A view from Athens: why I believe there will be no exit for Greece

While queueing at a cash point after hardly any sleep amid last night's drama, the Athens-based teacher Evel Economakis still believes his country will hang on in the eurozone.

http://www.newstatesman.com/economics/2015/06/view-athens-why-i-believe-there-will-be-no-exit-greece

This has never happened to me before. On Friday, I expressed in an article my confusion and amazement at all the speculation – and panic – concerning Greece’s imminent exit from Europe and the eurozone. I argued this would not happen for good and sufficient reasons that benefit both sides in the five-month-long negotiations that have been going on between Alexis Tsipras’ Syriza party and the EU, ECB and IMF. Then, short hours later, at half past midnight on Saturday morning, the announcement hit the news that the government has called a plebiscite for next Sunday, 5 June.

Ever since, my friends here in Greece have been kidding me about how off the mark I was in my appraisal of Syriza. They said the referendum is proof Syriza is not play-acting with the other side(s) in Brussels, Berlin, and New York, and that it will not sign off on a tough austerity package that condemns the country to harsh austerity and poverty for the next 20 years. 

“See,” said my friend Yannis, a pro-Syriza journalist who’s been unemployed for three years, “no one’s sold out – Tsipras is going to the people and his government won’t cross any of the red lines it set for itself.”

Yet are things so simple? I remain convinced that Syriza will sell out. I must confess though that some doubt did cross my mind when images appeared on TV, images instagrammed by foreign correspondents in Athens of people lining up at ATMs at three in the morning to withdraw euros. Perhaps the “catastrophe” was finally upon us?

I went to bed at 4am and woke up at 9am. With my ten-year-old son in tow, I drove off in search of an ATM, and we only found one that still had cash after visiting eight. We stood in line behind an elderly man. When he’d completed the transaction, he showed me his receipt. There were €13 left in his account.

Most of Sunday, the TV channels showed the debates in the Vouli, or Parliament. Deputies from the centre-right New Democracy party waxed indignant about Syriza’s decision to hold a plebiscite. This was irresponsible brinksmanship, they contended, suggesting in no uncertain terms that Greece’s exit from the EU and eurozone was Syriza’s policy all along since 25 January, when this “radical” (some said “Bolshevik”!) party of 4 per cent managed to capture 36 per cent of the vote and was propelled to power.

Others, like the former centre-left Pasok (Panhellenic Socialist Movement) leader Evangelos Venizelos, condemned the “anti-constitutional” nature of the referendum decision, going so far as to call it a “putsch”. His argument was multi-faceted:

a) the decision was taken “clandestinely” in the wee hours of the morning; b) the EU, ECB, and IMF were never informed, and learned the news from the media; c) the Greek people will have just five days' “preparation” to make a decision that will affect generations to come; d) because of its “weakness”, “inexperience”, “lack of guts” and unwillingness to admit failure, Tsipras’ government was irresponsibly passing the buck to the Greek people; and e) the referendum question is “unclear” and “cowardly” as it focuses only on the deal put on the table on Friday by the institutions, rather than boldly asking the nation to decide whether or not to remain in Europe, with all the attendant consequences.

Anti-Syriza deputies also pointed to the hypocrisy of a plebiscite that asks people what they think of the so-called foreigners’ new austerity proposal, when just a few days ago Syriza itself tabled a proposal for €8bn in austerity measures that surpassed in harshness all previous proposals by the Pasok and “bourgeois” New Democracy governments.

Interestingly, both the Communist Party and the fascist Golden Dawn insisted the referendum question be phrased so that voters have the opportunity to reject both the proposal of the Troika and that of Syriza. That is highly unlikely to happen.

 By contrast, the Syriza-Anel coalition (Anel: Independent Greeks, Syriza’s junior partner in government, a right-wing and anti-Europe party led by Panos Kamenos), which together have a comfortable majority in Parliament, responded with arrogance and indignation.

They pointed out that the negotiations have been going on for a full five months now; that the Greek people have had enough; that there is nothing intrinsically wrong with asking the people their opinion. Alexis Tsipras committed himself to obey the outcome of the referendum, whatever this may be. And, finally, quite a few Syriza-Anel politicians made patriotic speeches likening the coming decision to Greece’s historic “no” to Mussolini’s ultimatum in 1940.

So what will happen? To be sure, we are dealing with human beings, supremely unpredictable animals, and no possibilities may be excluded with mathematical certainty. Still, I strongly believe that in the end a deal will be signed.  Greece will remain in Europe and the eurozone, and its government will agree to a raft of austerity measures. In other words, what we are witnessing is a continuation of the theatre, the play-acting on both sides.

The referendum decision was taken by Tsipras in order to keep Syriza united and himself in power. It has only added drama to a poorly performed play. Does anyone honestly believe that the European Union will be torn apart over little Greece? This may eventually happen, but not before major players like Britain or France ask for a divorce from the EU.

Is it reasonable to expect that agreement will not be found because the creditors and their Greek debtors cannot agree on how much VAT to impose on macaroni and other foodstuffs? Or how much to tax businesses on the beautiful Greek islands, especially elite tourist magnets? The stakes, after all, are very high. North American and northern European banks stand to lose a hell of a lot of money. 

