Monday, February 23, 2015

And The Oscar Goes To?

John Loyd of Reuters opines, Greece blinked in loan battle, Putin’s gaze remains steely:
The European Union is now a thing of shreds and patches.

Its policies and projects are being shredded, and it seeks, not to find solutions to the crises consuming it, but to patch them up, and hope.

The patch which was the Minsk agreement of last week is now flapping in the wind. The fighting never stopped: the separatists and their Russian allies simply continued to roll back a demoralized Ukrainian army from Debaltseve, the town they had surrounded before the agreement and took after it. On Friday, the Kyiv Post was reporting that separatist and Russian military units were moving down toward the port city of Mariupol, which sits across the direct land route from Russia into its new appendage of Crimea. If that’s taken, then the Donbas area and Crimea can be fused together into a new Russian state, shredding Ukraine further.

The Russians have become much bolder about their involvement, scarcely bothering to disguise their contempt. Vitaly Churkin, the Russian ambassador to the United Nations, slapped down Ukrainian President Poroshenko’s suggestion that international peacekeepers be brought in to police the ceasefire, saying it “raises suspicion that he wants to destroy the Minsk accords.” Of course, Churkin’s government has already destroyed them. The Moscow daily Kommersant interviewed a group of young Russian soldiers, part of a detachment near Debaltseve: the report said, “The young soldiers’ role in military operations was to perform combat missions on behalf of either the self-proclaimed republics, or ‘separate regions of Donetsk and Lugansk region’ (as is written in the Minsk agreement). They know how to fight.”

When Debaltseve was taken, Russian President Vladimir Putin joked, “It’s always tough to lose.”

The disarray within Europe on Ukraine does not get better. A report from the British House of Lords was harsh on the UK, and Europe in general, for “sleepwalking” into an attempted agreement with Ukraine which would have seen it enfolded into Europe, out of the Russian sphere, without thinking through the likely Russian reaction.

This is probably right: yet even if no one in high authority grasped how momentous were the stakes, the EU — and the West as a whole — has no choice but to confront Russia now. It hasn’t, though: the patches are still being applied. Russia advances, European ministers fret about attacks on the tiny Baltic states, all three both NATO and EU members. No one knows the limits to Putin’s ambitions, though the best-informed commentators believe them to be large. For the moment, in any case, he is in the saddle.

The second crisis — the crisis within — that of Greece, on Friday evening inched toward the application of another patch. Faced with finance ministers of the euro zone who had, in many cases, swallowed great draughts of austerity and struggled to meet the conditions for loans and bailouts, Greece had backed down substantially.

The statement from their meeting was framed to be upbeat and optimistic: but had two large necessities embedded in it. One was what Jeroen Dijsselbloem, the Dutch finance minister and chairman of the euro zone ministers group called the “recovery of trust” — actually, the creation of a trust that was never there — between the Greek government and the other European states. The other was a tight ultimatum: that Greece produce, by Monday, a credible and substantial list of reforms it is prepared to undertake — which, if approved, will mean that the current financing program will be extended by four months (the Greeks had asked for six).

Is this a better quality of patch? Here’s why it might not stick through the weekend.

The Greek government had mounted a spirited but adolescent defiance of the EU, of the International Monetary Fund and the European Central Bank — the “troika” — which had tied the loans reforms. It promised its electorate (among much else) to raise wages and re-employ thousands of public-service workers.

In his speech last week to the Greek parliament, Prime Minister Alexis Tsipras said, “the bailout failed. We want to make clear in every direction that we are not negotiating. We are not negotiating our national sovereignty.” And, to rub a little more salt into the flesh of a Germany that the new government never fails to remind of its Nazi past, the prime minister promised he would seek World War Two reparations.

The Greeks have made much of the fact that they have a democratic mandate to get what they want from Europe.

One of the first questions to the Dutch finance minister, after he had presented the agreement to the press, echoed that mandate point “Have you not trashed Greek democracy?” the reporter, who was not Greek, asked.

Dijsselbloem, a suave operator, patiently explained that Greece was part of a community of governments, each with a different mandate, each with a stake in the euro and in ending the crisis — and thus the mandate of one could not override the judgments of all the rest.

