17 Feb 2015

Leak and counter-leak: how not to achieve a Greek deal

Documents leaked to me last night shed new light, but not total clarity, on the dramatic breakdown of talks in Brussels over a new Greek bailout deal.

On Monday afternoon the Greek delegation in Brussels told journalists a draft agreement presented at the start of the finance ministers meeting was “unacceptable”. A vigorously crossed out sentence, in the writing of finance minister Yanis Varoufakis, indicated disapproval.

Varoufakis (pictured, below), in a tense press conference, then claimed he had been ready to sign an earlier draft presented to him by EU Commissioner Pierre Moscovici.

Challenged to produce the draft, he did not immediately do so, and someone on the EU side briefed journalists it probably did not exist.

‘Close of business’

At 11pm UK time I was leaked a document described to me as that draft. Dated 18:20 on Sunday night, it was clearly at variance with what had been on offer Monday. I released it via Facebook and Scribd.

Then, at 11:28pm a different source informed my that the document sent to me was an earlier draft, and that the finally agreed one was headed “close of business” (see below). It was substantially different, and even more acceptable to the Greek side.

I released this also and by now the Greek media was in a frenzy.

Not only did the document exist, but it said: “The above forms a basis for an extension of the current loan agreement, which could take the form of a (four-month) intermediate programme, as a transitional stage to a new contract for growth for Greece, that will be deliberated and concluded during this period.”

As this is exactly what the Greeks wanted, it explains the shock, and the urgent nature of their briefings to journalists Monday afternoon when it was replaced by a much harder form of words.

However there are loose ends. Moscovici, as a member of the commission, is there to advise but he is not the man with the money. The Greeks are negotiating with the Eurogroup, representing the creditors, not the European Union.

Also none of the documents I’ve seen were signed. It is possible that two sides went away from each drafting session with misconceptions.

Information asymmetry

So if we step back from the overnight furore, where does it  leave us?

First, with information asymmetry. Journalists are used to coming away from Brussels with scant information – snippets of verbal briefings. It’s impossible to reveal the sources of three (!) documents I’ve been leaked – but though they were each different, the release benefited the Greek side.

The Eurogroup, IMF and commission are sticking to the old rules, speaking off the record to a few journalistic insiders, and that has left them stumbling to get their side of the story out. We have to bear this in mind whenever a blazing headline happens.

Second, we are close to a deal. The substance of the “close of business” document is that Greece gets to implement 30 per cent of its anti-austerity programme; it gets flexibility on this year’s budget balance (ie is not required to hit 4 per cent), and it gets a four month extension – and alteration – of the old agreement as a transition to a new agreement.

Today negotiators will continue to try and build on that. The question is whether they will run into the recurrent obstacle again: intransigence from an alliance involving Germany and the governments of peripheral countries who are going to look timid if Greece achieves what they did not: Spain, Portugal and Ireland.

Inherent danger

A large part of the commentariat, plus many politicians in the hardline countries, have staked their reputations on the scenario: force the Greeks into a humiliating climbdown or exit from the euro.

Just as the Greeks have a vested interest in securing a temporary deal, allowing them to do part of their programme, their opponents have an interest in forcing total submission.

Last night, with its frantic claim and counter-claim, shows the danger inherent in the situation. Fatigue, misinformation, misunderstanding, media rage, Twitter rage (which is media rage times 10) and mismatched time zones can turn a rational outcome into an irrational one.

Given what the Greeks themselves were “cool with” on Sunday night, the prospect of bank insolvencies, sovereign debt default, capital controls and Euro exit would seem an irrational outcome.

But it could happen, and within weeks, unless there is a deal by Friday.

Below: the “close of business” document.


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16 reader comments

  1. yiannis says:

    What is wildly irrational is the German insistence that the Greek MOU has been a success for Greece, when it has been an utter disaster failing every monetary projection regarding the breadth and depth of the recession. The only success has been to offload the debt of German and French banks onto European citizens whose pathetic governments acquiesced.

    If Greece is forced to choose between democracy with poverty and money with humiliation and submission, there’s no doubt that it must choose the former. And yes I know the implications and believe me they touch me more than your average reader.

  2. dimi says:

    Saying that the document never existed (!) shows the ethics of the EU leaders…
    They want to approve, as they say, every single move of the new greek government makes…
    Then why bother to have elections? If the EU is so anti-democratic, perhaps we are better of without it…

  3. David Hillstrom says:

    An informative and balanced article. Europe cannot survive this way. In lieu of rational federalist policies to support economic development and convergence we are witnessing bureaucratic incompetence and bull headed austerity. On the other hand Greece desperately needs to reform its oversized and inefficient public sector. The previous government made little progress against that goal. The current government is an unlikely champion of such reform.

    The fate that Greece faces has no good options. Accept the EU program and the country faces the slow spiral of economic decline. Exit the Euro and face a fiscal mess with no capital inflows.

