http://www.wsj.com/articles/it-looks-a-perfect-exit-stage-left-for-tsipras-1435783545?mod=e2fb
It Looks a Perfect Exit Stage Left for Alexis Tsipras
If Grexit was the prime minister’s goal, it is hard to think of anything he would have done differently
July 1, 2015 4:46 p.m. ET
How much of Alexis Tsipras’s tactics in the past five months have been driven by incompetence and how much by conspiracy? It’s a question even the historians may never fully resolve. The Greek Prime Minister said in a televised statement that those accusing him of having a deliberate plan to take Greece out of the eurozone were telling lies. But what is certain is that if Mr. Tsipras had set out in January to take Greece out of the eurozone, it is very hard to think of anything he would have done differently.
He won the election on a pledge to respect the overwhelming desire of voters to remain in the eurozone, which meant he had no choice but to go through the motions of negotiating with Greece’s creditors for as along as they were willing to indulge him. If Grexit was always his goal, then his only challenge was to ensure the talks dragged on until the bailout expired, capital controls were introduced and the country defaulted, making a euro exit hard to avoid. The only risk to such a strategy was a bank run before the bailout expired, in which case politics may have intervened.
If this was Mr. Tsipras’s plan, he has played it perfectly. Depositors were persuaded to keep their money in the banks by daily assurance for five months that a deal was imminent. In fact, for most of that time, no negotiations of any substance took place at all. Mr. Tsipras strung out the process with endless discussions over what the creditors should be called, where the talks should be held and who should talk to whom.
At the last minute, he tabled proposals that never stood any chance of being accepted, but which have allowed him to claim it was the creditors who were being unreasonable. Now with the bailout expired, the banks closed and the country in default, he has called a referendum asking voters to reject a deal that is no longer on the table.
Mr. Tsipras continues to insist that a “No” vote won’t lead to Grexit but will strengthen his hand with the creditors. No policy maker anywhere else in the eurozone thinks this is true. The relationship between Mr. Tsipras and other eurozone leaders has broken down so irretrievably that it is hard to see how they can possibly agree on new loans for Greece while he remains in power. Instead, a “No” vote would force the European Central Bank swiftly to conclude that the Greek banking system, which relies heavily on government guarantees, was insolvent, perhaps as soon as Monday. The banks would be forced to close and couldn’t be reopened until they had been recapitalized, either via a bailing in of depositors, or using a newly-printed currency.
Of course, Mr. Tsipras may have reached this point by accident. While there are certainly some hard-liners in his party who have always advocated “rupture” with the country’s creditors, the inscrutable Mr. Tsipras may simply have been one of those who accepted the assurances of Yanis Varoufakis, the self-confident finance minister and expert in game theory, who has always argued that the creditors would ultimately capitulate in the face of Greek intransigence.
Even now, most eurozone policy makers are willing to believe that Mr. Tsipras has blundered into his current position as a result of inexperience and incompetence rather than as a result of a secret mission to take Greece out of the euro. Perhaps Mr. Tsipras did miscalculate. If he sincerely thought that the eurozone would extend the bailout deal for an extra week to allow Syriza to campaign against it, then he really was naive. And if he didn’t realize that by turning his back on the only source of funding available to Athens, that the ECB was bound to take steps to protect its own balance sheet by—at the very least—capping the exposure of Greek banks to further emergency loans, then he was certainly inexperienced and incompetent.
It seems clear that Athens failed to anticipate how quickly panic would spread once capital controls were introduced and pensioners without bank cards found themselves cut off from their savings.
Yet even now, Mr. Tsipras’s tactics continue to baffle his creditors. At a meeting of Eurogroup finance ministers on Tuesday, Mr. Varoufakis formally requested the eurozone start talks on a third bailout program—yet somehow failed to provide a promised letter detailing what reform commitments Greece was ready to make in return. When the letter duly arrived on Wednesday, it turned out to fall far short of the expected capitulation.
Creditor officials said it created substantial new fiscal gaps compared to what the creditors had been demanding and took no account of further damage to the economy since the introduction of capital controls. Besides, many Eurogroup ministers made clear to Mr. Varoufakis that there could be no discussion of a new bailout program until Athens either canceled the referendum or agreed to campaign for a “Yes” vote. Instead, Mr. Tsipras took to the airwaves on Wednesday to reiterate his call for a “No” vote.
Mr. Tsipras’s decision to escalate rather than capitulate raises the stakes but not all of Greece’s creditors will be disappointed. Opposition leaders believe that with each day that capital controls remain in place, the polls are swinging further in their direction and that they are on for a large win.
That would bring a degree of political clarity to the situation: Mr. Tsipras would be forced to resign while eurozone officials say that in the event of a strong “yes” vote, they would have an obligation to find a deal with any new Greek government to keep Greece in the eurozone.
But the situation may not be so simple. In deciding to continue to fight for a “No,” Mr. Tsipras and his party can absolve themselves of any responsibility to implement a deal. Since Syriza and other antibailout parties dominate the current parliament, new elections would then be needed which would take up vital time and which could return him to power. Indeed, if Mr. Tsipras really did have his heart set on Grexit, then campaigning for a “No” vote in the referendum could enable him to “win” whatever the outcome.
