German Prime Minister Angela Merkel has demanded Greece to give 50 billion Euros in public assets for sale by a German state bank (that has been bailed out 4 times since 2008) where German Finance Minister Wolfgang Schäuble is a the controlling director. The punitively strict austerity measures demanded by Germany and their northern European allies are unacceptable to left-leaning members of Greek Prime Minister Alex Tsipras' Syriza party. If Tsipras accepts the German control of the Greek economy demanded by Merkel, his governing coalition will likely explode. This is effectively a German coup attempt. The Germans are demanding that Tsipras forces the Greek parliament to pass laws written by Germans and to revoke laws that were recently democratically enacted.
The speaker of Hellenic parliament was incensed by the German demands.
Zoe Konstantopoulou, speaker of the Hellenic Parliament, is bitterly opposed to the current negotiations saying this weekend “the government is being blackmailed … I could never vote for the contents of the agreement.”
UPDATE Deal Done "Tsipras a beaten dog"
“The Greek government has accepted practically everything,” Prime Minister Joseph Muscat of Malta said in an interview after the overnight marathon. “It accepted all the crucial and important points.”
Two officials who observed Tsipras at the Brussels showdown independently described him as a “beaten dog” whose only remaining option was to submit to the creditors’ will, carving out a concession here and there. Tsipras fretted privately about the reception that awaits him in Athens.
Under fire at home, Tsipras pulled off minor tactical victories, notably by retaining a measure of Greek control over a privatization fund that would raise up to 50 billion euros by selling state assets -- a target that proved unreachable in prior bailouts.
Paul Mason at Channel 4 news, UK, reporting from Athens compared this deal to the great European failures of the twentieth century.
The eurozone took itself to the brink last night, and we will only know for certain later whether its reputation and cohesion can survive this.
The big powers of Europe demonstrated an appetite to change the micro-laws of a smaller country: its bakery regulations, the funding of its state TV service, what can be privatised and how. Whether inside or outside the euro, many small countries and regions will draw long-term negative lessons from this. And from the apparently cavalier throwing of a last-minute Grexit option into the mix by Germany, in defiance of half the government’s own MPs.
It would be logical now for every country in the EU to make contingency plans against getting the same treatment – either over fiscal policy or any of the other issues where Brussels and Frankfurt enjoy sovereignty.
Parallels abound with other historic debacles: Munich (1938), where peace was won by sacrificing the Czechs; or Versailles (1919), where the creditors got their money, only to create the conditions for the collapse of German democracy 10 years later, and their own diplomatic unity long before that.
- See more at: http://blogs.channel4.com/...
END UPDATE
According to a high level government source of the Guardian, Germany is demanding the extreme measures of Greece as punishment for voting no to the EU's previous austerity package. The German leaders have said that Greece is not trustworthy.
European leaders have confronted the Greek government with a draconian package of austerity measures entailing a surrender of fiscal sovereignty as the price of avoiding financial collapse and being ejected from the single currency bloc.
Under the terms set before Tsipras on Sunday night, the Greek parliament has to endorse the entire package on Monday and then pass several pieces of legislation by Wednesday, including on pensions reform and a new VAT regime, before the eurozone will agree to negotiate a new three-year rescue package. ...Editorial Cut...
The terms are much stiffer than those imposed by the creditors over the past five years. This, said the senior official, was payback for the emphatic no to the creditors’ terms delivered by the snap referendum that Tsipras staged a week ago.
“He was warned a yes vote would get better terms, that a no vote would be much harder,” said the senior official.
The extreme austerity demanded will inflict further damage on an economy already driven by austerity into Great Depression levels of unemployment and misery. The demands make no financial sense what-so-ever because they will make a very bad financial situation much worse for both Greece and creditors. The EU previously made grossly optimistic predictions about the effects of austerity on the Greek economy. Austerity has been a disaster twice over. Reports are appearing that Germany is making an example of Greece to make France and southern Europe follow EU rules demanded by Germany.
