Alexis Tsipras is taking a gamble: today, it will be the Eurogroup (the finance ministers of the Eurozone) evaluating his reform plan presented to creditors before an extraordinary summit of the 28 EU countries convened for Sunday in Brussels. In case of disagreement, Grexit will be more of a choice than an option.
After a tense week, with the victory of the NO vote in the referendum, followed by the resignation of the flamboyant and whimsical Finance Minister Yaris Varoufakis and the European summit on Tuesday, the Greek prime minister must have realized that his strategy was running out of steam. Blaming the creditors instead of explaining how they will be repaid their loans may excite the minds of some pseudo-revolutionaries but it doesn’t get far.
Even though his youngest son is named Ernesto and a Che Guevara poster was part of his decor until recently, Alexis Tsipras will have to fall in line and limit himself to a patriotic-nationalistic rhetoric, which is a common trait of both the Greek left and right (and their supporters scattered in other countries).
After the mythology, it’s time to return to the harsh reality. A reality made up of numbers, variables, and unknowns.
Besides, his nice speech last Wednesday at the European Parliament, ending with a quote from Plato, didn’t fool many: Greek democracy is worth no more than that of other EU countries, and the rights of Greek citizens are opposed to those of other European citizens: it is their money that largely financed Greece’s debt and not vice versa, and without a change of course, Greece will have to borrow more.
But who will still want to finance a country that has already accumulated 320 billion euros of debt?
And to those who assail the evil creditors, it should be remembered that Greek debt was largely restructured in 2012. In return for this restructuring, private creditors agreed to a haircut of 50% to 75% of the bonds they held in their portfolios.
This was not enough, in the absence of effective measures, always promised but never applied.
Today, 75% of Greek debt is held by public creditors, namely the European Central Bank (ECB), the International Monetary Fund (IMF), and the European Financial Stability Facility (EFSF).
At this stage, Greece does not have the financial capacity to repay its next installments in July and August 2015, as well as the more than 50 billion euros it will have to honor before 2018 to ensure the sustainability of its public debt.
European leaders have always asked that Greece implements new reforms before starting negotiations on debt relief and refinancing conditions.
In a response text titled “Priority Actions and Commitments,” Greece commits to adopting most of the measures proposed by the creditors on June 26, which Athens had then rejected by announcing the referendum.
In exchange for the new efforts made, which should allow for 13 billion euros of savings over three years, Athens is demanding 53.5 billion euros in financing to cover obligations linked to its debt until 2018.
The radical left government also wants its creditors to review the primary surplus targets for the next four years and consider a “reprofiling” of the long-term debt.
According to the proposal text published by the Greek government, Greece wants a solution to “deal with” its enormous public debt, at 180% of GDP, as well as a “35 billion euro package” dedicated to growth.
The stakes are high: that’s why we can no longer talk about an economic crisis but a European political crisis.
