[Marxism] Evans-Pritchard on Tsipras "climbdown"

Dayne Goodwin daynegoodwin at gmail.com
Fri Jul 10 23:13:49 MDT 2015


Crippled Greece yields to overwhelming power as deal looms
by Ambrose Evans-Pritchard
The Telegraph, London, July 10
<http://www.telegraph.co.uk/finance/economics/11732926/Crippled-Greece-yields-to-overwhelming-power-as-deal-looms.html>

Greece's Left-wing Syriza government has agreed to draconian austerity
terms rejected by the Greek people in a landslide referendum just five
days ago, capping one of the most bizarre political episodes of modern
times.

Prime minister Alexis Tspiras sought to put the best face on a painful
climbdown, recoiling from a traumatic fight that would have led to
Greece's ejection from the euro as soon as Monday. He implicitly
recognised that the strain of capital controls and economic collapse
has been too much to bear.

“We are confronted with crucial decisions. We got a mandate to bring a
better deal than the ultimatum that the Eurogroup gave us, but we
weren't given a mandate to take Greece out of the eurozone,” he said.

Hopes for a breakthrough set off euphoria across Europe's stock and
bond markets, though Greece still has to face an emergency meeting of
Eurogroup ministers on Saturday, and probably a full-dress summit of
the EU's 28 leaders on Sunday.

A top Greek banker close to the talks said there is now a "90pc
chance" of clinching a deal, thanks both to intervention behind the
scenes by a team from the French treasury and to aggressive diplomacy
by Washington.

Inflows of tourist cash means that there is still €2.75bn of liquidity
available, enough to keep ATM machines stocked until Monday night.
Greeks will be able to withdraw the daily allowance of €60. Pensioners
will continue to draw €120 a week.

"We are preparing to open up branches for normal banking services next
week. Capital controls will last for a while but not for as long as in
Cyprus. The situation is very fluid but we don't think we will need a
major recapitalisation of the banks," said the source.

An estimated €40bn of money stashed in "mattresses" should flow back
into deposits as confidence returns. One or two of the weaker banks
may need a capital boost of €10bn to €15bn, involving a potential
"bail-in" of savings above the insured threshold of €100,000.

Any deal almost certainly means the European Central Bank will lift
its freeze on emergency liquidity for the Greek financial system as
soon as Monday, entirely changing the picture. Syriza accuses the ECB
of deploying "liquidity asphyxiation" to bring a rebel democracy to
its knees.

The ECB freeze has been a controversial political and legal move -
given the bank's treaty obligations to uphold financial stability -
and is likely to be dissected by historians for years to come.

A final deal to end the long-running saga is still not certain. The
outcome depends on how much debt relief the creditor powers are
willing to offer, and whether it is a contractual obligation written
in stone or merely a vague promise for the future.

Yet the broad outlines are taking shape after Syriza agreed to three
more years of fiscal tightening, with deep pension cuts and tax rises,
and a raft of "neo-liberal" reform measures that breach almost all the
party's original red lines.

Panagiotis Lafazanis, head of Syriza’s Left Platform, protested
bitterly, saying it would be better for Greece to restore sovereign
self-government and return to the drachma. "The most humiliating and
unbearable choice is an agreement that will surrender and loot our
country and subjugate our people," he said.

Party insiders did not hide their disgust, though Mr Tsipras managed
to quell a full-scale mutiny. "It is a total capitulation. We never
had a 'Plan B' for what to do if the European Central Banks cuts off
liquidity and the creditors simply destroyed our country, which is
what they are doing," said one Syriza veteran.

"We thought that when the time comes, Europe would blink, but that is
not what happened. It should have been clear since April that the
markets were not going to react to Grexit."

Yanis Varoufakis, the former finance minister, said he would back his
successor and close friend, Euclid Tsakalotos, but only for the next
two days.

"I will reserve my judgment. I have serious doubts as to whether the
creditors will really sign on the dotted line and offer substantive
debt relief. My fear is that they will make all the right noises, but
then fail to follow through, as in 2012," he told The Telegraph.

Mr Tsakalotos told the Greek parliament that Syriza aims to secure a
swap of $27bn of Greek bonds held by the European Central Bank for
longer-dated bonds at lower interest rates. "Many of Greece's debt
demands are going to be accepted," he said.

The government is also pushing for an extension of maturities on
€145bn of bail-out loans (EFSF) deep into the middle of the century to
avoid a fresh crisis when they come due as a clump in the early 2020s.

The US, France, Italy, the International Monetary Fund and the top
officials of the EU Council and Commission have all now called openly
for debt relief, a crucial shift in position that clears the way for a
possible accord.

Even German Chancellor Angela Merkel has opened the door to an
extension of debt maturities. The difficulty is that this alone is no
longer enough.

Greece has called for €53.5bn in fresh funds over the next three
years. While much of this is recycled back out to cover maturing
debts, the package requires a vote by the German Bundestag.

Germany alone can veto any deal since it has more than 15pc of the
voting weight in the bail-out fund. An estimated 100 MPs from Mrs
Merkel's Christian Democrat family have threatened to vote no.

"We have ended up with a standard bail-out package," said Costas
Lapavitsas, a Syriza MP and one of five rebels calling for the
nationalisation of the banks and a return to the drachma. "What has
happened shows that radical change is impossible within the
constraints of monetary union," he said.

Yorgos Kaminis, the mayor of Athens, said the stand-off with creditors
has brought the country to its knees. "Greece faces a national
catastrophe. If there is no deal, we will be obliged to go back to the
drachma immediately. Our country will be totally isolated. You can't
be a member of Europe if you are blackmailing the whole world," he
said.

Greek industry and the tourist sector are already preparing drastic
steps to defend themselves if talks collapse and the government is
forced to introduce IOUs and a parallel currency.

Alexander Kaminis, head of the Greek Tourism Confederation, said he
fears a breakdown of social order. "If it comes to the drachma, we'll
have to take exceptional measures. We'll be looking at a situation
where Greek resorts have to be protected by armed guards, and that is
not the sort of tourism we want," he said.

Greece is packed with travellers at the moment but Mr Kaminis said
late bookings have dropped by 30pc. "This is going to materialize in a
month or two," he said

Constantine Michalos, head of the Hellenic Chambers of Commerce and a
food importer, said the economy has reached near paralysis. "There is
no system in place for Greek companies to transfer money about. Our
life-blood has been shut off," he said.

"People are depleting their stocks. We are going to start seeing
shortages of meat by the end of the week."

The network of chambers in the Greek islands reports that the local
payments system is breaking down since nobody wants to accept
transfers into banking accounts that could be seized at any moment.
"The ferry operators are demanding cash up front to bring in fuel and
supplies," he said.

"The whole is economy shifting to cash. You can't really import
anything, and 40pc of Greek GDP is based on imports," said Haris
Makryniotis, who helps small businesses for Endeavor Greece.

Mr Makryniotis said his group is advising an olive processor that
can't import the tin its needs to make cans, and a peach producer that
can no longer obtain wooden crates for transport. "Stocks were already
low because financing costs were so high. These companies are both
reducing a shift this week, and they will soon be facing a complete
stop," he said.

"We're going to see severe shortages of basic food in Greece in less
than a month," he said.

This is the ghastly reality that Alexis Tsipras faces. He promised the
Greek people that he would achieve a miracle: an end to austerity and
the hated Troika Memorandum, without poisoning Greece's ties to Europe
and without having to give up the euro.

This was always dangerous political gambit. It has caught up with him.
His only possible redemption at this point is to bring back the prize
of debt relief.




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