20 Feb 2015

Greece gets its deal.. But if the detail’s wrong ‘we’re finished’

The eurozone and IMF have done a deal with Greece, extending its bailout for four months in return for a commitment to run all policy measures with significant economic impact past the lenders. The second part of the deal has to be done on Monday, by Greece submitting a list of proposed measures.

In football terms Greek finance minister Yanis Varoufakis has snatched an “narrow away defeat” from a potential knockout – from the cup and the league combined.

Here’s why. The draft does not give Germany everything it wanted. It allows Greece to vary its fiscal target this year – meaning it can run a lower surplus, as yet unspecified. In addition, according to Varoufakis, there is “creative ambiguity” about the surpluses Greece is required to run beyond this year.

Second it maintains the words Varoufakis proposed on Thursday: that Greece will not rollback old measures or unilateral policies “that would negatively impact fiscal targets, economic recovery or fiscal stability” – however with the addition of the words “as assessed by the institutions”. This clarifies who gets to decide whether the revised Greek programme threatens these things.

By Monday Greece has to submit a list of measures, in order to get the money to recapitalise its banks, and roll over its loans. Varoufakis spun this at a press conference as something that would be assessed jointly – so effectively the power game between Germany, Greece and everybody in between now continues, but with the IMF – whose methodologies are considerably less doctrinaire than the ECB on what Syriza proposes to do – in the loop.

In addition, the word “bridge” appears in the agreement. Dijsselbloem indicated that it would be a bridge to any future arrangement – and in that sense, the German opposition to any signal of the possibility of a transition phase was overcome.

Positives for Greece

Here’s why I think Varoufakis has achieved something. In the hours before the deal the Greek media reported deposit flight had significantly increased. So it was not the ECB threatening Greece with capital controls but the Greek central bank and finance ministry knowing they would have to limit ATM withdrawals as early as Tuesday.

With that hard deadline clear Greek negotiators feared the position they signed up to tonight would be chipped away by their opponents to nothing – i.e. towards the German position. So by signing early, they – they believe – have removed the ticking clock issue, and if the ECB – as Mr Varoufakis expects – makes positive announcements on restoring normal credit lines to the Greek banks, the banks are safe.


He said in the press conference the Banks would remain open “Tuesday, Wednesday and ad infinitum”.

A nightmare scenario for Greece was that, if they imposed ATM limits on Tuesday, the EU/IMF could then drag their feet, Cyprus style, forcing total capitulation.

The true substance of what’s been agreed will only be decided as the IMF/EU and ECB say yay or nay to each of the Greek measures. The German finance minister, and indeed the German “tone of voice” was not present at the final announcement of the deal. So it remains to be seen what the German lawmaker’s response is.

Syriza’s left

Varoufakis was visibly relieved. He has – we think – averted a bank run and total surrender, but only by beating a retreat from what Syriza promised in the aftermath of the election.

Syriza’s left will criticise this – and they will criticise the conduct of Varoufakis and his team who seemed to have very few bullets left in the clip by this evening. But because Varoufakis can sell this as “better than it could have been” I would expect there to be relief, and the anger focused on Germany, on the Greek streets this holiday weekend.

Asked what happens if the IMF/EU do not agree the list Syriza presents on Monday, Varoufakis said, disarmingly, “then we are finished”. But if it can be agreed, there is a massive amount Syriza can do on policies not tied to its fiscal limits, and four months only takes us to the end of June, which has always been “riot season” in the Greek crisis.

The strategic crisis is not over. But the damage to trust and solidarity, with one nation – Germany – being seen to attempt to force another’s electorate into total surrender – is real.

I asked Dijsselbloem in the press conference: “What do you say to the Greek people, whose democracy you’ve just trashed.” He replied that he did not think that was a very objective question. We’ll have to agree to differ.

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56 reader comments

  1. dee says:

    And will Germany pull the same bullyboy tactics when UK votes on leaving EU..will they threaten Uk with trade sanctions..think they might have got used to controlling other nations by then?

    1. onyroc says:

      Did you eat yesterday what you had for tommorow like in Greece? Do you have marxist government that promises free electricity like in Greece? No. You dont even use euro? So why do you bother commenting.
      Main anti eu force is bankster City of London. Pund willbe hard currency even when UK leaves. What will drachma be?

