Hello, Mr. Tusk … New Orders
Yesterday it emerged that the normally hardline European Council president Donald Tusk (the former prime minister of Poland), suddenly felt “debt relief†for Greece was needed after all. While he is undoubtedly correct, it seems to us that he likely received a stern phone call from Washington.
Donald Tusk, the life-like android currently presiding over the EU council, here photographed in hardline mode
Photo credit:Â Radek Pietruszka /Â PAP
It is also unlikely to be a coincidence that the IMF released its debt sustainability analysis last week, in what appeared to be a case of especially ill-chosen timing, at least from the perspective of the euro-group. Note here that the IMF only wants the EU to provide debt relief to Greece – the IMF itself intends to get back every cent of its Greek loans.
Politicians in neo-con infested Washington no doubt don’t want to let slip Greece away into the arms of its Russian Orthodox co-religionists, which would almost certainly happen after a Grexit. Such strategic considerations are certainly exercising the NATO bureaucracy and very likely the EU’s movers and shakers as well. A Grexit would also be a victory of the Marxist wing of Syriza (a Pyrrhic victory though it may be), which would over time throw Greece’s continued NATO membership into doubt.
According to press reports from this morning:
“The White House has been putting its immense diplomatic weight behind a debt restructuring for Greece. Treasury secretary Jack Lew made an intervention earlier this week, and seems cautiously optimistic that Greece’s current proposals should be enough to satisfy creditors, and gain some crucial debt concessions in return.
He told a forum in New York on Friday that “It certainly looks like they’re getting closer,†adding, however, that “they’ve had trouble getting from close to closed. It’s going to be a long slog through the next few days, but it should get worked out. It would be a better thing for the global economy if this thing gets resolved.â€
We would suggest that the “global economy†is only in second place on Washington’s list of priorities in this particular case, although the market crash in China has probably raised the level of economic concerns as well.
Greek and German 10 year government bond yields compared (via the WSJ) – click to enlarge.
Greek Capitulation
It seems Mr. Tsipras’ negotiating position hasn’t exactly improved after all as a result of the “No†vote in Greece’s referendum. It appears that the proposal Greece has now submitted along with its ESM aid application is substantially the same Greece’s electorate has just rejected.
One thing Mr. Tsipras may actually have achieved however is this: Support for Syriza has soared according to Greek polls, and given that he is the party’s face and its by far most marketable politician (especially with Yanis Varoufakis out of the picture, who ran a close second in terms of marketability), resistance from the party’s Marxist wing may well turn out to be futile. In other words, in spite of capitulating to the EU’s demands, Tsipras has probably managed to ensure his own political survival.
Actually, it seems Juncker was right … in the end, it has indeed turned out to have been an irrelevant circus
Cartoon by Steve Bell
In fact, if the EU agrees with Greece’s “new†proposals, Tsipras won’t need the votes of his own party’s rebels to get parliamentary approval in Athens. It appears the survival instinct of his party colleagues is trumping principle anyway – only five Syriza MPs have so far announced that they will vote against a new bailout deal with the EU.