It was a precious point. Greece’s new government was never in any shape to make the demands it did. Now, if its U-turn is genuine, it has the chance to do what should have been its first posture: to draw the EU partners into a cooperative effort to tackle not just the debt, but the underlying issues of corruption and public sector reform, changes which must be made over an extended period if the state is to get real and sustainable growth in the future. With such an effort, it could find — Christine Lagarde, head of the IMF stressed it at the press conference — flexibility and understanding. Instead, it has wasted a month in posturing.

And therein lies the largest reason why this all may fail. Syriza, deliberately and cynically, raised high the hopes of a population badly battered by austerity, unemployment and public service cuts — and now must return to that electorate to say that the promises mean very little. How far it will be able to keep the trust of its supporters and of the population as a whole while striving to win that of its European partners is the central question of the next days, in which it must commit itself to continuing, hard reform. The patch has been prepared. But it may not stick.
Indeed, as George Georgiopoulos of Reuters explains, as Greece readies for reforms, there is bitter infighting among prominent members of the ruling Syriza party:
Greece's government prepared reform measures on Sunday to secure a financial lifeline from the euro zone, but was attacked for selling "illusions" to voters after failing to keep a promise to extract the country from its international bailout.

Leftist Prime Minister Alexis Tsipras has insisted Greece achieved a negotiating success when euro zone finance ministers agreed to extend the bailout deal for four months, provided it came up with a list of reforms by Monday.

Greeks reacted with relief that Friday's deal averted a banking crisis which fellow euro zone member Ireland said could have erupted in the coming week. This means Tsipras has stood by one promise at least: to keep the country in the euro zone.

Tsipras maintains he has the nation behind him despite staging a climbdown in Brussels. Under the deal, Greece will still live under the EU/IMF bailout which he had pledged to scrap, and must negotiate a new program by the early summer.

"I want to say a heartfelt thanks to the majority of Greeks who stood by the Greek government ... That was our most powerful negotiating weapon," he said on Saturday. "Greece achieved an important negotiating success in Europe.".

Top Marxist members of Tsipras's Syriza party, a broad coalition of the left, have so far been silent on the painful compromises made to win agreement from the Eurogroup.

But veteran leftist Manolis Glezos attacked the failure to fulfill campaign promises. "I apologize to the Greek people because I took part in this illusion," he wrote in a blog. "Syriza's friends and supporters ... should decide if they accept this situation."

Glezos, a Syriza member of the European Parliament, is not a party heavyweight. But he commands moral authority: as a young man under the World War Two occupation, he scaled the Acropolis to rip down a Nazi flag under the noses of German guards and hoist the Greek flag, making him a national hero.

A government official said Glezos "may not be well informed on the tough and laborious negotiation which is continuing".

Finance Minister Yanis Varoufakis said the reform promises would be ready on Sunday and submitted to Greece's EU and IMF partners in good time. "We are very confident that the list is going to be approved by the institutions and therefore we are embarking upon a new phase of stabilization and growth," he told reporters late on Saturday.

A government official said the reforms would include a crackdown on tax evasion and corruption.

The Brussels deal opens the possibility of lowering a target for the Greek primary budget surplus, which excludes debt repayments, freeing up some funds to help ease the effects of 25 percent unemployment and pension cuts. It also avoids some language which has inflamed many Greeks, angered by four years of austerity demanded by foreign creditors.


In the deal the hated "troika" of inspectors from the European Commission, European Central Bank and IMF, which monitors compliance with Greek bailout undertakings, is referred to as "the three institutions".

Tsipras declared Greece was "leaving austerity, the bailouts and the troika behind". Nevertheless, government plans must still be approved by the re-named troika, although Tsipras won election last month on a pledge to end the humiliation of foreigners dictating Greek economic policy.

The opposition pounced on the climbdown from promises that have raised huge expectations among Greeks. "No propaganda mechanism or pirouette can hide the simple fact that they lied to citizens and sold illusions," said Evangelos Venizelos, leader of the socialist PASOK party.

Venizelos was deputy prime minister in the last conservative-led coalition which succeeded in raising funds from financial markets with two bond issues last year. With the economy showing signs of growth after a depression which wiped a quarter off GDP, it had prepared to exit the bailout program but lost power to Syriza on Jan. 25.