    2. Philip says:

      No. But we won’t be allowed tariff-free access to the EU that we currently enjoy. The EU made that p[lain to the Swiss when they attempted to change their “free movement of labour ” rules (& they aren’t even in the EU. We can’t expect to have the benefits of membership without paying the dues. The risk for us is (a) our exports to EU markets become more expensive & therefore reduce (b) there is EU resistance to buying British because of the rhetoric during the referendum (c) most of all, that external investors, like China, prefer to invest in countries that have free access to EU markets. The assumption that, free from the chains of EU restrictions, we shall suddenly leap forward economically with dozens of countries wishing to become our trade partners is utterly untested (not least that only around 20% of laws in the UK come from the EU and many of the so-called restrictions would undoubtedly be imposed by UK governments anyway). The risk is that, in the same way our anti-EU policies have so lost us influence in the EU that we’ve been ignored in the negotiations over the Ukraine crisis, that’s how we’ll be treated in economic terms. A further risk is that the Germans may see the departure of the UK as an opportunity to build up Frankfurt at the expense of the City – and as a country with a far stronger economy than ours and pretty well operating control over the Euro, they may be well placed to do so. In some respects, we rival the Greeks in having a naïve and insular view of the world. The Germans are responding to the wishes of their electorate in the same way that the Greeks are. the difference is that the Germans are the ones holding the cash & the economic power….and take a look at our debt ratio to GDP sometime!

      1. petermartin2001 says:

        The UK buys more stuff from the EU than they buy from us. So, other than cut off their nose to spite their face, there’s not a lot the EU can do about it.

    3. George says:

      It’s not only the Germanz who are unhappy with the Greek attitude “We didn’t do anything wrong and won’t pay back”. There are numerous other European nations who take the same view as the German government. Just as a reminder, Greek politicians and businessmen lined their pockets in the years leading up to the crisis while most of the common Greek people have to pay a heavy price for it now. When Iceland got into trouble during the banking crisis the UK was very quick to demand that Iceland has to step in for losses of British Icesave customers and used anti terror laws to freeze assets in the UK. … Bullies are all over the place, you know.

      1. Me says:

        I wonder if the same could have been said to the German’s after WWII, when a large portion of their debt was written off. I wonder what Germans, after WWI, would have thought of modern Germany’s stance in these negotiations as their economy was weighed down with un-payable debt back then. How did that turn out for Germany? I am sure that the irrational German leaders are aware of this history but, like most governments in the West, are so corrupted by a bankrupt ideology and banker influence that they could give a damn. The quality of people in governments across the West has really sunk to a new low.

        As far as the other countries in the EU, is austerity popular there? Does the prioritization of the banks over the people in the US sell well in the EU? I don’t know, I don’t live there or follow popular opinion. There are many countries in the EU in similar positions as Greece and the EU is not structured to deal with these issues in an equitable and just way. Good luck to those living in the EU. The EC, ECB and Germany have shown the lower income countries what awaits them when, not if, they run into financial difficulties.

  2. PETER CLOSE says:

    Well done Yanis …….. so far so good!

  3. Carmel Shortall says:

    Greek democracy trashed by European/German plutocracy.

  4. royaldocks says:

    Have to say, Dijsselbloem is correct – you’re obviously taking a stance here, abandonign objectivity completely and to say you’re not would be disingenuous.
    Just a teensy reminder that Schaeuble also has a democratic mandate, arguably a better one than Varoufakis as the share of the CDU vote in Germany was rather higher than the one in three Greeks voting for Syriza.

    1. Shabu Qureshi says:

      Not only Germany but the 17 other Euro nations that are negotiating with Greece are democracies last I heard. A couple of things. First, it’s always interesting that this politically this issue is posed as the responsible Germans versus the profligate Greeks, when it is at least as correct to view it as the German state bailing out the profligate bankers (more French than German in my recollection). Second, on a positive note, the Germans seem to be letting themselves be dragged along to a more productive, less austere approach on Greece. While this is slower than one would like, one can make a good argument that given Northern European political realities slow is the only possible speed. When I listen to Schäuble, I have the impression, perhaps incorrectly (who knows) that he is playing a role that Merkel wants and needs to have played, but that he is not playing to win.

