Greek Tragedy’s Final Act

You could have snoozed on a sunbed on Skyros for the past two weeks, and the ups and downs of the Greek mess – including a referendum and the departure of the Greek finance minister – might have utterly passed you by. But it finally looks as though, one way or another, the final act in this long-drawn-out tragedy (or maybe farce) is upon us.

By 10pm today (London time) Greece must submit new proposals to the European Central Bank (ECB), European Union (EU) and the International Monetary Fund (IMF). Tomorrow, Friday, those three will discuss the refreshed Greek plan. On Sunday all 28 members of the EU meet to decide Greece’s fate. On the agenda will be emergency humanitarian relief for Greece, fast running out of medically vital drugs and supplies. On Monday Greece needs to make a €3bn payment to the ECB. It won’t find that amount of cash in the ATMs; Louka Katseli, the head of the Greek bank association, says that there’s enough cash in machines to last until Monday. Greeks are currently limited to withdrawing €60 a day.

There’s a peculiar paradox to Greece today. The closer it gets to outright national bankruptcy, the more defiant it becomes. There ought to be nothing surprising about this: trapped rats fight fiercely. And these ‘rats’ (no insult intended) are approaching the brink.

Far from 0.5% growth in GDP in 2015, which was expected earlier in the year, the Greek economy is now likely to shrink by 3% as a result of the past two weeks’ capital controls – meaning the country will be even less able to service its debt, around €300 billion, than it was two weeks ago. With a third of all women out of a job, and more than 53% of 15-24 year-olds unemployed, Greeks have had enough of austerity. And I for one don’t blame them. Extending yet more loans to Greece would be madness – it will never be repaid and Greeks would be condemned to a decade or more of harsh austerity while they struggle to pay back the ballooning debts.

Greek god, frayed tempers

Greece’s Prime Minister, Alexander Tsipras, most resembles not a Greek god but a Roman one, Janus. Most people wrongly assume that Janus symbolises two-faced hypocrisy, but actually the god’s two faces represented a looking back to the past, and a looking forward to the future. So while Tsipras needs to sweeten the deal rejected by the EU a couple of weeks ago, this consummate left-wing politician will also have been preparing for a future exit from the euro. The de facto head of the far-left wing of Tsipras’s Syriza party, Panagiotis Lafazanis, the Energy Minister, has already staked out an intransigent position: “We don’t want add to the past two failed bailouts a third bailout of tough austerity which will not give any prospects for the country. “Greece is not facing execution, it is not ready to accept any fait accompli” he said today. Getting rid of Yanis Varoufakis (a quasi-Marxist economist who studied at the University of Essex) and appointing as his finance minister replacement Euclid Tsakalotos (a quasi-Marxist economist who studied at Oxford University) looks little more than a good joke.

In order to get a fresh bail-out the Greeks will need to accept an austerity programme very similar to the one rejected by the referendum. What’s likely to be offered by late tonight by the Tsipras government however looks very similar to what the EU has already rejected: tax rises, rather than commitment to structural reform such as deeper and wider privatisations. As others have said, if everyone simply wanted to cut and deal and go home and sleep for a week that could probably be achieved this weekend. But as one of the most astute followers of the Greek crisis, Wolfgang Münchau has said: “The talk in Berlin is…not about compromise, but about how to organise post-Grexit humanitarian relief. The idea that Greece would remain in the euro is considered somewhat quaint.”

Impasse leads to end-game?

German political anger with Greece reached boiling point on Wednesday this week, when Tspiras addressed the European Parliament. While he soberly told MEPs that “my country has been transformed to an austerity laboratory. The experiment has not been a success” a German MEP, Manfred Weber, a senior figure in Angela Merkel’s CSU party “you engage in confrontation, we engage in compromise. You are looking for a failure, we are looking for success.”

What Tsipras, Syriza, Greece all want and need is a ‘haircut’ on the debts – a willingness by the EU to write-off some portion of the debt, while alleviating the immediate cash crunch for the Greek banking system by coming up with emergency funding so the banks can re-open. This debt relief is inevitable, either with the agreement of the EU or without. The latter course of action is by far the worst outcome if the Eurozone is to have a long-term future. If we all wake up on Monday morning to discover that the drachma – or whatever – is now circulating in Greece, then it’s game over for the euro; and the European dream will be dead. And who should we blame? The reckless private banks, largely German and French, who lent Greece the billions in the first place, and then browbeat their governments to lend Greece the money with which to bail them out.