Published on 1 Jul 2015

Greece debt crisis: Tsipras prepares for compromise deal

I’m outside the Maximos Mansion in Athens where Prime Minister Alexis Tsipras is getting ready to stage a climb-down and he will tell them he’s about to accept something very very similar to the conditional bail out he rejected on Friday.

And the reason is clear, what six months of political pressure and diplomatic fighting haven’t produced in Europe, five days of financial terror have produced.

Because, this morning, not only were Greeks queuing at ATMs but also pensioners queuing for their pensions, €120 they’re allowed to take out. And there’s the bigger problem with tax receipts drying up, where do next month’s pensions come from?

We’ve seen, for the second time in three years, a modern economy brought to its knees by a central bank that is supposed to safeguard financial stability but actually switching off financial stability in the name of enforcing tough austerity rules.
First Cyprus and now Greece.

But in Greece, Greece is ruled by a far left government. Greece’s far left government has resisted until the very last, and however Tsipras tries to sell this, it will be seen by his supporters as a climb-down.

It will confuse people because they were getting ready to vote no to these conditions, in a referendum that he had called. And even now, this morning, after all the pressure and all the demonstrations by the centre-right and conservative parties, as of last night, the majority of people in opinion polls are saying they would vote no, they would reject these conditions.

So what’s changed is not the politics, what’s changed is the financial reality.

21_greece_protest_w

The European Central Bank has proved, yet again, that it can crash an economy if it wants to.

And that is what is has just done. What happens to Tsipras and his party, who knows? Because their strategy was to negotiate, to get the best deal, but the best deal had to include the debt.€320bn debt, every independent analysis says, is unpayable in an economy that cannot grow.

The austerity measures he’s about to sign up to will depress economic growth further so the debt ratio to GDP will rise and the German taxpayers and the Austrians, Slovakians, and the Fins who don’t like Tsipras will go on complaining about Greece and the Greeks because there is a very very little chance they will get all their money back.

Anger and dissolution

But as for them, here there will be anger, dissolution, dismay among the people who have thronged to the streets to support Alexis Tsipras. But then what next? If he goes on with the referendum, we will find out in a minute, how will he vote? He will have to now recommend a yes vote.

If he cancels the referendum he will be accused by his own supporters of bottling out. If he resigns and calls elections, he is still likely to win so the party has to govern and run and implement a programme it doesn’t agree with.

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32 reader comments

  1. Cesar says:

    In my opinion, now is the moment for Greece to leave the Euro. Germany and the EC have shown such inflexibility in the last couple of days, that Tsipras is having a gold opportunity. With a clear majority for a NO vote plus the succession of rejections from the EU to continue negotiations (including the almost capitulating last minute Greek offer), the government gains legitimation to adopt tough measures. But Tsipras is hesitating and his leadership seems confusing: the left of his party (plus the extreme left) is accusing him of capitulation, while the yes camp claims his head. Grexit is the only way out for Tsipras right now.

  2. Adrian Maycock says:

    All the choices are grim but not sure if the Greek people have had it explained in stark terms exactly what are the consequences of each choice. At this stage, possibly the reality is now starting to become apparent. It seems that a fair compromise between austerity and support for the Greeks has never been tabled because of dogmatic views on both sides. Surely, future gains are preferable to punishing past mistakes.

  3. Leo says:

    Everyone is in agreement that Greece’s debt is unsustainable, and that should no be a surprise. I’m confident there will be another haircut to bring it down to sustainable levels.

    The problem is that Tsipras is not the man to succeed in getting a haircut. As he has shown himself to be terrible unreliable and unpredictable nobody in their right mind will agree on a haircut with a “promise” from Tsipras to reform at some stage. There will need to be actual reforms -improve tax-collection for starters- and actual results first. Like the previous government actually managed to let the economy grow again, whomever is in charge from next week will have to demonstrate their able to solve problems, instead of creating them. Once that has been demonstrated, there will be more haircuts. Perhaps as early as the first quarter of next year.

    Ironically, Tsipras is the least likely Greek right now to achieve a haircut.

  4. Airey Belvoir says:

    That should be ‘disillusion’ not ‘dissolution.’ Rather than censor this correction, as you did the last, why not just put it right?

  5. The Meissen Bison says:

    It’s always fun to read a marxist analysis of a leftist government screwing things up.

    The European Central Bank has proved, yet again, that it can crash an economy if it wants to.

    Priceless!

    Who crashed Venezuela’s economy? The Banco Central de Venezuela?

  6. Paul Cockshott says:

    It beggars belief that they do nt have Drachmas printed and ready. What incompetance.

