Syriza’s Tsipras, no Leonidas, has essentially thrown in the towel (Kolotoumba is the Greek for somersault, a lovely word that seems curiously in vogue at the moment) and has offered to accept a lightly redrawn version of the (expired) bailout proposal that Greek voters rejected last week, bringing back golden memories of a quote from Jean-Claude Juncker (now the president of the EU Commission) after the French took the opportunity of a referendum to reject the proposed EU constitution in 2005:
If it’s a Yes, we will say ‘on we go’, and if it’s a No we will say ‘we continue’.
And if Brussels, supported by France has its way, Tsipras’s offer will be enough to do the trick. The problem is that whole ‘expired’ thing means that all Greece’s Eurozone ‘partners’ once again get to have their say.
Sceptical euro zone finance ministers demanded on Saturday that Greece go beyond painful austerity measures accepted by Prime Minister Alexis Tsipras if he wants them to open negotiations on a third bailout for his bankrupt country to keep it in the euro. Ministers lined up to vent their anger at Tsipras on arrival at their umpteenth emergency weekend meeting on Greece’s acute debt crisis, with Athens staring into an economic abyss when financial markets reopen on Monday unless it wins fresh aid. EU officials forecast a deal would be reached by the end of the weekend to keep Greece afloat, but two sources said there was consensus among the other 18 ministers that the leftist government in Athens must take further steps to convince them it would honour any new debts.
The elephant in the room—that Greece has a currency that just doesn’t fit—remains, of course, unaddressed.
Or does it?
Reuters again:
Wolfgang Schaeuble, finance minister of its biggest creditor Germany and a stickler for the EU’s fiscal rules, said negotiations would be “exceptionally difficult”. Emerging optimism about Greece had been “destroyed in an incredible way in the last few months” since Tsipras won power, Schaeuble said. A German newspaper reported that his ministry was suggesting that Greece either improve its proposals quickly and transfer state assets worth 50 billion euros (36 billion pounds) into a fund to pay down debt, or take a five-year “time-out” from the euro zone.
How accurate that story is uncertain (there’s a lot of kabuki going on at the moment), but this is not an idea that has come out of nowhere (the “time-out” is essentially what the prominent German economist Hans-Werner Sinn has being advocating for a while).
Nevertheless, in the end I suspect that even if Germany does have this Plan B, the risk-averse Angela Merkel will overrule it.
That leaves other potential hold-outs including Balts and Slovaks (vulnerable to pressure, I’d imagine, because of the amount of ‘structural’ funding they receive from the EU) and Finns. The Finns have caved in before, but now have to contend with the fact that the euroskeptic Finns Party (formerly the True Finns) are now in government, something that presents them (and the Finns Party) with something of a problem.
The final twist comes from the voting structure of the European Stability Mechanism (the ESM), the vehicle through which Greece would be bailed out. As is being pointed out today, this contains an ‘emergency’ voting mechanism that applies where the European Commission and European Central Bank find that an issue of ‘systemic importance’ has risen (clearly they would, and not unreasonably), which allows decisions to be approved not by unanimity, but by an 85 percent majority (voting follows capital contributions: it is not one country, one vote). That would allow Finland and other smaller hold-outs to vote against, but the bailout to go through.
Could that be what lies ahead?