Friday's agreement merely buys time for Greece to seek a long-term deal with the Eurogroup. Euro zone members Ireland and Portugal have already exited their bailouts, but Greece faces yet another program - on top of bailouts in 2010 and 2011 totaling 240 billion euros - when the extension expires.

"Once you get them into the safe space for the next four months, there'll be another set of discussions which will effectively involve the negotiation of a third program for Greece," Irish Finance Minister Michael Noonan said on Saturday.

Tsipras did much of the negotiating for the deal rather than Greece's Eurogroup representative, Varoufakis. But sources close to the government said this reflected Tsipras's need to win backing from Syriza's left wing and his right-wing coalition partner, the Independent Greeks party.

Their support will be crucial in maintaining government unity during negotiations for the long-term agreement.

Likewise Tsipras needs to keep public support. Costas Panagopoulos, who heads the Alco polling firm, said the initial reaction was relief that Greece would stay in the euro. Greeks might even accept Tsipras's change in language and assertions that the troika is no more. "It may sound odd but this could turn into political gains," he told Reuters.
I strongly doubt this could turn into political gains. Tsipras and Varoufakis were rebuffed by the Eurogroup and Germany's finance minister,Wolfgang Schäuble, took them to school. He basically called their bluff and told Varoufakis flat out: "Fine, you want democracy, go back to the drachma but don't expect us to keep lending you money so you can keep buying votes by expanding the Greek public sector" (I'm paraphrasing but that's how it went down).

John Cassidy of The New Yorker explains how Greece got outmaneuvered:
To the surprise of nobody except a few alarmists, the finance ministers of the European Union reached a deal with Greece on Friday, extending the country’s existing bailout until the early summer. Greece’s new left-wing Syriza government had been telling everyone for weeks that it wouldn’t agree to extend the bailout, and that it wanted a new loan agreement that freed its hands, which marks the deal as a capitulation by Syriza and a victory for Germany and the rest of the E.U. establishment.

Strictly speaking, though, the game isn’t over. The deal reached in Brussels is just an interim agreement, which will keep Greece solvent and its banks afloat while a broader agreement is negotiated on the country’s huge debts. Yanis Varoufakis, the Greek finance minister, has put forward some interesting ideas about how to proceed—for example, issuing new types of bonds to replace the old ones—but whatever bargaining leverage he had appears to have been undermined.

In the past few days, according to reports from Athens, ordinary Greeks have been withdrawing cash from the nation’s banks at a rate of about five hundred million euros a day. With the E.U. bailout program due to expire in a week, the Syriza government was facing the prospect of a wholesale financial collapse if the European Central Bank didn’t agree to supply the Greek banking system with more money. But the E.C.B. was telling Greece that it needed to agree to the terms laid down by Brussels and Berlin. Ultimately, this prompted Varoufakis and his boss, Alexis Tsipras, the Greek Prime Minister, to back down and agree to an extension of the bailout.

Going forward, Syriza’s policies will continue to be supervised by the hated “troika” (the European Central Bank, the European Union, and the International Monetary Fund), which many Greeks hold responsible for the dire state of their country. Moreover, the Greek government has agreed to push ahead with a series of new structural reforms, some of which it will have to detail this weekend. If the troika isn’t satisfied with what Greece offers, it could still withhold some of the money that the country needs.

In addition to all of this, Varoufakis appears to have promised not to dismantle some of the troika-imposed measures that he and Tsipras had campaigned against in the run-up to the election, such as privatizing publicly owned enterprises. The text of the new agreement says: “The Greek authorities commit to refrain from any rollback of measures and unilateral changes to the policies and structural reforms that would negatively impact fiscal targets, economic recovery or financial stability, as assessed by the institutions.”

In exchange for these U-turns, the Greek government did gain some concessions, including a relaxation of the fiscal targets that it has to meet. Under the terms of the bailout agreed to in 2012, Greece was supposed to generate a primary surplus of 4.5 per cent of G.D.P. (The primary surplus refers to tax revenues minus spending, not including interest payments on the national debt.) The official statement about the new agreement didn’t specify a target for this year. “Greek authorities have also committed to ensure the appropriate primary fiscal surpluses … in line with the November 2012 Eurogroup statement,” it read, but added, “The institutions will, for the 2015 primary surplus target, take the economic circumstances in 2015 into account.”

