The Battle of the Drafts



 Greece's battle with the Eurogroup over its debt and bailout terms is heating up. And both sides have deployed a new and powerful weapon. The draft communique.

It all started with the draft communique presented to the Eurogroup finance ministers meeting by Jeroen Dijsselbloem. This was leaked to the press by the Greek delegation, complete with angry annotations, before the meeting even started. When the Greeks rejected it, therefore, the press already knew both the contents of the communique and the reasons for its rejection. Round 1 to the Greeks.

And Round 2, as well. After the meeting, Yanis Varoufakis held a press conference in which he complained that the draft presented to the meeting was not the draft he had discussed with the European Commission's Pierre Moscovici, which he said he had been "happy to sign". A draft purporting to be the "Moscovici draft" was duly leaked to Channel 4's Paul Mason. Unsurprisingly, it contains none of the commitments to the "current programme" of the earlier leaked draft, except in the context of transition to a "new arrangement".

But the Eurogroup was not going to let the Greek delegation win this battle. Later that night, the "right" version of the "Moscovici draft" was also leaked to the press. This was welcomed by various commentators as being "pro-Greek", because it acknowledged Greece's concerns about social cohesion and the humanitarian crisis. But as I pointed out here, it also locked Greece into the current programme without relief: all it offered was a possible softening of imminent targets, which would have to be made up by harsher austerity later. It was, in reality, a combination of the "Moscovici draft" and the "Dijsselbloem draft".

The release of this third draft was accompanied by lots of complaints about the Greeks' failure to produce a draft of their own. If the measure of success was the number of drafts produced, the Eurogroup was winning three-nil. "Over to you, Greece", ran the headlines. Round 3 to the Eurogroup. 

This didn't go unnoticed in the Greek camp. Drafts, pah. They came up with an offer. The trouble was, the press didn't understand the offer. It was in Greek. The FT reported that Greece would seek "an extension of its international bailout". This would be a major climb-down by the Greek government, which has insisted that the bailout program will not be extended (and was elected on this basis). Once again, people were left scratching their heads. Why would they give in now?

The ever-helpful Yannis Koutsomitis contributed the following Google translation of the Greek offer:


It seems the FT was completely wrong. The Greeks have actually refused to request an extension of the bailout programme. They are intending to request an extension of the loan agreement WITHOUT the bailout programme. 

The rejected items are from the "Dijsselbloem draft". Greece has refused to agree to complete the current programme, refrain from unilateral action or cooperate with "European and international partners" (which is code for the Troika, of course) on fiscal policy and structural reforms. That was always its stance: there has been no "climb-down". 

The "points for discussion" are derived from the second "Moscovici draft". But there is a subtle change. This is a very rough translation, of course, but differences in wording are important. The second "Moscovici draft", released in English by the Eurogroup, says this:
Measures for reducing the debt burden and achieving a further credible and sustainable reduction of the Greek debt-to-GDP ratio should be considered in line with the commitment of the Eurogroup in November 2014.
But the Greek delegation appears to have taken advantage of the language difference to make a subtle alteration:
Measures to reduce the debt burden and achieve a further sustainable reduction of the Greek debt to GDP ratio should be calculated along with the commitments of the Eurogroup of November 2012.
This does rather change the meaning, doesn't it?

And the paper battle continues. The Greek government has now released to the press the presentations and associated "technical documentation" provided to the Eurogroup. Reports from Eurogroup sources that the Greek delegation made no credible offer seem to have been "economical with the truth", to put it mildly. According to Kathimerini (Google translation, original Greek here):
It shows that Mr. Varoufakis accepted the extension of the loan agreement, but not the program, while reference was made and the commitments it undertook to bring out the government during the "bridge program" proposed for the next 3-6 months. These are:
- Reduction of bureaucracy. Documents produced by the public administration should be presented to citizens.
- Strengthen the independence of tax administration.
- Creating an efficient and fair system of tax litigation matters.
- Modernization of bankruptcy law.
- Reform of the judicial system.
- Developing a competitive and healthy environment in broadcasting that enhances the transparency and tax revenue.
- Dissolution of various cartels.
And from Mr. Varoufakis's presentation to the Eurogroup on Monday:
"To sum up, our government is ready and willing to apply for an extension of the loan agreement by the end of August (or until whenever the Eurogroup judge), to agree on a set of reasonable conditions to be fulfilled in this period and commit in making a complete evaluation by the European Commission at the end of the interim period. A period which will allow Greece and its partners to create a new contract for the development of Greece".
So, to sum up, Athens' offer contains no commitment to completing the current programme, but does include commitments to complete certain structural reforms that form part of the current programme. Subtle, much?

