Syriza Goes For The Macho Approach

by Zak Mir

It would be pleasant to think that the battle between the alleged forces of darkness (otherwise known as the Euro group finance ministers) and the self proclaimed good guys (otherwise known as the new Greek government) is heading for some kind of endgame.

On the face of it, there should actually not be an endgame considering that the €319 billion owed by the Greeks to their lenders can of course be deferred on an indefinite basis. After all, we are not dealing with an ordinary householder not able to pay their mortgage. In that instance the person in question can be thrown on the street. In the case of the Greeks though, there is nowhere for them to be shunted off, and anyway, the debt could always be written off to keep them in the Eurozone club. After all, Mario Draghi’s €1.1 trillion QE bazooka is nearly three times the money the Greeks owe. On this basis it would have been cheaper just to hand a cheque of €319 billion to Syriza.

I would venture to suggest that even though both sides have nowhere to go apart from an uneasy status quo, all we are seeing at the moment, with crisis talks collapsing and then building, is merely posturing and bluff.

The reality is that the Greeks did borrow money, and are now suggesting that not only do they not want to pay it back, but they do not want to pay even the interest on it. This is a ridiculous suggestion, even for socialists. But at least it allows the new leftist government to give the impression of having teeth and that it is standing up to the big bad wolf in Brussels.

Why Syriza is still engaging in this charade even after winning the election remains a mystery.

One supposes that it is a strategy to offset the likely pain to come. Either Syriza eventually bows to the EU and more austerity and the Greek people suffer, or there is a Grexit and the Greek people suffer the pain of rebuilding. I would venture to suggest we are looking at a PR campaign which is essentially a softening up process.

This is of course a strategy that may win populist appeal in the near term. Unfortunately, sooner or later the new “Rock Star” Finance Minister Yanis Varoufakis will have to back down. He may even have to wear a tie. This is because even if the Greeks leave the Eurozone they will have to get money from somewhere else in order to rebuild their blighted economy. While Russia or China may have the cash to bank roll them, if only to make a political point, it is unlikely that even this kind of approach would work with a borrower that appears to be not only unreliable but aggressively so.

While it is difficult to read the exact sentiment in terms of how much the Euro group wishes to keep Greece within its fold, I would venture to suggest that much of the shock value of a Grexit has already been absorbed. Indeed for many it may simply be that the phrases good luck/good riddance are the most appropriate, debt default or otherwise.

Would this mean a domino effect in terms of other countries leaving the EU project over the next couple of years?

Given that we have had some five years to get used the idea it is to be doubted that the markets will as ruffled as many suggest. The latest reported Conservative poll lead of 4 points over Labour would imply that a referendum here may be avoided if UKIP do not hold the balance of power.