Write to Simon Nixon at simon.nixon@wsj.com
It Looks a Perfect Exit Stage Left for Alexis Tsipras
If Grexit was the prime minister’s goal, it is hard to think of anything he would have done differently
July 1, 2015 4:46 p.m. ET
How much of Alexis Tsipras’s tactics in the past five months have been driven by incompetence and how much by conspiracy? It’s a question even the historians may never fully resolve. The Greek Prime Minister said in a televised statement that those accusing him of having a deliberate plan to take Greece out of the eurozone were telling lies. But what is certain is that if Mr. Tsipras had set out in January to take Greece out of the eurozone, it is very hard to think of anything he would have done differently.
He won the election on a pledge to respect the overwhelming desire of voters to remain in the eurozone, which meant he had no choice but to go through the motions of negotiating with Greece’s creditors for as along as they were willing to indulge him. If Grexit was always his goal, then his only challenge was to ensure the talks dragged on until the bailout expired, capital controls were introduced and the country defaulted, making a euro exit hard to avoid. The only risk to such a strategy was a bank run before the bailout expired, in which case politics may have intervened.
If this was Mr. Tsipras’s plan, he has played it perfectly. Depositors were persuaded to keep their money in the banks by daily assurance for five months that a deal was imminent. In fact, for most of that time, no negotiations of any substance took place at all. Mr. Tsipras strung out the process with endless discussions over what the creditors should be called, where the talks should be held and who should talk to whom.
At the last minute, he tabled proposals that never stood any chance of being accepted, but which have allowed him to claim it was the creditors who were being unreasonable. Now with the bailout expired, the banks closed and the country in default, he has called a referendum asking voters to reject a deal that is no longer on the table.
Mr. Tsipras continues to insist that a “No” vote won’t lead to Grexit but will strengthen his hand with the creditors. No policy maker anywhere else in the eurozone thinks this is true. The relationship between Mr. Tsipras and other eurozone leaders has broken down so irretrievably that it is hard to see how they can possibly agree on new loans for Greece while he remains in power. Instead, a “No” vote would force the European Central Bank swiftly to conclude that the Greek banking system, which relies heavily on government guarantees, was insolvent, perhaps as soon as Monday. The banks would be forced to close and couldn’t be reopened until they had been recapitalized, either via a bailing in of depositors, or using a newly-printed currency.
Of course, Mr. Tsipras may have reached this point by accident. While there are certainly some hard-liners in his party who have always advocated “rupture” with the country’s creditors, the inscrutable Mr. Tsipras may simply have been one of those who accepted the assurances of Yanis Varoufakis, the self-confident finance minister and expert in game theory, who has always argued that the creditors would ultimately capitulate in the face of Greek intransigence.
Even now, most eurozone policy makers are willing to believe that Mr. Tsipras has blundered into his current position as a result of inexperience and incompetence rather than as a result of a secret mission to take Greece out of the euro. Perhaps Mr. Tsipras did miscalculate. If he sincerely thought that the eurozone would extend the bailout deal for an extra week to allow Syriza to campaign against it, then he really was naive. And if he didn’t realize that by turning his back on the only source of funding available to Athens, that the ECB was bound to take steps to protect its own balance sheet by—at the very least—capping the exposure of Greek banks to further emergency loans, then he was certainly inexperienced and incompetent.
It seems clear that Athens failed to anticipate how quickly panic would spread once capital controls were introduced and pensioners without bank cards found themselves cut off from their savings.
Yet even now, Mr. Tsipras’s tactics continue to baffle his creditors. At a meeting of Eurogroup finance ministers on Tuesday, Mr. Varoufakis formally requested the eurozone start talks on a third bailout program—yet somehow failed to provide a promised letter detailing what reform commitments Greece was ready to make in return. When the letter duly arrived on Wednesday, it turned out to fall far short of the expected capitulation.
Creditor officials said it created substantial new fiscal gaps compared to what the creditors had been demanding and took no account of further damage to the economy since the introduction of capital controls. Besides, many Eurogroup ministers made clear to Mr. Varoufakis that there could be no discussion of a new bailout program until Athens either canceled the referendum or agreed to campaign for a “Yes” vote. Instead, Mr. Tsipras took to the airwaves on Wednesday to reiterate his call for a “No” vote.
Mr. Tsipras’s decision to escalate rather than capitulate raises the stakes but not all of Greece’s creditors will be disappointed. Opposition leaders believe that with each day that capital controls remain in place, the polls are swinging further in their direction and that they are on for a large win.
That would bring a degree of political clarity to the situation: Mr. Tsipras would be forced to resign while eurozone officials say that in the event of a strong “yes” vote, they would have an obligation to find a deal with any new Greek government to keep Greece in the eurozone.
But the situation may not be so simple. In deciding to continue to fight for a “No,” Mr. Tsipras and his party can absolve themselves of any responsibility to implement a deal. Since Syriza and other antibailout parties dominate the current parliament, new elections would then be needed which would take up vital time and which could return him to power. Indeed, if Mr. Tsipras really did have his heart set on Grexit, then campaigning for a “No” vote in the referendum could enable him to “win” whatever the outcome.
Write to Simon Nixon at simon.nixon@wsj.com