That suggests some flexibility. Varoufakis has been saying his government will aim to produce a surplus of 1.5 per cent of G.D.P. Since tax revenues have collapsed over the past couple of months, this is still an ambitious target, and it seems to rule out any large-scale embrace of Keynesian stimulus policies. But any relaxation of the existing austerity policies would be welcome to Greeks—and, after the agreement was reached, that is what Greek officials were saying they’d achieved. “Greece today has turned a page,” one official told Reuters. “We have avoided recessionary measures.”

That’s not just spin. Syriza did get something significant out of the agreement, but nothing like what it was hoping for when it took power, on January 25th. Then, there was talk of liberating not just Greece but the entire continent from the grip of austerity policies. After Friday’s deal was announced, some Greek journalists warned that Varoufakis and Tsipras would have a tough time selling the deal to the party’s radical elements, which have been out on the streets protesting the perfidy of Germany, Brussels, and the E.C.B.

In retrospect, it is clear that Tsipras and Varoufakis overplayed their hand. Their early bluster riled up the Germans and alienated other players that they needed to win over, such as the E.C.B. and the European Commission. Since Varoufakis is an academic game theorist, this is a bit surprising, but perhaps not entirely so. Having been swept into office practically out of nowhere, Syriza’s leaders were understandably giddy, and understandably eager to meet the demands of the popular protest movement that was responsible for their rise.

Tsipras and Varoufakis had economic logic on their side, too. Austerity policies have proved disastrous for the country at large. Greece’s gross domestic product has fallen by about a quarter since 2009, and the unemployment rate stands at nearly twenty-five per cent. Austerity hasn’t even succeeded in reducing the country’s debt burden. Because G.D.P. has fallen so far, its debt-to-G.D.P. ratio has continued to rise, and now stands at about a hundred and seventy-five per cent.

In some other parts of Europe, there is considerable sympathy for the Greeks’ plight, and for their argument that austerity has proved counterproductive. But the fact is that Tsipras and Varoufakis didn’t have much leverage, and they should have recognized that earlier. From the start, there was only one threat they could have made that would have put a fright into Germany and other core countries: that Greece, if it didn’t get the deal it wanted, would default on its debts, leave the euro zone, and go back to printing its own currency. But a majority of the Greek people, despite all they’ve been through, want to keep the euro, and, throughout the election campaign, Syriza said that it had no intention of leaving the currency zone. From an economic perspective, this was arguably a self-destructive policy—the Greek economy is in such bad shape that it might have done better to follow the example of Argentina, which, in 2002, defaulted on its debts and said to heck with the I.M.F.—but promising to keep the euro was one of the prices that Syriza paid for being taken seriously as a political force.

Once Wolfgang Schäuble, the flinty German finance minister, realized that Varoufakis couldn’t play the Grexit card, he knew that he had him where he wanted him. The German government point-blank refused even to consider a Greek request for an end to the bailout and a new bridging loan, and it quietly encouraged the E.C.B. to issue a series of warnings to the Greeks. And then, a couple of days ago, after Varoufakis had reversed course and asked for an extension of the current bailout, Schäuble rejected that request, too, forcing the Greeks to make even more concessions.

Even after the deal was done, Schäuble seemingly couldn’t resist taking a jab at Varoufakis and his colleagues. According to the Guardian’s invaluable live blog, he remarked: “The Greeks certainly will have a difficult time to explain the deal to their voters.” Varoufakis, in his comments, was more reserved. “This is not a moment for jubilation,” he said. “This agreement is a small step in the right direction.”
The Economist also had a lengthy article, Outgamed, explaining why Greece had to step back and accept Schäuble's terms.

But not everyone is convinced that Germany and Schäuble came out victorious. In his article for Truthdig, Scourge of the Greeks: German Finance Minister Wolfgang Schauble, Alexander Reed Kelly writes:
Veteran German Finance Minister Wolfgang Schauble “indulged himself with some patronizing comments” after triumphing over the Greek government in debt negotiations last week, observed economics correspondent Phillip Inman at The Guardian.

