Greece cannot make its June debt repayments to the International
Monetary Fund unless it reaches a deal with creditors, Interior Minister Nikos
Voutsis said on Sunday.
In what appeared to be an act of defiance Greece's defense minister
recently threatens
to send migrants including jihadists to Western Europe. And while this
would be problematic, my opinion is that Greece will turn around and agree to
yield about austerity.
Since the January 2015 election of a coalition government made up of the
left-wing SYRIZA party and the right-wing ANEL (Independent Greeks) party,
Greece has been in constant negotiation with the EU about reformulating the
Greek bailout. Although Athens has often (but not always) denied it, any new
deal will come with serious restrictions on the Greek people.
The negotiations are secret, but there are plenty of leaks on both
sides. They traffic not in facts but in the impressions of people participating
in, or close to, the talks. It is clear that the Greek government is
relentlessly optimistic, it has been expecting an agreement “any day now” ever
since the removal of Yanis Varoufakis, the Greek
finance minister, from the chief negotiating position, whereas the rest of the
EU cannot see striking a deal anytime soon.
In other words, the leaks and conflicting daily statements from
participants offer little clarity about the real state of affairs. Beneath
them, though, lie structural issues that imply the EU has the upper hand. In
the negotiating game, the deck is stacked in the EU’s favor. In the Greek
domestic game, it favors Greek Prime Minister Alexis Tsipras, who wants a
compromise.
The EU’s institutional advantage is that decisions (in the Eurogroup and
in the council) are made unanimously, which implies that it is very difficult
for any proposal to be accepted. For example, the Treaty of Lisbon, which is
the functional equivalent of an EU constitution, took a decade to be negotiated
and adopted. In the negotiations game, unanimous decision-making works against
the Greek government, given the difficulty of getting any of its proposals
accepted.
The Greek government does not seem to understand this institutional
feature of the EU. The government maintains that its position expresses the
will of the Greek people and that it is thus entitled to impose its preferences
(“tear up the memorandums”) on the EU or demand that the EU make at least 30
percent of the concessions to reach a compromise. Tsipras has repeatedly asked
for private meetings with European leaders (German Chancellor Angela Merkel,
European Commission President Jean-Claude Juncker, and European Central Bank
[ECB] President Mario Draghi) to talk about a political solution. Yet time and
time again, he is pushed back politely with the argument that the decision will
be made by institutions—namely, the Eurogroup, or the “troika” of the
International Monetary Fund (IMF), the European Commission, and the ECB.
The EU’s substantive advantage is that it has control over liquidity. In
all bargaining situations, the most impatient player has to make the most
concessions. The Greek government points out that a failure in negotiations
would be detrimental to the EU as well as to Greece. That might be true, but
not over the same time frame.
Time extracts a price during negotiation games, and an early agreement
is better than a later one. In this particular case, delays diminish Greek
liquidity: Greece is running out of cash for payments on salaries, pensions,
and debts to the IMF. Several government officials have announced that they may
decide to pay salaries over creditors, which has resulted in capital flight
from Greece. Delays in the talks are also hurting the tourism industry,
Greece’s major source of income. Foreign travel agencies are asking for
contracts in which the Greek side assumes the risks of a change in currency (in
case of Grexit) or an increase in the value-added tax (one of the major negotiation
issues for the payment of the debt). Finally, delays have hurt the Greek
government’s standing with the public. Although Greek popular support for
SYRIZA has remained more or less stable since the election, government policies
have recently lost backing in the polls.
If there is an agreement in Brussels, it will still have to be approved
by the Greek parliament. To understand coming events (the current extension
agreement expires at the end of June, and Greek cash could run out before that
deadline), it is worth examining an important feature of Greek institutions:
any elections held within 18 months of a previous vote take place under a list
voting system. This means that party headquarters determine the sequence of
candidates on the ballot. Put simply, party leaders decide who gets elected.
This particular provision gives exceptional power to the Greek prime
minister, power much greater than that granted to counterparts in any other
country in the world. Almost all prime ministers of countries with parliamentary
systems have the power to call for a vote of confidence, forcing members of
parliament to decide not only whether they are in favor of a particular bill
but also whether they are willing to defend their choice by standing for a new
election (the result of a negative vote). This is a serious weapon in the hands
of a prime minister. Yet the Greek prime minister has an even bigger gun: not
only can he threaten to call an election, he can control the future members of
parliament (given that he can threaten not to place dissidents on the party’s
lists). Many party officials, including the ones closest to Tsipras, have
claimed that they will whip the vote and that if the government loses the vote,
there should be an election.
Working backward, it is easy to see the effects of these rules on the
negotiation game.
In all polls, SYRIZA is at least 20 points ahead of the second party,
New Democracy (ND). The reason is that the head of ND is the previous prime
minister, who wants to have his own policies recognized and approved by the
Greek people. As long as there is no change in the leadership of ND or the
creation of a wide coalition of all other parties, Tsipras (assuming he brings
negotiations to a conclusion) will be the winner. Out of the dissidents of his
party, very few will actually oppose him, and most of them will not have the
name recognition to be elected in opposition to him.
So here are the strategic calculations of the actors: Tsipras is the
median voter among the left wing of his party and of the Greek people. The left
wing of his party has become louder and stronger over the last four months. The
Greek people have become more confused and ambivalent. Any agreement that
Tsipras signs with the EU and brings in front of the parliament is sure to be
approved. (Even if he loses some of the 163 parliamentarians that support his
government, he will gain many more from the current pro-EU opposition.) The
question is, does he want to strike a deal that will violate all (or most) of
the principles he has advocated and the redlines he has drawn?
Assuming he is undecided or does not want to bring such a deal in front
of his party, he is likely to get one more chance: if he dramatizes the
situation, defaults on one of the debt payments and restricts currency
movements, the public (projecting the current trend of polls) will likely grow
more decisively in favor of staying in the eurozone. Such an outcome will tilt
the balance of power more in his favor within SYRIZA. This, of course, is a
risky gamble because predictions under such unprecedented circumstances cannot
be precise. But more to the point, it is a significantly more costly solution
for the Greek people, who will suffer as the economy freezes.
As of the current perspective, it looks as if any compromise that Greece
negotiates with the EU will indeed violate SYRIZA’s redlines. It will come to
parliament and will be approved without the need for elections (elections may
become necessary for the adoption of a new package). There is a possibility
that Merkel will step in to sweeten the deal (after all, she cares about having
a positive outcome, although she has to pass it in her own parliament) or that
some proportion of SYRIZA parliamentarians (a small one may be enough) will
vote down the deal (after all, they may be more ideological than ordinary
members of parliament from other Greek or EU parties). But neither is very
likely.
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