Tag Archives: varoufakis

Why this weekend’s election in Greece doesn’t really matter

meimarakis-tsipras-Photo credit to International Balkan News Agency.

In the televised debate earlier this week, Greece’s recent prime minister Alexis Tsipras dismissed the idea of a grand coalition as ‘unnatural,’ arguing that Greek voters would have to choose between a progressive coalition or a conservative coalition.Greece Flag Icon

Tsipras, however, is wrong.

Greek voters aren’t choosing much of anything at all. Greece is essentially now a fiscal ward of the eurozone’s finance ministers, and the next Greek parliament’s composition will not be much different than the current one, a mix of left-wing and right-wing legislators who committed to implementing the EU-mandated bailout program, despite their misgivings, because the alternative would be much worse.

Whether the recent prime minister Alexis Tsipras, leader of SYRIZA (Συνασπισμός Ριζοσπαστικής Αριστεράς, the Coalition of the Radical Left), or the opposition leader Vangelis Meimarakis (pictured above, left, with Tsipras), head of conservative  New Democracy (ND, Νέα Δημοκρατία) leads that effort doesn’t actually matter all that much.

In substance, it’s the choice between orange-flavored sorbet or tangerine-flavored sorbet.

Neither leader will truly be in charge of Greece’s fiscal policy, because that is already being set by eurozone finance ministers in Brussels and Berlin. The best that the next prime minister can hope for is some form of debt relief — eurozone leaders will discuss the matter in October, and economists believe that some form of debt relief (even if that just means extending Greece’s repayment period) will be necessary, despite strident political opposition in countries like Germany, Finland and The Netherlands.

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RELATED: Greece to vote in September snap elections

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The election is now a dead heat — polls show that the Tsipras-led rump of SYRIZA is essentially tied with New Democracy. Though the 300-member Hellenic Parliament is generally determined by proportional representation, the winner of Sunday’s election gains a ‘bonus’ of 50 seats, so even a narrow win means a windfall for the first-placed party.

But the question is chiefly one of style and symbolism — and which leader the electorate believes can lead Greece through the bailout in the most efficient and painless manner in light of the constraints any government will face in charting its own fiscal policy course. Continue reading Why this weekend’s election in Greece doesn’t really matter

How the Le Pen family feud influences France’s 2017 election


Sometimes, the cruelest cuts in international politics come not only from within your own party, but from within your very own family.France Flag Icon

Just ask David Miliband.

After months of increasingly strained relations, however, Marine Le Pen has now engineered the first break yet with her controversial father, Jean-Marie Le Pen, when he was formally ousted last week from the party that he founded, the far-right Front National (National Front). The legal move followed a political move earlier in the summer, when 84% of the party’s 30,000 followers also voted to expel Jean-Marie from the party that he founded in 1972.

In one sense, the Le Pen family spat has been a distraction from Marine Le Pen’s long-term goals of projecting her party as the true heir to French conservatism and building a majoritarian coalition that can woo not only traditional right-wing voters but left-wing voters disenchanted with French president François Hollande and the Parti socialiste (PS, Socialist Party) and the neoliberal economic prescriptions that now dominate policymaking within the eurozone.

Since her party easily outpaced the ruling Socialists and Sarkozy’s center-right party in the May 2014 European parliamentary elections, Marine Le Pen has spent much of 2015 feuding with her own father.

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RELATED: Marine Le Pen is still a longshot
to win France’s presidency in 2017

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What’s worse, the spat showcases just how problematic it can be when a political party becomes tied up too strongly in family dynasty — it’s as true for the French right as for Indian secularism or Canada’s center-left. As Marine tries to consolidate the Front’s rank-and-file under her leadership, with regional elections approaching in the autumn, her niece Marion Maréchal-Le Pen, the 25-year old MP from southern France, could still make her life difficult.

marion marechal

Maréchal-Le Pen (pictured above) has been more sympathetic to her grandfather and, unlike Marine’s journey toward economic nationalism, popular in northern France, Marion is far more of a traditional economic liberal and, with her southern base, far more focused on immigration. In December, Maréchal-Le Pen will be running for the presidency of the Provence-Alpes-Cote d’Azur region; Marion Le Pen, for her part, will be contesting the presidency of the northern Nord-Pas-de-Calais region. The party will be watching keenly to see which variety of the Front‘s politics will be more successful.

But in another sense, tossing the 87-year-old Jean-Marie Le Pen to the side in 2015 could help Marine in 2017 as she continues to remake the party’s image — and brand it further away from the often anti-Semitic tones of her father’s leadership, which was also rooted in his experience as a soldier fighting to defend France’s colonial holdings in Algeria. Remarks about Nazi gas chambers being just a ‘detail of history,’ as it turns out, do not go down well for Marine’s push for a Front sanitaire.

Marine’s mission

Instead, Marine Le Pen is forging an identity that blends welfare-heavy statism, social conservatism and a nationalism that rejects both immigration and European integration. There’s a reason it’s called populism. Rallying support for ‘a strong France’ and opposition to a feckless European superstate that now essentially dictate France’s monetary, justice and border control policy, championing the comfort of an unreconstructed cradle-to-grave social welfare and attacking the ‘other’ of eastern European, African and Middle Eastern immigrants has an undeniably popular allure to many voters whose economic futures are far less certain than they were two generations ago. It’s attracted some odd supporters, including a puzzlingly high number of urban LGBT voters — Marine’s chief adviser, Florian Philippot, and the architect of Marine’s anti-eurozone policy, is openly gay. While Marine discreetly avoided the most intense battles of the same-sex marriage fight in 2013, Maréchal-Le Pen embraced the opposition to marriage equality.