    2. Mcreynma says:

      Agree with you about Paul Mason being disingenuous – am disappointed, as I normally respect his commentaries. Dijsellbloem’s actual response was much more nuanced than Mason’s report suggests.
      When one democratic mandate comes up against another, different, one, compromise is essential.

    3. Gordon Churchill says:

      royaldocks misses the point about democracy. The issue is not a quantitative difference in size of ‘mandate ‘ between two countries. The issue surely is whether it is democratic for one part of an alleged community or union in its own interests, to’ trash’ another.

    4. iOa kala says:

      Almost 50% of the people who voted, voted for syriza and this is even bigger if we talk of the coalition government. Last Sunday the gathering along Greece squares of people supporting the government was immense. So don’t you dare present a different image. Greek people FULLY SUPPORT their government!!!
      And mr. Mason is one of the few honest and unbiased media men, who dares speak the truth.

      Thank you

    5. Trevor55e says:

      Since when did the CDU have a mandate over the Greek Electorate?

  5. Phill says:

    I wonder if the Germans are just giving the Greeks more time to shoot themselves in the foot. I cannot see the ‘Troika’ agreeing to any watered down proposals the Greeks put forward on Monday. The only reason the Greek government capitulated was the chaos a limit on ATM withdrawals would have caused…they could never have sold that to the population on their return. I still fear the worst for Greece however in the short term. These new boys seem ill equipped for negotiations at this level and the Greeks are in denial.

    1. A person says:

      Please allow me to make a correction on your last sentence. The Greeks are not the ones in denial as Joseph Stiglitz pointed out. They have been given a toxic medicine which has raised the debt to GDP ratio from 110% to 170% and reduced their economy by a quarter.

      Saying they are in denial after having followed this program is harsh to say the least.

    2. Brian says:

      Let us not forget that all the Westminster parties threatened Scotland in just that manner in advance of the independence referendum. Ed Balls and George Osborne saying that Scotland would be blocked from using sterling, chucked out of EU etc. Still getting over that love bomb..

  6. sandie says:

    “the end of June, which has always been “riot season” in the Greek crisis”. – What does this exactly mean? I think I object to this statement, but I await to reading an explanation that convinces. Thank you.

  7. Izzy says:

    Great question. For those who want it reduced to some objective value, I wonder how much did that election actually cost? They should be compensated for the negated result. The Greeks are not exactly rolling in money atm, and cannot really afford to fork out for a meaningless sideshow.

  8. A person says:

    If my information is correct, the previous Greek PM, Mr Samaras had agreed to reduce a 6 month program to only 2 hoping that this would force SYRIZA to flip-flop and consequently collapse. The term that was often used was the ‘left parenthesis’.

    Am I the only one thinking that the Eurogroup basically returned to the dates set before Samaras’s ‘intervention’?

  9. Ange says:

    Greece has no option but to leave the EU. It can seek assistance from Russia & throw the spanner in the works, geopolitically. This will repercussions on the very existance of the EU. This I would love to see.

  10. Nicolas Stavrou says:

    Speaking to the press afterwards, Mr. Varoufakis prided himself on being able to say “NO” to Brussels, in contrast to previous Greek Governments who wouldn’t. Well, we now know how Mr. Varoufakis says NO to Brussels: TOTAL CAPITULATION!!!

    Without a viable “PLAN B” he was definitely out-maneuvered!

  11. Casper says:

    I think the greek arrogance is amazing. Hight time that the germans stop to compromise.

    I am discusted about that greek arrogance…cheaters, nothing than that.

  12. Mark says:

    If I had been asked the question, I would have responded that my democratic mandate came from being elected president of the eurogroup by my peers in the eurozone countries, who have been democratically elected by their peoples to represent the interests of their peoples while trying to reach a reasonable accommodation that could satisfy the concerns of all 19 member countries of the eurozone, not just Greece.

    The Dutch coalition government (combined share of vote at general election – 51.4%) has no less a democratic mandate than the Greek coalition government (combined share of vote at general election – 42%) and its coalition programme for government, available in English on the government.nl website, sets out clearly its attitude to eurozone states in financial difficulties.

    The address of the Dutch Prime Minister to the newly elected parliament is also available on the same website. In it, he sets out the harsh reality of €16 billion worth of spending cuts and tax increases to be made up to 2017, and states that the total value of Dutch austerity measures from 2010 to 2017 would be €46 billion.

