While Greece and its creditors are being more circumspect than usual as they try to hammer out the terms of an agreement by Wednesday evening prior to a previously-scheduled EU summit later this week, what little messaging that is leaking out is not as positive as it should be. In general, in negotiations, both sides tend to overhype any smidgeon of what could conceivably be called progress in order to create a sense of momentum. Here, with Greece having made large enough concessions that even hardliners are willing to contemplate the latest Greek proposal, there’s more unhappiness from both sides that one likes to see at this juncture. After a breakthrough, you expect to see more positive sentiment, mixed with doubts about maybe having given too much.
Now the testy mood may simply be due to how much bad blood exists between both sides. And an old saying in negotiating is that a good deal is when both sides feel bruised. But that type of deal is typically a one-off, not one where the parties have to continue to live with each other.
Given how high the stakes are, let’s hope that these troubling undercurrents are just noise and I’m being too much of a worrywart. But what has me concerned is that the Greek side has already crossed its red lines, which puts the Tsirpas government at some risk of delivering (or at least delivering on the unduly tight timetable, between the ongoing bank run and the drop dead date of a €3.5 billion payment due the ECB on July 20). And there are more signs than I like that the Germans and perhaps the IMF want to push Greece even further.
Since this is all in play, I don’t want to belabor the matter overmuch. Nevertheless, here are some not so good signs:
Lack of an official announcement showing preliminary support for the Greek offer. Consider this from an interview yesterday by BBC with Greece’s Economy Minister Giorgos Stathakis:
He said he expects eurozone government heads to issue a communique later today that will say there is now a basis for a formal agreement with Athens to complete the current bailout programme and release €7.2bn of vital funds.
Readers are encouraged to correct me, but I see no sign this happen. EC officials like Donald Tusk and Pierre Moscovici have made positive noises, but there aren’t as many preliminary approvals as one would like to see at this juncture. In fairness, Merkel did make acknowledge that progress had been made, but her tone was cautious, and it is widely believed that she will not back any deal unless the IMF signs off.
Unhappiness within the ruling coalition to the point elections might be necessary. From Reuters:
Greek lawmakers reacted angrily on Tuesday to concessions Athens offered in debt talks and parliament’s deputy speaker warned the proposals would struggle to win approval, puncturing optimism that a deal to lift Greece out of crisis might be quickly sealed….
“I believe that this programme as we see it … is difficult to pass by us,” Deputy parliament speaker and SYRIZA lawmaker Alexis Mitropoulos told Greek Mega TV on a morning news show.
If parliament does fail to back the latest offer, which included higher taxes and welfare changes and steps to curtail early retirement, Tsipras might be forced to call a snap election or a referendum that would prolong the uncertainty..
‘The prime minister first has to inform our people on why we failed in the negotiation and ended up with this result,” Mitropoulos said. “I believe (the measures) are not in line with the principles of the left. This social carnage … they cannot accept it.”
Now this unhappiness may die down. But at a minimum it suggests the creditors will have difficulty pushing the Greek government much further. The Guardian reports that pensioners plan protests today. A large turnout would embolden skeptics and might turn fence-sitters against the deal. From Helena Smith:
Pensioners have announced that they will be taking to the streets at 6pm (4pm BST) in what they say will be a mass display of protest against the leftist-led government’s proposed austerity package. Some 70 coaches, packed with retirees, are currently on their way to Athens.
I have just spoken to Manolis Rallakis, general secretary of the federation of Greek pensioners, who says older Greeks feel “totally betrayed” by the tough measures envisaged in the leftist-led government’s proposed austerity package.
“We feel totally betrayed, totally disappointed, that this government is continuing the cut-throat policies that every other government also enforced. What we are seeing are countless indirect and direct taxes that, once again, the little man on the street will be forced to carry,” the 75-year-old told me.
“Pensions have been cut by between 60 and 40 percent and now they want more with additional income for health care and the like, services that we paid for all our working lives through contributions to funds. It is outrageous. Where are the 13 and 14th pensions that they stole from us? Why should we go on paying the price?
The 13th and 14th payments were the two supplementary monthly incomes that pensioners received until they, too, were cut with the crisis…
Nearly 45% of Greece’s 2.5 million retirees now live on incomes of less than €665 a month – below the poverty line defined by the EU. Over half that number fell below the threshold at the start of the crisis in late 2009.
The Greek communist trade union, Pame, will also take to the streets this afternoon to protest an agreement that will not only bankrupt but butcher people, it said.
Greece is unlikely to have the financial runway to allow for elections, if it comes to that. From the Financial Times:
Analysts at Citigroup reckon in any case that at the current elevated rate of deposit withdrawals, the banks have sufficient collateral to secure only another 20 days of ECB money.
The run rate would be likely to continue at high levels if a deal were to look to be in jeopardy.
Merkel is contending with an unhappy coalition that wants more from Greece. Remember, Germany is not the hardest of the hardline countries, so the fact that a significant cohort of German lawmakers, reflecting broader public sentiment, are looking askance at the Greek proposal is troubling. From Politico:
Shortly after receiving the Greek proposal, Martin Selmayr, European Commission President Jean-Claude Juncker’s major-domo, trumpeted via Twitter that it was “a good basis for progress.” Asked about that assessment later Monday, German Finance Minister Wolfgang Schäuble delivered a withering takedown.