That means that Le Pen has found common cause in recent years with a strange number of odd political bedfellows. That includes Nigel Farage, the anti-immigrant head of the United Kingdom Independence Party, who encourages a British exit from the European Union in the 2017 referendum, and Geert Wilders, the anti-Islam and anti-immigrant crusader of Dutch politics. But she also encouraged Greek prime minister Alexis Tsipras in his standoff with European finance ministers over Greek debt relief (though Le Pen rejected him in stark terms when he agreed in July to enter negotiations for a third bailout for his country). She has also voiced sympathy for Russian president Vladimir Putin in his two-year quasi-standoff with Ukraine.

Marine’s bet seems to be working as French voters begin to focus on the contours of what could be an unpredictable presidential election in May 2017. In IFOP’s latest August 2015 poll, Le Pen leads all contenders for the first-round vote, garnering 26% in a race against Hollande (20%) and former president Nicolas Sarkozy (24%), guaranteeing her a spot in a runoff against Sarkozy. Though her father made the runoff in the 2002 presidential election against then-president Jacques Chirac, Jean-Marie Le Pen only narrowly managed a second-place victory over the Socialist candidate, prime minister Lionel Jospin. Continue reading How the Le Pen family feud influences France’s 2017 election

Greece to vote in September snap elections


Ballot-worn and crisis-weary Greeks will go to the polls for the third time in nine months in what amounts to a fresh referendum on the country’s third European bailout.Greece Flag Icon

Facing a growing insurgency in his own government as he implements the terms of a new European Union-backed bailout of up to €96 billion, prime minister Alexis Tsipras will dissolve the Hellenic Parliament and call early elections for September 20 — in an autumn where Turkey, just across the Aegean Sea, is also likely to hold snap elections after the apparent failure of coalition talks.

There’s already been a disproportionately large amount of ink spilled on poor Greece in 2015. With the first disbursement of the country’s third bailout accomplished, though, there’s probably no better time for Tsipras to go to the electorate. The early expectation is that Tsipras will survive the elections and govern with a more stable and likely centrist majority. But if you’ve learned anything about Greek politics this year, it’s that you should expect the unexpected twists and turns of a country that’s struggling culturally, economically and politically to exit crisis mode.

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RELATED: Both Greece and Turkey could be headed
for autumn snap elections

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From anti-austerity crusade in January to a third bailout in July 


Tsipras (pictured above), the leader of SYRIZA (Συνασπισμός Ριζοσπαστικής Αριστεράς, the Coalition of the Radical Left), won election in January on a pledge to reduce the terms of Greece’s memorandum and provide relief from the effects of a half-decade of austerity imposed on Greece’s fiscal policy — all without endangering Greek membership in the eurozone. After months of talks, headed by his outspoken one-time finance minister Yanis Varoufakis, it became clear that Greece did not have the political leverage that Tsipras hoped would force a more lenient deal for his country. By the end of June, it was clear that the eurozone’s finance ministers had no appetite for extending Greece’s second bailout program without additional concessions to cut Greece’s still-bloated public sector and to reform its economy.

Tsipras then hastily called a referendum for July 5, campaigning against the latest deal on offer by the Europeans, and the ‘no’ campaign (‘oxi‘) won a stronger-than-expected victory, despite closing Greece’s banks and imposing capital controls that restricted daily ATM withdrawals, at their nadir, to just €60.

Despite the referendum, Tsipras returned to the negotiating table and ultimately accepted a proposal for the third bailout — with terms even tougher than those rejected in the July 5 referendum. Tsipras, who dismissed Varoufakis as his finance minister hours after the referendum, argued that Greece had to choose between two tough choices — austerity tied to yet another bailout program or the insolvency and financial chaos that would result from a disorderly exit from the eurozone. Tsipras essentially admitted at the time that he had no ‘plan B,’ and that his country lacked the foreign reserves to establish a new currency in the event of ‘Grexit.’

Leftist rebels increasingly split from SYRIZA over bailout

SYRIZA, until recently a loose coalition of leftists ranging from mildly anti-austerity centrists to former communists, almost immediately split over whether to accept the third bailout, in spite of the chaotic alternative. In particular, Varoufakis and then-energy minister Panagiotis Lafazanis, the leader of Left Platform (Αριστερή Πλάτφορμα), have been vocal critics of the deal, and parliamentary speaker Zoe Konstantopoulou attacked it vociferously in several key votes.

For the past month, however, Tsipras has pushed through the terms of the third bailout with dwindling support from his own party, and opposition MPs have kept his government and the bailout afloat. SYRIZA controls 149 of 300 seats in the parliament, and its junior governing partner, the nationalist right-wing and anti-austerity Independent Greeks (ANEL, Ανεξάρτητοι Έλληνες), control just 13 more seats. But by last week, support from within Tsipras’s coalition dropped to below 120.

