Playing a dangerous game of chicken with the European Union, 40-year-old socialist Greek Prime Minister Alexis Tsipras gambled and lost with German Chancellor Angela Merkel and Mario Draghi’s Frankfurt-based European Central Bank. Spending over 240 billion euros bailing about Greece’s mounting debts since 2010, Greece ran out of euros again, refusing to give the Eurogroup the kind of fiscal reforms needed to get the last 7.2 billion euros to payoff a 1.6 billion euro debt to Christine Lagarde’s International Monetary Fund. Tsipras gambled that the Eurozone was too fearful of a Greek default and exit from the Eurozone to insist on the needed reforms. Tsipras assumed he had far more clout with the Eurozone, refusing to allow member state to go down. When Tisipras called June 28 for a national referendum on staying or leaving the Eurozone, Merkel and the ECB said no to more cash.
What really irked Merkel and Draghi was Tsipras public denunciation of the Eurozone, threatening, should voters vote to stay in the Eurozone to resign his post as prime minister. Tsipras flat-out told voters that he would only return with a “no vote,” essentially opting Greece out of Eurozone. Tsipras, who ran for prime minister on an anti-Eurozone platform, despises German control of the Greek economy. Whatever the consequences to a Greece exit, Tsipras wants out the euro precisely because it damaged the Greek economy. Since joining the Eurozone Jan. 26, 2001, Greece’s economy has been in steady decline. Using the pricey euro translated poorly into Greece’s developing world economy. It didn’t take long for Greece to run massive deficits, explode the national debt and run out of cash. Good, bad or indifferent, Tsipras wants Greece to coin and print its own money.
As time ran out on June 30, Tsipras asked creditors to extend the current arrangement without making the necessary austerity concessions to reduce Greece’s mushrooming debt. Merkel told Tsipras she wasn’t going to negotiate anything until after the July 5 referendum. Tsipras told Eurogroup officials to essentially jump-in-the-lake, refusing to accept the Eurogroup’s austerity demands, something Tsipras sees as tyranny on the Greek state. What Tsipras doesn’t get is the Eurozone, especially Germany, doesn’t want to underwrite Greece’s un-repayable debt in perpetuity. With high costs of government salaries and pensions, Greece simply lacks the resources to meet all obligations without running massive debt. Refusing to pony up, Tisipras essentially blamed the Eurozone for Greece’s economic woes and expects Germany and the Eurogroup to pay Greece’s debts.
Instead of playing hardball with the Merkel and Eurozone’s chief finance minister Jeroen Dijsselbloem, Tsipras should have made more concessions in good faith. Calling for a national vote July 5 forced the Eurozone to stop the ECB from re-supplying Greek banks under the old 2012 bailout contract. Tsipras didn’t take the June 30 expiration seriously, imposing capital controls and closing banks once old contract expired. No one at the Eurozone wanted to end the 2012 contract but couldn’t get Tsipras to agree to creditor’s demands before 7.2 billion euos were released to Greece’s national treasury. Demanding a last-minute payment extension failed to deal with any substantive issues required by the Eurogroup, including dealing with civil salaries and pensions. Tsipra’s gamble caused Greek citizens unnecessary economic hardship imposing capital controls, closing Greek banks.
Now that the ECB spigot has been turned off, Tsipras shows signs of compromising on a temporary debt relief plan. “What can change is the political stance of the Greek government that has led to this unfortunate situation,” said Dijsselbloem, putting the onus on Tsipras. When Tsipras went public with his opposition to staying on the euro, Dijsselboem and the Eurogroup had no choice to inform the ECB of Greece’s intent to exit the euro. Had Tsipras bit his tongue and played his cards close to the vest, Greece would not be in today’s mess. When Merkel said today that there’d be no further negotiation with Athens until after the July 5 national vote on staying or exiting the Eurozone, she let Tsipras sweat allowing the Greek government to default on pay its 1.7 billion euro debt to the IMF. Feeling the squeeze, Tsipras shows signs of coming to his senses.
Greece’s matcho prime minister overplayed his hand with the Eurogroup, refusing to accept creditors demands for receiving another 7.2 billion in liquidity. If Tsipras really wanted out the Eurozone, he should have been upfront with Dijsselbloem’s Eurogroup’s finance ministers. Whether Greece leaves the Eurozone or not, Tsipras can no longer lead Greece’s government. Causing so much unnecessary pain to the Greek people, Tsipras must admit his bravado backfired with the EU. Cutting Greece’s bond ratings Tuesday to CC junk, Fitch determined Greece could not meet its debt obligations in the foreseeable future. Tsipras doesn’t have to be a rocket scientist to figure out the damage he’s caused the Greek economy. Letting Greece’s bailout deal with the Eurozone expire, Tsipras proved he’s not fit to manage the Geek economy or continue to find a way out of Greece’s economic crisis.