And it is also now clear where the battleground is. Both sides seem to have taken to heart Bulwer-Lytton's famous adage, "Beneath the rule of men entirely great, the pen is mightier than the sword". No longer simply spectators, journalists have become part of the game. I wonder how the world's press will react to being used as a weapon?

UPDATE. Via @WEAYL on twitter, the full set of Eurogroup documentation released to Kathimerini is here. It includes Yanis Varoufakis's presentations to the Eurogroup meetings on 11th and 16th February, with associated technical documentation, plus the Dijsselbloem and second Moscovici draft communiques. Looking at this, it is very hard to argue that the Athens government has not been specific about its plans, or that its plans are unreasonable. Round 4 to Syriza, I think.

Related reading:

The two words dividing Greece and the Eurogroup - Pieria

Europe's Game of Spin - New Left Project

Media Misinformation on Greece Misleads European Leaders - Forbes

Greece's latest loan request still leaves the country no closer to a deal - Business Insider

Eurogroup: battle of the drafts - Asteris (storify)
A very good collection of tweets and links exposing the Eurogroup's bait & switch con on Monday. And a great title. Thanks.




Comments

  1. This comment has been removed by the author.

    ReplyDelete
  2. "I hear you are looking for answers"

    https://m.youtube.com/watch?v=O0K_ahjmJuc

    ReplyDelete
  3. A most enlightening commentary on the fiasco. Bravo!

    ReplyDelete
  4. Dear Frances,
    Here is a smart man I do hope you want to read:
    http://www.flassbeck-economics.de/griechenland-war-auf-gutem-weg-der-bundesfinanzminister-verweigert-sich-der-realitaet-und-griechenland-steht-am-scheideweg/

    Kind regards, Guurst

    ReplyDelete
  5. As a side issue, it was interesting how the FT analysis was immediately picked up by the media, so we had the Guardian reporting about an imminent climb-down, and how they were "under pressure", when the Greeks hadn't moved noticeably.

    Schauble's quote that "nobody knew the Greek position" also seems either rather opaque or particularly stupid.

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    Replies
    1. Schauble's comment was pure and malicious propaganda. This tells us all we need to know about the German position: it is not honourable and it is not sincere.

      Delete
  6. This is starting to look like Germany would prefer that Greece leaves the euro, rather than any compromise, even one where they get all they asked for. If they wanted a compromise in terms favourable to them, they wouldn't go around making false accusations or messing around with draft communiques. An experienced negotiator would only do that sort of thing if they wanted the other side to walk out.

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    1. Some of the British press are talking about a rift between Brussels and Berlin over this, and that the primary issue is that Schauble hates Varoufakis.

      If the latter is true, the Germans are prepared to gamble the stability of the eurozone (and the future of the German economy) over the personal opinions of an old man in a wheelchair who thinks he knows all about economics (and clearly understands nothing). Not since the 1930s have we seen such German arrogance.

      Delete
  7. I suspect the Schäuble view is that Varoufakis' proposal lacks *quantitative* precision, which, if so, is technically correct, because the proposal is essentially *qualitative* with only macro level quantitative metrics (e.g. the budget surplus) thrown in. That almost the entire outside world thinks line costing is a distraction at this stage may not be enough to sway him.

    More generally, the difficulty of this negotiation seems to me that it's like an oncologist and a cardiologist, who both think the patient has "their" disease, trying to agree on a treatment. The patient has been treated for a heart complaint so far, and a newly appointed oncologist, convinced that she has cancer, has two strategies available: (1) try to convince the cardiologist the patient indeed has cancer or (2) try to find a medication that helps for cancer but that the cardiologist will not object to, because he thinks it won't have any effect on the heart complaint, and maybe will get the patient some placebo effect benefits.

    I think the failure of (1) was embedded in Yanis' "we didn't even agree to disagree" at their first meeting and (2) is what he's trying to do now, while still trying to convince less obtuse cardiologists of his diagnosis.

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    Replies
    1. Yes, I accept the analogy. Except that in this case, the cardiologists' treatment is refuted by all independent doctors (regardless of discipline) and after five years of their treatment the patient is in a worse condition than at the beginning.

      The other point that could be used in the analogy, is that the cardiologists own the hospital where the patient is being treated, and do not accept the concept of their diagnosis being incorrect.

      Without extreme behaviour from the patient's relatives and personal doctors, the certainty is that the patient will die. And the hospital authorities will regret his unfortunate demise. Just as they did with leeches and blood-letting in past centuries.

      Now that I think of it, the analogy between blood-letting treatment and austerity economics is rather more apposite than with cardiology -- and let us not forget that Schaueble has no expertise in anything at all. He is a miserable old fool of a politician.

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