“We haven’t received any substantial proposals,” Schäuble said. “It shouldn’t be that some unauthorized person over the weekend is creating expectations. It has to be a serious review.”…
A hint of deeper discord surfaced Monday in Berlin, where officials reiterated Schäuble’s position that an agreement would only be possible once Greece had agreed to strict oversight and a catalogue of preconditions
Bear in mind that oversight and “preconditions” amount to further demands from Greece. They also add to the complexity of negotiating when time is already perilously short.
The Financial Times corroborates these concerns:
Hours after Germany’s Angela Merkel gave a cautious welcome to Greece’s latest reform proposal, she received a sharp reminder of the depth of frustration back home when one of her own backbenchers poured scorn on the bailout talks….
Not for nothing was Ms Merkel asked in Brussels about the challenges of getting any deal through parliament. As often, she parried the question, saying there would be work to be done.
Both Der Speigel and Frankfurter Allgemeine Zeitung called for the deal to be examined and negotiated, with Frankfurter Allgemeine Zeitung taking a tougher line. What concerns me is that the German MPs will feel compelled to demand more from Greece out of negotiating reflex (surely there is more to be had!) and to prove to voters that they have been tough. But pushing Greece runs the risk of upsetting the deal by forcing Tsipras to call for a referendum or snap elections.
There are too many signs of a punitive attitude towards Greece among its counterparties. IsabelPS pointed out this story in the Guardian, noting that this was not the sort of slant one expected to see there:
Greece’s date with destiny started with its upstart prime minister, Alexis Tsipras, being slapped on the face. It is the customary gesture of endearment from Jean-Claude Juncker, president of the European commission. It means the two men are friends, despite Juncker saying at the weekend he no longer trusted Tsipras.
And the day that was supposed to arrest Greece’s collapse into bankruptcy, and prevent the euro’s diminution, ended more than 12 hours later on Monday evening with the bizarre spectacle of a phantom summit….
Tsipras caved and there may well be hell to pay back in Athens. But the Greeks were nonetheless said to be impersonating cats and too much cream. Tsipras wanted a favourable summit declaration to take home with him, but the meeting ended late on Monday night without granting him that. The aim was quite the contrary, said a senior EU official. The idea was “to remove from Tsipras the illusion he can get a better deal at the summit, or that a decision can be taken at the summit level. The point is to have Tsipras learn the position of the other leaders. No negotiation”.
It was Tsipras who wanted a summit in the first place, insisting that Greece’s pain and the eurozone’s troubles could only be sorted out at the highest political level. The answer he heard from the chancellors, presidents and prime ministers was an ultimatum: “You can have your summit, but you’re not getting a negotiation.”
Donald Tusk was reported in other stories as having been criticized for officials for being a Chicken Little in calling the summit. But I suspect there was another reason that Eurocrats do not want to acknowledge: that if Greece had made no offer or a clearly inadequate one over the weekend, the national leader would have used the session for emergency planning for a default and possible Grexit.
Another sign of simmering hostility, from Politico:
National finance ministers fumed Monday over the time and cost of attending the countless Greece summits that produce little more than large travel bills…
National delegations receive an annual stipend from the Council to finance their summit travel and accommodations. They are free to spend it as they wish, but the more often the leaders meet, the quicker the cash runs out.
The Greeks didn’t have to bother with airport security lines.
They flew to Brussels late Sunday by a government jet rather than on a scheduled commercial flight. According to a Greek government source with knowledge of the flight itinerary, they chartered their own ride for “flexibility” reasons because today’s summit had no clear finishing time. The government source said that Greek ministers usually fly commercial.
The Greek delegation is staying at The Hotel, where rooms go for €300 to €500 a night. The hotel off Avenue Louise has served as host to U.S. President Barack Obama and claims to have the best views in town.
The last story read like petty gossip and in many ways, it is just that. But these negotiations have ben going on for months and many people on both sides have come to genuinely not like each other. As Peter Spiegel mentioned today in the Financial Times:
In the words of one senior official close to the negotiations, many people at the IMF “would rather cut off their little finger” than extend what has been a fractious and controversial relationship with Greece. But it is “unrealistic” to believe that Greece’s economic woes will be solved less than a year from now.
And from an article over the weekend:
“In diplomacy, national interests set the stage but human emotions determine the script,” said one veteran eurozone diplomat who has been involved in multiple EU-level negotiations. “The longer the negotiations take, the more sympathy, love, rancour, jealousy and exasperation come into play. It’s the one profession that robots are least likely to take over.”
In other words, despite the fact that the stakes are high and the Eurocrats understand that even a contested and uncomfortable deal is probably better and vastly less uncertain than a rupture, simmering anger may lead them to try to push Greece further than it can go (and that’s already allowing for the fact that we regard the level of primary surpluses that Greece has agree to meet as draconian). And they can too easily justify acting out of difficult-to-contain rancor as necessary to pacify unhappy voters that are loath to continue funding Greek bailouts. In other word, the negotiations remain fraught Negotiations with Greece remain fraught. Only a narrow path has been opened to getting a deal done, and it is far too easy for the parties, for reasons good and bad, to stray from it.