    The Dutch have made sacrifices too and don’t expect to have to loan money to Greece without conditions attached. If the Greeks want to borrow money without these conditions attached they can turn to the bond markets, although they would be unlikely to find much comfort there.

    Also if the democratic mandate of the Greek people has been trashed, shouldn’t its own government face the consequences and resign?

  13. PhilJoMar says:

    One thing Syriza is helping with is the slow contamination of the German ‘brand’. It may not have occurred to the German elites but people are actually free to buy products from other countries. The hubris on show from this generation of German politicians is amazing to witness. They tend to talk about Europe when they actually mean their own country and this elision will prove the downfall of their idea of the European project. Stupid, stupid, stupid.

  14. Yiannis says:

    What is happening here is that the leaders decided that they could not do a “big deal” and divided the loan terms into a minutiae-based timetable.

    Because the two positions of the Greece-friendly countries and institutions (Italy, France, EU Commission) and the German-led austerity countries (Germany, Netherlands, Finland, Slovenia, Slovakia, Portugal, Ireland and Spain) could not be reconciled, the process was broken down into small bits and pieces that will make this an incredible grind rather than a big bang.

    The problem for Greece will be the June and July deadlines. For Germany the problem was that it failed to obtain a surrender to austerity which it asked before the previous elections and the submission of all political process to economic bureaucracy.

    Going forward the Syriza government will need to prove that their anti-corruption changes will bring new Euros to the Greek economy. Another massive difficulty in July will be the reform the current pension system into a sustainable path without making extensive cuts. Even if there was no unemployment, this system would still be unsustainable.

    I’m guessing that going forward the Eurogroup circus will be monitoring Greece more often and their agreements will be short-lived. If the Greek economy expands this will be doable, if the recession persists it will fail. The EU, for the first time acknowledges that the Greek austerity program has failed. It now appears to be choosing small-scale baby steps that couple with the ECB QE and the Juncker funds may spark growth. If Syriza’s changes fail to meet expectations there is no viable democratic political movement to move Greece forward. And that’s why the EU cannot but ultimately support the SYRIZA government. If it fails, Italy and the whole of Europe fails.

  15. Stephan says:

    Heh heh, I bet there are British economists dancing on their beds for not joining the Eurozone

  16. Olivier says:

    ““What do you say to the Greek people, whose democracy you’ve just trashed?” does not seem a very smart question to me. Answering it would imply that you agree with the proposition “I have trashed the democracy of the Greek people”. So you can be sure that you will not get any answer. Or wasn’t it a question, but a statement?

  17. socs says:

    Close defeat sound like a big win if you consider the starting point, given that time will provide the chance for other democratic powers to sring up all over Europe. The glass is cracked and as usual to our, the Greeks, expence.

  18. Jim Brash says:

    I still think the best option for Greece is to leave the euro, return to the drachma, and seek economic aid from ALBA or the BRICS. Oh , and to probably nationalize the banks.

  19. George says:

    Respect & kudos to you for your question to Dijsselbloem.

  20. Sascha says:

    @royaldocks: Schäuble might have some democratic mandate through the elections in Germany. But then he took a 100000 DM bribe from a black market weapons dealer, so his democratic legitimization is actually zero. He is just a criminal, same as those criminals SYRIZA is trying to get rid off in the Greek state.

  21. JohnScully says:

    It appears that Greece got everything they originally asked for ( including keeping the 10B odd as cover ) while massaging the ears of the austerity camp voters, in an ostensible compromise, – so everyone goes away claiming a win.

    Agreement on a list of proposed reforms was always on the cards – overall both sides working well toward a solution. Don’t see any grounds for claiming democracy was trashed, on the contrary picking the right elements of a deal is the way forward.

  22. Joe says:

    Well done Varoufakis. However this demonstrates how Germany are colonising European countries and they need to be cut down a peg or two. Not all Greeks are rich tax evaders, 58% youth unemployment not including the people who have already left Greece shows what a failure the troika led bailout has been. I hope that Syriza implement meaningful reforms now. Troika should be embracing this new greek government because they do not represent the old greek establishment who created the mess in the first place. They have a strong mandate in parliament and the ability to push through reform. Isn’t it better to work with a creditor rather than stand on their throats…….