Ultimately, Tsipras wants to call snap elections because he can’t function indefinitely with a government that refuses to deliver him a majority. By calling a fresh vote, Tsipras hopes to win a mandate for his new approach and for the new bailout program, though even Tsipras himself has grumbled that its terms will continue to retard Greek GDP growth and employment, keeping Greece stuck in its six-year economic depression.

There are no reliable August polls, but surveys from the summer show that SYRIZA, under Tsipras’s leadership, still commands a massive majority of around 40% compared to just 20% for the center-right opposition, New Democracy (ND, Νέα Δημοκρατία).

But we have no polls that show what might happen if, as seems likely, Left Platform splits formally from SYRIZA. This is a crucial question because the party that wins the most votes in an election also wins a ‘bonus’ of 50 MPs. So if Left Platform steals a significant share of SYRIZA’s voters, another third party — most likely New Democracy — could win the election with a much smaller share of the vote.

Tsipras is a wily campaigner, though, and he should benefit from the fact that for the first six months of his premiership, he engaged in substantial brinksmanship in pursuit of a better deal for Greece.

He failed.

So the challenge for Varoufakis and Left Platform will be to describe how they would otherwise succeed — and how a eurozone exit would make life easier for Greece’s poor and its shrinking middle class. After all, Varoufakis and Lafazanis were key players in Tspiras’s government until July. At some point, voters will realize that the SYRIZA rebels have little more to offer than Greece’s Communist Party (KKE, Κομμουνιστικό Κόμμα Ελλάδας), which won only 5.5% in the January election. Tspiras, having followed Varoufakis’s advice, brought his country to the edge of Grexit. Tsipras will argue that Left Platform and the Greek Communists offer no solution that will keep Greece in the eurozone, and he’ll have the political scars of the last six months to prove it.

The state of Greece’s center-right and center-left opposition

Ultimately, however, Tsipras’s greatest threat may come from the right, which encompasses not just the traditional Greek right, but the center and the center-left as well. They will argue that Tsipras’s hardball negotiation tactics not only failed, but needlessly disrupted a nascent economic recovery and led to the flight of billions of deposits from Greek banks. And that’s not incorrect. But Tsipras will argue that, unlike his predecessors, conservative Antonis Samaras and leftist George Papandreou, he fought for Greek sovereignty in the face of the eurozone’s unelected officials and tried to reintroduce the democratic voice of the Greek people into the debate over Greece’s economic future.

Moreover, by calling snap elections so soon, Tsipras also hopes he can win a mandate before even more economic pain befalls voters from the additional pension cuts and an increase in Greece’s VAT required under the new bailout.

With former prime minister Antonis Samaras’s resignation after the July referendum, New Democracy has removed one of the most toxic figures in Greek politics from its leadership. But its acting leader, Vangelis Meimarakis, in office for six weeks, hardly seems prepared for the sudden challenge of unseating Tsipras. Nor does Fofi Gennimata, the leader of Greece’s once-dominant center-left party, PASOK (Panhellenic Socialist Movement — Πανελλήνιο Σοσιαλιστικό Κίνημα). She’s held the PASOK leadership only since June 14.


Tsipras’s most credible opponent will be centrist Stavros Theodorakis, a former television reporter and commentator who founded To Potami (Το Ποτάμι, which means ‘The River’), a centrist, pro-European party, in February 2014. Theodorakis (pictured above) harshly condemned Tsipras’s decision to call a referendum over extending Greece’s bailout, but he has nevertheless supported Tsipras’s efforts to enact Greece’s new bailout since mid-July. As a more pragmatic and centrist ‘Tsipras 2.0’ is emerging, the distance between him and Theodorakis is shrinking.

If Tsipras wins, that means he will look towards To Potami as a coalition partner in his next government; until then, however, he will be fighting with Theodorakis over the same pool of centrist and center-left voters.

Though the Independent Greeks have backed Tsipras throughout the ups and downs of the last seven months, it’s not clear how such an anti-austerity party will hold onto its support after having embraced a new bailout memorandum. Its leader, defense minister Panos Kammenos, could face an uphill battle in selling the bailout deal. If ANEL collapses, however, it could be to the gain of Golden Dawn (Χρυσή Αυγή), a eurosceptic, anti-bailout, anti-immigrant and neo-fascist group that vies with To Potami for third place in the polls, typically with between 5% and 8% support.

Both Greece, Turkey could be headed for snap elections


August may be among the most quiet periods of the year for world politics, especially in Europe as workers spend weeks away on holiday. Greece Flag IconTurkey

But events earlier this week made it very likely that two Mediterranean countries could hold snap elections later this year, adding greater political uncertainty to a European electoral calendar that will see elections for a new Labour leader in the United Kingdom next month, a new regional government in Catalunya (with implications for the Catalan independence movement) and new national governments in Portugal, Poland and Spain.

Greece’s troubled far-left government may call a vote of confidence as it begins implementing the country’s third bailout package, finalized with European leaders last weekend despite onerous conditions that could retard economic growth for years. The bailout and its aftermath could split prime minister Alexis Tsipras’s ruling SYRIZA (Συνασπισμός Ριζοσπαστικής Αριστεράς, the Coalition of the Radical Left). With far-left SYRIZA rebels already opposed to the bailout and with other opposition parties refusing to prop up Tsipras’s government, Greece could be forced to hold its second election since January, when SYRIZA first swept to power.

