"Tsipras has his European creditors by the throat", Viewpoint, Ambrose Evans-Pritchard in The Daily Telegraph, p.b2

Thursday 21st May 2015

Greece getting ready to stand and fight ? Sentiment may just be swinging their way.....

 

"Tsipras has his European creditors by the throat", Viewpoint, Ambrose Evans-Pritchard in The Daily Telegraph, p.b2

There comes a time when you have to say "enough is enough"..... time to draw a line in the sand and suffer the consequences. The signs are that Greece may finally be reaching that point of no return. The next of many potential D-Days (Default days?) is June 5th, when 300m euros is due to be repaid to the IMF. It is increasingly unlikely that the payment will be made without a further release of bail-out funds, which the creditors are still insisting wont happen until Greece enacts the stringent cuts and reforms demanded four months ago. On this, it seems, they will not compromise.

It's always easier with hindsight of course, but few would doubt that the loans given to a Greek state on its knees in 2010 imposed terms and conditions that were utterly unrealistic, not to say unfair. At the heart of things lies the suspicion that the deal was struck with the interests of the Euro, a vulnerable banking system and the EU's credibility in mind rather than a genuine desire to mitigate the huge problems of a member state in any practical way. One could even argue that an enforced sale of state assets (at a price much lower than their value) to an "oligarchal" private sector would in fact exacerbate many of the issues that the creditors seek to address.

Despite the unfortunate and sometimes absurd posturing of individuals within the Greek negotiating team that can only have soured relations and made compromise less likely, it's not as though Greece hasn't put forward its own proposals for reform that might have been a starting point for meaningful discussion at least. But Greece's leadership , a far-left body lest we forget, has several lines it will not cross. Primarily, it will suffer no more cuts in wages and pensions and it requires some measure of debt relief that does not demand a budget surplus above 1% of GDP. Meanwhile the hawks amongst the creditors are brooking no compromise. Therein lies the impasse, and it looks as though Greece is readying to pull the plug, whatever the cost.

Not too much should be read into the ECB's decision to ease collateral requirements for Greek banks that has freed up 3b euros in liquidity, but there are some more doveish noises coming from senior EU officials. They are concerned that Grexit would be seen as confirmation of a North / South divide within the EU and that the credibility of the euro project and the EU as a whole could be seriously damaged. Chancellor Merkel and President Hollande have also been pushing for more urgency in finding a solution. They will be well aware that any turmoil in the EU can only give further help to far-right parties across Europe already buoyed by great success in the last European elections. Even more crucially, they are under pressure from President Obama. He will have left them in no doubt of his views on a post-Grexit Greece, a key Nato member of course, being allowed to drift into the orbit of Vladimir Putin's Russia.

The endgame is approaching, and Greece may hold more cards than we thought.