  23. Iann says:

    I think that Wolfgang Schäuble said on the side the true purpose of the negotiation. When he stated that the Greek goverment will have a problem announcing the deal to its people, there is not much more to be said.

  24. Ardent Masterchief says:

    I want to thank the Greeks who voted for SYRIZA AND proceeded to pull their money out of the banks for this situation.(don’t know how many fit into both groups) You can’t have it both ways, thanks for doing Europe’s handiwork..

  25. Stevie says:

    Let’s be honest Paul, Germany have effectively been engaged in a process of regime change since SYRIZA were elected (seriously, a radical left government comprising everything from trade unionists to communists in power within the EU?) , and the leverage has been a Grexit. I was no SYRIZA fan before this election (I’ve been in Athens since the crisis broke in 2009) but now, after seeing how both the elected government of Greece and the Greek electorate have been treated by Germany in particular, I’m more than happy that there is a party with wherewithal to give them them a kicking in return. They made have made an offer that the radical left can’t accept, but there are whispers here that they will, backed by the rest of parliament.

    @Royaldocks, CDU may well have a greater mandate by vote share than SYRIZA, but that mandate is to govern Germany, NOT Greece. (not that we measure how much ‘democracy’ we have this way, we demonstrably do not)

  26. Bob J says:

    To me this is just like a stage play that has no counterpart in the real world. It is just diplomatic finessing.

    The Euro is, to my mind, unsustainable and the Greek drama is a minor sideshow. The logic of relentless austerity will further encourage those who want to end the Euro experiment and return some semblance of sanity to economic policy making.

    In the meantime Greece has to continue to cope with stratospheric levels of general and youth unemployment with no relief in sight. Appalling.

  27. vinny says:

    The Greeks are to blame themselves rather than EU or Germany. Spending more than taxes bring in, corruption, low age pensions, falsifying information on the state of their economy, and so on..

  28. StuartM says:

    “I [Paul Mason] asked Dijsselbloem in the press conference: “What do you say to the Greek people, whose democracy you’ve just trashed.””

    A demoray cannot unlatterally vote to override the loan terms the country only recently agreed to. If that were the case then everybody would vote to discard our national debt … just like that. If those lending to us did not agree they would not be “trashing our economy”.

    It seems to me that the democratic voice of Germany (whose money the Greeks are using to stay afloat”) is pretty relevant. Greece’s legal government agreed to the terms and on that basis Germany agreed to lend the money. So what about German democracy ? Does Greece voting to unilatterally trash the loan terms override the democracy of the lending state ?

  29. Tommy Judd says:

    Royaldocks is correct: you have turned into SYRIZA’s spokesman in the UK and Dijsselbloem was right to dismiss an inappropriate (and also wrongheaded) question from the press room.

    As for gorgeous pouting Yanis’ supposed wins last night – freedom to introduce fully funded left policies and run a lower primary surplus – those were on offer three weeks ago to whoever won.

    The programme always had significant policy flexibility in it as long as the broad fiscal goals were met. But Papandreou, Samaras and now Tsipras didn’t have the bottle to do what Ramsay McVaroufakis has been banging on about for three weeks now but not actually doing – proposing and implementing “deep reforms”.

    Greece’s fundamental problem is endemic rent-seeking, as he has said between soundbites, and that was never going to be addressed by PASOK or ND. The creditors including the dreaded “Germans” have been gagging for this for 5 years and would trade a lot of short-term budgetary austerity for it.

    SYRIZA could do it – especially if they had chosen Potami over anti-semitic right-wing crooks – but instead they have wasted three weeks, €20bn+ of bank deposits and a taxpayers’ strike and lost any allies they had in Europe in return for a theological argument over whether the current programme should be extended or not. Today they are precisely back where Samaras was in December but without a modicum of trust from their creditors, the banking sector on the edge of collapse and in a deeper short-term fiscal hole.

    As you admit in your otherwise on-message SYRIZA UK press release, the party’s real left will see through this supposed victory and Tsipras has a choice to make over the coming 4 months. Will will continue trying to appease his statist-corporatist wing or become the harbinger of an outward-looking mainstream European political economy and so re-define the Greek left?

  30. Alastair says:

    Hi Paul,
    What do you think of this report that the Greek debt is actually quite manageable due to the long term maturation and low interest rate?

