Mar 032015
 March 3, 2015  Posted by at 1:17 am Finance Tagged with: , , , , , ,

DPC Country store, Venezuela 1905

From what I read in the press every day, as well as from private communication, a pretty wide divide seems to appear between what many people think the Syriza government in Athens should do, and what they actually can do at this point in time. It should be useful to clarify what this divide consists of, and how it can be breached, if that is at all possible.

In particular, many are of the opinion that Greece cannot escape its suffocating debt issues without leaving the eurozone and going its own way, reintroducing the drachma and defaulting on much of its €240 billion debt. Those who think so may well be right. But right now that is mostly irrelevant. Because Alexis Tsipras and his men and women simply don’t have their voters’ mandate to go down that road. They may at some time in the future, but they don’t today. The expectations are too great, and certainly too immediate.

If Syriza wants to achieve anything, it will need to stick to democratic principals and procedure. Every important decision, and every – even slight – change of course will need to be laid out before either the Syriza fraction in Parliament, the entire parliament, or the Greek population as a whole, to vote on. The government looks to be sticking to this principle as solidly as it seeks to stick to its mandate. None of that grey wiggle room that is so typical in most political systems.

This also makes the task ahead that much harder. Syriza must be seen by its voters as doing what it can to remain in the eurozone, while at the same time negotiating terms with the other members that will allow relief from the relentless -humanitarian – pressures the country has been put under by its previous governments and EU partners.

And while it may well be so that Tsipras and Varoufakis et al have in private long concluded that in the long term attempts to succeed in combining these two goals are doomed to fail, or even that the eurozone as a whole has no future, the fact is that for now some 70% of Greeks reportedly demand that the country remain in the currency union.

There’s a deep underlying historic component to this that needs to be recognized if one is to understand what is happening. Before the EU, and certainly the euro, Greece always felt under threat from the east, a result of centuries of occupations. They had a deep longing to be recognized as a part of Europe, and to feel protected in that sense.

Ambrose Evans-Pritchard summed it up quite nicely in an interview from ‘the lion’s den’ over the weekend:

Humiliated Greece Eyes Byzantine Pivot As Crisis Deepens

“When it comes to the choice, I fear Tsipras will abandon our programme rather than give up the euro,” said one Syriza MP, glancing cautiously around in case anybody was listening as we drank coffee in the “conspiracy” canteen of the Greek parliament.

“The euro is more than just money. It is talismatic for the Greeks. It was only when we joined the euro that we felt truly European. There was always a nagging doubt before,” he said.

“But you can’t fight austerity without confronting the eurozone directly. You have to be willing to leave. It is going to take a long time for the party to accept this bitter reality. I think the euro was a tremendous historic mistake, and the sooner they get rid of it, the better for all the peoples of Europe, but that is not the party view,” he said.

This is what Tsipras faces. There’s an almost schizophrenic attitude even among his own caucus. And there may be plenty voices that say he should at least threaten to leave the eurozone, just to have some leverage in negotiations, but they don’t understand the lay of the land. The European ‘partners’ in the talks know only too well that it would be an empty threat: Greek voters don’t want to leave the eurozone, so threatening to go anyway would only ring hollow.

Tsipras instead must repeat again and again that his goal is to remain in the union, and Greece will do what it can to pay off all its debts. He has no wiggle room on that, not at the moment. If he would want to present his people with the option of leaving the eurozone, it could only be done after very extensive talks in which it becomes ever clearer that the ‘partners’ make it impossible for Greece to achieve that other Syriza commitment, of cutting back austerity measures, within the currency union.

He must at some point be able to turn to his people and say: we’ve done all we could, we’ve even compromised some of your election demands, but Germany etc. just won’t give up. He needs to be able to prove to Greek voters that they can’t have both an end to austerity AND the continued membership of the eurozone.

This will take time, probably lots of it. But it’s the only thing Tsipras, if he means to stick to strict democratic rules – which he’s done thus far -, can do. Claiming today from the outside that he should already have left the eurozone, or at least threatened to do so, is premature at best, and not helpful.

The Syriza MP cited above by Ambrose says it all, really. Some of the MPs are pretty much willing to let go of the euro. But they, too, need to understand that Tsipras can offer that option to the people only after long-drawn-out talks, at the end of which he may be able to say:

“Look, you know what we’ve been discussing with the partners, because we’ve kept you informed every step of the way. It is now clear that if you wish to stay in the eurozone, it will mean austerity, it will mean soupkitchens and no health care and no jobs for your children, for years to come. Do you really want the euro that much? If not, we can go it alone, we have the models ready and we can explain them to you. And it will no doubt be difficult at first, but at least it will be our own difficulties, not those imposed by others.. It’s up to you, the people, to decide.”

For now, those talks haven’t been held. So Tsipras can’t say these things. It will need to be a game of patience. There was never any other way.

Home Forums Great Big Fat Greek Expectations

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  • #19574

    DPC Country store, Venezuela 1905 From what I read in the press every day, as well as from private communication, a pretty wide divide seems to appear
    [See the full post at: Great Big Fat Greek Expectations]

    John Day

    The EU apparatchiks are already pretty pissed-off and fed up with the straightforward and unconventional style of Varoufakis, and Tsipras, too.
    Just doggedly getting right back in front of them and innocently asking the “impossible” again, maybe with a little Peter Falk “Colombo” style thrown in, will wear them down, or make them blurt something out that they want to keep hidden.
    Damn, Colombo was good.
    Go for it, guys!

    Formerly T-Bear

    Most do not consider the enormity of the accomplishment of changing currencies for daily needs. The Euro not only did that but was transnational in its scope as well as being fully accepted by the populations affected, some easily and immediately and others having slower rates of acceptance, none now would know how to return to their former currency without grave dislocations. Greece would be no different, the Euro is now part and parcel of being Greek, of being Eurozone European, very few would willingly change that now established fact. These things are compounded by the problem that economic change requires the parties to negotiate together to accomplish desired goals, one party, taking after U.S. Republicans, have lost any ability to negotiate (That’s you Angela M’s finance minister, a rather forgettable personage) or even acknowledge disagreement. Although modern expectations of politicians is whenever lips are moving to expect hollow promise or misrepresentations, moving lips are also required to negotiate, something the German contingent of the EMU has either forgotten or has yet to learn – but there is hope yet – maybe.

    John Day

    The real de a ocha, “Spanish Dollar” was the first global trade currency, and legal tender in the US until 1857 (just my “two bits”). It worked out pretty well for hundreds of years.
    Silver dollars could make a comeback. It’s my humble suggestion.
    Call them “Thaler’s” if you prefer.


    When the experts put their minds to how to best manage some country leaving the Euro, they came up with this: “Leaving the Euro: A Practical Guide”

    It makes it clear that the country CANNOT have a public discussion about leaving, because it will cause ” large capital outflows from the country as international investors and domestic residents withdrew their funds; associated falls in asset prices and increases in bond yields; runs on banks, perhaps causing a banking crisis; and negative effects on consumer and business confidence.”

    So the decision has to be made by a small number of people, and kept secret while preparations continue. Should leaks occur, capital controls would have to be instituted immediately, which is illegal under EU law, but would have to be done anyway.

    So I don’t think Syriza is bound to discuss anything publicly, now that it is clear that there is no compromise on Austerity to be had from the EuroGroup. The decision to leave may already have been taken, and we will only hear about it on close of business on the Friday before the Monday that it happens.

    That would explain the apparent backdown – all they needed was funding to cover the few weeks until the grexit happens, and the terms didn’t really matter except for saving face at home.

    Read the report, it’s really good and has had a lot of thought put into it.

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