Across the Aegean Sea, Turkey may find itself forced to hold a repeat election after the ruling Adalet ve Kalkınma Partisi (AKP, the Justice and Development Party) of president Recep Tayyip Erdoğan and prime minister Ahmet Davutoğlu (pictured above) apparently failed to find common ground with Turkey’s two largest opposition parties, leaving it just shy of a majority in the Turkish parliament. Without a working majority, Erdoğan may be forced to call a new election by August 23, when Davutoğlu’s mandate to form a coalition government expires. Continue reading Both Greece, Turkey could be headed for snap elections

How Schäuble’s failures shape the eurozone fight

German Finance Minister Wolfgang Schaeuble attends a German-Greek chamber of industry meeting in Athens, on July 18, 2013. Local authorities stepped up security in the capital for the visit, as Schaeuble is seen by some in Greece as a champion of the tough austerity policies that have gripped the country for the past four years. AFP PHOTO / Angelos TzortzinisPhoto credit to Angelos Tzortzinis /AFP.

Though it’s Yanis Varoufakis, the Marxist economist and recently deposed Greek finance minister, who is typically painted in the media as the drag on the long-running negotiations to avoid a Greek default and keep the country within the eurozone, his intransigence has been met at every step of the way by Germany’s finance minister Wolfgang Schäuble, whose sneering impatience for Greek demands has been no less personal than Varoufakis’s over-the-top denunciations of European ministerial colleagues as ‘terrorists.’Germany Flag Icon

Schäuble’s sharp-tongued wit has been a constant through five years of negotiations that stretch back long before prime minister Alexis Tsipras and the far-left SYRIZA (Συνασπισμός Ριζοσπαστικής Αριστεράς, the Coalition of the Radical Left) took power in January. On Thursday, Schäuble joked to an increasingly concerned US treasury secretary Jack Lew that he would be willing to swap Europe’s Greece troubles for Puerto Rico’s debt crisis.

When it comes to Greece, Schäuble is in many ways Germany’s opposition leader, even though he’s a stalwart of chancellor Angela Merkel’s governing Christlich Demokratische Union Deutschlands (CDU, Christian Democratic Party). He’s made it clear throughout the course of negotiations that he favors pushing Greece out of the eurozone, a result that other European leaders worry could destroy the single currency’s credibility — not to mention plunge Greece into an even more painful depression. Back in 2011 and 2012, few German politicians — just a handful of grey-haired Bavarian conservatives — were willing to call for Greece’s eurozone exit. Today, however, it’s a mainstream position, even on the center-left.

Germany is currently governed through a ‘grand coalition’ between the center-right CDU and the Sozialdemokratische Partei Deutschlands (SPD, Social Democratic Party) that includes around 80% of the entire Bundestag, the lower house of the German parliament. Nevertheless, Merkel is limited in her maneuverability — if she gives too much to Greece, there’s a chance Schäuble could lead a revolt of CDU backbenchers who already worry Merkel has transformed the party into a political amoeba that sways to the path of political expediency.

As Tsipras and his new finance minister Euclid Tsakalotos wait for Greece’s creditors to evaluation the government’s probable last proposal for debt relief, there’s a lot that lies in Schäuble’s hands. Even as French president François Hollande has directed his entire economic leadership — prime minister Manuel Valls, finance minister Michel Sapin and economic minister Emmanuel Macron — to help save Greece’s place in the eurozone, German doubts about the deal, a three-year bailout of over €50 billion, could still derail Saturday’s deadline. A full summit of the European Union’s leaders has been scheduled for Sunday. With banks running out of money and Greece banks nearing insolvency, European leaders have made it clear that if they don’t reach a deal with Tsipras on Saturday, they will spend Sunday addressing how Greece will exit the single currency.

Germany, as the largest member-state, is the largest contribution to any stability funding that comes from the European Commission and/or the European Central Bank. It’s currently on the hook for around €90 billion of Greece’s €5320 billion public debt. Merkel, despite doubts in her own party, has supported Greece’s two bailouts in the past, though she’s done so by demanding harsh strings that satisfy her own conservative flank and, of course, German taxpayers, who are ultimately on the hook for nearly one-third of Greece’s bailout debt.

Back in 2010, with a nod to moral hazard, Merkel cruelly told then-prime minister George Papandreou that she had to make the bailout as difficult as possible:

Mr. Papandreou says that when he asked German Chancellor Angela Merkel for gentler conditions in 2010, she replied that the aid program had to hurt. “We want to make sure nobody else will want this,” Ms. Merkel told him.

In principle, it was Merkel’s nod toward moral hazard — she couldn’t give the Greeks terms that Spain, Italy, Ireland, Portugal or the Baltic states might soon want. But in practice, it was a sop to the German right, which was growing ever more disgusted at consecutive Greek governments, which haven’t had the strongest reform record.

But Schäuble makes Merkel look relatively welcoming. The 72-year-old finance minister, according to reports, apparently asked Greek negotiators how much money it would take to get them to leave the eurozone. Continue reading How Schäuble’s failures shape the eurozone fight

Three ways Europe and Greece could blow their last chance at a debt deal

varoufakiseuclidPhoto credit to EPA/BGNES.