  7. Daniel Gadd says:

    Someone has to walk into the fire first.I wish Ireland could but we are having serious corruption problem at moment. I am right now heading to Dublin to protest against our government and Call on Greece to leave Europe. I will be in Dublin Again Saturday to join Irish people from all over the country to call on Greece to Exit Europe. Print your own Money. We will join you as soon as we can

  8. william says:

    The fact is that the ECB has failed, in its role of central bank, to provide liquidity to Greek banks, because the politics of the democratically elected Greek government is anathema to Merkel, who has a democratic mandate, and to Lagarde and Juncker, who are placemen. The EU has been shown up, for what it is, a dirigiste system of unelected bureaucrats. CF. The insolvency of the Scottish banks and their rescue by the English taxpayer.

  9. Richard says:

    We ALL know the banks rule the world. All Tsipras has proved is the old saying from the Rothschild patriarchy: “Give me control of the money supply of any country and I care not who is in charge”. So – here is that sentiment in action. Greece is in a similar position to Iceland. The banks crashed Iceland – a country with an enviable standard of living and resources to keep their population secure for generations.
    That’s why TTIP is important to the corporatocracy (run by senior politicos in Europe, America and the developing world). Control the money supply – run a corporate world court system – own the globe.
    Greece should exit – it should never have gone in at all. It was better off when it had it’s own currency and the people had autonomy from Brussels. It’s been a gravy train for a hand full of wealthy (and in many cases – corrupt) Greek people – all of whom have done jolly nicely out of membership. The ordinary Greek people will be no worse off with home-grown austerity than they will be having it hosed at them by the ECB & the IMF. At least it’ll be something under their own control though..

  10. Smoke says:

    Well lets see…the progressive politicians in Greece bought votes for decades through very generous pensions (government employee, teachers, etc.). They paid to buy the votes by borrowing more and more money. It was such a good idea they hired all their cousins, aunts, brothers, sister, etc. (Minister of Silly Walks comes to mind?) So now the bill is due, and I see very little real reporting on the vote scam (pensions) and the politicians that set it up. How about we bail out Greece after they arrest every politician there that voted to borrow for the Kleptocracy, have a nice trial where we confiscate all their property, followed by a right proper firing squad.

  11. j newton says:

    They were broke when they went in and are still broke now!
    They had a good run on the Euro .Their MEP’s made a few bob
    Time to face reality!!

  12. Leo Waldock says:

    I don’t see how the financial reality has changed. This slow motion car crash has been a long time coming but the basic fact is that when a Government runs out of money (and has no control of its currency) it also runs out of options.

  13. Paul Brennan says:

    I still do not understand how they are going to get to an economy that does not rely on client-ism and protectionism at every level. There seems to be no movement to remove the state from involvement in every part of the the economy. There seems to be no change in how to get the tax process to work in an efficient manner to stop this happening again.

    My thoughts are that there will be a much larger IMF/EU/ECB driven process to address these items while the next bail out is negotiated.

    Maybe there should be a move to the drachma to devalue then after these structural problems are solved a move back into the Euro at a lower exchange rate?

  14. Izzie says:

    Yep, it looked like he had to recommend ‘yes’ to be consistent with accepting the substance of the proposal. Then he stuck with ‘no’ and now I’m all confused again. I suppose we have to know what he doesn’t accept of the proposal and what else he’s asking for… Right now it feels like he’s pointing both left and right while saying ‘this way is up.’ This is a strange old situation. I could wish that Syriza would deploy a more coherent strategy.

    What remains clear, though, is the ruthless push for regime change, with pensioners and the poor lined up and blindfolded as hostages at the ATMs. If Tsipras is confusing (really!) he still claims the moral highground. The ECB should be ashamed. What next? They’ll decline to shoot so the Greeks can starve instead?

  15. Jim says:

    “The European Central Bank has proved, yet again, that it can crash an economy if it wants to.”

    Erm, no it hasn’t. It’s proved it can crash an economy that is utterly dependent on their money to keep functioning. Not that hard really. Its a bit like saying that if I remove this pile of books thats replacing a missing table leg, which then falls over, then I’ve broken the table. No, I haven’t, I’ve just revealed the true nature of the table’s condition.

    Same goes for Greek banks – they have been effectively insolvent for months if not years, and only kept afloat by the ECB liquidity support. Withdraw the support and the true picture becomes apparent. The Greeks have borrowed themselves into the poor house. The whole economy is a house of cards.

  16. william says:

    Your right Paul. Coup de’tat. By the ECB! But I still think there’s more to come from Tsipras. They would be better defaulting, returning to the drachma, and writing off 320 million euros, at a stroke!

