STUMP » Articles » Bastille Day Roundup: Greece and Hints of History » 14 July 2015, 05:58

A little interlude for a Bastille Day comment.

The storming of the Bastille itself was a little anticlimactic. While the revolutionaries were supposedly freeing political prisoners held on lettres de cachet, this is what they found:

As it happened, at the time of the attack in July 1789 there were only seven inmates, none of great political significance.

The Wiki article asks for a citation, I figure this source of a contemporary news account may help.

Of course, they weren’t there for the prisoners. They were there for the ammo.

Initially seeming to yield, Louis legalized the National Assembly but then surrounded Paris with troops and dismissed Jacques Necker, a popular minister of state who had supported reforms. In response, mobs began rioting in Paris at the instigation of revolutionary leaders.

Bernard-Jordan de Launay, the military governor of the Bastille, feared that his fortress would be a target for the revolutionaries and so requested reinforcements.
…..
On July 12, royal authorities transferred 250 barrels of gunpowder to the Bastille from the Paris Arsenal, which was more vulnerable to attack. Launay brought his men into the Bastille and raised its two drawbridges.

On July 13, revolutionaries with muskets began firing at soldiers standing guard on the Bastille’s towers and then took cover in the Bastille’s courtyard when Launay’s men fired back. That evening, mobs stormed the Paris Arsenal and another armory and acquired thousands of muskets. At dawn on July 14, a great crowd armed with muskets, swords, and various makeshift weapons began to gather around the Bastille.

Launay received a delegation of revolutionary leaders but refused to surrender the fortress and its munitions as they requested.

Much resulted from this revolution, such as an attempt to “rationalize” everything (and thus the Church had to go), a bloodbath of innocents and not-so-innocents, the rise of Napoleon, the attempt to recreate a European union, and then it all falling apart.

Just something to keep in mind while one watches Europe now.

AGREEKMENT?!

Seriously? This was a ridiculous announcement:

In a press conference Monday, Tusk said “we have an ‘agreekment’” and said both sides had agreed in principle “to start negotiations on an (European Stability Mechanism) ESM program, which, in other words, means continued financial support for Greece.”

“The decision gives Greece the chance to get back on track with the support of European partners,” he added, but said there would be “strict conditions.”

This is serious, not an opportunity for a weak pun. WTF, dude.

Back to the story:

Billion-euro fund

A key part of the agreement is that a 50 billion euro ($55 billion) fund will be set up using Greek government assets.

This will be used to help pay down the country’s debts and refinance its banks. Dijsselbloem said a panel of experts would decide which assets will be used and how the funds will be monetized—either through privatization or re-investment. Some 25 billion euros of the fund are expected to be used to recapitalize Greek banks, which have been operating under capital controls for over a week.

Although the agreement helps quash fears that Greece could be heading for a euro zone exit, there is some skepticism that Tsipras can get the reform measures passed through parliament.

As we’ll see that’s an understatement.

Before we get to terms, let us remember what has happened before this point: Tsipras and his party, Syriza, were elected just this year on promises that they would rollback all the reforms imposed on Greece by the eurozone/IMF/etc. The Greek people recently voted overwhelmingly to reject a recent deal.

And this one is even worse.

TERMS OF “AGREEMENT”

Here are the terms of the deal from the WSJ:

So, what does the new deal entail? Well, to begin with, a lot of money.

Greece’s creditors figure the country needs between €82 billion ($90.2 billion) and €86 billion in rescue funds. Immediate financing needs amount to €7 billion by July 20 and an additional €5 billion by mid-August, in large part to help Greece clear arrears to the International Monetary Fund and pay back other loans falling due.

That might sound a lot, but it’s only around a third of what Greece has already received in the first two bailout programs–it already owes an estimated €230 billion to the International Monetary Fund, the European Central Bank and other European governments. Although much of the focus has been on German resistance to stumping up ever more cash to the Greeks, smaller eurozone countries that were given much smaller lifelines on strict terms during the crisis were also unhappy at the prospect of forking endless amounts of money to the Greeks.

As for Greek banks, they’re still in big trouble. Greece’s creditors figure they need a buffer of between €10 billion and €25 billion for recapitalization and resolution costs, of which €10 billion would be made available immediately.

