Greek Financial Obligation Tactic Revealed: Forget The Economics, Let’s Do Politics

August 2, 2015 Nemes Random

An intriguing little method by Yanis Varoufakis, Greece’s finance minister, floated today in the German press, informs us something about exactly what Greece’s negotiating plan over the financial obligation issue seems to be. Basically, let’s disregard all the economics right here and make a play for the politics of all of it. The play here is pretty naked too: Varoufakis is appealing to Angela Merkel as being the person who can sort this problem out. That is indeed to move it up out from the world of economics and into the pure politics of the euro and the European Union. The issue with this is twofold. Firstly, the IMF IMF was brought into the second bailout specifically to prevent all of it becoming a purely political problem. And second of all the domestic political issues of the other eurozone nations militate versus a political solution that is divorced from the economics.

Right here’s exactly what Varoufakis is stating:

In a column for Germany’s Frankfurter Allgemeine Sonntagszeitung, Finance Minister Yanis Varoufakis guaranteed that Greece was prepared to move, although he gave no details.

“Our side will arrive in Brussels with the determination to compromise further as long as we are not asked to do what previous governments did: to accept new loan tranches under conditions that provide little hope that Greece can repay its debts.”

He stated German Chancellor Angela Merkel faced a “stark option” over whether to accept an agreement, adding: “The option, I am really much scared, is hers.”

In more information:

“On Monday, [when EU leaders gather for an emergency situation summit in Brussels], the German chancellor will face a raw choice,” Varoufakis wrote.
“Get inParticipate in a respectable arrangement with a government that opposed the ‘bailouts’ and which seeks a negotiated option that ends the Greek crisis as soon asat last. Or … follow the sirens from within the [German] federal government motivating her to reject the only Greek government that is principled and which can carry the Greek individuals along the path of real reform,” he said.

Basically, exactly what is being argued right here is that the political factors to consider of the euro, of ever closer European Union, must imply that those laborious financial information can be ignored. So, those comprehensive grievances that the Eurogroup and the IMF are making about privatisations, VAT rates, pensions ages and so on. Look, they’re just not as vital as the preservation of the euro. So, we can and need to put those information to one side and pertain to a deal that will maintain that euro and that European unity.

That’s what the standard pitch is right here. And that naturally would permit Syriza to get exactly what it has actually desired all along. It wouldn’t have to jeopardize on its red lines, those BARREL, pensions and privatisation issues, but would still get the debt bailout it requires.

From the European political side this has distinct tourist attractions. Taking a look at individuals like Juncker and Schultz (the Presidents of the European Commission and of the Parliament in order) this makes great sense. That European unity as represented by the one way nature of euro membership is worth any number of details.

Nevertheless, there’s two flies in this ointment. The very first is the presence of the IMF. They were deliberately brought in at the insistence of some members of the Eurogroup in order to ensure that such details were attendedaddressed, that the solution didn’t become another piece of European politics. Due to the fact that we all know that that is how European politics works. We have to keep the bandwagon on the road, whatever the cost to great economics. So, in comes the IMF and they absolutely will not validate a deal, nor contribute to, that does not attend to those financial details. That’s why they’re there: to make sure that whatever is accepted does put Greece, in a micro- and macro- financial sense, on the path to being able to pay off those financial obligations.

So, attracting a purely political solution may work, however it runs the risk of losing the IMF and hence the contract of a few of those other Eurogroup members.

Economics,

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