Obrador (AMLO) with an insurmountable lead. AMLO will be Mexico's next president.

Yesterday Yves Smith, "Mexican Business Elite, US Government, Brace for Likely Win by Leftist Obrador as Mexico’s President," turned her gimlet eye to AMLO, and she concluded that while AMLO might not be a revolutionary Marxist, neither is he a neoliberal, which nowadays in the reign of the zombie is radical indeed:

Even in his measured way, Amlo intends to turn Mexico away from neoliberalism, which is enough to make heads explode. The US press either ignores or considerably downplays how poorly Mexico has fared under its tender ministrations. Again from In Defense of Marxism:

Mexico has been immersed in neoliberalism for 32 years and the results are overwhelming: “Under Porfirio Diaz [Mexican general who served as president in the late-19th, early-20th century], 95 percent of the population was poor. In 1981 it had fallen to just over 40 percent. Now it is actually 85 percent”, said Dr. José Luis Calva Téllez, a member of the Institute of Legal Research of the National Autonomous University of Mexico (UNAM), in an interview with Contralínea. (Contralínea 2015)

In addition, the purchasing power of wages dropped by 71.5 percent. It is practically impossible to live on the minimum wage…

The driving priority was “macroeconomic management above everything else. More than 1,000 state-owned companies were privatized to stop state intervention in the economy. Foreign trade was liberalized by drastically reducing all taxes or tariffs on foreign products; the Mexican financial system was privatized.”….

In the three neoliberal decades, GDP per capita has grown at a rate of 0.6 percent per year; that is, an aggregate growth of 21 percent. That is not to mention the millions of Mexicans who emigrated in search of jobs they do not find in our country. “Counting the emigrants, the growth of GDP per inhabitant is scarcely 0.3 percent per year, or an aggregate growth of 10 percent in 32 years.” (José Luis Calva, Mexico Beyond Neoliberalism: Options Within The Global Change)

With "Crash-Out" Looming, Brexit Re-Vote Likely

Naked Capitalism's Yves Smith has never lost focus on the Brexit negotiations between the Europe Union and the United Kingdom. She has been skeptical of Tory promises and Tory tough talk. She sees a calamitous "crash-out" coming Britain's way.

This is from Friday's "EU (Finally) Slaps Down UK on Fantasy Irish Border Solutions":

[T]he UK is now on track for a crash-out Brexit. There is astonishingly still no comprehension of what leaving the EU entails among, it seems, both houses of the legislature, all of the ministers, and virtually all of the UK punditry. That means they will not come up with solutions to the problems they are trying to remedy. It also implies yet more incomprehension as the UK will pose approaches to the EU that are non-starters in light of how the EU operates, which the EU will reject them for what ought to understood as perfectly logical reasons. But that will elicit more outrage and upset from the UK, which will instead regard yet more EU rebuffs as proof that the EU wants to punish them by forcing them into the worst possible Brexit, when it will be the UK that has gotten itself in that mess due to unprecedented incompetence. 

Shorter: assume the brace position.

She was back with her doom and gloom this morning in "Hoisted from E-Mail: Brexit, Security, and the UK’s Coming Poodledom": "[A] Japan-like relationship with the US is the endgame for the UK, this will make a mockery of the Brexit selling point that that UK would be reclaiming its independence."

I lost interest in tracking the Tory twist and turns on Brexit because I think the May government's strategy is fairly transparent. It's running the clock out until such time as a re-vote can be engineered. Stephen Castle provides proof of this in "Could the U.K. Vote Again on Brexit? The Prospects Are Rising."

Castle assesses May's options once a deal is struck with the EU:

Any withdrawal deal struck by Britain’s prime minister, Theresa May, will need approval from Parliament, where she has no reliable majority.

Were lawmakers to reject her agreement, Mrs. May would then face three choices, says Dominic Grieve, a pro-European rebel lawmaker in her own Conservative Party. She could try to renegotiate it — unlikely, in view of domestic political pressures and resistance from the European Union — call a general election or put her Brexit plan directly to the people.

If Yves Smith is right, if there is any deal at all, it will be horrible. Parliament is bound to reject it. Then new elections would be inevitable, all with "crash-out" looming.

It could be the gift of the outgoing government to put in place a Brexit re-vote. Infrastructure is already being put in place for the Remain campaign. That's one of the points of Castle's article. 

Catalan Capitulation?

The reaction to the Catalan independence vote in the mainstream press and European capitals has been to condemn the brutality of the police crackdown while upholding the legal position of Spanish prime minister Mariano Rajoy (see Steven Erlanger's "For E.U., Catalonia Pits Democratic Rights Against Sovereignty").

