A week away, and some thoughts upon return ...... some dark, dark thoughts

Thursday 2nd July 2015

 

A week away, and some thoughts upon return ...... some dark, dark thoughts

Greece  --  in all papers, everywhere

Surely no one could have been naïve enough to hope that after a week in which Greece either did or didn't repay 1.6bn euros to the IMF, the picture would become a little clearer ? Not resolved in any way you understand, but would it have been fanciful to think we'd have a clearer picture about which particular precipice we are about to step off ? Fat chance ......

Yesterday saw Greek PM Tsipras present a letter to creditors which he said contained "almost all" the demanded concessions. The creditors plainly disagreed, pointing out that Mr Tsipras' big play about tackling corruption (clientalism) was something he had always agreed to but just never instigated and that there were still problems regarding pensions and taxes. The issue almost immediately became moot when in yet another apparent contradiction just hours later Mr Tsipras went on national television to urge voters to reject the creditors conditions in Sunday's referendum. Some pretty brassed off EU officials then lined up to say that no further negotiations could take place until the result of the referendum is known.

About this referendum, then :

It's a 72-word question that asks the Greek people whether they wish to accept the creditors' conditions, studded with technical and opaque references (e.g. "preliminary debt sustainability analysis" !! ). It does not mention the Euro, or the desirability or otherwise of staying in the Eurozone.

Mr Tsipras is asking the people to vote on a deal that is in fact no longer on the table.

The polls suggest the "No" campaign is ahead, although anecdotal evidence suggests that as current capital controls give Greeks  a taste of what a "No" vote might mean, the gap is closing.

 PM Tsipras is leading the "No" campaign, but nominally at least is also Greece's chief negotiator with its creditors. Some mistake here, surely ?

 Eurozone officials obviously are urging a "Yes" vote (well, most of them anyway), but in doing so stand accused of interfering in a member nation's domestic democratic process.

So, what if the referendum returns a "No vote" ? Mr Tsipras says it would give him a stronger negotiating hand, which is surely being disingenuous. Who's he going to negotiate with ? It seems highly likely that the creditors would pull the plug rather than go through the same shenanigans that have plagued the last five months. It's not absolutely guaranteed, but in the event of a "No" vote, "Grexit" would at least seem inevitable.

It's often argued that a devalued new drachma would be the way forward for Greece.  A cheaper currency allows economies in desperate straits to export their way out of trouble. That's true, or can be, but the trouble is that Greece's exports are tiny and it does not have the industrial infrastructure to produce the kind of goods that would be in demand on the export market. The devalued currency would bring rampant inflation and therefore even further cuts to already savaged real wages. Sitting in an office in Berlin, Paris or London say, it's easy to say that Greece has to take the hard times before emerging the other side but try saying that if you're on the breadline in Athens or Thessaloniki. The very real potential for the kind of turmoil that might bring in Europe's (and Nato's) southeast corner is a huge concern.

And if they vote "Yes" ? Mr Tsipras has said that he will resign and an election will be called. It's too ghastly a thought (from a deal-making point of view) to contemplate that whilst a "Yes" vote reflected a desire to stay in the Eurozone, the people remained resolutely anti-austerity and returned a slightly chastened Syriza party. Let's assume a new government will resume negotiations with the creditors, who at least will be relieved at no longer having to deal with people they have come to view with great personal bitterness and distrust, and may therefore feel a little more conciliatory. They'll need to be. For all the irresponsibility of Greek officials and policies going back a very long time before Mr Tsipras was elected, we should not forget that the first bail-out in 2010 was designed to protect the euro and the Eurozone banking system and imposed completely unrealistic, not to say impossible, conditions on Greece. If a third bail-out is to be negotiated with a new government, surely some relief has to be part of it. We can only wonder whether Mr Tsipras might find that ironic. But of course, any "generosity" to Greece would not go down well with the other peripheral Eurozone nations who have already taken their medicine in full.

 

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