EU's austere "bailouts" of Greece that saved German and French banks by spreading the costs to the Eurozone have created a depression in Greece. The EU grossly under predicted the economic devastation caused by austerity.
Twitter via PoliticoEU: Nicholas Hirst 2 hours ago
Mathieu von Rohr of Der Spiegel quotes from tomorrow’s editorial in the German newspaper Süddeutsche:
That reflects an important battle-line in these negotiations.The Germans are fed-up of unfulfilled French (and Italian) promises to reform and this is an opportunity to show that ‘rules are rules’. But it means that Greece has become a proxy for a wider battle over the future of the eurozone.
Nobel prize winning economist Paul Krugman castigated German leadership writing that the trending hashtag #ThisIsACoup is exactly right.
this Eurogroup list of demands is madness. The trending hashtag ThisIsACoup is exactly right. This goes beyond harsh into pure vindictiveness, complete destruction of national sovereignty, and no hope of relief. It is, presumably, meant to be an offer Greece can’t accept; but even so, it’s a grotesque betrayal of everything the European project was supposed to stand for.
Can anything pull Europe back from the brink? Word is that Mario Draghi is trying to reintroduce some sanity, that Hollande is finally showing a bit of the pushback against German morality-play economics that he so signally failed to supply in the past. But much of the damage has already been done. Who will ever trust Germany’s good intentions after this?
In a way, the economics have almost become secondary. But still, let’s be clear: what we’ve learned these past couple of weeks is that being a member of the eurozone means that the creditors can destroy your economy if you step out of line. This has no bearing at all on the underlying economics of austerity. It’s as true as ever that imposing harsh austerity without debt relief is a doomed policy no matter how willing the country is to accept suffering. And this in turn means that even a complete Greek capitulation would be a dead end.
The anger of Europeans at Greece is misdirected. Greece was never bailed out. French and German banks were bailed out by the nations of the Eurozone. Italy and Spain have paid billions of dollars, damaging their financial condition, to bail out French banks which lost 50 billion Euros and German banks which lost over 25 billion Euros in bad loans to Greece.
French and German bank loan failure costs were distributed to the whole Eurozone in "Greek bailout" which was actually a bailout of French and German banks that did little to benefit Greece. France and Germany transferred billions of Euros of private French and German bank debt to the governments of Spain and Italy.
In March 2010, two months before the announcement of the first Greek bailout, European banks had €134 billion worth of claims on Greece. French banks, as shown in the right-hand figure above, had by far the largest exposure: €52 billion – this was 1.6 times that of Germany, eleven times that of Italy, and sixty-two times that of Spain.
The €110 billion of loans provided to Greece by the IMF and Eurozone in May 2010 enabled Greece to avoid default on its obligations to these banks. In the absence of such loans, France would have been forced into a massive bailout of its banking system. Instead, French banks were able virtually to eliminate their exposure to Greece by selling bonds, allowing bonds to mature, and taking partial write-offs in 2012. The bailout effectively mutualized much of their exposure within the Eurozone.
The impact of this backdoor bailout of French banks is being felt now, with Greece on the precipice of an historic default. Whereas in March 2010 about 40% of total European lending to Greece was via French banks, today only 0.6% is. Governments have filled the breach, but not in proportion to their banks’ exposure in 2010. Rather, it is in proportion to their paid-up capital at the ECB – which in France’s case is only 20%.
In consequence, France has actually managed to reduce its total Greek exposure – sovereign and bank – by €8 billion, as seen in the main figure above. In contrast, Italy, which had virtually no exposure to Greece in 2010 now has a massive one: €39 billion. Total German exposure is up by a similar amount – €35 billion. Spain has also seen its exposure rocket from nearly nothing in 2009 to €25 billion today.
There is no European Union. The Eurozone is a neoliberal economic war zone, not a union.