For the always-pessimistic take on democratic possibilities, see Yves Smith's "Catalonia Blinks in Secession Staredown." She thinks Catalan leaders are signalling that they are not going to declare independence:

Continued over-the-top use of force could move public sentiment the other way in Catalonia. But the unyielding position of the central government means that Catalonia would need to engage in a sustained campaign, meaning over a period of years, to make it painful enough to Madrid to force it to relent. I’d rather be proven wrong, since Rajoy represents a particularly ugly face of neoliberalism, but the rapid backpedaling by the separatists says they know they don’t have enough support among the public to go toe to toe with Madrid.

I was under the impression that Puigdemont, because of the police crackdown, had a rare opportunity to act. But Smith sees sign of wavering. And Smith's track record of cynical predictions is excellent.

British Vote Today Not Looking Good for Labour

UPDATE IV: From the The Guardian's "election results live":

Labour says 'Tories are being punished for taking British people for granted'

Labour is starting to feel more confident about the exit poll. It has just put out this statement, from a spokesperson.

If this poll turns out to be anywhere near accurate, it would be an extraordinary result. Labour would have come from a long way back to dash the hopes of a Tory landslide.

There’s never been such a turnaround in a course of a campaign. It looks like the Tories have been punished for taking the British people for granted.

Labour has run a positive and honest campaign – we haven’t engaged in smears or personal attacks.

Labour’s poll standing and Jeremy Corbyn’s standing surged as people were able to hear our message, policies and Jeremy directly.

Labour poured energy and resources into voter registration – and an extra 3 million people registered in the five weeks between the election being called and the deadline.

It looks like their voice has been heard.

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UPDATE III: The first announced exit poll has the Tories falling short of a majority. "The survey predicts the Conservatives will get 314 seats and the Labour Party 266." This is a far cry from the 345-375 spread predicted by a majority of the final polls. If the exit poll is accurate, there will be plenty of upheaval -- anarchy? -- in the UK.

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UPDATE II: With exit polls soon to arrive, I just finished reading yesterday's FiveThirtyEight post, "The Three Scenarios For The U.K. Election," Both Nate Silver and Harry Enten still appear to be snake-bitten by the Trumpocalypse of last November; hence, the excessive hedging they indulge in prior to revealing their three scenarios: 1) modest Tory triumph, 2) Tory landslide; 3) Tories lose their majority:

We don’t have a model of this election — but in our view, there’s no way around the fact that uncertainty is high and that nobody should be surprised about the outcome unless perhaps Labour wins an outright majority of seats. U.K. polls have not historically been very accurate. And pundit attempts to outguess the polls have often been even worse. (In 2016, pundits and betting markets were notoriously confident that Britain would vote to remain within the European Union even when polls showed a nearly even race.) However, if one takes the polling average but assumes that the error is as high as it has been historically, then it turns out that each of these three outcomes are roughly as likely as one another. 

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UPDATE: If the Tories gain 45 seats, a forecast that Yves Smith featured in her post, this would be considered an enormous victory for Theresa May. According to a helpful scorecard provided by The Independent, any gain of 34 seats or more for the Tories will be considered a landslide, a triumph for May and "[T]he 'terrible campaign' story will be rewritten as a brilliant reading of the essence of the British people."

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Naked Capitalism's Yves Smith has a strong track record of pessimism when it comes to the left's ability to transform the neoliberal center. She is at it again with "Final UK Election Polls: YouGov Still the Outlier, Predicts Tories Get Only 302 Seats." Smith, with slight a hedge in the form of an acknowledgement that polls were wrong about Brexit, seems to favor the point of view that the Tories are looking to pick up something like 45 seats, which would give them a 100-seat majority over all other parties in Parliament. This scenario imagines Tories racking up wins in the midlands, the north, even Scotland.

I understand that Labour's vote is concentrated in metropolitan areas and is heavily dependent on fickle youth turning up at the polls, but the idea that the Scottish National Party could lose as many as 12 seats because of its pro-independence stance seems far-fetched to me.

The fact remains that Yves Smith's pessimism is mostly on the mark. The neoliberal center, entrenched in the West for decades, is remarkably resilient. Look at how it was able to stymie the Obama 2008 landslide or how it was able to Jiffy Pop a new electoral majority seemingly overnight with Emmanuel Macron's En Marche!

Sadly, neoliberalism will likely have to collapse internally -- we're seeing that now with Trump -- before it is deconstructed by social-democratic majorities at the polls. The problem with internal collapse -- remember Thucydides! -- is that it is bloody, horrific, painful, basically the worst.

