Where is Odysseus? Part 2 - Uncertainty
Greece needs to re-think natural gas policy, starting with demand
Where is Odysseus? Part 1 - Demographics
Podcast - Losing game: Greece's weak defence against hooliganism
How economic sanctions on Russia could affect Greek economy
The Parable of the Populists and the Contemplatives
Which way now, Mr Tsipras?
After his haphazard cross-country drive across Europe over the last six months, Alexis Tsipras has arrived at the crossroads. He has already been forced by European lenders to make a huge compromise; now he has to decide whether he will be just as ruthless with dissenters in his own party.
Tsipras has decide whether he will accommodate the more radical views of the 32 MPs who this week voted against the first set of prior actions demanded by lenders or whether he will commit exclusively to the implementation of the Brussels agreement, which he has admitted he does not agree in.
As unorthodox a party as SYRIZA may be, balancing the desires of those who are now openly advocating an exit from the euro against the stringent demands of those who will decide whether Greece stays in the single currency is an impossible balancing act.
Through his folly and the stubbornness of Greece’s partners, Tsipras has been left with no more political wiggle room.
As the prime minister told the defectors in Parliament on Wednesday night, he had three choices in Brussels: One was to sign the agreement, the other was brace for a disorderly default and the third was to accept German Finance Minister Wolfgang Schaeuble’s plan for a “temporary exit.” Tsipras called on his critics from within the party to put forward a credible fourth choice if they could. Naturally, they couldn’t. With a sick economy, fragmented political system, struggling public administration and beleagured society, Greece is in no position to endure a testing transition to a new currency.
This lack of options is the result of years of mistakes but was compounded by the diplomatic folly of the last few months. Tsipras revealed in a TV interview this week that he commissioned a report on the effects of a Grexit and was convinced immediately upon reading it that this was not a genuine option for a Greek prime minister.
Having accepted this, Tsipras has no other choice but to attempt to implement the programme, certainly until a productive discussion on debt relief (which may yet be his personal vindication from all this) with European lenders takes place. The prime minister would be naïve to think that there is any other way he can play his non-existent hand now.
Worryingly, Tsipras showed inexplicable naivety over the last six months. In his interview, he claimed that ex-Finance Minister Yanis Varoufakis warned him in March or April that Schaeuble had put a Grexit offer on the table, as he had done in 2011 only for Evangelos Venizelos to reject it.
Given that Tsipras admits he knew from that point onwards (although if he had been paying any attention over the last five years he should have been aware much earlier) that Schaeuble was gunning for a Greek exit, one wonders what measures the Greek prime minister took subsequently to prevent the German finance minister’s wish from coming true. Infuriating even those mildly supportive of Greece’s cause, walking away from negotiations at the last minute, calling a referendum on the lenders’ proposal and advocating a “no” vote, allowing the programme extension to lapse and defaulting on the International Monetary Fund do not seem the actions of someone aware of imminent peril.
If Tsipras is equally negligent in the weeks and months ahead Greece will be sent tumbling out of the euro. Schaeuble may not have got what he wanted at the weekend summit, where euro leaders removed the reference to a temporary Grexit from the final statement, but he has succeeded in banishing a taboo. It is clear from his subsequent comments that he will not cease advocating for Greece to leave for as long as there will be any doubt in policy makers' minds.
There is a self-destructiveness in Schaeuble’s action because the idea of a country leaving the Eurozone being recorded on a Eurogroup statement cannot be erased. It is a poison that will gradually flow through the eurozone’s veins, perhaps not claiming an immediate victim but at some point someone will succumb until the necessary antibodies have been created by that time.
By making his idea so public, Schaeuble has also made it perfectly legitimate for other eurozone officials to openly question Greece’s position within the single currency without being concerned about overstepping the mark. By all accounts, a number of finance ministers backed Schaeuble’s plan on Saturday. Following the meeting, several of them – such as Slovakia’s Peter Kazimir - felt no compuction about openly questioning the agreement that eurozone leaders’ reached early on Monday.
Kazimir, who seems to be basking in the limelight once hogged by his former counterpart Varoufakis, described Schauble’s proposal as “courageous.” If he needed any further proof, this should leave Tsipras in no doubt that Greece will be in a peculiar limbo over the next few months as some of its supposed partners will be poised to seize on the first opportunity to put into effect Schauble’s “courageous” plan.
Maybe the government has learned a – very expensive – lesson over recent months. Deputy Prime Minister Yiannis Dragasakis warned this week about the carrot of debt relief being dangled Greece in the case of a Grexit, and the heavy beating from the stick that would likely follow. Tsipras also emphasised that until the third package has been agreed, there will be a threat of default hovering over the country.
This new-found maturity and heightened awareness will be needed in the weeks ahead during negotiations on the details of the third bailout, as the International Monetary Fund and the eurozone try to agree on a formula that leads to debt sustainability, as a mid-term fiscal plan is drawn up and when the implementation and review process begins in the autumn, there will be an immense burden on Tsipras. If he slips up, there are many who will not wait for a second excuse to advocate even more strongly for the eurozone to pull the plug on Greece.
Circumstances demand that before entering such a highly pressurised atmosphere, he must address the imbalance within his own party. By doing that he will prove to those watching him, and perhaps to himself, what his goals are and where his priorities lie. If he can’t do that then the end of the road for him, his party and the country membership of the euro won’t be far.
*Nick is the editor of MacroPolis. You can follow him on Twitter: @NickMalkoutzis