The world woke up to the news Monday morning that outspoken Greek finance minister Yanis Varoufakis had, at long lost, been dismissed by his prime minister, Alexis Tsipras.Greece Flag Icon

Varoufakis (pictured above, right, behind Greece’s new finance minister, Euclid Tsakalotos) had become, to say the least, a brake on negotiations with the Eurogroup, even though his widespread popularity and strident anti-austerity boosted Tsipras’s government to a stunning victory in Sunday’s debt negotiations referendum, whereby 61.31% of voters rejected a prior plan offered by Greece’s European creditors.

European officials struggled to reach consensus with Varoufakis, who just last week, in the middle of the rushed referendum campaign, referred to his European ministerial colleagues as ‘terrorists.’ Tsakalotos, an Oxford-trained economist, is expected to take a more mild-mannered approach, and he already supplanted Varoufakis as Greece’s chief negotiator back in April. That was, however, only to the extent anyone could supplant the motorbike-riding, free-wheeling Varoufakis, who gave his final press conference as finance minister Sunday night in a t-shirt.

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RELATED: If Grexit comes,
Greece will have wasted five years in depression

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Varoufakis’s resignation, along with a pledge of national unity across Greece’s mainstream domestic political spectrum, breathed new life into hopes for last-minute talks for a third bailout, allowing the country to reopen its illiquid and perhaps insolvent banks, lift (at least partially) capital controls that have limited daily cash withdrawals to €60, restore liquidity to ATMs that have run out of cash altogether, address Greece’s €1.6 billion default on June 30 to the International Monetary Fund and meet a July 20 deadline to make a €3.5 billion payment to the European Central Bank.

For all the celebration that followed the resounding ‘no’ vote in Sunday’s referendum, the coming Sunday could bring financial austerity far more severe than Greece has known in the past five years, marked by a nearly 30% drop in GDP growth and a 26% unemployment rate. Failure to reach a deal could result in a shortage of cash, food, medicine and so many other necessities to the extent that European leaders are whispering that Greece could require humanitarian aid.

Notwithstanding the dire consequences, a deal is not necessarily likely — or even possible. If they’re lucky, the European Union has five days to prevent Grexit. Here are four reasons why it will be so difficult in the hours ahead.  Continue reading Three ways Europe and Greece could blow their last chance at a debt deal

If Grexit comes, Greece will have wasted five years in depression


Photo credit to Orestis Panagiotou / EPA.

If you think the past nine days have been tense, just wait.Greece Flag Icon

For all the uncertainty and mistrust that have characterized Greek-EU relations since Greek prime minister Alexis Tsipras suddenly announced a snap referendum last Friday, the week ahead promises to reach ever dizzying heights of suspense after Greek voters delivered a strong endorsement to Tsipras by rejecting the terms of the most recent deal on offer from the Eurogroup — over 61% of the electorate voted no (or ‘oxi’). The result, whether Tsipras admits it or not, essentially begins the process by which Greece will eventually leave the eurozone.

There are no winners here.

Tsipras and the far-left SYRIZA (Συνασπισμός Ριζοσπαστικής Αριστεράς, the Coalition of the Radical Left) took power after January’s parliamentary elections on the mutually incompatible pledge of keeping Greece in the eurozone while demanding more lenient conditions from the country’s creditors. In so doing, Tspiras miscalculated European goodwill. It wasn’t unreasonable for Tsipras and finance minister Yanis Varoufakis to argue that Greece’s debt load is unsustainable. Moreover, even plenty of orthodox economists, including many at the International Monetary Fund, one of Greece’s creditors, admit that years of austerity have exacerbated economic conditions — GDP contraction of nearly 30% since 2008, a 26% unemployment rate and a nearly 50% youth unemployment rate. But the erratic and amateurish approach of the Greek government, capped by Tsipras’s 11th-hour decision to call the July 5th referendum, destroyed what little goodwill remained for his government.

There’s still time — even now — for Greece and the rest of Europe to reach a deal. But the complete lack of trust between Tsipras’s government and the entirety of the rest of the eurozone’s leadership makes it much less likely to happen. The complete breakdown in trust between Tsipras and even sympathetic European leaders must certainly rank among the most troubling casualties of the past nine days. Continue reading If Grexit comes, Greece will have wasted five years in depression

IMF report backs up Tsipras in Greek referendum


Did the International Monetary Fund’s latest proposal just basically admit Greek prime minister Alexis Tsipras is right? Greece needs, under still-optimistic growth projections, at least € 50 billion through 2018 and debt restructuring. If Berlin admitted this even a week ago, we’d have avoided a lot of trauma. So while the Greek government is still amateur-hour, Tsipras, finance minister Yanis Varoufakis (picutred above with IMF managing director Christine Lagarde) and the rest are fundamentally correct — Greece can’t meet its debt burden.Greece Flag Icon

All of this should have been easily foreseeable five years ago. The answer is that this deal, like the eurozone’s creation in the 1990s, was more about politics than economics. I don’t know if that means ‘nai’ or ‘oxi’ or what ‘nai’ or ‘oxi’ generally even mean anymore.