Pink Revolution Demographics + Trump on Trade + Goading the Dragon + Brexit in Play

Nate Silver has a definitive breakdown of Saturday's women's marches ("The Long March Ahead For Democrats"):

Saturday’s Women’s Marches, which rebuked President Trump on the day after his inauguration, probably drew more than 3 million participants between hundreds of locations across the United States, making them among the largest mass protests in American history. The marches recalled the tea party protests of April 15, 2009, an event that helped to mark the beginnings of a backlash to former President Obama — but overall attendance at the Women’s Marches was about 10 times higher than at the tea party rallies, according to our estimates.

But the geographic distribution of the marches also echoed November’s election results, in which Hillary Clinton lost the Electoral College despite receiving almost 3 million more votes than Trump nationwide. About 80 percent of march attendees were in states that Clinton won, and a disproportionate number were in major cities. So if the marches were a reminder of the depth of opposition to Trump — unprecedented for a president so early in his term — they also reflected Democrats’ need to expand the breadth of their coalition if they are to make a comeback in 2018 and 2020.

Silver then proceeds to analyze the marches in terms of geography. The marches overwhelming took place in big cities, in states Clinton won, and reflect an urban versus rural divide that defined the election. Silver has very faint praise for the overall import of the Pink Revolution:

Like the early tea partiers, some of the people who turned out on Saturday will turn into organizers, fundraisers and influential voices in their communities, and some of them will even become candidates for office. The Democratic Party needs broader geographic appeal than what it has right now. But turning out 3 million people one day after the new president is inaugurated is a pretty good start.

My gut sense is that the women's march is a classic one-off like the People's Climate March of 2014 organized by 350.org -- huge but hard to replicate and of uncertain merit in creating meaningful change.

Yves Smith assesses what is in store for us with a Trump presidency. In "Consternation as Trump Starts Delivering on Campaign Promises While Making More Crazy Attacks on Critics" Smith argues that Trump is a narcissist with a difference -- he's a narcissist who is willing to regularly destroy his own image:

With Trump, we have, far more visibly. the same question that dogged the Obama Administration: what does he really stand for? With Obama, we learned that he was conservative and cautious, but also very much liked the appearance of getting things done. His press office repeatedly cited how much legislation was passed on his watch, as if volume was more important than quality. Trump is likely to have the same orientation. It’s easy to assume, as critics do, that Trump wants to become even wealthier. But Trump more than anything wants to be visible: his splashy/trashy buildings, his TV show, his relentless self-promotion, his reckless tweets. While Trump in oh so many ways looks like a classic narcissist, one departure is his need to mix things up. Most narcissists are working above all to have their environment reflect back a good image of them. Trump’s regular undermining of his own image is at odds with that.

There are far too many moving parts to have any firm view as to how the Trump Administration will pan out. But even though there was good reason to suspect that given the record of both celebrity politicians and DC outsiders, that Trump would wind up as Jimmy Carter squared, a President that didn’t get much done, the flip side is that underestimating Trump has proven to be a losing bet. Stay tuned.

Much a Trump's popular support is going to depend on how he handles trade. The Democrats doomed themselves by Obama pushing the TPP throughout 2016. Trump is off to a good start by scrapping the TPP. But as Smith points out much remains to be seen:

Both Bernie Sanders and the Teamsters praised Trump for ending the TPP. It is surprisingly under-reported that Trump met today with labor leaders, almost all of whom had supported Clinton. It is a not-well-kept secret that many union members bucked the leadership and voted for Trump. But the bosses engaging in a session with Trump that they described as “excellent” may be the start of the formal and long-overdue exit of unions from a party that has treated them as disposable for over 30 years. 

But how far will Trump go? The problems with TPP were much better publicized than many might assume; when Lambert saw Trump speak in Bangor, Trump referred to the TPP only by its initials, didn’t explain it, and the crowd seemed familiar with it. By contrast, other dangerous “trade” deals, like the TTIP and TISA, are still as of now, moving forward.

Trump appears committed to goading the Dragon. According to this morning's Foreign Policy Situation Report:

Warning shot aimed at Beijing. Sean Spicer also told reporters Monday that Washington is prepared to take action to prevent China from building more islands in the South China Sea and claiming the territory as its own. "It’s a question of if those islands are in fact in international waters,” he said, “and not part of China proper, then yeah, we’re going to make sure that we defend international territories from being taken over by one country."

