******************** POSTING RULES & NOTES ********************
#1 YOU MUST clip all extraneous text when replying to a message.
#2 This mail-list, like most, is publicly & permanently archived.
#3 Subscribe and post under an alias if #2 is a concern.
*****************************************************************
WSJ, Jan. 29 2015
Athens Banks on Europe Blinking First
by Simon Nixon
Alexis Tsipras has been prime minister of Greece for only 48 hours and
so far has done little to back his claim of wanting to keep his country
in the eurozone. With just weeks to secure a deal with Greece's official
lenders to prevent a financial collapse, almost everything he has said
and done has seemed calculated to deepen the rift with Greece's creditors.
From his refusal to back a toughening of the EU's response to Russia's
latest support for separatists in Ukraine to his cabinet's pledge to
reverse key reforms, his approach has suggested an appetite for
confrontation rather than compromise.
Belatedly, the markets have registered the rising risk that Greece may
exit the eurozone, with three-year government bond yields surging to
about 17% and the shares of its top banks collapsing by more than 25% on
Wednesday.
At a meeting in Brussels earlier this week, now-former Finance Minister
Gikas Hardouvelis warned that the deterioration in tax revenues and the
pace of bank-deposit outflows had accelerated in recent days, according
to people present.
Some eurozone finance ministers and senior officials say that they are
more worried about the fate of the European currency bloc now than at
the height of the euro debt crisis in 2011 or 2012.
Mr. Tsipras's problem is that attitudes in the eurozone are also
hardening. His strategy appears to be to put himself at the head of a
Europe-wide leftist assault against "austerity," playing to an
anti-German gallery in the hope of isolating Berlin. His ambitions might
have been encouraged by the disarray that his success has sowed among
mainstream European leftist parties.
These now face a strategic dilemma: Caught between Mr. Tsipras's radical
populism and their own acquiescence in the eurozone's crisis response,
their electoral support is crumbling.
The early signs suggest they hope to co-opt Mr. Tsipras to their club.
Dutch Finance Minister Jeroen Dijsselbloem wasted no time inviting
himself to Athens this week in his capacity as president of the group of
eurozone finance ministers, despite having no mandate from the group.
This has angered his conservative colleagues, who believe it would have
been better to wait for the Greeks to put their proposals on the table
first, according to people familiar with the discussion.
Mr. Tsipras and his finance minister have already been in contact with
leftist governments in France and Italy. Conservative governments fear
the left's readiness to compromise with Athens may send Mr. Tsipras the
wrong signals.
In reality, the eurozone's beleaguered mainstream left can't deliver Mr.
Tsipras the deal he seeks. A headline reduction of Greece's debt burden
looks out of the question. Germany and Finland have voiced their
opposition; other governments feel equally strongly.
A potentially bigger stumbling block is the question of Greece's reform
program. Here, it is Spain rather than Germany that may prove Mr.
Tsipras's most implacable opponent. Madrid is clear that any deal with
the Greek leader must be based on reform commitments at least as tough
as those demanded of former Prime Minister Antonis Samaras. Anything
less would represent a win for Mr. Tsipras and fuel support for Spain's
own new radical leftist party, Podemos.
The Spanish government believes that the recent turnaround in its own
economy is proof that a robust pro-market reform program is the only way
to exit the crisis. Madrid believes it would be in Spain's and the
eurozone's best interests to allow Greece to crash out of the eurozone
rather than boost support for Podemos and risk the recovery, according
to someone familiar with its thinking.
In other words, it may be necessary for the eurozone to sacrifice Greece
to save Spain.
Could Mr. Tsipras ever really sign up to the reforms agreed to by Mr.
Samaras? That has never seemed likely -- and appears even less so
following his cabinet's decision to raise the minimum wage by 30% and
block the government's privatization program. At best, weeks of
brinkmanship lie ahead.
Mr. Tsipras may be making a grave error if he is counting on the
eurozone to blink first.
_________________________________________________________
Full posting guidelines at: http://www.marxmail.org/sub.htm
Set your options at:
http://lists.csbs.utah.edu/options/marxism/archive%40mail-archive.com