Besides, polls taken show that around 60 per cent of respondents want the government to come to an agreement with the creditors – regardless of how tough these may be – and remain in the European Union and eurozone.

Let us not fool ourselves. The lenders will continue to play hardball. The Eurogroup meeting of finance ministers convened in Brussels without the presence of their Greek counterpart, Yanis Varoufakis. This has been criticised by Syriza as a flagrant violation of EU regulations. Who ever heard of not allowing one of the EU’s 18 finance ministers to participate in a Eurogroup meeting?

Worse, the lenders rejected Varoufakis’ request for a one-month “bridge loan”. This clearly raises the prospect that after 30 June the country will receive no more injections of cash. If that were to happen, the 5 July referendum will be held in conditions when all banks will be closed for lack of funds.

So what are the likely scenarios? The institutions could remove their tough proposal and come forward with a slightly milder one before Tuesday – one Athens will accept. Or they will keep their present proposal and wait for Greece, bloodied but proud in a resounding “No” referendum vote, to table a milder proposal before Tuesday – one Berlin, Brussels, and New York will accept. Either of the above possibilities will occur, but some time after 30 June. 

Or, finally, Greece – with all financial stopcocks closed – will be forced to issue its own coin, the drachma, and thus effectively withdraw from the eurozone.

One thing seems certain. No one can kick Greece out of the European Union and eurozone. A Grexit can only happen if Syriza desires it, which it certainly does not. Neither does the Troika. That is why the title of this article is meant both literally and – much worse – figuratively. At least not unless the icebergs begin to crack and break elsewhere, and crises break out in France, Italy, Britain, or any other combination of important EU players.

At the last minute, Greece requests a third bailout

The Greek PM Alexis Tsipras has made a dramatic bid for a financial lifeline.

http://www.newstatesman.com/politics/2015/06/last-minute-greece-requests-third-bailout

Greece has requested a third bailout just before a key repayment deadline on its existing debt. Just before its deadline to repay €1.6bn to the International Monetary Fund, the Greek prime minister Alexis Tsipras reportedly made the request to the eurozone’s €500bn rescue fund, the European Stability Mechanism (ESM).

In a statement from Tsipras’ office, the PM said his government was seeking “a viable solution, under the end, aimed at staying in the euro”. This would not be an extension of the country’s current bailout, which expires at midnight, but a new programme, and would likely include some measure of debt restructuring.

Greek public debt currently stands at €323bn, and fears that it will default and have to exit the eurozone persist. Banks are closed in the country at the moment, with cash withdrawals capped at €60 a day. A referendum is due to take place on Sunday, where the Greek people will vote on whether to accept the proposals from their country’s creditors.

The European Commission has stated that if funds were to be released via the ESM, Tsipras and his government would have to back a “yes” vote in the referendum. The PM has previously hinted that he would resign if the result is a “yes”.

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Who thinks Greece is doing the right thing? Krugman does!

 

http://en.protothema.gr/who-thinks-greece-is-doing-the-right-thing-krugman-does/

A lot of people are pointing fingers at Greece’s leaders with claims that they are acting irresponsibly, but Nobel-prize winning U.S. economist Paul Krugman said Greece is doing the right thing.

He argues that the financial noose around Greece’s neck has strangled the Greek economy. Every loan comes attached with spending cuts, austerity and damage to the Greek economy.

In the past, in every situation Greece has caved, becoming little more than a “financial slave state mired in an economic depression. There is no way Greece will ever be able to cut its way to prosperity,” says Krugman. Given that Europe refuses to restructure Greece’s debt in a sustainable way and allow the country to try to grow its way out of its misery, Greece has no choice but to default and withdraw.”

Despite Greek PM A. Tsipras being called “weak” to put the question to the test, Krugman notes that he is being smart by not making the decision single-handedly. Rather, he is forcing his own government and people to make the decision with him, democratically via a referendum. This will improve Tsipras’ own odds of surviving the messy and scary period to come.

The current Euro structure, in which country governments control their own spending but borrow in a single currency, will never work over the long-term unless, says Krugman, unless states like Germany subsidize the poorer ones much like the richer states in the United States subsidize the poor ones. This concept is a no-go for Europe’s elite and this means that weak states like Greece are better off on their own.

Writing for his blog in New York Times, Krugman notes he would vote ‘no':

I would vote no, for two reasons. First, much as the prospect of euro exit frightens everyone — me included — the troika is now effectively demanding that the policy regime of the past five years be continued indefinitely. Where is the hope in that? Maybe, just maybe, the willingness to leave will inspire a rethink, although probably not. But even so, devaluation couldn’t create that much more chaos than already exists, and would pave the way for eventual recovery, just as it has in many other times and places. Greece is not that different.

Second, the political implications of a yes vote would be deeply troubling. The troika clearly did a reverse Corleone — they made Tsipras an offer he can’t accept, and presumably did this knowingly. So the ultimatum was, in effect, a move to replace the Greek government. And even if you don’t like Syriza, that has to be disturbing for anyone who believes in European ideals.