terça-feira, 16 de junho de 2015

Tsipras does want a deal, as the alternative is unthinkable / GUARDIAN

Tsipras does want a deal, as the alternative is unthinkable

Greece would face unprecedented hardship if capital controls were introduced, and the Syrizia party would see its populist support plummet rather fast

Larry Elliott

Hard though it is to believe sometimes, Alexis Tsipras does want to strike a deal. The increasingly abrasive language used by the Greek prime minister is a front for a politician who still thinks it is possible to negotiate his way out of the sticky situation he finds himself in.

That has to be the assumption. The alternative to a deal would appear to be a Lehman Brothers-style moment sometime in the next 72 hours, when the Greek banks haemorrhage money and capital controls are introduced. At that point, support for Tsipras and his Syriza coalition is likely to dissipate rapidly, especially if Greece’s eurozone partners say capital controls are incompatible with membership of the single currency.

Tsipras came into power as the man who could do a deal. Even now, he believes he can strike one – not least because he thinks the desire to keep the euro intact will trump the desire to inflict more austerity on Greece. Put simply, he is sure Angela Merkel does not want to go down in history as the chancellor who undid all the work towards European integration of Konrad Adenauer, Helmut Schmidt and Helmut Kohl.

The sort of agreement Athens envisages was just about detectable, as Tsipras and his finance minister launched their latest denunciation of the way Greece is being treated by its creditors: debt relief in exchange for accepting more painful economic reforms.

This has a certain logic to it. Greece’s debt is currently around 175% of its annual national income, most of it owed to official creditors such as the European Central Bank or the International Monetary Fund. It would take unachievable levels of growth to make a dent in this debt burden, which will hobble the country for years to come.

The IMF accepts this. It thinks that Greece’s debts need to be reduced to 120% of GDP to be sustainable, and that debt relief will need to be part of a third bailout package that would follow the successful completion of the current negotiations.

Thus far, the IMF has failed to convince the European commission or the ECB that Greece needs debt relief, providing an opening for Tsipras. He wants to drive a wedge between the IMF and the two other bodies that make up the troika.

Ideally, he would like the US – alarmed at the potential geopolitical consequences of Greece being driven into the arms of Russia – to use its influence to put pressure on Merkel to strike a debt relief for reform deal. The compromise would involve cutting pensions and increasing VAT in return for reducing Greece’s debt to GDP ratio. This might be amenable to the Greek parliament, particularly with safeguards to protect the poorest pensioners and VAT exemptions for sensitive products.

There is though one flaw in this seductive plan. Taking the axe to Greece’s debt would be expensive and it would be taxpayers in other eurozone countries – Germany is particular – that would pick up the tab. The value of Greece’s debt is currently €320bn, so a cut to 120% of GDP would mean a writeoff of around €100bn.

The rest of the eurozone might consider this a price worth paying to keep Greece in the single currency. Given the poisonous atmosphere, though, it will be a hard sell.

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