Syriza default threat worked! Tsipras blackmailed himself into submission


As the rest of the world, I am sure, I am tired of watching Dijsselbloem and Moscovici giving press-conferences after Eurogroup meetings, hanging off their every word for clues as to what may happen to Greece, which is (perpetually it seems) on the cusp of default, Grexit, Armageddon etc.

As I have said before on this blog, this sad state of affairs is the result of a disastrous failure on the part of Syriza, and a catastrophic miscalculation on the part of the lenders (primarily, yes, you guessed it, the Germans). Who did what and when does not matter anymore. What matters is what to do now.

What has helped bring things home (like a kick in the shin) is today’s IMF repayment. Greece did not pay the IMF, despite what you read in the press. Greece used its SDRs to pay the IMF, meaning the IMF paid itself and Greece has a short period of time to refund the money used. SDRs are special drawing rights that are an emergency mechanism available to IMF members to repay the fund when they are facing difficulties. It is a relic of the Bretton Woods system and operates as a pre-agreed overdraft (see here for details). This in the view of everyone is not a ‘credit event’, yet it is not a payment either.

Syriza has dragged this on beyond the point of reason. Greece cannot repay the IMF, it cannot repay the ECB or the EFSF. It cannot pay anymore pensions unless the funds are made available through the pension funds releasing money (another circular way to make payments). It can pay wages by pillaging the funds from local government and state enterprises.

For all the grand rhetoric on Red Lines and Electoral Promises and Mandates, Syriza has managed to back itself into a corner and blackmail itself into submission. Like Mel Brooks’ sheriff, it is threatening to shoot itself in the hope the likes of Schaeuble blink and pay up. They will not. It is game over.

Syriza needs now to accept reality and protect the population from the consequences of default. It is time to reach agreement, not tomorrow, today!



3 thoughts on “Syriza default threat worked! Tsipras blackmailed himself into submission

  1. Pancho says:

    You haven’t noticed Greece’s bargaining position considerably improved lately, have you? Now it’s not yet crunch time, but when it is, we will see if an “honorable” compromise can be reached or not. As we know now, even a default scenario, which you can be assured has been played through, would leave the Greek government with enough leeway to pick from a number of acceptable future paths.

    No question, amongst those in solidarity with Greece, only few people consider a default or even an Grexit an outright good perspective for the country. If the creditors however stick to their both economically and politically insane policies, then be it. While certainly not preferable and a major defeat for Europe, for Greece it is ultimately acceptable. Contrary to that, the only outright unacceptable alternative is what you’re desperately promoting: a compliant submission back into what has ruined Greek society since 2009/10. If one thing is clear then that this option isn’t on the cards.

    When the Greek electorate voted Syriza into power it did so exactly because it didn’t want the government to cowardly give in. Certainly noone is happy about the endless negotiations, the disgustingly anti-Greek media warfare and the creeping asphyxiation by the institutions. But even after these worst conceivable three months, a vast majority continues to acknowledge that Syriza is doing a fairly good job, and certainly a better job than the preceding governments did.

    As you live in Britain, you’re personal preferences may be different. That’s fine. But if you really are sympathetic with the Greek people and – as you once even claimed – with your homecountry’s new government, then would you please refrain from feeding the haters the way Mr. Stournaras does?
    Your fear and your outrage are perfectly understandable, but how about directing it against those responsible for the situation? The ones stubbornly refusing an honorable compromise? The ones insisting on further extending and pretending while drying up Greek economy and society? The traitors inside Greek media and finance? That would be awesome, thanks.


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