    See this article –

  31. Philip Edwards says:

    So……No “Greek Spring,” then?……Just more far right neocon claptrap from propagandists like you.

    Nothing new here. Move on.

  32. scipio says:

    Our new political leadership in Athens with a cross-party mandate and unprecedented popular support allowing them, if necessary, to pull the plug on unsustainable debt repayments and to use the repayment and bond maturity money to pay salaries, pensions and kick start the economy by supplying liquidity to the marketplace, funked it, and gave in to the EU, (except for some minor concessions that would allow a claim of partial victory). The popular mandate was not for this, but for Alexis Tsipras to save our society from total and abject collapse. Yanis Varoufakis, our erudite and stylish political economic minister-star who took centre stage, like another illusionist David Copperfield, had the whole of Hellas standing by expectantly last night as he reached into his hat, only to draw out…a dead fish, with the claim that with four months of pickling it would be palatable to us and the EU. He is wrong and it will be wise for him and prime minister Tsipras to kick the interim agreement into the gutter of history if Greece is to be saved, even if this means a new Thermopylae, where true victory follows sacrifice. Great moments in a Greece’s history were never the result of compromise, but of a willingness to fight superior odds in order to succeed.

  33. nh downing says:

    The Greek people were not given the money – the banks were. Is a new government in Britain required to sign up to policies agreed by a defeated government?

  34. disgusters says:

    Trashed Greek democracy? Well, I would certainly vote for Germany to pick up our bills too, so long as we could ignore their terms for the loan, and continue to do so, Monday, Tuesday ad infinitum. If I was a German voter I would be furious with my government if they let anyone get away with trashing our good will and good name, and spending my taxes on filling the bottomless pit that is Greece. Time for a managed Grexit.

  35. GWI says:

    Difficut one, this … but Paul’s piece is excelent. I expect that Tsipras & Co have contingency plans in place. Chinese finance would not be so difficult to get!

  36. NickDavisGB says:

    Why are these bankers, who destroyed the world economy, still calling the shots ?
    These sociopaths should be in jail.
    They are worse than IS – they have destroyed the lives of hundreds of millions of people for what ? Money, cash, lucre, vanity, greed, power.
    At least IS is upfront about their plans for world domination.
    The bankers smile while stabbing you for their own gain.

  37. AndrewY says:

    The Greeks cynically voted for Tsipras, fully aware that he had nothing more than smoke and mirrors up his sleeve… Hoped for the best, expected the worst. It will be very quiet out in the streets this time.

  38. Simon says:

    When I next get my credit card bill for five grand I’ll have a vote in my household and ask who thinks my neighbour should pay. Pretty sure the vote will be unanimous. When my neighbour refuses to pay will they be trashing my families democracy ?

    There is nothing moral about asking the electorate of a country like Slovakia to pay for the Greeks mis-management of their own economy. You seem to be wearing your own views firmly on your sleeve these days – you have a duty to be impartial you know! If not go work for a newspaper. Also there is a Germanphobic quasi nationalistic tone to your reporting that is pretty unpleasant – even comparing Greek and German contributions to western society… Pretty gutter stuff ! Stick to the facts and report fairly please.

  39. ixnilatis says:

    better for us to go back….to drachma….with our own currency….we can put oyr lives in growth again…better to suffer…for a year…than suffer for lifetime

  40. Neil says:

    So, what actually happens on Tuesday morning if the “institutions” don’t agree with the proposals made by Greece on Monday?

  41. Kiwi7 says:

    Yes, Greek democracy has been challenged.

    But you should not forget the democratic will of the countries that are lending to Greece.

    And therein lies the problem of the whole Euro project – multiple, difference political entities and just one currency. They need to either come together into one superstate or go for different currencies.

  42. Nigel Wilson says:

    Looks like permanent negotiation to me. Maybe that way we can find a way out of this minefield constructed by poor decisions made in the good times.

  43. Evi_M says:

    Salvation of Greece depends in part on the actions of its creditors. Μost important are the internal reforms. These, there was no case be done by the past governments. Do you think that the Greeks were expecting anything more from the negotiations? If yes, you are wrong. Almost no one accuses Tsipra or Varoufakis about it. SIRIZA will fall only if it fails to reform the state apparatus and inspire changes in the Greek society.

  44. John Turner says:

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