Schauble said of his Greek opponents in the Syriza party, led by Prime Minister Alexis Tsipras and Finance Minister Yanis Varoufakis, “Being in government is a date with reality, and reality is often not as nice as a dream.” His smugness recalls the arrogance of former British Prime Minister Margaret Thatcher, who famously claimed in the 1980s that “there is no alternative” to neoliberal economic reforms.

Copious empirical research shows that the austerity Schauble and his peers have inflicted on Europe over the past half-decade destroys economies rather than preserves them. His arrogance is therefore that of the powerful, not the informed. He is hypocritical too, given that the willingness of the Allied nations to forgive Germany’s debts after World War II enabled the prosperity that its citizens—Schauble included—enjoy today.

Disturbingly for those who acknowledge these facts, according to statements and findings collected by the analytical political-economy site Open Europe, much of the German public and leading members of the press share Schauble’s self-serving near-sightedness:
A new Emnid poll for N24 finds that 52% of Germans think that the demands made by Greek Prime Minister Alexis Tsipras and Finance Minister Yanis Varoufakis are “outrageous,” 41% say they are “naive,” 25% say they are “strategically skillful,” while 13% said they “secretly admire” Tsipras and Varoufakis.”
German tabloid Bild responded to the conclusion of the negotiations with the headline, “Finally someone says ‘no’ to the bankrupt Greeks. Germany says: Thank you Wolfgang Schauble!” It then printed in its pages:
“Billions in gifts to the Greek people - and we should pay for it! Schauble is not doing this any longer!”
Klaus-Dieter Frankenberger, foreign policy editor for Frankfurter Allgemeine Zeitung, wrote:
It is time that the Tsipras government grasps reality, and recognizes who is the creditor and who is the debtor - it must understand how great the resentment is in many European countries over the “Greece” issue. Many citizens are sick of it; this is also nourishing annoyance at Europe.

Apparently the Greek government thinks that it could hold its partners for fools. At times, it has abused the Brussels stage for theatrical performances, sometimes there are signs of program change, and then it starts all over again. This is not serious.
As one Truthdig reader commented privately to this blogger, “If this piece from Open Europe accurately describes the majority view of the press, including some of the leftist press, then we see some more of the fright felt by Syriza’s leaders.”

Read more of the comments here.
In his comment in Counterpunch, Ironman Varoufakis’s Revolutionary Plan for Europe, Mike Whitney praises Varoufakis's strategy as pure genius "mainly because it knocked the EU finance ministers off balance and threw the process into turmoil." Whitney notes the following:
If you look at the way that Varoufakis has handled the Eurogroup, you have to admire the subtlety, but effectiveness of his strategy. In any battle, one must draw attention to the righteousness of their cause while exposing the flaws in the character of their adversary. The incident on Monday certainly achieved both. While David never really slayed Goliath, Goliath is certainly in retreat. And that’s a lot better than anyone expected.

As for the “cause”, well, that speaks for itself. The Greek bailout was never reasonable because the plan wasn’t designed to create a path for Greece to grow its way out of debt and deflation. No. It was basically a public relations smokescreen used to conceal what was really going on behind the scenes, which was a massive giveaway to the banks and bondholders. Everyone knows this. Check this out from Naked Capitalism:
“According to the Jubilee Debt Campaign, 92% of €240 billion Greece has received since the May 2010 bailout went to Greek and European financial institutions.” (Naked Capitalism)
Yep, it was all just one big welfare payment to the moocher class. Meanwhile, the Greeks got zilch. And, yet, the Eurogroup wants them to continue with this same program?

No thanks.

As far as Greece’s finances are concerned, they’ve gotten progressively worse every year the bailout has dragged on. For example, Greece’s debt-to-GDP ratio has gone from 115 percent in 2010 more than 170 percent today. The country is headed in the wrong direction, which is what makes Varoufakis’s remedies so compelling. It’s because everyone knows that ‘if you are already in a hole, stop digging’. That’s the logic behind Varoufakis’s position; he simply wants to “stop digging.” But that can’t be done by borrowing more money to repay debts that only get bigger with each new bailout. And it can’t be done by implementing excruciating belt-tightening measures that increase unemployment and shrink the economy. It can only be done by reducing one’s debts and initiating programs that help to grow the economy back to health. This isn’t rocket science, but it is anathema to the retrograde ideology of the European Union which is one part bonehead economics and one part German sanctimony. Put the two together and you come up with a pre-Keynesian dystopia where one of the wealthiest regions in the world inches ever-closer to anarchy and ruin for the sole purpose of proving that contractionary expansion actually works. Well, guess what? It doesn’t, and we now have six years of evidence to prove it.