  17. Eric says:

    Just to confirm on reporting standards. if greece is run by “far” left is Britain run by the “far” right if the term “far” seems only relative to economic and social ideals

    Maybe its time to start doing that as we all know the word “far” carries extremely negative conotations but yet i would wager the “far” left would do far less societal damage then what i term the “far” right ilks of Cameron and Ian ‘starve the poor while i rack up credit card bills’ Duncan Smith.

  18. Richard Fairchild says:

    The ECB hasn’t crashed the Greek economy. The Greeks did that. The ECB has simply refused to a blackmail demand that the free-spending Greeks be let off repayment to the other citizens of Europe (and the World with regard to the IMF). All the money Greece borrowed came, originally, from citizens of other countries.

  19. Boffy says:

    “If he cancels the referendum he will be accused by his own supporters of bottling out. If he resigns and calls elections, he is still likely to win so the party has to govern and run and implement a programme it doesn’t agree with.”

    Actually, no. Engels in “The Peasant War in Germany” set out the problem of a revolutionary party taking power, when the material conditions were not ripe for it to fulfil its programme. He argued that even were such a party in a position to take power, they should not do so in those conditions.

    Instead, the tactic of “extreme opposition” was developed. That is Syriza could simply win the election and say we cannot fulfil the programme we stood on and that you the majority have voted for, under the conditions that currently exist of opposition from conservative forces in Europe, and a lack of support from other workers across Europe, so we will not take power. We will, however, sit here, and oppose every anti-austerity measure any government seeks to impose upon you, and with our majority we will be able to vote it down.

    We will prevent the Parliament being used as a democratic cover for attacks to be made on you, and we will work to build support across Europe from other anti-austerity forces, and to change the conditions to ones in which our programme can be implemented.

    That, in fact, is probably what Syriza should now do.

  20. Neil says:

    This is not a negotiation, but a classic stalling tactic. What is the Greeks governments real motive here…. What is their end game. Will they open a big warehouse full of Dracmas on Tuesday and shout “tadaaa” when the no vote comes in? The last 6 months seem to have been very carefully orchestrated and planned! We will see soon enough.

  21. Hugh Prysor-Jones says:

    Keep up the good work! I fear you are right about extra parliamentary pressure at weekend.
    Trying to follow Tsipras. Was impressed he held back offer until certain EG would reject it. AEP beginning to hint Tsipras laid a trap for JD and think that right. Complicity between Tsipras and Schauble? Both want to blow up EU and not get blamed. Are Syriza the Bolsheviks? Have they got a long-written script and will start reading it ?
    From this distance my impression is that politics starts on Monday.
    What we’ve been watching is just warm-up.
    Washington has blundered and made enemies not just of Russia but whole BRICS machine.
    Dollar now in play. Goldman noticed and frantically shroud-waving.
    Riyadh finally talking to Moscow about pricing not price of oil. Game on!

  22. John Whiting says:

    This is a Greek tragedy and this is the ἔξοδος.

  23. Pete Radcliff says:

    ‘Yes’ or ‘No’ both appear bleak choices for the Greek working class people. What has surprised me is that the lack of a plan to bypass capitalism’s stranglehold of the economy through the banks.
    The malicious tweet that says that this what happens when you let a country be run by Russell Brand has a semblance of truth.
    There has been too much rhetoric about austerity and too little practical plans to deal with it.
    Of course, trade into Greece remains a huge problem with the obstruction of the banks. But internally, there must be means of organizing the operation of the economy without depending on Euro transactions.
    I know there have been local experiments but this needs government wide organisation

  24. Andrew Dundas says:

    Two points to start:
    * Bloomberg website is reporting (@UK time 10:20am) that the ‘Yes’ vote is at 47% and ‘No’ at 43%. I don’t know whether that is a reliable poll, but the margin in favour of austerity is interesting.
    * Whilst the recent economic history of Greece – especially its huge gains in wealth since the 2000 accession to the EZ – is now irrelevant, their failure to take necessary measures to pay back at least some of their debt takes away all my sympathies.
    There is a long-term benefit is sight: no more will it be assumed that a sovereign EZ member will automatically be bailed out when its debts become over-whelming.

  25. Alan says:

    Mr Tsipras is either an ‘Our man in Havana’ character or just another callous politician playing both ends to secure his own position. A Greek referendum holds as much validity as the ‘customer service’ referendums held in Britain. Self termed Investors and financiers will get their ‘pound of flesh’ no matter what is reported.

