The country is drifting. The ministers in Prime Minister Lucas Papademos?s provisional administration appear preoccupied with safeguarding their political careers, protecting themselves against backstabbing and organizing public relations stunts.
But they are getting hardly any work done.
Defeated politically, senior government officials are being humiliated by an opportunistic Giorgos Karatzaferis, leader of the far-right LAOS party, who is to a considerable extent shaping the domestic political agenda. At the same time, they know that the most crucial decisions about the future of debt-wracked Greece are being made outside the country?s borders.
The haircut on the Greek debt, to be undertaken with a voluntary private sector involvement plan (PSI+), is being challenged in intense bargaining. Banks that own Greek bonds want the new bonds to be governed by British law and bear an 8 percent interest rate. Greece?s counteroffer is for the new bonds to be governed by Greek law and carry a 6 percent interest rate.
Banks obviously neither want to lose any money under a voluntary haircut nor risk a future debt restructuring or currency switch.
It is also clear that following a catastrophic couple of years, Greece is trying to rescue all it can, to make its debt viable and serviceable and, most importantly, to protect the country?s sovereignty and dignity for the sake of future generations.
Recent statements by Deutsche Bank chief executive Josef Ackermann indicate that, as a guarantee, banks want the ability to confiscate Greek state property. This is something that would be possible under British law.
In contrast, national — and in part international — law would offer Greece the ability to protect its state assets.
Greece has strong bargaining weapons at its disposal, and it should make use of them — most importantly the decision by European leaders to make the country?s debt sustainable and prevent a disorderly default.
Greece?s transition government, which has already come under pressure, has a mission to fulfill: It must put up a strong fight to protect national interests in the area of PSI and not mortgage the country?s future.
Greece has already suffered a great deal of damage.