Holy jesus motherfucker AEP just dropped the mother of all bombshells (and I think his source is Varoufakis, more explained below).
Greek premier Alexis Tsipras never expected \nto win Sunday\u2019s referendum on EMU bail-out terms, let alone to preside \nover a blazing national revolt against foreign control.
\n He called the snap vote with the expectation - and intention - of \nlosing it. The plan was to put up a good fight, accept honourable \ndefeat, and hand over the keys of the Maximos Mansion, leaving it to \nothers to implement the June 25 \u201cultimatum\u201d and suffer the opprobrium.
\n This ultimatum came as a shock to the Greek cabinet. They thought they \nwere on the cusp of a deal, bad though it was. Mr Tsipras had already \nmade the decision to acquiesce to austerity demands, recognizing that \nSyriza had failed to bring about a debtors\u2019 cartel of southern EMU \nstates and had seriously misjudged the mood across the eurozone.
\n Instead they were confronted with a text from the creditors that upped \nthe ante, demanding a rise in VAT on tourist hotels from 7pc (de facto) \nto 23pc at a single stroke.
Creditors insisted on further \npension cuts of 1pc of GDP by next year and a phase out of welfare \nassistance (EKAS) for poorer pensioners, even though pensions have \nalready been cut by 44pc.
They insisted on fiscal tightening equal to 2pc of GDP in an economy reeling from six years of depression and devastating hysteresis.\n They offered no debt relief. The Europeans intervened behind the scenes\n to suppress a report by the International Monetary Fund validating \nGreece\u2019s claim that its debt is \u201cunsustainable\u201d. The IMF concluded that \nthe country not only needs a 30pc haircut to restore viability, but also\n \u20ac52bn of fresh money to claw its way out of crisis.
They rejected Greek plans to work with the OECD on market reforms, \nand with the International Labour Organisation on collective bargaining \nlaws. They stuck rigidly to their script, refusing to recognise in any \nway that their own Dickensian prescriptions have been discredited by \neconomists from across the world.
\u201cThey just didn\u2019t want us to \nsign. They had already decided to push us out,\u201d said the now-departed \nfinance minister Yanis Varoufakis.
So Syriza called the \nreferendum. To their consternation, they won, igniting the great Greek \nrevolt of 2015, the moment when the people finally issued a primal \nscream, daubed their war paint, and formed the hoplite phalanx.
\nMr Tsipras is now trapped by his success. \u201cThe referendum has its own \ndynamic. People will revolt if he comes back from Brussels with a shoddy\n compromise,\u201d said Costas Lapavitsas, a Syriza MP.
\u201cTsipras \ndoesn\u2019t want to take the path of Grexit, but I think he realizes that \nthis is now what lies straight ahead of him,\u201d he said.
What should have been a celebration on Sunday night turned into a \nwake. Mr Tsipras was depressed, dissecting all the errors that Syriza \nhas made since taking power in January, talking into the early hours.
\n The prime minister was reportedly told that the time had come to \nchoose, either he should seize on the momentum of the 61pc landslide \nvote, and take the fight to the Eurogroup, or yield to the creditor \ndemands - and give up the volatile Mr Varoufakis in the process as a token of good faith.
Everybody knew what a fight would mean. The inner cabinet had \ndiscussed the details a week earlier at a tense meeting after the \nEuropean Central Bank refused to increase liquidity (ELA) to the Greek \nbanking system, forcing Syriza to impose capital controls.
It \nwas a triple plan. They would \u201crequisition\u201d the Bank of Greece and sack \nthe governor under emergency national laws. The estimated \u20ac17bn of \nreserves still stashed away in various branches of the central bank \nwould be seized.
They would issue parallel liquidity and California-style IOUs denominated in euros\n to keep the banking system afloat, backed by an appeal to the European \nCourt of Justice to throw the other side off balance, all the while \nasserting Greece\u2019s full legal rights as a member of the eurozone. If the\n creditors forced Grexit, they - not Greece - would be acting illegally,\n with implications for tort contracts in London, New York and even \nFrankfurt.
