Greece’s 40-year-old Prime Minister Alex Tsipras has pushed the European Union finance ministers and Christine Lagarde’s International Monetary Fund to the brink, making unrealistic demands to Greece’s creditors. Begging for a $16 billion cash infusion as a part of the promised $110 billion May 1, 2010 and $130 billion Feb. 1, 2012 bailouts to pay the IMF $1.6 billion, Tsipras played a dangerous game of chicken with the EU, especially Germany and the Frankfurt-based European Central Bank, rapidly getting fed up. Elected on a platform Jan. 26, 2015 to stand up to the IMF and Eurozone, Tsipras promised to resist the deal with the EU signed former Prime Minister George Panpandreou in 2010, agreeing to austerity measures to reduce Greek debt that left the country near bankruptcy. Proving that beggars can’t be choosers, the EU rejected Tsipras one-month extension expiring June 30.
Playing hardball with EU finance ministers, Tsipras fulfilled a campaign promise but now pushed Greece to the precipice of dropping out of the Eurozone. Dreaded by the Eurozone’s 19 member states, a Greek default or Grexit from the Eurozone raises the prospects of contagion, something that could cause other Eurozone defaults, especially in cash-strapped Portugal, Spain, Ireland and possibly Italy. Stock markets worldwide have gyrated dealing with the prospects of a Greek default and exist from the euro. Rushing to cash machines all over Greece, the banking system nears collapse as the panic-stricken Greeks run on the bank. Proposing that Greek citizens vote July 5 on whether to accept the EU’s latest bailout, with its draconic austerity measures, Tsipras tried to buy time, but, more importantly, save his rear end. Eurozone finance minister rejected Tsipras stalling tactics.
When your consider all the broken promises and commitments to the 2010 and 2012 bailout deals totaling $240 billion, the EU and IMF are at the end of their rope. “We must conclude that, however regretful, that the program will expire on Tuesday night [June 30]. That is the latest date that we could have reached an agreement,” said Jeroen Dijsselbloem, the Eurozone’s top official. Dijsselbloem confirmed that with or without an extension, Greece would get no cash to pay the IMF or another creditor. If Tsipras has no deal, it’s doubtful the ECB would continue giving Greek banks cash loans from Eurozone taxpayers. “How does the Greek government think that it will survive and deal with its problems in that period [one month]? I do not know,” said Dijisselbloem, doubting whether the ECB would extend more credit to the Greek banks after the June 30 deadline.
If Tsipras signs onto the Eurozone’s bailout plan, including draconic austerity measures, it’s inconceivable that anything would change, including another default in the near future. Only days away from the collapse of the euro-based Greek banking system, Tsipras would have to order his government to print drachmas, subject to international currency valuations. Greece would have officially but certainly existed the Eurozone, sticking the IMF and other foreign banks with massive debts, other than repaying them in drachmas. Leaving the euro would cause havoc across the Eurozone, especially inside Greece where otherwise solvent businesses and personal wealth would be vaporized overnight. “There is no reason why we can’t have a deal by Tuesday,” said Greek Finance Minister Yanis Varoufakis, assuming the Eurozone and ECB would accept Tsipras bailout terms.
Expecting Greece to meet the Eurozone’s financial targets when it comes to implementing austerity measures and GDP targets is unrealistic. “It is a sad day from Europe but we will overcome it,” Varoufakis said leaving his finance minister meeting with no deal. Whatever reforms the EU, ECB or Eurozone expect, it’s not realistic for Greece to comply with them. Since the $240 billion 2010 and 2012 bailouts, Greece hasn’t complied with any EU, Eurozone or ECB demands. What led to Tsipras’ unlikely election was his tough talk against the EU for essentially enslaving Greece with excessive debt. Voters liked his tough talk despite knowing that he’s run out of options: Either he complies with the EU’s demands for Greek financial reforms or drops out of the Eurozone. Once thought unthinkable, Tsipras may have no other option if the ECB cuts off the cash to Greek banks.
Whether or not Greece stays in the Eurozone, its financial problems have little chance of going away anytime soon. Restructuring the Greek economy was unrealistic in 2001 when Greece joined the Eurozone, hoping to gain more economic stability or eventual prosperity. Without printing or coinage rights, it didn’t take long for Greece to run bigger budget deficits, create unacceptable debt-to-GDP ratios, go out of compliance with Eurozone standards and run out of cash, begging the Eurozone for more euros. Since the 2010 and 2012 bailouts, the Eurozone, especially Germany, accepted Greece’s financial problems has holding down the price of euro, making exports more attractive. “The nation’s most vital interests demand that the country remains at the heart of Europe. The EU’s actual shortcomings do not, in any way, negate this,” said former Prime Minister Costas Karamanlis,” expressing more wishful thinking.
