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Greek Crisis: An Exercise In Mental Waterboarding For Tsipras

Merkel tells Tsipras to surrender fiscal sovereignty in return for bailout

Greek crisis
Alexis Tsipras is under pressure from the German and French leaders for their request of guaranteed austerity measures in exchange for any hope of a new bailout deal.

European officials have described the request as an extensive mental water-boarding exercise. The German and French leaders are split over their approach to the Greek crisis. European leaders are at odds over how desperately they need Greece to stay within the Euro-zone. Germany wants compromises from Greece and is not happy to have Greece in the Euro-zone at any cost. France is more understanding of the Greek point of view and hopes a deal is reached. Italian Prime Minister doesn’t want Greeks to be humiliated any further. Finland threatens to veto the new deal. Ireland asks for all revenues to be explored before giving up hope on the Greeks.
At talks in the Euro-zone leaders summit in Brussels, a draconian package of austerity measures was offered to Greece in exchange for financial stability and membership of the single currency bloc. The measures are worse than the previous ones and asks the Greeks to surrender their fiscal sovereignty.

The Guardian reports:

A weekend of high tension that threatened to break Europe in two climaxed on Sunday night at a summit of eurozone leaders in Brussels where the German chancellor, Angela Merkel, and President François Hollande of France presented Greece’s radical prime minister, Alexis Tsipras, with an ultimatum.

In what a senior EU official described as an “exercise in extensive mental waterboarding” to secure Greek acquiescence to talks on a third bailout in five years worth up to €86bn (£62bn), the two leaders pressed for absolute certainty from Tsipras that he would honour what was on offer.

Two days of high-stakes negotiations between the finance ministers of the currency bloc resulted in a four-page document that included controversial German elements leaked on Saturday. Those measures included expelling Greece from the euro for at least five years if it refuses the eurozone terms for talks on the new bailout or, in the event of agreement, that Greece parks €50bn worth of assets in Luxembourg as collateral for new loans and for eventual privatisation. Both passages, however, did not enjoy a consensus among eurozone leaders.

Under the terms set before Tsipras on Sunday night, the Greek parliament has to endorse the entire package on Monday and then pass several pieces of legislation by Wednesday, including on pensions reform and a new VAT regime, before the eurozone will agree to negotiate a new three-year rescue package.

The terms are much stiffer than those imposed by the creditors over the past five years. This, said the senior official, was payback for the emphatic no to the creditors’ terms delivered by the snap referendum that Tsipras staged a week ago.

“He was warned a yes vote would get better terms, that a no vote would be much harder,” said the senior official.

The Eurogroup document said experts from the troika of creditors – the International Monetary Fund, European Commission and European Central Bank – would be on the ground in Athens to monitor the proposed bailout programme. The trio would also have a say in all relevant Greek draft legislation before it is presented to parliament. Furthermore, the Greeks will have to amend all legislation already passed by the Syriza government this year that had not been agreed with the creditors.

Although billed as the last chance to secure “the ultimate agreement” on the Greek debt crisis, the prospects of a grand political bargain to keep Greece in the eurozone are far from assured.

Entering the leaders’ meeting, Tsipras said he was looking for compromise: “We can reach an agreement if all parties want it.”

But France and Germany are split on their approach to the Greek question, while Finland could refuse outright to sign up to a third bailout for Greece.

France’s Hollande vowed to do everything possible to get an agreement on Sunday night, but Merkel said there wouldn’t be an agreement at any cost.

Other eurozone countries urged Germany to drop its objections. “Grexit has to be prevented,” said Jean Asselborn, the Luxembourg foreign minister. “It would be fateful for Germany’s reputation in the EU and the world.

“Germany’s responsibility is great. It’s about not conjuring up the ghosts of the past,” he told German newspaper Süddeutsche Zeitung. “If Germany goes for Grexit, it will trigger a deep conflict with France. That would be a catastrophe for Europe.”

Italy’s prime minister, Matteo Renzi, was expected to tell Merkel at the leaders’ meeting that “enough is enough” and the eurozone should not humiliate Greece when it had already given up so much.

Earlier on Sunday, the finance ministers said they had made some progress after 14 hours of talks over two days and failing to reach any agreement on Saturday. “We have come a long way, solved a lot of issues, but some big issues still remain,” said Jeroen Dijsselbloem, who chairs the Eurogroup of finance ministers.

Donald Tusk, the president of the European Council, cancelled an emergency full summit of the 28 countries that was to deal with the fallout from Greece’s ejection, in order to give eurozone leaders a last chance to reach an accord saving Greece and forestalling what would be a devastating schism, sowing deep resentment and division between Europe’s leaders.

The intractable problem is that many governments do not trust the Greek government to implement a €12bn (£8.6bn) programme of spending cuts and reforms that will be delivered as part of a bailout. Eurozone governments are seeking proof from Athens it can keep its promises, in exchange for agreeing to start talks on a deal.

“The main obstacle to an agreement is trust,” said Pier Carlo Padoan, finance minister of Italy, one of the countries most sympathetic to Greece.

The Irish taoiseach, Enda Kenny, urged his fellow leaders to “look at the bigger picture”. Kenny, who has been Ireland’s leader since the early days of its own bailout programme, said in his country’s case trust was built incrementally.

“We don’t want to look back in 10 years’ time and think this could have been saved, but wasn’t,” he said.

The German news magazine Der Spiegel called Sunday the biggest day of Merkel’s 10-year chancellorship and appealed to her to “show greatness” and save Europe.

If Der Spiegel was right about the momentousness of Merkel’s day, the same could be said for Hollande of France who, with his government and officials, has been campaigning tirelessly in recent weeks to keep Greece in the euro, helping Athens to draft its proposals.

A decision to go ahead with a so-called Grexit, which has never been closer, would be a shattering failure for Hollande and the resulting Franco-German recrimination would be deeply damaging, say observers.

 

Edmondo Burr

BA Economics/Statistics
CEO
Assistant Editor
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