Hardened creditors drive Greece to dire straits; Tsipras desperate for an agreement

From left to right: Francois Hollande, President of France, Angela Merkel, German Federal Chancellor, Alexis Tsipras, Greek Prime Minister. EU Heads of State or Government meet on 26 June 2015 to discuss jobs, growth and competitiveness, and the security challenges facing the Union. In the sidelines of the summit Francois Hollande and Angela Merkel held a long meeting with the Greek PM Tsipras, who seems obviously stressed with what he hears from the EU’s ‘directory’. (EC Audiovisual Services, 26/6/2015).

From left to right: Francois Hollande, President of France, Angela Merkel, German Federal Chancellor, Alexis Tsipras, Greek Prime Minister. EU Heads of State or Government meet on 26 June 2015 to discuss jobs, growth and competitiveness, and the security challenges facing the Union. In the sidelines of the summit Francois Hollande and Angela Merkel held a long meeting with the Greek PM Tsipras, who seems obviously stressed with what he hears from the EU’s ‘directory’. (EC Audiovisual Services, 26/6/2015).

Alexis Tsipras, the Greek Prime Minister, his government and their depressed country are now in real dire straits. This is a much worse position than in any time during the last five years, a period in which Greece repeatedly faced total collapse and was rescued by a troika of creditors (the European Union, the European Central Bank and the International Monetary Fund). Alas, today the economic, political and social Armageddon is there.

Tsipras himself is challenged by members of government and some heavyweights of his SYRIZA left-wing party. They press him to accept any offer the country’s creditors may make, and even ask him to withdraw his decision to hold a referendum on Sunday. After three days, voters are expected to accept or reject the latest offer the creditors made, with Tsipras urging for a resounding ‘no’ result.

Voting for what?

It turns out though that the creditors have withdrawn their last offer and the Greeks are about to vote on a non-existing proposal. As for the country itself, it’s financially suffocated, with the banks closed for at least one week until Monday 6 July and its citizens queuing day and night in front of the ATMs to withdraw €60 a day. And this is possible only if the machine is loaded with cash. It became apparent then that Tsipras cannot even deliver part of the pensions and the public sector salaries he had promised to protect from the ‘bad’ guys in Brussels and Berlin. Let’s take one thing at a time.

Selective default

Last Tuesday Greece defaulted on an IMF payment. On the same day the Standard & Poor’s rating agency downgraded the credit ratings of the all four Greek systemic banks to selective default. This is one step before a full default. On the same day at midnight, the support program of the three creditors, which financed Greece after May 2010, expired. During the past few months due to a flight of capital the country’s banking system was kept alive by the Emergency Liquidity Assistance (ELA) transfers from ECB. Last Saturday the ECB decided to freeze those transfers provoking the shutdown of all Greek banks and the introduction of capital controls. Currently the internal market functions if at all only with cash. By the same token the country’s international trade has come to a standstill.

There is no indication if the banks will be able to open on Tuesday 7 July, when the six days of the enforced bank holiday ends. The problem is that the ECB won’t resume the ELA transfers for as long as Greece is not under a troika program. As a result, the banks cannot reopen without the backing of ECB. In short, the country is in a state of limbo without any light at the end of the tunnel. The possibility of the introduction of a new national currency is so dreadful and administratively complex that cannot offer a tangible way out, at least not in the short-term. Let’s turn to the political agenda.

Political limbo

Unquestionably, the government and personally PM Tsipras are out of tricks. In his appearance in a public TV interview last Monday he asked for a resound ‘no’ result in Sunday’s referendum. He said a strong ‘no’ result of 60-70% would have enabled him to negotiate with the creditors from a better position. Only three days later his policy is disputed even by the vice- President of government, Giannis Dragasakis.

Tsipras’s strategy is now buried under the ruins of the banking system. He is offering everyday new concessions to creditors but one after the other all those proposals are being denied by the Eurogroup, the council of the Eurozone minister of Finance. According to a Wednesday report of the prestigious Financial Times newspaper, Tsipras is now ready to accept almost all the terms and conditions the creditors demand in order to restart financing the country.

Hardened creditors

Still it seems rather impossible that the creditors accept even the slightest alternation of their last week’s offer. Actually Jeroen Dijsselbloem, the President of Eurogroup, has observed that last week’s proposal of the creditors is now not enough and Greece has to accept more austerity and reform measures. On the same line of thinking, the German Chancellor Angela Merkel said that the creditors will now wait and see what the outcome of Sunday’s referendum will be and then reshape their offer to Greece.

