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Generational Dynamics Web Log for 3-Jun-2015
3-Jun-15 World View -- Greece will NOT go bankrupt on Friday

Web Log - June, 2015

3-Jun-15 World View -- Greece will NOT go bankrupt on Friday

Greece's Alexis Tsipras faces a government mutiny from the far left

This morning's key headlines from

Greece's game of Chicken no closer to resolution

Prime Minister Alexis Tsipras (center) speaks with Minister of Culture Aristides Baltas (L) in Athens (Kathimerini)
Prime Minister Alexis Tsipras (center) speaks with Minister of Culture Aristides Baltas (L) in Athens (Kathimerini)

"Greece could face bankruptcy on Friday."

That's what we've been hearing almost every week for months, but now we're being told that even though Greece has a 300 million euro payment due to the International Monetary Fund (IMF) on Friday, there is no danger of a bankruptcy.

The reason is that the IMF has agreed to postpone the payment. Greece owes four payments to the IMF this month (June), totaling 1.6 billion euros. And the IMF has agreed to wait until the end of the month for Greece to pay the entire amount. And so, Dear Reader, you'll be relieved to know that Greece will not go bankrupt this week on Friday.

Nonetheless, the clock is clearly running out. Postponing this Friday's payment simply has the effect of postponing the final deadline, again. It looks like the end of the month is a hard deadline, but we've heard that before.

As many people have noted, it looks like both sides are playing a game of Chicken. This would be particularly appealing to Greece's colorful finance minister Yanis Varoufakis, who is an expert on game theory. In the 1950s game of Chicken, two cars race towards each other at top speed. The first one to veer off is the "chicken." If neither car veers, then there's a collision, and both drivers are dead. (They didn't have seat belts in those days.)

So as the clock runs out, both sides are maintaining their demands, hoping that the other side will give in. According to the logic of the game of Chicken, there's no hope of a compromise until the very last moment, which means that the game will continue at least until the end of June.

The institutions -- IMF, European Central Bank (ECB) and European Commission (EC), formerly known as the "Troika," a word that's now forbidden -- are demanding that Greece continue the austerity programs that were in place until January, when Alexis Tsipras's far left Syriza party won the elections on a platform of no more austerity. The institutions are demanding that Greece institute reforms to address various economic issues, including Greece's bloated public sector, curbing tax evasion and corruption, privatizing public businesses, and adjusting generous pension and minimum wage policies.

In January, Tsipras agreed to some minor reforms, but even those have not been implemented.

On Sunday, Tsipras wrote an editorial that blamed the failure to reach a compromise on " the obsession of some institutional representatives who insist on unreasonable solutions."

This was not received well. It resulted in an emergency meeting in Berlin on Monday evening. Attending were the leaders of Germany, France, the ECB, the EC and the IMF. Greece was not invited.

The result was a new final proposal from the Troika. Tsipras has defiantly countered by announcing that he has his own new 47-page proposal. The contents of the two proposals have not been revealed, but analysts seem to agree that they're likely to be very far apart when they're revealed on Wednesday. So the game of Chicken will continue.

There's an assumption behind the game of Chicken that does not apply to the situation in Greece. In the 1950s game of Chicken, if one or both cars veer off, the nothing has been lost, except that someone may be humiliated.

But the game of Chicken has already cost a lot. Greece had a budget surplus last year, and Tsipras has blown that away on new social programs. Greece's government has confiscated the cash reserves of all the public institutions, including municipalities, provinces, universities and hospitals. That money also has been blown away.

So even if a compromise of some kind is reached this month, the game of Chicken is going to result in a major wreck. Kathimerini and RTE (Ireland) and Value Walk

Greece's Alexis Tsipras faces a government mutiny from the far left

Greece's prime minister Alexis Tsipras is facing open rebellion in his far left Syriza party, over the austerity demands of the Europeans. The far-far-left politicians are calling themselves the "Left Platform" faction of Syriza. They are demanding that Tsipras stop humiliating himself and Greece, and that Greece leave the eurozone and return to the drachma currency.

According to Syriza member Stathis Kouvelakis,

"It has become now clear that the 'institutions' are not striving for what some are calling an 'honorable compromise'. ...

What the ruling circles of the EU, the ECB and the IMF are ruthlessly and consistently aiming for in the last for months, is to strangle the economy, to milk even the last euro from the country’s reserves and to push an 'unprotected' government to full submission and exemplary humiliation."

After that, the Left Platform is demanding all sorts of new spending programs, nationalizing the banks, substantial taxation of top earners, and full implementation of labor union rights.

Polls have shown that most Greeks want to find a compromise that lets Greece stay in the eurozone, but among Syriza supporters, 58% want to return to the drachma. Telegraph (London) and Guardian (London) and Red Flag

(Comments: For reader comments, questions and discussion, see the 3-Jun-15 World View -- Greece will NOT go bankrupt on Friday thread of the Generational Dynamics forum. Comments may be posted anonymously.) (3-Jun-2015) Permanent Link
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