Saturday, April 4, 2015

Rumblings in Greece: A tectonic shift that could set off shockwaves that will smash the unity lie

  • Greece has signaled its willingness to default on its upcoming IMF payment
  • Sets in place a plan to shift from Euros to a new issue of Greek controlled Drachmas
  • Tspiras boards a plane for Moscow
  • Seeks alternative creditors in Russia and China
  • A "Grexit" would be the de facto end of NATO and shift alliances in the Aegean from Europe to Russia
  • IMF formally withdraws staff from Athens....
Greece arrives at an existential fork in the road:  which way to turn? Continue to go West or strike out for an unknown path heading East 

The far-Left Syriza party of Greece, contrary to assertions of the European Monetary Union (EMU) has not agreed to further "austerity" measures, but has decided to double down on its threats to default on its IMF payments and align itself with Russia.

The Telegraph explains some of the backstory for Syriza's popularity and rejection of "austerity" measures that don't include significant debt write-offs (forgiveness).

"...One might righteously protest at what amounts to open blackmail by Mr Tsipras, deeming such conduct to be a primary violation of EU club rules. Yet this is to ignore what has been done to Greece over the past four years, and why the Greek people are so angry...

An apartment building for "middle class" Athens residents, in a "decent" part of Athens, 1 block from our 4 star hotel  (Jan 2015).  According to local social workers, 50% of the population of Greece has migrated from the countryside to Athens in an effort to find work and pool resources with other like-impoverished family members. (Click to embiggen detail)


...Leaked IMF minutes from 2010 confirm what Syriza has always argued: the country was already bankrupt and needed debt relief rather than new loans. This was overruled in order to save the euro and to save Europe’s banking system at a time when EMU had no defences against contagion.

Finance minister Yanis Varoufakis rightly calls it “a cynical transfer of private losses from the banks’ books onto the shoulders of Greece’s most vulnerable citizens”. A small fraction of the €240bn of loans remained in the Greek economy. Some 90pc was rotated back to banks and financial creditors. The damage was compounded by austerity overkill. The economy contracted so violently that the debt-ratio rocketed instead of coming down, defeating the purpose.

India’s member on the IMF board warned that such policies could not work without offsetting monetary stimulus. "Even if, arguably, the programme is successfully implemented, it could trigger a deflationary spiral of falling prices, falling employment and falling fiscal revenues that could eventually undermine the programme itself.” He was right in every detail."

The "Troika"'s earlier demands had compelled the previous Greek government in 2013 to conduct a fire sale of state-owned assets to rich Qataris, Russians and other assorted oligarchs, but even that panicked "selling of the silver to save the family" wasn't enough to satisfy the demands of the EMU.

If anything, it only delayed the inevitable as it did not address any of the structural deficits that had prevented the bailout funds from reaching down to the small businesses and institutions that were best positioned to leverage the cash transfusion into productivity that could revitalize the economy.  Instead, Greece was forced to further cannibalize its meagre state resources, exacerbating an already untenable situation.

While the "Troika"  (EU, IMF and ECB) double down on their threats to cut Greece off from any additional funding which would force Greece from the EU, Syriza forges ahead with building new arrangements that will help it backstop the looming EU credit clawbacks -

Greece’s deputy premier, Yannis Drakasakis, vowed to throw open the Port of Piraeus to China’s shipping group Cosco, giving it priority in a joint-venture with the Greek state’s remaining 67pc stake in the ports. On cue, China has bought €100m of Greek T-bills, helping to plug a funding shortfall as the ECB orders Greek banks to step back.

This development should be a concern to anyone watching as the security situation in both the mideast and Ukraine/Crimea regions continue to devolve in concert with China's growing regional ambitions.  Germany's intractability may give the Chinese access to a key strategic port for "cents on the dollar".  Greece's position as "gatekeeper of the Bosphorus" with the nearby mideast engulfed in a spreading multi-state war could lead to realignments that will reverberate for decades.

Greece's Strategic Geo-political position

Greece is keenly aware that its sole remaining chip on the table is its strategic geo-political position, which the Tsipras government has elected to exploit as one of the few remaining resources that may buy Greece and its battered citizens some much needed and hoped for respite.

Already moving closer to Turkey, Syriza is seizing its key geographic position as an opportunity to solve not only its immediate credit crunch, but to forge a deeper relationship with Russia in both the security and energy sector spheres:

As for a likely bilateral cooperation in the energy sector, a high-ranking government source told Kathimerini that Greece “will reassure the Russians, not the Westerners.” According to sources, Energy Minister Panayiotis Lafazanis has already agreed in principle to a proposal made by the head of Russian giant Gazprom, Alexey Miller, for a new gas pipeline through Turkey to be extended through Greek territory. The plan foresees the creation of a consortium in which Greece’s Public Gas Corporation (DEPA) would play a key role along with Russian funds and possibly also European clients of Gazprom, Kathimerini understands.

It could be the first time a NATO member exits the alliance and moves into the Russian sphere, in addition to potentially the first default of a developed nation in the post-Bretton Woods era.  The improbable is suddenly not only probable, but increasingly likely.

The unyielding demands of the Troika for repayment without any debt forgiveness has left Syriza backed into a corner where it literally has nothing to lose.  Capitulate to the demands of the Troika, and they immediately lose political power, something that the far-right Golden Dawn is waiting in the wings to exploit.  Citing their electoral mandate, Tsipras instead has chosen to play out their hand, and move forward with other regional strategic alliances that align more closely with Syriza's own political temperment:

Mr Tsipras is now playing the Russian card with an icy ruthlessness, more or less threatening to veto fresh EU measures against the Kremlin as the old set expires. “We disagree with sanctions. The new European security architecture must include Russia,” he told the TASS news agency.

He offered to turn Greece into a strategic bridge, linking the two Orthodox nations. “Russian-Greek relations have very deep roots in history,” he said, hitting all the right notes before his trip to Moscow next week.

Whether or not Germany's stance softens will have irreversible historical consequences. The IMF staff departure from Athens makes a last minute deal preventing default less likely than it was a few days ago.

Keenly aware that their mandate is to first alleviate the suffering and impoverishment of its citizenry, Syriza has made it clear that

"...the EU creditor powers have yet to grasp that the political landscape has changed dramatically since the election of Syriza in January and that they will have to make real concessions if they wish to prevent a disastrous rupture of monetary union, an outcome they have ruled out repeatedly as unthinkable. 

“They want to put us through the ritual of humiliation and force us into sequestration. They are trying to put us in a position where we either have to default to our own people or sign up to a deal that is politically toxic for us. If that is their objective, they will have to do it without us,” the source said."


It would appear that the economic and social fault lines between Europe and the Aegean gateway to the East can no longer be papered over with a false belief in "equal relationships" of "unequal states", nor can the lie that insolvency can be solved by further extensions of credit be sustained for much longer.

History favors the bold.

Neither should a ship rely on one small anchor, nor should life rest on a single hope. -Epictetus

Cross posted at the The Conservative Treehouse.

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