During the period after SA transitioned to democracy, all kinds of interesting people visited the country to see for themselves and, sometimes, offer assistance. Among them was former Spanish Finance Minister Guillermo de la Dehesa, an advisor to global investment banking powerhouse Goldman Sachs. My interview with him was memorable because of how he unpacked the dilemma of a politician. Ahead of joining the EU in 1986, he says although everyone in his Socialist Workers’ Party knew their policies were driving Spain to bankruptcy, they saw little option. Apply the medicine required to fix the country’s economy and he’d soon join the unemployed. De la Dehesa explained this was one of the main reasons why joining the Eurozone was irresistible – his party could implement the politically unacceptable and blame it on the EU. After hearing last night that his fellow Eurozone members have now completely lost their sense of humour, Greek Prime Minister Alexis Tsipras might draw some solace from the Spanish example. The EU now demands Greece’s total and utter capitulation. Tsipras has three days to convince his Parliament to comply. It’s humiliation brought about because he and his hard left party overplayed their hand. Paradoxically, the Spanish example suggests this is precisely what Greece’s economy needs. – Alec Hogg
(Bloomberg) — European leaders gave Greek Prime Minister Alexis Tsipras a straightforward choice: ditch his principles or quit the euro.
Tsipras was presented with a laundry list of unfinished business from Greece’s previous bailouts at an emergency summit that stretched in its 14th hour by 5:59 a.m. Monday in Brussels. Euro-area chiefs gave Tsipras three days to enact their main demands to keep alive chances of adding bailout funds of as much as 86 billion euros ($96 billion) to earlier commitments of 240 billion euros.
With Greece running out of money and its banks shut the past two weeks, the gathering was billed as the country’s last chance to stay in the euro. Tsipras, who says he wants to keep Greece in the currency union, has been in financial limbo since his government missed a payment to the International Monetary Fund and allowed its second rescue package to lapse on June 30.
“The situation is extremely difficult if you consider the economic situation in Greece and the worsening in the last few months, but what has been lost also in terms of trust and reliability,” German Chancellor Angela Merkel told reporters.
With the final sticking points the role of the IMF and Europe’s demand for a fund to hold Greek state assets for sale, the euro slid 0.3 percent to $1.1130 by 12:49 p.m. in Tokyo. Standard & Poor’s 500 Index futures fell 0.2 percent.
The summit and the finance ministers’ meeting that preceded it featured skirmishes pitting hardliners led by Germany against others. French President Francois Hollande rejected the notion of suspending Greece from the currency. Earlier, German Finance Minister Wolfgang Schaeuble snapped at European Central Bank President Mario Draghi.
Greek Pushback
An official in Brussels said the document was very bad for Tsipras and the Greek people. “They want to wreck us,” Defense Minister Panos Kammenos posted on Twitter. “Enough is enough.”
“This Eurogroup list of demands is madness,” Nobel laureate Paul Krugman wrote on his blog. “It’s a grotesque betrayal of everything the European project was supposed to stand for.”
In addition to requirements to cut pensions and raise sales taxes, measures that Tsipras accepted last week, the memo demanded that creditor representatives return to Athens with full access to ministers and a veto over relevant legislation.
Euro-area leaders also want Tsipras to transfer as much as 50 billion euros of state assets to a Luxembourg-based company for sale and make him fire workers he hired in defiance of previous bailout commitments.
Pressing Tsipras
After putting up with personal attacks, contradictory messages and an anti-austerity referendum from Athens, euro-area policy makers pressed home their advantage with Tsipras’s resistance running out of fuel.
“I’d like to see them demonstrating starting tomorrow in their parliament they’re serious about implementing the changes, legislative and structural, that need to be put in place,” Irish Prime Minister Enda Kenny said. “Every day that this goes on, the eventual solutions are more costly.”
Tsipras was elected in January after campaigning to reject austerity. After routinely calling the conditions demanded in exchange for aid “blackmail,” he may be forced to organize a government of national unity or call new elections.
“#ThisIsACoup” became the most-trending Twitter hashtag in both Greece and Germany as talks stretched into the early hours of Monday.
Balancing Costs
“The costs for Greece of staying in the euro are reaching a point where the balance could favor grexit,” said Daniel Munevar, who advised former Finance Minister Yanis Varoufakis before he quit last week. “The costs being demanded of Greece are so punitive that they are almost impossible to meet.”
Greece, whose economy has shrunk by about a quarter since the first of two bailouts was enacted in 2010, needs as much as 86 billion euros over three years, with 22 billion euros required by the middle of August.
Any deal is unlikely to be rubber-stamped before Greece has to repay the European Central Bank 3.5 billion euros on July 20, and so creditors discussed bridge financing to avert a default, officials said. An EU official rejected speculation that the ECB was willing to postpone the payment.
Greece’s banks remain shut and capital controls will remain in place when they reopen, as soon as this week if there’s a deal, Economy Minister George Stathakis told Mega TV.
The banks are expected to stay closed on Monday, so the ECB won’t need to adjust its now-frozen emergency credit line to the banks right away, an EU official said as leaders were meeting. The ECB’s Governing Council is slated to review the banks’ situation again on Monday.
Greece needs to pass laws by July 15 to raise sales tax, cut pensions, change the bankruptcy code, safeguard the independence of the statistics office and make spending cuts automatic if the budget misses its target, according to the text presented to leaders.
The deal on offer is “clearly harsher than what Greece rejected in the referendum last weekend,” Finnish Finance Minister Alex Stubb told reporters as the leaders talks began. “It’s a rather black and white choice.”