Chinese Foreign Ministry spokeswoman Hua Chunying shot back on Tuesday that China's sovereignty over the Spratly Islands in the South China Sea was "irrefutable," adding, “we urge the United States to respect the facts, speak and act cautiously to avoid harming the peace and stability of the South China Sea," Hua said. "China's resolve to protect its sovereignty and maritime rights in the South China Sea will not change.” 

If Trump continues down this path it can't end well. Trump acts as if he thinks that the Chinese are lightweights. He is going to have to switch up his game or risk catastrophic failure.

When it comes to catastrophic failure the UK political class' management of Brexit comes to mind. The Supreme Court ruled today that Article 50 negotiations can't begin until Parliament votes. Here is an 11th-hour opportunity for the discredited neoliberal orthodoxy. Parliament could block Article 50 and in effect repeal Brexit. This outcome is usually dismissed in most stories. But why? A majority of Labour and Conservative MPs opposed Brexit. I suppose they are worried about the repercussions to their political careers if they were to block Brexit. But a plausible scenario is to amend and talk any Parliamentary vote to death, May's government would fall and new elections would be held which would be a replay of the Brexit referendum. The outcome could very well be different this time.

Elites Feeling Queasy This Morning: Brexit Triumphs by a Million-Plus Votes

Markets are down but not breathtakingly so in response to the triumph of Brexit at the polls yesterday. The Leave campaign ended up winning 52% to 48% -- more than a million votes -- over the Remain campaign. Cameron has announced his resignation effective in 90 days.

As Yves Smith makes clear in her flinty, dour post, "Brexit: The Crisis Begins," jockeying to shape the separation of the UK from Brussels will commence immediately. Cameron will be distracted by leadership battles among his Tories. Smith dusts off a post by Willem Buiter from 2008, "How likely is a sterling crisis or: is London really Reykjavik-on-Thames?," to sketch a worst-case scenario for Britain, which she then takes global in the final two paragraphs of her post:

And with the US growth sputtering, our economy will feel the effects. Roughly 25% of S&P earnings come from Europe. The strong dollar will weigh on exporters. Europe is a major export market for China, and China may allow the renminbi to slide. Earlier this year, a devaluation of the renmibi was also seen as having the potential to trigger major upheaval. A flagging US economy going into the election hurts Clinton and Democrats generally. And this vote will embolden other separatist movements, most important, Le Front National. 

No matter how this plays out, the UK and EU will have to blaze a difficult path. And this rupture is taking place when advanced economies almost without exception have singularly weak leaders. We are in for a rough ride, and the portents suggest it will be much rougher than it needs to be.

I would like to accentuate the positive. With the Brexit vote people showed, as they did in Rome on Sunday, that they are not the zombies who inhabit the leadership level of political-economic class. The majority is willing to cast aside the bankrupt zombified neoliberal consensus and strike out in a new direction, even if it is not clear exactly where it will lead. This is cause for great hope.

For decades we have been told that "There Is No Alternative!" And things have steadily worsened. Now we have proof that, after forty years, people are willing to scrap the neoliberal paradigm and begin anew.

The future is no longer foreclosed.

Brexit Winning + General Strike Tomorrow in France

Good news. Recent polls show the "Leave" campaign moving ahead in the upcoming June 23 Brexit referendum. Yves Smith summarizes in this morning's must read, "Why a Leave Vote May Not Result in a Brexit":

The officialdom in England and in much of the rest of the advanced world is suddenly in alarm over the possibility of a Brexit. US Treasury yields sank last Friday as investors ran for cover, and the flight to safety continued today as a surge in the yen led to a 3% fall in the Nikkei. 

The UK's elites had been confident that frequent, loud “Don’t Touch That Dial” warnings, with vivid descriptions of all of the horrors that would ensue, would herd voters into line well before the June 23 polling date. 

Instead, an online poll commissioned by the Independent showed the Leave campaign to be winning by a stunning 55% to 45%. That revelation coming on top of weak economic data from the US, put Mr. Market in a funk. The Financial Times’ “poll of polls” puts Leave in the lead by a smaller margin, 46% to 44%. 

Moreover, the sense is that with only 10 days to the decision date, the Leave campaign is gaining momentum. The Conservatives have realized that having a bunch of toffs, big banks, and intrusive foreign leaders tell British citizens how economically damaging a Brexit would be seems only to have persuaded voters at most that the people at the top of the food chain would take a hit. Voters seem to be in a bloody-minded enough mood to be willing to take a hit if they can inflict some pain on their putative leaders and take the banking classes down a notch or two. Another sentiment (and one that the elites appear to deny) is that voters are willing to pay an economic cost, even a large one, for more national sovereignty. So now Labor leaders have been moved to the front line of the sales campaign.

