A pause in political games
Greece must stand on its own feet, stay in the eurozone and swiftly get on the road to growth. In order to achieve all this we have to go through a number of obligatory, and crucial, stages.
The first of these steps is a deal for a haircut to Greek debt via Private Sector Involvement (PSI), which needs to be finalized and set into motion. This will give the country some breathing room, as it will take considerable weight off payments that have to be made toward the debt. At the same time it will alleviate the next government of the burden of the troika?s three-month evaluations, leaving more space for political maneuvering, changing the political mix and so on.
Europe and the IMF will, meanwhile, be in a position to give more elbow-room, though the danger of them pulling the plug on Greece will always be on the horizon given that a firewall protecting the rest of the European Union from a Greek default will already be in place.
The haircut will bring another significant change as well: the recapitalization of Greek banks with the sum of 30 million euros will inject some much-needed cash flow into the bone-dry local market.
Obviously, in order to get back onto some kind of safe track, the troika will demand yet another reform package as a prerequisite for PSI.
The deal will be negotiated by the government of Lucas Papademos, clearly with the participation of New Democracy. Europeans expect ND?s chief Antonis Samaras to vote in favor of the reforms, followed by the bailout. If Samaras doesn?t vote in favor of the new ?austerity program,? as the Memorandum is known, things will become extremely sticky.
There are alternative solutions, such as abstaining from the parliamentary vote or withdrawing his ministers from the Papademos administration without bringing the interim governing body down entirely. In that case, the country would face a hardened European front that would not back down from the kind of hardline course it followed on the issue of the commitment letters it demanded from Greece?s political leaders, for instance.
There are those who consider that the crisis currently hitting the eurozone will render the deal carved out in October inoperable. They think it?s better to renegotiate all the terms from scratch, in other words to demand a full haircut or a complete write-off of Greek debt. These circles also believe that Greece will seek protection in an alliance made up of southern European countries and France, and ultimately succeed in signing an altogether better deal.
In practice, this could be put to the test if New Democracy brings down the Papademos government on the strength of its opposition to the new memorandum, which is set to reach Parliament before the bailout deal.
European affairs experts suggest we do not resort to this approach, however, because as observed at the Cannes meeting following the referendum fiasco, Greece?s exit from the eurozone is no longer a taboo subject. Those who know the European game well enough also know that it is precisely France, Spain and Italy who do not wish to see Greece participating in any alliance against Berlin.
The sensible thing to do at this point is pause the games in the local arena of politics and allow Papademos, with the assistance and participation of Samaras and his advisers, to negotiate a deal for debt relief and staying in the eurozone.
If this does not work out, I would be more than curious to discover what kind of Plan B was being envisioned by some of the people out there, be it along the lines of Greece not being able to count on public sector involvement or championing a return to the drachma as though it really were a viable solution.