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Greece Talks With Eurogroup Hit “Complete Breakdown”
By Yves SmithWe said as soon as Syriza was voted into office, in How Much Success is Syriza Likely to Have in Ending Austerity? that it was unlikely to prevail:
I see three stumbling blocks for the Greek negotiating position. The first is that there seems to be no overlap between what they want and the northern bloc is likely to be willing to concede….
Second is that the best idea that the Greeks have to square the circle of austerity v. the Greeks wanting a more pro-growth, more humanitarian solution, the so-called Modest Proposal, is not modest at all from the Eurozone perspective. While it is “modest” in that it works within the existing Eurozone institutional frameworks, it is such a radical departure from the negotiating terms that the Troika generally has on the table in these discussions that there is simply no way to get agreement by summer…even if the Troika had an unexpected change of heart and was willing to be far more innovative on the policy front, as opposed to the financial smoke and mirrors front….
Aside from the fact that this plan has too many moving parts to get done in an at best six month runway there is a third, deeper reason it won’t happen. The Germans do not want deeper integration and more cedeing of power to Eurozone/European level institutions. From their perspective, they are footing the bill of their neighbors, and they therefore want to maintain a position which gives them leverage. Of course, Germany is perversely in denial of the fact that it wants contradictory things, namely, to keep running large and sustained trade surpluses within the Eurozone, and not finance its trade partners. Nevertheless, the very assumption that Galbraith set forth on behalf of Syriza, that Syriza is pro the Eurozone project working, and to them that means deeper integration, is not what Germany wants since that would require it to give up its advantaged position.
Second is that the best idea that the Greeks have to square the circle of austerity v. the Greeks wanting a more pro-growth, more humanitarian solution, the so-called Modest Proposal, is not modest at all from the Eurozone perspective. While it is “modest” in that it works within the existing Eurozone institutional frameworks, it is such a radical departure from the negotiating terms that the Troika generally has on the table in these discussions that there is simply no way to get agreement by summer…even if the Troika had an unexpected change of heart and was willing to be far more innovative on the policy front, as opposed to the financial smoke and mirrors front….
Aside from the fact that this plan has too many moving parts to get done in an at best six month runway there is a third, deeper reason it won’t happen. The Germans do not want deeper integration and more cedeing of power to Eurozone/European level institutions. From their perspective, they are footing the bill of their neighbors, and they therefore want to maintain a position which gives them leverage. Of course, Germany is perversely in denial of the fact that it wants contradictory things, namely, to keep running large and sustained trade surpluses within the Eurozone, and not finance its trade partners. Nevertheless, the very assumption that Galbraith set forth on behalf of Syriza, that Syriza is pro the Eurozone project working, and to them that means deeper integration, is not what Germany wants since that would require it to give up its advantaged position.
As Syriza spoke more about its vision and plans, it confirmed our initial reading, that there was no overlap between its bargaining position and that of its creditors. When that is the case in business negotiations, the talks go a few rounds and either cease due to understandable failure to make progress (or the discovery in ones mainly about price that the bid and offer ranges don’t overlap at all) or end in a huff as both sides become disenchanted with each other. In international negotiations, there is more pressure to reach any kind of a deal, even if just a face-saving, empty statement. But when talks do fail, it’s often like the Doha trade round: the parties have lots of tries, make one last push to see if they can resolve differences, and then give up with a sense of defeat and exhaustion.
Today, an important date came and went. Friday was a Eurogroup meeting. There had been a dim hope that Greece and the Troika would make enough progress and have had agreed or largely agreed on the structural reforms that the Eurogroup could conceivably have approved the release of the so-called bailout funds. But instead, the regularly scheduled meeting took place with a deal on the structural reforms still looking remote. As a fallback, the Eurogroup wanted to hear about what progress Greece had made, presumably with a goal of reaching an agreement by the next Eurogroup meeting on May 11 (note that this will be after Greece has two more IMF payments to make, and it’s already under great stress to find the funds). The conversation got ugly, as if the other ministers wanted to pick up Varoufakis by his lapels and shake him. It reads like a divorce, when partners keep having to deal with each other when they’ve decided emotionally that they are done with each other.
Mind you, the Eurogroup is not necessarily the final arbiter; Tsipras has pinned his hopes on Merkel being committed to not having the Eurozone break up and having enough clout to force the others to heel. But any of the Eurozone members could stymie a deal around the bailout; it takes the approval of all members to release the monies. And the IMF and the ECB are not happy with Greece either.
Read more: http://www.nakedcapitalism.com/2015/04/greece-talking-eurogroup-hit-complete-breakdown.html
