Wednesday

1st Apr 2020

Questions raised on Tsipras' true euro intentions

  • While bailout talks drag on between Greece and its creditors, capital controls remains in place (Photo: Eric Maurice)

Greece presented no new reform proposals Tuesday raising questions on whether prime minister Alexis Tsipras really wants a bailout agreement.

He was expected to submit new reform ideas to eurozone leaders, who called the emergency meeting to unlock bailout talks and prevent a Greek euro exit.

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But finance minister Euclid Tsakalotos arrived empty-handed at the Eurogroup meeting earlier in the afternoon and indicated the new proposal would be submitted only Wednesday.

With the delay coming despite the worsening economic conditions in Greece and despite the weight of expectation from his euro partners, the main question in Athens and other EU capitals is: What does Tsipras want and what can he deliver?

During the referendum campaign last week, he said he intended to get a deal 48 hours after the vote and keep Greece in the euro.

On Tuesday, he received the backing of the four main Greek parties, in addition to his own Syriza-led coalition.

The four backers are the Greek Independents (nationalists), New Democracy (conservative), Pasok (socialist), and To Potami (centrist).

He now enjoys more power and popularity than any leader since the start of the crisis in 2009.

"He has full support," Greek journalist and economic analyst Thanasis Koukakis told EUobserver.

"MPs will vote for any deal he might bring back from Brussels. The other parties will back him even if he agrees to very strict measures”.

But Koukakis added: “I’m not quite sure he wants a deal with Europe”.

With capital controls, and public and private sectors short of liquidity, "we have [already] gone more than halfway to a Grexit”, he said.

The situation has stirred debate within the Syriza party.

Alexis Mitropoulos, a Syriza MP and parliament deputy speaker, said on Greek TV on Tuesday that "Greek society [is] not prepared for a rift with the creditors and for a Grexit”.

But Costas Lapavitsas, another Syriza MP, told this website it would be "very difficult … to accept [austerity] measures" after the referendum.

For Lapavitsas, who is also an economist, the question of parliamentary endorsement isn’t even relevant anymore.

"The referendum was a political earthquake that created a new logic”, he said. "Now it has to do with what the people want, and the people don't want austerity".

Tsipras’ way out?

"This contradictory situation will be resolved very soon," Lapavitsas, a Syriza left-winger and an advocate of euro exit, added.

"I expect Greece to come under enormous pressure and the Greek government to take unusual economic steps”.

"If you follow the logic of the situation, it goes a lot deeper than the negotiations. It is the structure of the monetary union itself that creates this situation”, he said.

A few hours before he resigned on Sunday, finance minister Yanis Varoufakis also said that, if necessary, Greece would "issue parallel liquidity and California-style IOU's, in an electronic form”.

"We should have done it a week ago”, he added.

Whether Tsipras will lean toward the Lapavitsas faction or towards MPs like Mitropoulos remains to be seen.

He has led Syriza since 2008, but insiders say he doesn't have the personal qualities to impose his will on the party.

Two models

In the end, his decision might boil down to choosing one of two economic models which inspire Syriza, said Koukakis, the economic analyst.

The first model is the Latin American left, "which needs currency autonomy for its economic policies, like the use of devaluation”, Koukakis noted.

The second model is the J curve of economic growth advocated by economists such as Nobel prize winner Paul Krugman and by John Galbraith, both of whom Varoufakis likes.

According to the J curve model, a country can have a rapid growth "if the monetary policy is free, without constraint like a monetary union”, Koukakis said.

Meanwhile, on the streets of Athens, people await developments in Brussels with a sense of fatalism.

"If there is no agreement, there will be no alternative than to leave the euro”, a man who voted No said.

"It will be very difficult, but we will have no choice”.

Greece says No to creditors

In a result that sent shockwaves across the EU, around 60 percent of Greek voters Sunday rejected the bailout reforms proposed by creditors.

Final deadline, as EU prepares for Grexit

Greek government given “final deadline” until end of the week to present reform proposals, with Juncker saying a detailed Grexit scenario is already prepared.

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