50 Shades of Greece
By Raúl Ilargi Meijer
February 23, 2015 "ICH"
- "Automatic
Earth" - When it
comes to the ongoing Greek question, I see a
lot of people eagerly jump to conclusions,
after the ‘debt deal’, that I don’t think
are justified; certainly not yet. The
overall conviction in the press seems to be
that Syriza has given in on just about all
fronts, and Germany and Dijsselbloem are the
big winners.
But since that may well be
the exact position Syriza wants ‘the other
side’ to be in, where they think they have
prevailed, one will have to try and think a
few steps ahead before judging the
situation. There’s far more grey area here
than many pundits seem to assume, easily 50
shades of it.
If Greece wouldn’t have
given Germany the idea that it was winning,
Athens would have already come very close to
an exit from the eurozone. The problem with
that is that it is not part of the mandate
Syriza has been given by Greek voters. Who
have spoken out for an end to austerity, but
within the existing euro framework.
Varoufakis et al. may long
have concluded that such a set-up is simply
not realistic, but they would still have to
work up to a situation where, at some point,
they can present this to the people. And
that can only be done after they can
convincingly show that Germany and Holland
refuse to honor the democratically decided
mandate Syriza brings to the table.
They would have to make
absolutely sure that the other side gets the
blame for the failed negotiations. They have
to do that anyway, even if a Grexit is not
their preferred outcome. They need to be
able to prove that they bent over backwards
and Germany still wouldn’t play ball.
The 4-month extension debt
deal agreed on this week is still contingent
on a set of measures Varoufakis is due to
hand to his various European ‘partners’ on
Monday. If the ‘partners’ throw out the
package, or too much of it, then Tsipras can
go to the Greek people and say:
“Look, they’re not
acting in good faith, they refuse to honor
your democratic vote, and the mandate you
handed us with that vote. So what are we
going to do now? Do you want to stay in the
eurozone and the austerity programs it
forces upon you, or are we going to try to
find out what would happen if we leave the
euro?”
Even if Tsipras et al had
been relatively sure, before the recent
elections that brought them to power, what
the negotiations with the ‘partners’ would
lead to, it couldn’t have those negotiations
and show the results to the voters. Perhaps
as early as this Monday, it may be able to.
It was simply always going to be a necessary
step in the process.
Over the past week, Syriza
has shown its ample willingness to
negotiate, to do concessions, so much so
that it’s being accused of betraying its
voters. Also a necessary step. But if
Schäuble and Dijsselbloem overplay their
hand the coming week in reacting to
Varoufakis’ proposals for getting the
4-month extension, the trapdoor may fall
shut, and Greece may start preparing to
leave the euro. Either after getting the
people’s mandate first, or after being
thrown out by Brussels and Frankfurt.
Would that be such a bad
thing for Greece? Nobody really knows, even
if everyone is more than ready to opinionate
about it. One must not forget that things
are already very bad in Greece, so threats
of armageddon could easily ring hollow.
An interesting perspective
comes from a Bloomberg interview with Gordon
Kerr, co-founder of Cobden Partners, a firm
I know Varoufakis was urged to consider as
financial advisors, before Syriza chose to
go with Lazard (I can’t seem to embed the
video, so please click the link and watch it
on Bloomberg, it’s only 5 minutes and worth
every second):
Euro Is One of the Worst
Designed Currencies
Q: Why should they
bail? Why should Greece go: you know
what: we’re going it alone?
A: Because that’s
probably the best alternative for them
in the medium term, if not the very
short term. I suspect the reason why
Greece is clearly trying to do something
with the European Central Bank in the
next couple days is maybe they have no
contingency plan ready to go.
Q: Is Europe ready for
Greece to leave? Are the contingency
plans in place?
A: I don’t think
Europe has any contingency plans.
And a few more points from
the conversation:
• Even Citibank are
saying that if the ELA’s (=ECB emergency
loans) are not extended, Greece would
be perfectly within its rights to
repudiate up to €300 billion of
debt.
• So
the day after this
happens, Greece will be €300 billion
better off than it is right now.
• Bulgaria’s currency
collapsed in 1996; within a weekend it
was restructured..
• They [Greece]
don’t have systemically important
financial institutions dragging down
their economy ..
I find it hard to believe
Syriza wouldn’t know at least a good chunk
of what Kerr says. And that would give them
a lot more room to move than is generally
assumed. Thing is, they need to get that
mandate from their voters.
The long and short of it
is there are a lot of possibilities, lots of
shades of grey area, both when it comes to
what people involved are thinking and in
what they are doing. It doesn’t seem very
wise to draw conclusions before having
thought through the possibilities, like a
strategist, like an army general or a chess
player would.
Perhaps Syriza is just
playing for time, perhaps that is their no.
1 priority, just so they create the space to
come up with a contingency plan in case they
leave the euro. But also perhaps they
already have such a plan, and what is
happening now is simply part of that plan.
And then there’s the
option they’ve already been defeated and
they’ll have to get ready for more
humiliation next week. It’s just that that
would make them look very short sighted, and
awfully bad strategists.
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