As things stand now the troika of creditors, effectively guided by Berlin and the IMF, seems to have decided to let the country rot for some more weeks after the Sunday 5 July referendum, with the banks closed or even bankrupt and the economy completely dried of liquidity. In such an environment, the Tsipras government may finally capitulate and probably call for an early general election, only months after his January 25 win. This prospect will entail for the Greeks a very long and hot summer in every respect, economic, political and social. Greek society is already deeply divided between those who want to stay in Eurozone and those who prefer the introduction of a national currency, probably the new drachma.

In conclusion the five month-long bold Tsipras strategy in the negotiations with the country’s creditors has been proved disastrous for the country and personally for him.

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

the European Sting Milestones

Featured Stings

How to build a more resilient and inclusive global system

Stopping antimicrobial resistance would cost just USD 2 per person a year

European markets itchy with short-term disturbances

“A sustainable economy, low-carbon, resource-efficient, resilient and more competitive on the global stage”, EU Commissioner Vella in a Sting Exclusive

Fed and ECB prepare a new party for the financial sharks

Making the most of the Sustainable Development Goal 3: its overlooked role in medical education

EU to gain the most from the agreement with Iran

Parliament makes EU electricity market cleaner and more consumer-friendly

Managing and resolving conflicts in a politically inclined group of team members

It’s time to ‘eliminate the scourge of conflict-related sexual violence’, urges UN chief

How Leonardo da Vinci’s outsider status made him a Renaissance man

G20 LIVE: G20 Statement on the fight against terrorism

New forms of work: deal on measures boosting workers’ rights

Code of Practice against disinformation: Commission calls on signatories to intensify their efforts

EU Elections: new rules to prevent breaches of data used to influence elections

16 foods that are good for you – and the planet

The EU-US trade agreement, victim of right-wing extremists and security lunatics

Cyclone Idai: emergency getting ‘bigger by the hour’, warns UN food agency

MWC 2016 LIVE: BlackBerry acquires Encription, talks Microsoft and health

The world is too complacent about epidemics. Here’s how to change

Sustainable Infrastructure and Connectivity in the Belt and Road Initiative (BRI): a stimulating China-EU dialogue at European Business Summit 2018

UN global counter-terrorism strategy review an ‘overarching vision for the future’: Assembly President

UN human rights chief denounces grave ‘assaults’ on fundamental rights of Palestinian people

Populist Eurosceptics helped by Trumpists seriously threaten the EU edifice

EU Parliament and Council: Close to agreement on the bank resolution mechanism

This mobile laundry gives homeless people free showers and washes their clothes

UN chief reaffirms commitment to untying ‘Gordian knot’ of Middle East conflict and instability

Mandela, ‘true symbol of human greatness’, celebrated on centenary of his birth

From cheeseburgers to coral reefs, the science of decision-making can change the world

Security Council condemns ‘heinous and cowardly’ attack in Iran

New rules for short-stay visas: EP and Council reach a deal

European banking stress tests 2014: A more adverse approach for a shorter banking sector

EU Justice Scoreboard 2018: justice systems’ key role in upholding the rule of law and EU values

Ecocraft: take gaming to another level by greening Minecraft

The global appetite for meat is growing, and it’s harming the planet

Service and Sacrifice: Guinean peacekeepers make their mark in Mali

Joint U.S.-EU Statement following President Juncker’s visit to the White House

Bank resolutions to remain a politically influenced affair

MWC 2016 LIVE: The top 5 themes of this year’s Mobile World Congress

Terrorist content online should be removed within one hour, says EP

African migration: what the numbers really tell us

Celebrating the Customs Union: the world’s largest trading bloc turns 50

Schengen: new rules for temporary checks at national borders

A Valentine’s Special: we can never overdose on love

Restoring government control across Central African Republic is ‘key’ to lasting peace, stability – UN envoy

The China-US trade deal will be signed on time; the path is set

Modern humanitarian aid at times of global crises

EU unfolds strategy on the Egypt question

FROM THE FIELD: Photos highlight agony of West African civil wars

IMF: How To Deal With Failed Banks

How and why Mercedes fakes the EU fuel consumption tests

A day in the life of a refugee: We should be someone who helps

How to unleash the enormous power of global healthcare data

India’s economy is growing fast, but its poorest areas lag behind. Here’s why this could be about to change

Why Commissioner Rehn wants us all to work more for less

The Shifting Rhythms of Harmonious China: Ancient, Modern & Eternal

Theresa May expresses her optimism about Britain’s economic success while UK business outlook seems ominous

As many as 330,000 displaced by heavy fighting in south-west Syria – UN agency

Google case: A turning point in competition rules enforcement

MEPs reject making EU regional funding dependent on economic targets

Q and A on the draft digital copyright directive

Sudzha gas metering station at Russian-Ukrainian border (Copyright: Gazprom, 2015 / Gazprom’s website, Media)

Gazprom starts suspending gas contracts with Ukraine as Brussels fears limited transit to Europe

More Stings?

Speak your Mind Here

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s