    1. José Luiz Ferreira says:

      «The current government is an unlikely champion of such reform.» Some things come from where they are least expected, and the previous government was an even more unlikely champion of a public sector reform. The size and inefficiency of the Greek public sector are inextricably linked to corruption; Syriza’s stand against corruption, if successful, may have the collateral effect of reducing the public sector, or at least of making it more efficient. Even if it doesn’t, it will be a valuable development in itself.

  4. José Luiz Ferreira says:

    So the four goverments that have the most to gain by a humiliating Greek defeat are Germany, Ireland, Portugal and Spain. Which puts three at least of these governments seriously at odds with their own populations.

  5. Gordon says:

    This is all very interesting but it stands that the same finance ministers will bend over backwards to support the banking industry but are quite content to sink a nation state and plunge its citezens into financial uncertainty.

  6. Neutral European says:

    It seems there are no easy answers now. Some of the EU states appear to be intransigent, but can they be blamed for expecting a country (Greece) to abide by agreements they themselves accepted (and sought), as everyone should do? There are many reports from Greek politicians (and others) which make reference to ‘honourable’ agreements and their willingness to fight for democracy, yet by openly threatening the Eurozone (and EU) with collapse and by not honouring their debts, they appear to be acting in a completely dishonourable way. The threats to take Germany to court for war reparations for 11 billion Euros – to a modern European should be anathema as (in the spirit of the EU) they are our cousins. Yet this is the plan of the current Greek government, who threaten and attempt to blackmail all of us within the EU one moment and then resume their usual sycophantic manner to get what they want the next. We should not forget that Greece colluded its entry into the Euro and has shown considerable expertise in siphoning EU funding into the country. Anyone who knows Greece well will admit that corruption, nepotism and an unusual attitude of considering EU law as ‘optional’ are commonplace. I know that there is high unemployment and poverty, but it is not necessarily worse than in other EU countries who are making the same sacrifices and are honouring their agreements. It should also be remembered that unlike many of those countries, most of what is happening now is the consequence of Greek actions. By this I refer to: people being employed in non-existent jobs, endemic tax avoidance (at all levels) and the employment of people on full salaries to sit on a chair for a couple of hours a day (doing very little). Can anyone seriously expect anything other than an unhappy ending for a country with this profile which also has the highest Porsche ownership per capita? Before someone posts a response referring to urban myths – I don’t believe the fact that both my ‘relatively normal’ Greek friends have Porsche cars to be a coincidence. Greece wants to stay in the EU because it wants to exploit EU funding, to gain unrestricted access to employment abroad and to gain financially (pensions, etc.), not because it has Europe’s interest at heart or the interest of other nations’ citizens -they are like tourists, there to be milked. I suppose it comes down to whether Greece intends to pay its debts or whether they expect everyone else to do so for them. Many people I have talked to express the opinion that a Greek exit would not lead to chaos or EU collapse if it is managed and directed by the EU, which has strengthened its position considerably over the last three years.

    1. Aristotelis says:

      I’d like to say that, in my personal opinion always, people of Greece do want to repay their debt to other countries, from talk I have in every day life. Especially those who face the same problems, Spain Portugal and Ireland. Not because we are good christians, but because we cannot stand the thought of loosing face with others.
      The problem, and what is at stake at this very moment, is how we do it. By continuing this policy that escalated the national debt from 120% of GDP to 180% and brought the middle class crumbling down on it’s knees. The policy that closed 450.000 small businesses. Or do we dare to try a deferent one.
      By the way during this crisis inside Euro zone Germany is the one of one of the feu countries that thrived under all this austerity. My personal belief is that Merkel and the other right-wing parties, inside Europe, do not want to talk about an other policy to tackle this problem because they will find them selfs in a predicament stating that “we were wrong”. And most of all they do not want to lose face in their respective parliaments. Also see what this policy did to Spain, for example.
      By the way we Greeks, for the most part, are not lazy country men. We get payed to work 40 hours per week, but we end up working 50 or 60 and of course we don’t get payed for over time. Most of us do not evade our tax payments, yes we have those who avoid paying but in every country there are some. Every body is blaming us for corruption, yes there is and quite a lot, but they do not help us end it. Germany for example refuses to arrest Christoforakos who had a key role in the scandal with Siemens and cost dearly to Greece, he was the middle man between the government of Greece and Siemens. Oh and there are the scandals of the submarines which cannot float. The ones we were forced to buy, by our friends the Germans, in the middle of this crisis.
      To sum it all up we want the current austerity policy to be changed and give us some room to breathe. They have the choke hold on us way too long and we are grasping for air and some dignity.

      (All of those are my thoughts on the matter and are deprived from the talks I have and from my own understanding of the current situation inside Euro zone and Europe it self. I do expect your respectful replies and opinions on the matter.)

      1. Neutral European says:

        Aristotelis – How much better it would have been for your country and all of us in Europe if people like you had been negotiating rather than the vain, self-obsessed, high ego individuals that were sent from Athens. This whole debacle need not have taken the course it has done had the individuals involved not taken such a confrontational approach. I cannot remember another event where an EU member state has tried, so openly, to use misinformation and now with this result – is trying to deceive their own population that they have won a great victory. I suppose this is a warning to all of us that we need to be vigilant in democracies and watch all those who seek power and appointment as we may live in different countries – but they all have a habit of speaking the same weasel words.