They would impose a haircut on \u20ac27bn of Greek bonds \nheld by the ECB, and deemed \u201codious debt\u201d by some since the original \npurchases were undertaken by the ECB to save French and German banks, \nforestalling a market debt restructuring that would otherwise have \nhappened.
\n \u201cThey were trying to strangle us into submission, and this is how we \nwould retaliate,\u201d said one cabinet minister. Mr Tsipras rejected the \nplan. It was too dangerous. But a week later, that is exactly what he \nmay have to do, unless he prefers to accept a forced return to the \ndrachma.
Syriza has been in utter disarray for 36 hours. On Tuesday, the Greek side turned up for a make-or-break summit in Brussels\n with no plans at all, even though Germany and its allies warned them at\n the outset that this is their last chance to avert ejection.
The new finance minister, Euclid Tsakalotos,\n vaguely offered to come up with something by Wednesday, almost \ncertainly a rejigged version of plans that the creditors have already \nrejected.
Events are now spinning out of control. The banks \nremain shut. The ECB has maintained its liquidity freeze, and through \nits inaction is asphyxiating the banking system.
Factories are \nshutting down across the country as stocks of raw materials run out and \ncontainers full of vitally-needed imports clog up Greek ports. Companies\n cannot pay their suppliers because external transfers are blocked. \nPrivate scrip currencies are starting to appear as firms retreat to \nsemi-barter outside the banking system.
Yet if Greece is in turmoil, so is Europe. The entire leadership of \nthe eurozone warned before the referendum that a \u201cNo\u201d vote would lead to\n ejection from the euro, never supposing that they might have to face \nexactly this.
Jean-Claude Juncker, the European Commission\u2019s \nchief, had the wit to make light of his retreat. \u201cWe have to put our \nlittle egos, in my case a very large ego, away, and deal with situation \nwe face,\u201d he said.
France\u2019s prime minister, Manuel Valls said \nGrexit and the rupture of monetary union must be prevented as the \nhighest strategic imperative. \u201cWe cannot let Greece leave the eurozone. \nNobody can say today what the political consequences would be, what \nwould be the reaction of the Greek people,\u201d he said.
French \nleaders are working in concert with the White House. Washington is \nbringing its immense diplomatic power to bear, calling openly on the EU \nto put \u201cGreece on a path toward debt sustainability\u201d and sort out the \nfestering problem once and for all.
The Franco-American push is \nbacked by Italy\u2019s Matteo Renzi, who said the eurozone has to go back to \nthe drawing board and rethink its whole austerity doctrine after the \ndemocratic revolt in Greece. He too now backs debt relief.
Yet 15 of the 18 governments now sitting in judgment on Greece \neither back Germany\u2019s uncompromising stand, or are leaning towards \nGrexit in one form or another. The Germans are already thinking beyond \nGrexit, discussing plans for humanitarian aide and balance of payments \nsupport for the drachma.
Mark Rutte, the Dutch premier, spoke \nfor many in insisting that the eurozone must uphold discipline, whatever\n the financial consequences. \u201cI am at the table here today to ensure \nthat the integrity, the cohesion, the underlying principles of the \nsingle currency are protected. It is up to the Greek government to come \nup with far-reaching proposals. If they don\u2019t do that, then I think it \nwill be over quickly,\u201d he said.
The two sides are talking past \neach other, clinging to long-entrenched narratives, no longer willing to\n question their own assumptions. The result could be costly. RBS puts \nthe direct financial losses for the eurozone from a Greek default at \n\u20ac227bn, compared with \u20ac140bn if they bite the bullet on an IMF-style \ndebt restructuring.
But that is a detail compared with the damage to the European \npolitical project and the Nato alliance if Greece is thrown to wolves \nagainst the strenuous objections of France, Italy and the US.