It’s worth noting that the Eurogroup hasn’t budged one inch from its original position. In other words, there really haven’t been any negotiations, not in any meaningful sense of the word. What there has been is one group of pompous blowhards reiterating the same discredited mantra over and over again, even though austerity has been thoroughly denounced by every reputable economist on the planet. Of course that doesn’t matter to the ex-Goldman swindlers at the ECB or their hairshirt counterparts in Berlin. What they want is to extract every last drop of blood from their Greek victims. That’s their game. And, of course, ultimately what they want to do is annihilate the entire EU welfare state; crush the unions, eviscerate pensions, wages and health care, and privatize everything they can get their greasy hands on. That’s the real objective. Greece’s exorbitant debts are just a means to an end, just a way to decimate the middle class in one fell swoop.

Keep in mind, the EU just narrowly avoided a triple-dip recession in the third quarter, which would have been their third slump in less than six years. How do you like that track record? It just illustrates the stunning mismanagement of the Union’s economic affairs and the incompetence of the bureaucrats making the decisions. Even so, these same leaders have no qualms about telling Greece to step in line and follow their diktats to the letter.

Can you believe the arrogance?

Fortunately, Greece has broken from the herd and set out on a new course. They’ve disposed of the mealy-mouth, sellout politicians who used to run the country and put the A-Team in their place. And, boy, are they happy with the results. Syriza’s public approval ratings are through the roof while Varoufakis has become the most admired man in Europe. The question is whether this new troupe of committed leftists can deliver the goods or not. So far, there’s reason for hope, that is, if we can agree about what Varoufakis’s strategy really is.

In earlier writings, Varoufakis said that he wants a New Deal for Greece. He said:
“Unless we have a new deal for Europe, Greece is not going to get a chance….It’s a necessary condition that the eurozone finds a rational plan for itself…. until and unless the eurozone finds a rational plan for stopping this train wreck throughout the European Union, throughout the eurozone, Greece has no chance at all.” (Naked Capitalism)
Okay, so Varoufakis wants to stay in the EU, but he wants a change in policy. (Reducing the debts, ending austerity, and boosting fiscal stimulus.) But he also has more ambitious plans of which no one in Brussels, Frankfurt or Berlin seems to be aware. He wants to change the prevailing culture of the Eurozone; gradually, incrementally, but persistently. He wants a Europe that is more democratic and more responsive to the needs of the member states, but he also wants a Europe that is more united via institutions and programs that will strengthen the union. He believes that success will only be achieved if concrete steps are taken “to unify the banking system”, mutualize debt (“the Federal Government having its own debt over and above states.”) …”And thirdly we need an investment policy which runs throughout the Eurozone… a recycling mechanism for the whole thing. Unless we have these things,… I’m afraid there is absolutely nothing to avert the continuation of this slow motion derailment.” (Naked Capitalism)

So, there you have it. Nationalize the banking system, create a Euro-wide bond market, and establish mechanisms for fiscal transfers to the weaker states like we do in the US via welfare, food stamps, gov contracts, subsidies etc. to create some balance between the very rich and productive states like California and New York and the poorer states like South Dakota and Oklahoma. That’s what it’s going to take to create a viable United States of Europe and escape these frustratingly recurrent crises. Varoufakis knows this, but of course he’s not pushing for this. Not yet at least.

Instead, he’s decided to take it slowly, one step at a time. Incremental change, that’s the ticket. Just keep plugging away and building support until the edifice cracks and democracy appears.

That’s Varoufakis’s plan in a nutshell: Revolution from within. Just don’t tell anyone in Berlin.
Unfortunately, Whitney is dreaming in technicolor when he writes about a viable "United States of Europe." He also fails to understand what others, including Nober laureate Paul Krugman, fail to understand about Syriza and Greece.

