Greek postwar alliances show Europe has more to lose than money

As Prime Minister Alexis Tsipras focuses on the economic arguments for a new bailout deal for Greece, the country’s strategic importance to the European Union may do as much to persuade Germany to grant him concessions.

With war in Syria to the east, the failure of the Libyan state to the south and a nascent cease-fire in Ukraine to the north adding to the perennial tensions between Israel and its neighbors, the value of Greece as a NATO member and its ports on the eastern Mediterranean is rising.

“One would be justified to ask whether Europe, the U.S. and NATO could afford the creation of a security vacuum and a black hole in a critical region,” Thanos Dokos, director of the Hellenic Foundation for European and Foreign Policy, an Athens-based research institute, said by e-mail. That may not be “an acceptable loss for an EU with any ambitions to play a meaningful global and regional role,” he said.

The diplomatic effort that persuaded Russia to halt the violence in Ukraine was punctuated by Tsipras’s own, far more amicable exchanges with President Vladimir Putin. It signaled to German Chancellor Angela Merkel that European powers have more than just 195 billion euros ($223 billion) of bailout funds at stake in its standoff with Greece.

The country, among a handful that complies with the North Atlantic Treaty Organization’s defense spending recommendations, has more than 200 fighter jets and 1,000 tanks. NATO facilities include a military base in Crete that was used during the airstrikes on Libya in 2011.

Civil War

That role may be Tsipras’s strongest weapon in negotiations with the rest of the euro area, according to Dimitris Kourkoulas, a former deputy foreign minister.

“This is probably the last bargaining card Tsipras has,” Kourkoulas said in an interview.

Western powers recognized Greece’s strategic importance during and after World War II. The country’s resistance to Italy under Benito Mussolini scored the first allied ground victories against the axis powers and is marked annually by a national holiday in Greece on Oct. 28.

The U.S. and Britain then intervened in the civil war to help defeat the communists as the rest of eastern Europe fell under the influence of the Soviet Union.

The Greeks joined NATO in 1952, three years before the Federal Republic of Germany and at the same time as Turkey. In 1981, Greece became the 10th member of the EU, joining before countries like Spain and Austria, and adopted the euro two decades later.

Courting Greece

Greek Finance Minister Yanis Varoufakis is meeting his euro-area colleagues in Brussels on Monday in a bid to thrash out a short-term deal to keep the country afloat. Tsipras is searching for a formula to appease voters who have been promised an end to austerity while official creditors insist he stick to the previous government’s program of budget cuts. The first round of talks on Feb. 11 ended in a stalemate.

Putin, who consolidated his power in the neighboring Black Sea with the annexation of Crimea last year, is courting Greece just as Germany plays hardball over Tsipras’s plea for concessions on the country’s debt burden.

The Russian leader sent Tsipras a congratulatory telegram on Jan. 26, the day after his election victory, offering to boost cooperation between their countries. Merkel’s congratulations arrived a day later and came with a reminder of the new prime minister’s “great responsibility.”

It was also Tsipras’s first intervention in EU affairs, when he objected to a European Council statement paving the way for new sanctions on Russia. The Greek government said it hadn’t been consulted on the statement and didn’t endorse it.

Russian Sanctions

On Feb. 11, as Varoufakis was failing to reach agreement on a way forward and Merkel was hammering out a cease-fire agreement during 18 hours of talks with Putin, Russian Foreign Minister Sergei Lavrov said his country would consider providing economic aid to Greece if Tsipras asked for it.

Greek Foreign Minister Nikos Kotzias, meanwhile, was talking down the prospect of further sanctions against Russia, which require the unanimous support of all EU members.

“Sanctions have never brought the results desired by those who imposed them” Kotzias told reporters after meeting with Lavrov. “We need to find other tools.”

Greece needs to be careful it doesn’t compromise its bargaining position, said Kourkoulas, the former deputy minister. By flirting with Putin, Tsipras risks undermining his credibility with the rest of the EU, he said.

“With their moves lately, they may lose this chip,” said Kourkoulas, who served in the previous government. “You can have excellent relations with Russia without fueling concern that you are playing two games at the same time.”

Looming Deadline

Tsipras has until Feb. 28, when the existing bailout expires, to persuade the rest of the euro region to extend its financial support for his government. After initially demanding a debt writedown and an end to austerity, Varoufakis said on Feb. 9 that Greece is prepared to honor about 70 percent of the conditions set out in its rescue deal.

Without an agreement, the government and the country’s banks are set to run out of cash before the end of March, a step that could force Tsipras to abandon the euro, calling into question Greece’s position in Europe.

“Negotiations between the new Greek government and its official creditors seem to be running into a brick wall,” Neil Mackinnon, a London-based strategist at VTB Capital Plc, part of Russia’s VTB Group, said this week. “Geo-politics and U.S. pressure to keep Greece in NATO might play a part in the EU blinking first and making a compromise over the debt.”

[Bloomberg]