Greece And The EU – Nothing But Political Theater?

Varoufakis’ Tour of Europe

Greece’s new finance minister Yanis Varoufakis has toured Europe, trying to drum up support for – actually, we’re not quite sure what for exactly, as the precise nature of the Greek government’s demands is currently in flux (this is a parallel to Syriza’s ever-changing pre-election statements). Essentially, he seems to be gauging what they can get away with.

Not surprisingly, France’s political leadership has announced its support for a “debt deal” in principle (whatever that means), as the spendthrift French government is so to speak an ideological partner-in-crime of Syriza. However, the French government stopped short of supporting a partial write-down of Greece’s debt (Michel Sapin: “No we will not annul, we can discuss, we can delay, we can reduce its weight, but not annul”). Similar noises have issued from Berlin and Madrid.

 

Yanis Varoufakis and French finance minister Michel Sapin. France’s socialists are actually split over the Syriza government – some are ecstatic over its election victory, but e.g. economy minister Emanuel Macron appears far less enthusiastic about Greece’s lurch to the left.

Photo credit: Jacques Demarthon / AFP

We have argued all along that no EU government can afford to accept such a write-down, as then the guarantees issued for Greek debt would come due and the losses would become “real” – and appear on everybody else’s budget. We imagine that every EU leader Mr. Varoufakis has spoken to so far has impressed the political necessity of “extend and pretend” on him in no uncertain terms; details may well be up for debate though.

UK Chancellor of the exchequer George Osborne urged Mr. Varoufakis to do a deal with Brussels asap and “be responsible”, undoubtedly fearing repercussions for the only just reanimated City of Zombie Banks.

Varoufakis continues to insist that the Greek government won’t take any more bailout money from the troika and that it won’t even talk to it, leaving Jeroen Dijsselbloem in Brussels in a somewhat miffed and flabbergasted state in the process (reportedly JD whispered apocalyptic assessments about the troika’s very existence into the Greek refusenik’s ears after their pow-wow). However, he also says that “Europe comes first” (whatever that means), seemingly in an attempt to placate the centralizers.

Dijsselbloem and Varoufakis in Brussels

Photo credit: Simela Pantzartzi / APA / EPA

Over the weekend, Alexis Tsipras and Yanis Varoufakis have announced a new plan of theirs that apparently no longer includes a debt write-off:

“Finance Minister Yanis Varoufakis is in London to reassure investors he is not seeking a Wild West-style showdown with Brussels over a new debt agreement.

He told the Financial Times that Athens would no longer call for a write-off of Greece’s €315bn of foreign debt. Instead it will seek a “menu of debt swaps” including two types of new bonds – one indexed to nominal economic growth and one he called “perpetual bonds” to replace European Central Bank (ECB)-owned Greek bonds, the newspaper reported.

“What I’ll say to our partners is that we are putting together a combination of a primary budget surplus and a reform agenda,” Mr Varoufakis told the FT.

“I’ll say, ‘Help us to reform our country and give us some fiscal space to do this, otherwise we shall continue to suffocate and become a deformed rather than a reformed Greece’.”

The bonds indexed to economic growth would replace Greece’s European rescue loans, Varoufakis said. Athens planned to target wealthy tax-evaders and post primary budget surpluses of 1% to 1.5% of gross domestic product, he told the paper, even if it meant his party, Syriza, could not fulfil all the spending promises on which it was elected.”