It\n is hard to imagine what would remain of Franco-German condominium. \nWashington might start to turn its back on Nato in disgust, leaving \nGermany and the Baltic states to fend for themselves against Vladimir \nPutin\u2019s Russia, a condign punishment for such loss of strategic vision \nin Greece.
Mr Lapavitsas said Europe\u2019s own survival as \ncivilisational force in the world is what is really at stake. \u201cEurope \nhas not show much wisdom over the last century. It launched two world \nwars and had to be saved by the Americans,\u201d he said
\u201cNow with \nthe creation of monetary union it has acted with such foolishness, and \ncreated such a disaster, that it is putting the very union in doubt, and\n this time there will be no saviour. It is the last throw of the dice \nfor Europe,\u201d he said.
Today, the new Greek Finance Minister walked into a Eurogroup meeting with absolutely no new proposals, shocking everybody. He was photographed on the way out with a piece of paper on which he had written English notes, including \u201cno triumphalism\u201d.
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Now maybe this is all one big scheme to smooth the path to SYRIZA forfeiting, just making sure that everybody believes they had no choice, but I trust that chaos is the law of the land far more than order. Tsakalatos\u2019 face doesn\u2019t look like a \u201c>TFW\u201d, it\u2019s a \u201cOh god, we fucked up, what do we do\u201d.
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Now, this is not nearly the time to start planning a Grexit, which should have begun in January. It\u2019s also not good that the battle plan was leaked, which means the ECB can take precautions (not that they probably haven\u2019t already thought of it. They need to make sure Greece is dependent on humanitarian aid and has as few Euros in the country as possible to make it as pliant to Germany when the exit comes). But holy shit, it makes for exciting reading.\u00a0
Now, why do I think Varoufakis is the source? AEP has implied over and over that he has intimate dealings with high level Syriza figures who were privy to the negotiation process, yet in this case, nothing about Tsakalatos\u2019 dealings leaked. Instead, we heard about things that happened before Varoufakis resigned. In AEP\u2019s last article, he mentions outright that he had spoken to Varoufakis, and his tone seemed to have been similar to the sort of things AEP\u2019s articles have been saying:
But then he was starting to harbour \u2018dangerous\u2019 thoughts. When I asked him before the vote\n whether he was prepared to contemplate seizing direct control of the \nGreek banking system, a restoration of sovereign monetary instruments, \nGrexit, and a return to the drachma \u2013 if the ECB maintains its \nliquidity blockade, forcing the country to its knees - he thought for a \nwhile and finally answered yes.
\u201cI am sick of these bigots,\u201d he said.
\n His fear was that Greece did not have the technical competence to carry\n out an orderly exit from EMU, and truth be told, Syriza has already \nraided every possible source of funds within the reach of the Greek \nstate - bar a secret stash still at the central bank, controlled by \nSyriza\u2019s political foes - and therefore has no emergency reserves to \nprevent the crisis spinning out of control in the first traumatic weeks.\n
He was putting out feelers for technical experts in London, \ntargeting veterans of Britain\u2019s ERM exit in 1992, though he was under no\n illusions that Grexit could ever be anything other than gruesome.
AEP\u2019s been awfully kind to Syriza for somebody who calls himself a \u201cBurkean conservative\u201d, implying maybe there was a personal friendship. I think Varoufakis stayed around to give his last interview to AEP so he could drop this bombshell scoop.
Hopefully, Greece can fly in those experts very quickly. There seems to be almost no chance that an exit can be averted. Eurocrats have outright stated that if they don\u2019t get a detailed proposal on a third bailout on Thursday to hash out through the weekend, then Sunday\u2019s Eurogroup meeting will be all about the exit.\u00a0
\u201cWe have a Grexit scenario prepared in detail,\u201d said Jean-Claude Juncker, president of the European commission.
In no way is this legal, but neither were the first two bailouts, and that never stopped them. This is gonna be a wild week. Will our heroes ride off into the sunset?
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