Greek referendum — the right step at a dangerously wrong time


For the past 48 hours, the rest of Europe and, indeed, the rest of the world have watched Greece come unhinged. Greece Flag Icon

In a speech shortly after midnight Friday night, prime minister Alexis Tspiras announced that instead of continuing negotiations between the Greek government and the Eurogroup of eurozone finance ministers, he would call off talks to hold a referendum next Sunday, July 5, thereby putting the question to the Greek people — will they accept the terms of the latest deal with Greece’s creditor institutions or will they reject it?

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RELATED: Seven lessons from the Greek election results
RELATEDMeet Greece’s new economic policymakers
RELATED: As Schäuble sneers, Greeks agree four-month debt deal
RELATED:  What are the chances of snap elections (again) in Greece?

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Never mind that the creditors’ offer could be moot by next Sunday.

Never mind that Greece faces, at best, a technical default on Tuesday.

Never mind that the referendum caught everyone else in Europe off guard, eliminating what little goodwill Greece had left.

Never mind that Greece’s constitution seems to forbid direct referenda on fiscal matters.

Never mind that it seems to be accelerating a financial crisis now mandating extraordinary measures in Athens.
Continue reading Greek referendum — the right step at a dangerously wrong time

Four sentences that frame the Greek-EU brinksmanship conundrum


If you don’t have time to read Suffragio‘s latest update on the chances of Greek elections, here’s an easy framework to think about the endgame for Greece and EU leaders:Greece Flag Icon

1. The central dilemma for Greek prime minister Alexis Tsipras and his SYRIZA-led government is that the Greek electorate wants both (a) Tsipras to continue to engage in high-stakes brinkmanship with the European Union and Greece’s lenders to get a better deal on Greek debt and (b) to remain in the eurozone, and this is an untenable position for Greek voters to take, given the facts — even if you believe that the austerity measures taken pursuant to Greece’s two bailouts were unjust and injurious to the Greek economy.

2. The trickiest question now is when Greece and the Eurogroup will reach a ‘brink’ moment where there’s no going back, which could be triggered by any sort of financial, political or other factors.

3. If Tsipras calls fresh snap elections before the ‘brink’ moment, it could make a final deal on Greek debt even harder because Tsipras might easily win a stronger mandate from the Greek electorate, especially if Greek voters don’t fully realize the inconsistencies of point (1) above (and, by the way, Tspiras will have no political incentive to clarify them).

4. If the ‘brink’ moment comes before any fresh elections, Tsipras will have to choose between (a) making a deal with the Eurogroup, which will cause SYRIZA to crumble one way or another (though not necessarily Tsipras if he’s politically talented enough to emerge as the leader of whatever center-left entity emerges from the collateral damage) or (b) returning to the drachma, probably on an involuntary basis when Greece can’t meet its obligations.

Call option 4a the ‘Cyprus 2013’ option.

Call option 4b the ‘British Black Wednesday 1992’ option on steroids.

Both will be painful.

Economist Tyler Cowen, over at Marginal Revolution,  has taken to calling Greece’s new government the ‘Not Very Serious People,’ riffing off a term familiar to Paul Krugman’s readers. But put aside all the smoke over the personalities (of course Wolfgang Schäuble and Yanis Varoufakis hate one another) and the smokescreen over reparations and the possibility of a last-minute loan from Moscow (or Beijing), and what you’re left with is the conclusion that Tsipras and his government have some Very Serious decisions to make soon.

What are the chances of snap elections (again) in Greece?


It’s a sign that fiscal affairs in Greece are bad when the sensible Plan B to cover the Greek government’s looming shortfall involves loans from Moscow (despite protests to the contrary).Greece Flag Icon

Greek prime minister Alexis Tsipras has dismissed European sanctions against Russia, and he met Russian president Vladimir Putin in Moscow earlier this week, signaling to the European Union that Greece is keeping its options open if ongoing debt talks fail. Though Tsipras didn’t seek any financial assistance from Putin, he failed to convince Putin to lift a ban on Greek agricultural exports.

The even more outlandish Plan B involves demanding reparations from Germany for World War II damages, amounting to €278.7 billion. Perhaps not coincidentally, that’s just a little more than the €240 billion in financing that Greece has received in the last half-decade under two bailout programs from the European Commission, the European Central Bank and the International Monetary Fund.

Today, Greece’s government, not even three months old, will repay a €460 million portion of its debt to the International Monetary Fund. But that doesn’t mean that all is well in Athens, where last year’s green shoots of economic recovery are now obscured by the uncertainty of a leftist administration that’s engaged in brinksmanship over Greece’s financing and, ultimately, over the wider question of national fiscal sovereignty in today’s eurozone.

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RELATED: EU should give Tsipras a chance to govern

RELATED: What a Eurogroup-brokered deal with Greece might look like

RELATED: Seven lessons from the Greek election results

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 Why Tsipras can’t (and won’t) make a deal on Berlin’s terms

Without a deal, Tsipras will go down in history as the prime minister who led Greece out of the eurozone, willingly or not. Politically, however, Tspiras can’t agree to any deal that the Eurogroup seems to be offering. That’s increasingly a recipe for Tsipras to call fresh elections early this summer, but there’s no guarantee the results will solve the Greek-EU political quagmire.