That’s a broad range of estimates for how much money the banking sector needs. Maybe because the question of who takes a hit has yet to be resolved. By July 22, the Greek government will have to adopt the European Union’s Bank Recovery and Resolution Directive (BRRD). The BRRD outlines how creditors take the hit in a bank insolvency. In other words, it suggests Greek depositors could be subject to bail-ins, i.e. losses on deposits above certain guaranteed minimums, as happened in Cyprus in 2013, during its banking crisis.

So what does Greece have to do to get hold of the money? Value-added tax will be streamlined and go up. The pension system will undergo major reforms. The Greek statistics agency is to be made independent and reliable. A system of quasi-automatic spending cuts are to be implemented if Greece deviates from ambitious surplus targets. These have to be adopted by Wednesday.

Then, besides the adoption of the BRRD, the Greek civil justice system will have to be overhauled by July 22.

And then there’s a raft of other market reforms, including recommendations on Sunday trade, sales periods, pharmacy ownership, milk and bakeries and the opening of macro-critical closed professions like ferry transportation. The electric grid system will have to be privatized or subject to competition. The labor market is to be made more flexible. And the financial sector is to be strengthened.

On top of all that, Greece has to set up a €50 billion privatization fund half of which will pay for bank recapitalization, a quarter of which will be for paying down debt and the final quarter for investments. As a small concession to the Greeks, its creditors will allow the fund to be run from Athens rather than Luxembourg, which was originally proposed.

Some of the above might sound sounds familiar for a very good reason.

The Syriza government will have to reinstate policies on pension reforms agreed under previous rescue plans. Basically, the Syriza government has had to back down on almost all fronts relative to what it promised when seeking election in January. And the new bailout plan includes the IMF, a situation Mr. Tsipras fought against in the talks overnight, but a battle he ultimately lost.

I’m not sure Greece would be able to do what is demanded, even if they found this agreeable.

Do you think they find this agreeable?

UNSURPRISING REACTION

As you can imagine, this is not going over well in Greece itself. That link is live-updated right now, and I’m not going to quote that because of the active changes, but just watch it. This is not going well.

Here is something that looks static, but you never know with online media.

Mr Tsipras looks set to be forced to rely on opposition support to pass a swath of economic reform measures by Wednesday’s EU-imposed deadline or face the country’s bankruptcy, as a growing number of far-left MPs voiced opposition to the deal. The ruling Syriza party’s extremist Left Platform called it a “humiliation of Greece”.

The leader of the Independent Greeks, the rightwing coalition partner, also said that his party could not agree to the accord, calling it a “coup by Germany” and its hardline eurozone allies, the Netherlands and Finland.
Marina Chrysoveloni, the Independent Greeks spokeswoman, said on state TV on Tuesday there were “limits” to the party’s support for the government “that are shaped by the mandate of the Greek people, both in January’s elections and in the referendum”.

Where is the support supposed to come from?

I don’t see how Germany et. al. thought strongarming the one man in the room in front of them was going to make any difference in the country itself. The election of this man in the first place was a big NO, and the recent referendum was a HELL NO.

It’s not like Tsipras is Hitler (whups, I went there) and can just impose his will on the nation.

They were dealing with a man who has limited power. They could get him to say anything, but that doesn’t mean any of the agreement will go through.

WHY ARE THE EUROS DOING THIS?

I am no European expert. I assume the various European politicians are used to being able to make their deals without having to worry about the “little people”. It does not occur to them that the deal is so bad that not only will the ruling party tell off its leader but that the people will do nothing about it.

Some commentary before even the Greek people voted on the prior deal seems to agree with me:

It is startling that the troika has refused to accept responsibility for any of this or admit how bad its forecasts and models have been. But what is even more surprising is that Europe’s leaders have not even learned. The troika is still demanding that Greece achieve a primary budget surplus (excluding interest payments) of 3.5 percent of GDP by 2018.

…..
But, again, it’s not about the money. It’s about using “deadlines” to force Greece to knuckle under, and to accept the unacceptable — not only austerity measures, but other regressive and punitive policies.

But why would Europe do this? Why are European Union leaders resisting the referendum and refusing even to extend by a few days the June 30 deadline for Greece’s next payment to the IMF? Isn’t Europe all about democracy?

