We have always maintained beyond a doubt that Greece and its Creditors would, sooner or later, reach an agreement, rather than let Greece collapse. An agreement, however, that would exclusively serve the expediencies and the needs of the creditors, which include the European Union, the European Central Bank and the International Monetary Fund (IMF).
The Greeks, for reasons of domestic politicking, refer to the Creditors as the “Institutions” (formerly they were named the “Troika”). Since we are calling things by their name, we will refer to them by their real name: the Creditors. We will leave the term “Institutions” to the Greeks for domestic consumption.
It should be added here that the Washington-driven IMF has increased its role in the talks. Yet, despite the fact that it runs the show on behalf of the Creditors, the IMF remains behind the scenes, as the US wants to keep a discrete distance from what, for Washington, seems to be an intra-EU affair.
Under these circumstances, and provided that someone from either side does not leave the table at the last moment, Greece – no matter what – will not exit the Euro. Greece will stay in the European Union and will sign an agreement with the Creditors.
Why will the Creditors and the Greeks sign an agreement?
The Creditors are aware that if there is no agreement, Europe and the world economy might enter into “unchartered waters” with no measurable consequences. Indeed, there is no such precedent to allow for a cost-benefit calculation of a Grexit.
The Euro currency is a rather sensitive currency, not supported by a common fiscal policy. Europe is in a deep socio-political crisis and the world economy is on a slippery path after the partial abolishment of the Glass-Steagall Act by the Clinton Administration in 1999. Thus, the Creditors cannot take any risk for a debt of one third of a trillion Euros of a small country in the periphery of Europe, while many trillion Euros are actually at stake. What worries Western leaders is the possibility of the “butterfly effect” in a nonlinear complex system, where a minor change in the periphery might result in a large unpredictable, bottom-up irrevocable change to the entire system.
On the other side of the fence, the Greeks cannot drive the country into official bankruptcy and isolation. No Greek leader, right, left or centre, can afford to be accused of high treason and to pass into history as the country’s killer, while undoubtedly facing a Special Court as a result.
Therefore, it is beyond a doubt that by the end of this month an agreement (a possible interim one?) will be signed. It remains to be seen what kind of agreement it will be.
The creditors, for reasons we have already explained (http://www.neurope.eu/article/greece-and-the-eu-close-to-a-revolving-interim-deal/) do not want the leftist government of Greece to remain in power. The creditors want to conclude a durable realistic agreement in order to eliminate a potential destabilising threat within the Eurozone.
Therefore, an agreement will secure the payment of Greece’s foreign obligations, but at the same time will not provide any political comfort to the present government, which should find a way to address its national obligations on its own.
The present SYRIZA government has a strong popular support, which in case of elections will become even stronger. A report published last week by the
Truth Committee on Public Debt,established by the Hellenic Parliament in April 2015, concluded “that the entire adjustment programme, to which Greece has been subjugated, was and remains a politically orientated programme”. The figures of the country’s debt were inflated, according to the report, and “the debt emerging from the Troika’s arrangements are thus a direct infringement on the fundamental human rights of the residents of Greece. Hence, the conclusion that Greece should not pay this debt because it is illegal, illegitimate, and odious”.
The Greek reality and the recent history of the country disallow farfetched thoughts of any interference into Greece’s domestic matters. Under these circumstances, the creditors will wait until the current government falls under growing popular discontent. The Greek problem is a deficit accumulated by a huge public sector. The present Greek government (as the governments before) will never choose to reduce the size of the public sector. Instead, the government will opt for more austerity (i.e. taxes) in order to pay for the overcrowded public sector, as the Creditors do not wish to lend more money to cover domestic needs.
The Creditors would prefer to enter into a final deal with a new grand coalition government. Such a deal would provide a series of structural changes in the Greek socio-economic system, which the present government is not willing and cannot in any case deliver. At the same time, the Creditors will never grant a leftist government a substantial reduction of the Greek debt because this would stabilise the SYRIZA government in power, with the potential spill-over effects in other European countries.
Therefore, yes, we will have an agreement between the Greeks and the Eurozone, but this agreement will be an interim deal that will ensure Greece stays in the Eurozone without declaring bankruptcy (officially), yet without contributing to the solution of any of the problems that led to the crisis. On the contrary, the Creditors estimate that such an agreement will push Greece deeper into recession, increasing social discontent, thus gradually leading to the downfall of the present government.
The SYRIZA government has realised that it has no bargaining power on the Creditors and that it cannot achieve any real concession. Thus, it will accept in the first place what it is given in order to avoid the worse. However, as this is a Leftist government, the first of its kind in the European Union, and as the Greeks think and act only politically, it is difficult to anticipate how they will react after the deal in case they will not be in a position to pay for salaries and pensions.
Indeed, Greece itself might trigger a “butterfly effect” and if this happens… sky is the limit.
http://www.neurope.eu/article/a-deal-for-greece/