Tsipras and his anti-austerity SYRIZA (the Coalition of the Radical Left — Συνασπισμός Ριζοσπαστικής Αριστεράς) were elected three months ago on a pledge to renegotiate the terms of Greece’s debt with its European lenders and end the harsh austerity measures that have exacerbated Greece’s contracting economy and growing unemployment. But the EU’s leaders, including Commission president Jean-Claude Juncker, German chancellor Angela Merkel and, presumably, ECB president Mario Draghi, no longer fear the ‘contagion’ effect of a Greek eurozone exit.  Continue reading What are the chances of snap elections (again) in Greece?

As Schäuble sneers, Greeks agree four-month debt deal

schaublePhoto credit to Bloomberg News.

If you want to know which side ‘thinks it won’ in today’s temporary deal between Greece and the Eurogroup, you need look no further than the extraordinary statement from German finance minister Wolfgang Schäuble, who essentially spiked the ball in Greece’s face after winning a key concession from its new anti-austerity government that it would honor existing Greek commitments to its creditors in exchange for a four-month extension of its bailout program:Greece Flag Icon

“Being in government is a date with reality, and reality is often not as nice as a dream,” the conservative veteran said, stressing Athens would get no aid payments until its bailout program was properly completed. “The Greeks certainly will have a difficult time to explain the deal to their voters.”

Even if you think the Greek government had little leverage to force the Eurogroup to accept its demands and even if you think today’s temporary deal is at least a step on the path to a stronger Greece within the eurozone, I can’t think of a statement from any European leader more at odds with reality and basic political acumen since the out-of-touch musings of former French president Valéry Giscard d’Estaing in 2004 and 2005, when he was in charge of the process to enact a constitution for the European Union, a process that died when France itself rejected the constitution in a referendum.

It’s as if Schäuble (pictured above with Greek finance minister Yanis Varoufakis) actively wants to feed the notion that Germany dominates European policymaking. His comments might play well in Munich or Stuttgart, but they’ll be poisonous in Madrid and Athens, and cause some amount of indignation in capitals like Paris and Dublin. 

Imagine a different response, whereby German chancellor Angela Merkel delivered a statement that, even while holding steady against concessions to the Greek government, acknowledged Greece’s economic suffering and acknowledged that the Berlin-led bailouts have caused more harm than anticipated — an admission, by the way, that the International Monetary Fund was already making years ago.

A German Europe, and a divided Europe

Greece is in a depression that’s now lasted six years and runs deeper than the Great Depression of the 1930s in either Europe or the United States. Unemployment is rife in Spain, so much so that an untested anti-austerity group, Podemos, now leads polls for the general election later this year. Italy, for now, has placed its trust in its young Tuscan prime minister Matteo Renzi, who seems to have far more commitment to reform than ability to carry it out. Romania and Bulgaria, despite responsible budget policies, are being hollowed out by depopulation and migration to wealthier EU countries.

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RELATED: What a Eurogroup-brokered deal with Greece might look like

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Europe’s best and brightest are leaving economically depressed regions and countries, and they’re heading to London. To Amsterdam. To Frankfurt. That’s left national governments responsible for fiscal commitments to social welfare, education and health care. While its most ambitious citizens look abroad for careers, these national governments find their revenues shrinking and their obligations increasing. Continue reading As Schäuble sneers, Greeks agree four-month debt deal

What a Eurogroup-brokered deal with Greece might look like


At times this week, it has felt nearly like the European Union was brokering a bailout of Ukrainian debt, while working to negotiate a ceasefire with Greece.European_UnionGreece Flag Icon

But as Greece’s new left-wing government and the Eurogroup, the collection of eurozone finance ministers, work over the weekend for a new Greek debt deal to float Greece’s treasury for the next two years (or thereabouts), there are glimmers of hope on both sides that a deal might possibly emerge. Negotiations continue as the February 28 deadline approaches, when Greece’s current bailout program is scheduled to end.

So what might that deal ultimately be? Above all, any deal that attempts to put Greece on a long-term path to prosperity needs to start from the notion that its debt burden of nearly 175% of GDP growth is simply unsustainable. You might not hear that in public from figures like German chancellor Angela Merkel, German finance minister Wolfgang Schäuble, European Commission president Jean-Claude Juncker or Eurogroup president and Dutch finance minister Jeroen Dijsselbloem, but it’s likely another story in private.

No matter how many cuts successive governments make to future budgets, the cost of servicing that debt will cripple its ability to provide the same level of public services to Greek citizens — especially at a time when unemployment remains so high. (Not everyone has the view, however, that the Greek debt burden is so incredibly unsustainable).

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RELATED: A Russian bailout may have always been Plan B for Tsipras

RELATED: Seven lessons from the Greek election results

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Here’s an outline of what to expect — perhaps as soon as early Monday morning: Continue reading What a Eurogroup-brokered deal with Greece might look like

A Russian bailout may have always been ‘Plan B’ for Tsipras

junckertsiprasPhoto credit to ELTOS/ELTA.

It may have seemed odd that, within hours of taking office, Greece’s new prime minister Alexis Tsipras struck out at the European Union to delay and ultimately weaken the bloc’s resolution to extend sanctions against Russia and certain actors within the Russian government.Greece Flag IconRussia Flag Icon

The incident shed light on an under-explored element of policy preferences of Greece’s new governing party, the leftist SYRIZA (the Coalition of the Radical Left — Συνασπισμός Ριζοσπαστικής Αριστεράς), including its reluctance to embrace NATO and the traditional military and security alliance that links the United States and the European Union. Tspiras, who has visited the Kremlin several times, has forcefully opposed the EU sanctions against Russia stemming from its involvement in the unrest in eastern Ukraine.