In January, Greece’s citizens voted for a government committed to ending austerity. If the government were simply fulfilling its campaign promises, it would already have rejected the proposal. But it wanted to give Greeks a chance to weigh in on this issue, so critical for their country’s future wellbeing.

That concern for popular legitimacy is incompatible with the politics of the eurozone, which was never a very democratic project. Most of its members’ governments did not seek their people’s approval to turn over their monetary sovereignty to the ECB. When Sweden’s did, Swedes said no. They understood that unemployment would rise if the country’s monetary policy were set by a central bank that focused single-mindedly on inflation (and also that there would be insufficient attention to financial stability). The economy would suffer, because the economic model underlying the eurozone was predicated on power relationships that disadvantaged workers.

And, sure enough, what we are seeing now, 16 years after the eurozone institutionalized those relationships, is the antithesis of democracy: Many European leaders want to see the end of Prime Minister Alexis Tsipras’s leftist government. After all, it is extremely inconvenient to have in Greece a government that is so opposed to the types of policies that have done so much to increase inequality in so many advanced countries, and that is so committed to curbing the unbridled power of wealth. They seem to believe that they can eventually bring down the Greek government by bullying it into accepting an agreement that contravenes its mandate.

I think they’re underestimating the damage they may be doing to the eurozone as a whole. Already there is UKIP in the UK, and I imagine more anti-EU political parties will come to the fore.

They forget how Napoleon was popular among various non-French European peoples (for a while), because they wanted to be liberated from the autocrats over them. As the EU and eurozone took away more sovereign power, they took away the power of the “little people” to keep these bureaucrats in check. And they are bureaucrats if they don’t have to even listen to elections.

Here is Megan McArdle’s take:

To answer the question about why the euro zone would want to hold onto Greece, I think you have to get into the same kind of emotional and historical attachments that Britain has to Northern Ireland, except of course that it’s the euro that Europeans are attached to, not the remnants of a fading empire. And I think that this weekend we started to see the limits of those sorts of attachments. A lot of smaller countries are getting to the “I have had enough” point. Germany seems as if it might be ready to join them. It looks as if the coalition of the unwilling came pretty close to carrying the day during this weekend’s marathon talks; the only thing that saved them was heroic efforts by the shrinking core that was absolutely determined to make a deal.

I think she’s downplaying the situation with Northern Ireland. I may agree it’s idiotic for the UK to hold onto Northern Ireland, but remember — it’s still part of the UK. She forgets the Ulstermen. I’m Irish Catholic, so the Ulstermen are not my people (well, maybe the Campbells…. but I don’t know where my Campbells came from. There’s a lot of us out there), but I understand why the Ulstermen wanted to stay part of the UK. The UK has tried to jettison Northern Ireland a few times, but there was strong feeling among the Ulstermen.

But the Greeks don’t really seem to want to stay part of the eurozone, not if they have to give into all these demands. Maybe there are some who do, I don’t know.

But my main question is: how the hell do they expect this deal to take?

Are they giving Tsipras any help? No, they basically battered him down. He doesn’t have the power to carry this through.

NOW WHAT?

Hell if I know.

Just remember the Bastille. Sometimes the people decide they’ve had enough of autocrats, and it can get extremely ugly.

Don’t think we are beyond the age of revolutions. People never are.

Yes, the Greeks have a relatively large army (relative to the other Greeks), but that is because of Turkey to a large extent. Remember that part of the revolution was that the army came over to the revolutionaries’ side. They refused to fight them. That’s not the first revolution where that happened.

I’m not saying there will be armed rebellion – it will take phenomenal stupidity on the part of “leaders”.

But maybe they really are that stupid. If they thought this deal was a good idea, they may not realize that what they think can’t happen actually can.

Roundup of other reactions: (may update)

• Leo Kolivakis at Pension Pulse, a Canadian of Greek origin
• Reactions from Mish: Humiliation; Arrogance; Crucifixion; Demolition of Eurozone Project … tell us what you really think, Mish
• A positive take from the WSJ….keep the hope alive!
  French-German ties strained by deal-making (awwwww)
• Does Anyone Understand the Greek Prime Minister’s Political Strategy? – I know I don’t.

Just a quick supposition: Tsipras told them over and over he couldn’t sell the deal, but he just wanted out of the room.