Greece is at the edge of the abyss, but mixed signals from radical left prime minister Alexis Tsipras have raised fresh doubt over the prospects for a last-gasp deal.
Tsipras waited until the very moment of an IMF default, the first by a developed country, before an apparent démarche yesterday. In a letter to creditors, immediately taken as a sign of capitulation, he seemed to accept the bulk of their funding proposals.
Hours later, however, Tsipras went on television to say he would continue to campaign against the bailout arrangements in the referendum next Sunday.
It was yet another perplexing twist in a tense psychodrama of fate and danger. The Tsipras letter had led to anticipation that a breakthrough might yet be in play to keep Greece in the single currency. The unexpected correspondence was seen to provide “a basis” to the end the stalemate.
However, the prime minister’s TV performance prompted questions as to whether the offer of compromise was serious at all. What would be the value of an agreement grounded in the creditor plan if the Tsipras administration campaigns against it?
There is another dimension to the tale. With Greek banks on life support from a reluctant ECB, Tsipras’s Wednesday wavering came as ECB governors discussed whether to maintain, increase or curtail emergency lending.
Capital controls are in place, but the bank run has raised questions about the viability of individual institutions and whether the €60 daily limit on withdrawals will be reduced.
This was the backdrop to a teleconference of euro zone finance ministers last evening. As ministers prepared, there was talk of a face-to-face meeting before the week was out to push again for an agreement. Indeed, French president François Hollande had said a deal must be reached “before the referendum” and “wouldn’t have much sense afterwards”.
Such sentiments were in sharp contrast to the attitude in Berlin, where Chancellor Angela Merkel was angling forcefully to wait until after the plebiscite.
In the event, the intervention on TV served to stamp out enthusiasm for immediate talks. Once the teleconference began, the French delegation did not even push for a return to Brussels this week.
“There was no basis for an agreement,” said an informed source. “Effectively the Greeks have applied for a new programme, a third bailout, and the response from the eurogroup was that this would be examined after the referendum on Sunday.”
Long road to recovery
Chaotic brinkmanship has taken Greece to a dark place. Its banks and stock market are shuttered, its ATMs dry, its tax receipts down, its economy at a halt and its put-upon people in a state of fright and anxiety. Even if a pact is reached with creditors, the road back to prosperity is now longer than ever.
Yet still the struggle for one-upmanship goes on. It’s been said for many months that the Greek negotiation strategy is rooted in game theory, a branch of mathematics that analyses choices and strategies available in decision-making. But long queues of worried pensioners outside banks in Athens illustrate that this is a human crisis in real time, neither a game nor a theory. At issue is the very fate of Greece and its 11 million people.
Trust has vanished. German finance minister Wolfgang Schäuble castigated the Tsipras administration yesterday, saying in parliament that it had worsened the situation in the country.
“This government has done nothing since it came into office,” Schäuble charged. “It has only reversed measures. It reneged on previously agreed commitments. It negotiated and negotiated.
“We don’t know if the Greek government is going to hold a referendum or not, whether it is for or against it. You can’t in all honesty expect us to talk with them in a situation like this.”
Not long afterwards on television, Tsipras accused the creditors of “blackmail” and struck out against “extremist conservative forces” in the EU leadership.
This was the same man whose letter to EU leaders said Greece was prepared to accept the last creditor proposal, subject to amendments, additions or clarification. Concrete Greek amendments, Tsipras said, “fully respect the robustness and credibility of the design of the overall programme”.
A blackmailers’ charter? Or a robust and credible package? Take your pick.
All of this, of course, is open to the interpretation that the TV performance was for the home team in Tsipras’ Syriza party and the letter to the creditors was to bring talks forward at a very difficult time.
Major defections
Such practices are not unusual in politics – and it must be remembered that Tsipras could face major defections if he cedes too much ground. Indeed, the conclusion was quickly drawn outside Greece that the scale of the climbdown in the letter would be enough to topple his leadership.
Thus the climb-back, despite the contradiction with the letter, might be seen as an act of self-preservation.
With no deal in prospect before the referendum, Tsipras’s leadership of Greece now rests on its outcome. A vote in favour of the creditor plan in defiance of his campaign would be devastating. Although he went a long way towards meeting the creditors’ demands in the letter, his calculation remains that a vote against the plan would strengthen his hand.
But the reasoning is convoluted. Tsipras still seeks a mandate against a plan, the thrust of which he has said he accepts.
For all the rhetorical swagger of both the Greek and creditor camps, the two sides are not that far apart. Reliable sources say they came within 30 minutes of a deal last Thursday when EU leaders gathered in Brussels. Not for the first time, progress was set at zero when the referendum was unveiled.
If a Greek exit from the euro would be a historic error, Tsipras has made a mess of his campaign for concessions from lenders. Hardly anyone disputes that the country’s debts are too big. But a deal is not possible on that front without trust.