Smith goes on to describe the likely scenario of Brexit winning at the polls -- a re-vote after the EU grants a few more concessions. It has happened before in Denmark and Ireland.

I think Smith has it right. And it must noted that she was incredibly accurate last summer in her assessment of the phoniness of Syriza. So, as I said, good news. It looks as if the EU, feckless enabler of U.S. hegemony and enforcer of neoliberal orthodoxy, is about to sustain a body blow.

Smith quotes Peter Hitchens of the Daily Mail, "The British people have risen at last - and we're about to unleash chaos":

It has been a mystery to me that these voters stayed loyal to organisations that repeatedly spat on them from a great height. Labour doesn’t love the poor. It loves the London elite. The Tories don’t love the country. They love only money. The referendum, in which the parties are split and uncertain, has freed us all from silly tribal loyalties and allowed us to vote instead according to reason. We can all vote against the heedless, arrogant snobs who inflicted mass immigration on the poor (while making sure they lived far from its consequences themselves). And nobody can call us ‘racists’ for doing so. That’s not to say that the voters are ignoring the actual issue of EU membership as a whole. As I have known for decades, this country has gained nothing from belonging to the European Union, and lost a great deal. 

If Zambia can be independent, why cannot we? If membership is so good for us, why has it been accompanied by savage industrial and commercial decline? If the Brussels system of sclerotic, centralised bureaucracy is so good, why doesn’t anyone else in the world adopt it?

Compare Hitchens' piece with the shallow, laughable fear-mongering of NYT's cold warrior Roger Cohen, "Europe and the Unthinkable," and you understand what thin ice the reigning paradigm is erected upon. Cohen creates an image of a Putin bogeyman waiting eagerly for the Europe Union to come undone so he can swallow up the Baltic nations, and he celebrates the power and coherence of Atlanticism by describing Samantha Powers, one of the architects of R2P and the chaos in Libya, sharing the stage in Berlin with Dr. Strangelove:

I listened the other evening at the American Academy in Berlin as Henry Kissinger, the personification of realpolitik, insisted that the “necessity of the coherence of the Atlantic world” had become “even greater.” With him was the American ambassador to the United Nations, Samantha Power, the recipient of this year’s Kissinger Prize — and long the personification of liberal interventionist idealism. In many ways they formed a strange duo. But their togetherness was also a statement: That, until now, America’s postwar European and internationalist commitment has held across the foreign policy spectrum.

Realpolitik and idealism meet in the unity of Europe. The unthinkable, on both sides of the Atlantic, must be resisted before it is too late.

The unthinkable is that the status quo, based as it is on a paradigm that has been juiced out since the millennium, should be allowed to continue. In order to remain in power and keep the paradigm intact rulers are subjecting the planet to an increasing number of wars and failed states while the media monopoly engages in Goebbels-like crass propaganda.

Case in point, try to find some decent reporting of what is going on in France with all the strikes brought on by the El Khomri law. You won't find it in the mainstream media. You have to go to the Marxist press like the World Socialist Web Site or Workers World.

A general strike is set for tomorrow in France as the Senate begins debate today.

Why Hillary is So Beatable

This morning the pro-Hillary New York Times calls on Clinton to release the transcripts of her speeches to the big banks, "Mrs. Clinton, Show Voters Those Transcripts." This comes a day after video of Black Lives Matter protester Ashley Williams confronting Hillary at a tony Charleston fundraising soiree with a piece of cloth reading "WE HAVE TO BRING THEM TO HEEL" (a quote from Hillary's 1996 "super-predator" speech) went viral.

Look at Adam Johnson's AlterNet post "Black Lives Matter Activist Confronts Clinton About Racially Charged Remarks Because the Corporate Media Won't" for an immediate visceral understanding of why Hillary is the establishment's candidate of choice -- not Rubio, not the "suspended" Jeb Bush, not Ted Cruz.

Hillary is the personification of everything rancid in a political system controlled by the wealthy for the wealthy to the detriment of working people and the planet.

The hashtag #WhichHillary began trending yesterday as people saw the video. Naked Capitalism's Yves Smith points out that Twitter "apparently expunged from the 'trending' list" #WhichHillary.

This is the story of Hillary 2016. We all know that she is a sickening corpse. The problem is that the people in power want her to lead us.

It's not over yet. There is still hope. Young Ashley Williams will inspire many more activists. The transcripts of Hillary's Goldman groveling will hopefully find there way to the public.

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.

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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.