  26. Jim McMorrow says:

    Greece is being made an example of by the troika (European Central Bank (ECB), the European Commission (EC), and the International Monetary Fund (IMF). Do as the unelected financial institutions (and Germany) say or we’ll bring down your economy/government, which is exactly what the troika is trying to do right now.
    If you want some clarity on the choice the Greeks have to make in the referendum, watch the riveting interview Blomberg just had with Yanis Varoufakis, if only all politicians were that cool.
    Personally I think grexit is the only viable long term solution to the financial mess the troika has inflicted on Greece.

  27. cliff slaughter says:

    Greece’s debt? The Greek people owe precisely nothing to the ruling classes of Germany and Britain. On the contrary, the German ruling class owes an incalculable debt to the Greek people for the murders and untold misery inflicted on them during the Nazi occupation in World Two. As for Britain, Churchill at the end of the war signed an agreement with Stalin to delay the liberation of Greece (in the interests of a 50-50 post-war settlement in Europe), with the result of many thousands of deaths of Greek people. In the post-war years, the rulers of both countries condoned the imposition of brutal dictatorships in Greece.
    Who are the debtors?.

  28. Ryan Swindon says:

    Mr Mason, The issue of Greece re-paying its debt has not come into play just yet. We haven’t got that far. So far Greece has failed to reduce its deficit, even with the “austerity” Greece is still paying out more in pensions, healthcare and so on than it receives in taxes. Currently the shortfall is being made up by the Germans. The Germans are more than a little tired of paying out their taxes in order to fund Greeks that have retired very early, and who can blame them? It is still the case that the Greek government feels it should offer its citizens Swedish-style welfare somehow paid for with a Turkish-style economy.

  29. Herbert says:

    I can’t stand any longer the blame against austerity politics and the so called neoliberal European Union. Greece as the victim of draconic measures inflicted by the strict an inflexibel Germans, who want to rule finally over the poor Greek people. This perception is, excuse me, nonsense.

    Greece have got 500 Billion Euro since 1981 from the structural Fonds of the European Union, they have got more than 150 Billion as cheap credits after the introduction of the Euro 2002 and after 2010 they have got again 280 Billion from the Troika. Where is all this money gone? It has been invested in some large mansions and yachts of the Greek elite. 2000 of the richest Greek families have brought their money abroad to London or to Switzerland. In Switzerland there are supposely 250 Billion Euro invested in stock market fonds. The Greek elite never payed any taxes. The members of the elite and the fellow party members got jobs as civil servants with incredibel high payments and pensions. Pensions start from age 57 on.

    Why should any hard working German tax payer, who enters his pension age with 67, pay furtheron for this lazy and greedy Greek “elite” and their friends in the inefficent and bloated administration. The first measure Tsirpas executed: 5000 new employees for the Greek administration, most of them with a Syriza membership. But he never introduced any reform, he inforced not even the tax paying of the Rich.

    As long as there isn’t any fundamental reform of the economic and political structures in Greece, this country is a bucket without a bottom. No additional money will generates any economic growth. The average, poor Greek folks shoud blame their upper class for the crisis and they should blame themselves, that they have voted for them for decades. But they shouldn’t blame, at least not this one time, the Germans, who showed solidarity for a long time.

  30. Confused says:

    What confuses me as an ill educated ignoramus, is why the so called clever elites of the EU and the financial world have managed to create such a mess of the situation.
    When the debt problem first arose it seemed patently obvious that the loans should be rolled over with a low interest rate so that the Greeks could tighten their belts slightly and rebuild their liquid assets.and eventually repay the debt capital. This would have meant the idiot banks who lent money irresponsibly having a small return on their money and not losing their capital. But no! Instead the buffoons in the EU decided to bail out the stupid banks and lenders by continually giving Greece more money to pay back the loans each time and asking them to reduce their economy. Effectively this is rolling over the debt but increasing the amount of interest each time thereby compounding the debt.
    I believe that someone in the EU has now admitted that the EU policy has been to save the banks and not Greece.
    I think it is about time that the finance ministers should admit that they haven’t the faintest idea of what they are doing and that their vision is obscured by euro cataracts on their eyeballs and let those who lent irresponsibly suffer the consequences of their actions.
    I believe that Greece should exit the euro and create its own internal currency. As about 85% of its income is from tourism it can ask for payment in euros or dollars or any other currency it wishes which could be used to pay for imports. I’m sure the average Greek is quite capable of pricing his goods in euros for the tourists.

  31. Geyza says:

    Are you feeling daft yet, Paul? I know lefties are desperate for their delusions to become true and for the possibility that a country mired in massive debt, to the point of bankruptcy, to be able to afford to stave off inevitable austerity AND remain in the Euro and EU, whilst not paying their bills.

    However, back in the real world, running out of other people’s money has consequences which are very harsh and necessarily austere.

    We are witnessing what actually happens when an “anti-austerity” government gets put in charge.

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