EMU creditors have Greece’s Alexis Tsipras by the scruff of the neck, but he has a knife to their throats
Europe’s creditor powers have started to wobble. Berlin, Paris and Brussels are coming to the grim conclusion that Greece may not capitulate as expected, and time is running out fast.
Athens is now warning openly that the “moment of truth” will come on June 5, when the country faces default on a €300m payment to the International Monetary Fund, unless the EU authorities hand over the next tranche of bail-out cash.
It would be hazardous to bet the integrity of monetary union on the assumption that this is just a bluff.
For the past four months the creditor bloc has been dictating terms, mechanically repeating the same demand that Alexis Tsipras and his Syriza rebels deliver on an austerity contract that they vowed to repudiate and which the previous conservative government was unable to implement.
EMU leaders have never at any moment acknowledged that the extra loans imposed on a bankrupt Greek state in 2010 were chiefly designed to save the euro and stem a European-wide banking crisis at a time when the eurozone had no defences against contagion.
They have yielded slightly on Greece’s primary budget surplus but are still insisting on fiscal targets that can only trap Greece in a vicious circle of low growth and under-investment. Such a regime would leave the country just as bankrupt in the early 2020s as it was when the traumatic ordeal began, with nothing to show for so many cuts and a decade of depression.
They are still pushing Greece to sell off state assets for a pittance to the same old oligarchy, further entrenching the deformities of the Greek economy, presumably – for there is no other urgent imperative – so that they can collect their debts.
Yet creditor bluster has reached its limits. It is by now clear that Syriza is so angry, and so driven by a sense of injustice, that it may be willing to bring the whole temple of monetary and political union crashing down on everybody’s heads, if pushed to the brink.
Chancellor Angela Merkel is in turn meeting groups of MPs from her Christian Democrat family, quietly warning them that the Bundestag may have to vote on a third rescue package for Greece even if Syriza stands fast on its “red lines” and does not fully comply. The southeastern flank of Nato cannot be allowed to unravel.
Syriza has always had a stronger hand than supposed in this high-stakes game of strategic chicken, even if it has misjudged horribly in trying to play off Europe’s debtor bloc against the Teutonic core, or in playing off Washington against Moscow.
It is no light matter to shatter a currency built with ideological fervour to bind Europe together, the crown jewel of EU integration. As Mr Tsipras puts it, the eurozone is like a woollen jumper: “Once it begins to unravel, you can’t stop it anymore.”
Full article: Defiant Greeks force Europe to negotiating table as time-bomb ticks (The Telegraph)