When we talk about austerity in Greece, we have to understand the starting point. As I explained here and here, Greek politicians from all parties have never cut the disgustingly bloated Greek public sector because they all make promises the country can't afford and try to buy votes by expanding the public sector to ensure they remain in power (remember, over 50% of all jobs in Greece are directly or indirectly related to the public sector).

This is why part of me is glad Schäuble called Varoufakis's bluff and told him "NEIN!" in no uncertain terms. The Germans didn't want to push Greece over the edge but they also didn't want to give Syriza more power so it can continue hiring public sector workers, adding temporary and fake growth to the economy but doing nothing to bolster the Greek private sector, the engine of the real economy.

As the New York Times rightly notes, it's Greek bureaucracy, not austerity that's weighing down the Greek economy. The amount of insane regulations totally turn off foreign investors and domestic entrepreneurs, but they're there to protect the interests of Greek interest groups including many unions that see these regulations as a way to protect public sector jobs and a way to supplement their income via outright bribes (bribes are second nature to most Greeks, if you don't bribe, good luck navigating their regulatory mess!!).

Hence, while I openly criticize Germany's myopic and destructive austerity measures which will only exacerbate global deflation, I also think Syriza's leaders (like all Greek politicians) are blatant and corrupt liars that will say and do anything to remain in power. Unlike professor James Galbraith who wrote a comment on the way forward to support his friend Yanis Varoufakis, I believe the sooner Greeks get on to transforming their economy, cutting regulations, privatizing industries and cutting their bloated public sector down to an appropriate size, the better off Greece will be in the long-run.

And therein lies the problem. Don't expect any material changes on the Greek economy from Tsipras and company. They want to implement the same ridiculous policies that got Greece into this mess, just like the Germans want to implement the same asinine austerity measures that is transforming Greece and other periphery economies into "debt colonies."

So forgive me if I'm cynical on this latest Greek deal. Each side will claim victory but in the end, the world got a lot more of the same, namely, kicking the can down the road. This is why I personally think the Oscar should go to Greek and German leaders for proving once more that drama sells fear but at the end of the day, nothing ever changes.

It's about time our global leaders get their heads out of their collective asses. They should read a brilliant comment from another Nobel laureate, Michael Spence, who thinks the world is facing the prospect of an extended period of weak economic growth and the best way to avoid such an outcome is to figure out how to channel large pools of savings into productivity-enhancing public-sector investment. My biggest fear is that it's already too late, and when global deflation takes hold, we're all screwed.

Below, professor Nicholas Economides appeared on BBC TV discussing the results of the Eurogroup meeting on the issue of extension of the Greek program. I don't agree with everything he says, including the fear of contagion being limited but he outlines the real problem of being the "implementation of the conditions which are exactly the opposite" of what the Greek government promised its electorate.

But a few brave investors remain undeterred. Japonica Partners founder, Paul B. Kazarian, one of the largest holders of Greek government bonds, thinks that Greece's debt is vastly overstated. He was recently trying to persuade a room full of investors that Greece’s debt load of 318 billion euros was actually a tenth that size. Listen to his comments below.

Update: Greek finance minister, Yanis Varoufakis, sent the following letter to the president of the Eurogroup (click here to view). A lot of discussion focusing on cracking down on tax evasion. I have to see it to believe it as I've been hearing this over the last 30 years and nothing ever happens.

Andreas Koutras shared this with me: "The list is amazing. It's almost a copy and paste of the MOU. The bad thing is that they will have problems implementing it. The good thing is at least they endorse it. If they had said this from the start Greece would have gotten the 7 billion euros and much hardship would have been avoided." A friend of mine is fairly positive Lazard wrote both lists.

Finally, take the time to read Duncan Cameron's article in, Greek debt negotiations: A Eurozone tragedy -- or will sense prevail?. I think sense is prevailing but the agreement is tenuous at best and the eurozone is on a collision course with deflation.

Update: If you really want to understand why Greece is in such a mess, take the time to read an op-ed the New York Times published by Aristos Doxiadis, What Greece Needs. It is truly superb and he explains it all in that short comment. Another great article you should all read is Ambrose Evans-Pritchard's latest, Humiliated Greece eyes Byzantine pivot as crisis deepens.

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