Monday, July 06, 2015

Greece opts for the outside track

Well, let's mark the occasion: Greece has resoundingly voted "No" to the terms of an EC bailout program that would involve more austerity measures.
In the worldview of the smiling new Greek Prime Minister Alexis Tsipras, this represents the victory of democracy over EC tyranny and economic blackmail. To everyone else, it looks like the victory of bullheadedness over common sense, and the prelude to a spectacular economic implosion of a once-proud nation (and possibly even the beginning of the end of the grand European experiment, if the predicted snowball effect takes hold).
I do wonder whether the Greek voters fully understood the referendum question. I must admit, when I read it, I found it far from easily comprehensible. It reads:
Should the agreement plan submitted by the European Commission, the European Central Bank and the International Monetary Fund to the Eurogroup of 25 June 2015, and comprised of two parts which make up their joint proposal, be accepted? The first document is titled "Reforms For The Completion Of The Current Program And Beyond" and the second "Preliminary Debt Sustainability Analysis."
Say what?
Anyway, enough virtual ink has already been spilled on the matter, and I don't intend to add my own analysis into the mix, other than to mention that - far from the Greek Finance Minister's claim that  “Today’s No is a big yes to democratic Europe, and it strengthens the protection that Greece offers its people” - I can't see the decision in anything other than a negative light, and it seems to me that Greece's path to prosperity just got that bit harder. Greece's many creditors are unlikely to look very favourably on new proposals with no concomitant austerity measures, and their patience has all but run out.
Yes, the Greek people have been through some tough times recently, but I've a suspicion that they ain't seen nothing yet. They are out of cash, out of options, and now they are out of friends.

Just a few days later, Tsipras managed to get the Greek parliament to vote for a bailout package of tax increases and spending cuts which shows a marked resemblance to the very package the referendum voted against so recently (and of which Tsipras himself was so hawkish in his rejection).
Some might argue that the referendum debacle was necessary for Greece to salvage at least a modicum of its national pride. But such a climb-down so soon after the vote perhaps indicates that Tsipras himself was never under any illusions that Greece would be able to proceed on its own, and that the whole referendum process was purely an exercise in political brinkmanship.
Of course, it is still by no means certain that Germany and the EC will accept the revised package, and there are still many in Europe who would willingly part with an albatross like Greece, whatever the implications. The drama is by no mean over yet.

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