      2. Daniil says:

        Dear Neutral (?) European(German ?), it seems to me that you read a lot of German yellow press…..

    2. José Luiz Ferreira says:

      As it happens, an important part of Syriza’s proposals focus on fighting corruption and inefficiency in public administration. They are ready to set measurable goals in these matters and to have results monitored by European institutions. The Eurogroup seems singularly uninterested in these proposals. Can it be that Northern European banks find Southern corruption profitable and want it to go on as usual?

      Anyway, here’s my placard for the next demonstration in support of Syriza:


  7. Chris Piché says:

    Greetings from Eugene, Oregon, USA. Our centrist and at times, left-leaning daily, the Register Guard, is routing for Greece. Yes, way out here. This is worldwide. The old guard in Europe, while appearing solid, is stiff and looks to save face. This is a political struggle. They know it. That’s a fear and place of their resistance. Syriza has more life to it. It shows. They fear that too. Apparently, they’d like to crush you but they can’t.

    Don’t get lost in high finance. It’s not all about figures. You’re out-hearting them. They’re hearts appear cold. Even if they win the battle, they’ll lose the war for the hearts and minds of the worlds people. Don’t back into an angry corner.

    Smarts are secondary to genuine suffering. Greece’s humanitarian crisis is also a crisis in the crumbling humanism of old Europe. You’re the new Europe. The momentum is on the side of Greece. Syriza has broken through the wall of silence on austerity. Bend and stay solid, like the living, breathing dialectic, Greece gave rise to centuries ago.

    And thank you Paul for your excellent analytic and heart-felt reporting. You’ve got your finger on the pulse of Greece and Europe. I look forward to your new book.

  8. megalos magkas says:

    What I like, is that we (the Greeks) want to negotiate but, we expect the others to write the what and the how. …and then, when they do, we don’t like it cause they didn’t write it the way we want it :-/
    …and when they ask what is it that you want, we say “fairness”. Go ‘n read it in the NYTimes ;-)

  9. VN Gelis says:

    Greece isn’t its people that are scavenging in dustbins for food, jumping off balconies to commit suicide or its children fainting in school due to having no food at home but it’s banks, bondholders and owners of industry. They were saved from capitalist collapse. To continue to be saved the system of general impoverishment has to increase, the race to the bottom is real not imaginary. So is the EU. To believe it can be suspended for a time out with national elections is a good fairy tale. The problem is most of us left primary school many decades ago. Syriza will go the way of its four government predecessors if it doesn’t create jobs. By employing personnel from the infamous era of Fujimoris Peru or from the UN direct it doesn’t stand a chance in hell. Political hell is what awaits it.

  10. Jon says:

    A second, super-critical Greek ‘Ohi’ stands in the way of a third attempt by Germany to destroy Europe…

  11. vkos says:

    If you are asking from someone money… the same person who gives the money can be stupid or smart. Can see you are addicted in overspending or not. The EE is not stupid anymore. Previous goverments were overspending when they were saying ‘its all good’… dont worry.

    Now. If you have a job and you earn money , you can give to your child an ammount as dinner-pocket money… If the money you earn in your job goes to half.. then whats the ammount of money you ll give to your child? you can still give the same money but you want have money soon to pay electricity etc. Or cut it in half till things go better. The child will cry a little bit but soon will get use to it.

    Creditors want to cut down salaries. First because they want the Greek goverment to be able to pay back its dept and second to increase competitiveness.
    I AGREE ……. BUT

    If they want to cut down salaries, products and servicies must go cheaper too. So people wont care if they lose 100 euros per month, cause they will have the same things they had before. Be able to pay rent etc…

    Now. what exactly is happening? Well salaries are going down. they ve been down long time now. In some cases more than 40%. In others around 20-30…
    AT THE SAME TIME they forced new taxies, they are asking for more VAT on products (which will make them more expensive) and in other things too.More hidden taxes in electricity bills. More taxies for houses,cars,. more, more ,more.
    They take 10% form a father who gives money to his son. In other words. Money who have been taxed more than once has to be taxed again. if i ask for my father 1000e i m going to have to pay 100 of them to the goverment.
    If my grandma give it to me 20%…
    There is a problem here. People dont have jobs. But at the end of the year they had to pay taxes cause the own a car or a house. Jobs with lots of hours and sometimes no money, are in offer and if you dont get it then someone else will. I was looking an interview when Varoufakis was explaining that increasing the VAT in inslands is crazy since last year we had more tourists than the previous year but less taxes to the goverment. Is there a VAT problem or noone give receipt?( we are famous for it).
    And noone is checking them if they do or not..? I will not bring corruption in the table. its a long story and even if they find all the people who were involved its too late now. Money have been spend. So goverment at the moment says that it needs time to fix the system and people had enough of taxes and cutting salaries. Creditors are cretidors. They want their money back.

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