Furthermore, Tsipras’s choice to form a coalition with the right-wing, anti-austerity Independent Greeks (ANEL, Ανεξάρτητοι Έλληνες), and to appoint ANEL’s leader, Panos Kammenos, as defense minister, brought into government a brand of right-wing nationalism with roots in traditional Greek Orthodoxy and plenty of euroscepticism.

Throughout the campaign and, indeed, for years, Tspiras has publicly evoked confidence, if not outright cockiness, that he would be able to negotiate a deal to lighten Greece’s debt load if elected to power. Presumably, many commentators believed that meant Tsipras was willing to engage EU elites, including German chancellor Angela Merkel, in a game of ‘chicken’ over Greece’s potential exit from the eurozone. That’s probably still true.

But the common view among most economists is that Greece’s leverage on this point is growing weaker. Merkel and others have privately briefed that the eurozone is much stronger now than in 2012 when the ‘Grexit’ issue first became a real concern, and they don’t believe that the contagion from a Grexit today would be considerable. Greece’s turmoil can be isolated, but caving to the demands of the Tsipras government could embolden radical leftists elsewhere in Europe, especially in Spain, where the leftist Podemos movement now leads polls in advance of elections later this =year. The European Central Bank last week essentially backed Merkel’s view by announcing that it would refuse to accept Greek bonds as collateral, pushing the burden of risk on Greek debt exclusively upon the Greek central bank. Greek finance minister Yanis Varoufakis clashed publicly with German finance minister Wolfgang Schäuble last week as well, noting that he didn’t even ‘agree to disagree’ with Schäuble over the Greek debt standoff.

But Kammenos’s comments yesterday about Greece’s ‘Plan B’ make it clear that the Tsipras government believes it has another, potentially more explosive card it can play:

“What we want is a deal. But if there is no deal – hopefully (there will be) – and if we see thatGermany remains rigid and wants to blow apart Europe, then we have the obligation to go to Plan B. Plan B is to get funding from another source,” he told a Greek television show that ran into early Tuesday. “It could the United States at best, it could be Russia, it could beChina or other countries,” he said.

The United States is certainly not going to undermine Merkel and the EU leadership, especially to bail out a far-left government in Greece. Furthermore, China’s recent history demonstrates that it very rarely makes splashy political moves in foreign policy outside regional Asian politics (such as in Bhutan or Sri Lanka).

That, of course, leaves Russia, which shares a common form of Christianity with Greece in Orthodoxy, and which also happens to be in the middle of the most high-stakes geopolitical struggle with NATO since the end of the Cold War. Continue reading A Russian bailout may have always been ‘Plan B’ for Tsipras

Meet Greece’s new economic policymakers


With the Greek far left set to take power after Sunday’s staggering parliamentary elections, its next prime minister Alexis Tspiras will be just one of many key figures who will now become the central players in the latest chapter of the European Union’s economic policy debate.Greece Flag Icon

After Tspiras, no one will be more important than the economic advisers to whom the new government will entrust its attempt to reverse Greek economic policy and to negotiate debt relief from skeptical European Union leaders and international bondholders.

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RELATED: EU should give Tsipras a chance to govern

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Among the chief economic advisers to Tsipras and the soon-to-be-governing SYRIZA (the Coalition of the Radical Left, Συνασπισμός Ριζοσπαστικής Αριστεράς) are a handful of colorful personalities, from moderates to Marxists, all of whom will shape Greek economic policy in the years ahead.

Varoufakis: the political neophyte and telegenic economics professor

Yanis Varoufakis, an economics professor at the University of Athens, is widely tipped to become Greece’s next finance minister or, at the very least, lead the new government in negotiations with the troika — the European Central Bank, European Commission and the International Monetary Fund — and other EU leaders. Until very recently, Varoufakis was an outsider to Greek politics. He’s not a politician and, until recently, was a visiting professor at the University of Texas in Austin.

Varoufakis, however, was invited to run for a parliamentary seat by SYRIZA’s leaders. His international profile (Varoufakisis half Australian) and fluent English skills mean that he could soothe international markets as the chief economic spokesperson for Greece’s new government. A former adviser to George Papandreou in the early 2000s, Varoukakis has been a strident critic of the austerity measures that, first Papandreou and, since 2012, outgoing prime minister Antonis Samaras have accepted as conditions for Greece’s two bailouts, totaling €240 billion. In his announcement that he would stand as a candidate for the Hellenic Parliament, he compared that austerity to ‘fiscal waterboarding’:

Instead of discussing, in the European Union’s fora, the nature of our systemic crisis, the powers-that-be were busy fiscally waterboarding proud nations, letting them take a few short breaths before submerging them again into the waters of illiquidity.

Somewhat unusually for a European finance minister, Varoufakis has not shied away from criticizing the United States. Three years ago, Varoufakis wrote a book, The Global Minotaur, that paints a menacing portrait of the role of US economic policy vis-à-vis the rest of the world and American workers. Continue reading Meet Greece’s new economic policymakers