Greeceâs finance minister Yanis Varoufakis has spelled out the negotiating strategy of the Syriza government with crystal clarity.
âExit from the euro does not even enter into our plans, quite simply because the euro is fragile. It is like a house of cards. If you pull away the Greek card, they all come down,â he said.
âDo we really want Europe to break apart? Anybody who is tempted to think it possible to amputate Greece strategically from Europe should be careful. It is very dangerous. Who would be hit after us? Portugal? What would happen to Italy when it discovers that it is impossible to stay within the austerity straight-jacket?â
âThere are Italian officials â I wonât say from which institution – who have approached me to say they support us, but they canât say the truth because Italy is at risk of bankruptcy and they fear the consequence from Germany. A cloud of fear has been hanging over Europe over recent years. We are becoming worse than the Soviet Union,â he told the Italian TV station RAI.
This earned a stiff rebuke from the Italian finance minister, Pier Carlo Padoan. âThese comments are out of place. Italyâs debt is solid and sustainable,â he said.
Yet the point remains. Deflationary conditions are causing interest costs to rise faster than nominal GDP in Italy, Spain, and Portugal, automatically pushing public debt ratios ever higher.
Berkeley economist Barry Eichengreen warns that Grexit would be âLehman squaredâ, setting off a calamitous chain reaction with worldwide consequences. Syriza’s gamble is that the EU authorities know this, whatever officials may claim in public.
Premier Alexis Tsipras is pushing this to the wire. Rightly or wrongly, he calculates that Greece holds the trump card â the detonation of mutual assured destruction, to borrow from Cold War parlance â and that all the threats from EMU power centres are mere bluster.
His cool nerve has caught Brussels, Frankfurt, Berlin, and the markets off guard. They assumed that this 40-year neophyte would back away from exorbitant demands in his landmark policy speech to the Greek parliament on Sunday night. Instead they heard a declaration of war.
He vowed to implement every measure in Syrizaâs pre-electoral Thessaloniki Programme âin their entiretyâ with no ifs and buts. This even includes a legal demand for âŹ11bn of war reparations from Germany, a full 71 years after the last Wehrmacht soldier left Greek soil.
There is no possible extension of Greeceâs bail-out programme with the EU-IMF Troika, for that would be an âextension of mistakes and disasterâ, a perpetuation of the debt-deflation trap. âThe People have abolished the Memorandum. We will not negotiate our sovereignty,” he said.
Macropolis said every item was in there: a pension rise for the poorest; no further rises in the retirement age; an increase in the minimum wage to âŹ751 a month by 2016; a return to collective bargaining; an end to privatisation of utilities; cancellation of a new property tax (ENFIA); a rise in tax-free thresholds from âŹ5,000 to âŹ12,000; and a rehiring of 10,000 public workers fired âillegallyâ.
Greece’s economic woes by numbers
He did not row back from his campaign rhetoric. He did not water down anything. The demand for a debt write-down has been switched to a debt-swap, but this is presentational legerdemain. Nothing has in fact changed.
The speech puts Greece on a collision course this Wednesday with Eurogroup finance ministers, who are having great trouble coming to terms with the election of the first radical Left government in Western Europe since the Second World War. Nor are they listening to what Syriza is actually saying.
Jeroen Dijsselbloem, the Eurogroupâs chairman, issued an ultimatum last week that this weekâs meeting is the final chance for Greece to puts its Troika programme back on track. The implicit threat is clear. Should Greece refuse, over âŹ60bn of liquidity support from the European Central Bank for the Greek financial system will be cut off on 28th February, forcing the country out of EMU in short order.
âWe donât do bridge loans,â said Mr Dijsselbloem. It was a revealing slip. Syriza has not asked for a bridge loan. It has stated repeatedly and categorically that it never wants another euro in EMU loans. What it wants is a âbridging agreementâ allowing it to raise an âŹ10bn extra T-bills on its own domestic bond markets.
This showdown has reached the point where if goes beyond the proper authority of finance ministers and central bankers. Austriaâs Chancellor Werner Faymann has already sought to defuse the crisis, knowing from his countryâs history how seemingly minor confrontations in the Balkans can spin out of control. âWe must save Greece and Europe from a Grexit outcome,â he said before meeting Mr Tsipras in Vienna.
In Washington, President Barack Obama has already warned EMU elites to be careful. âYou cannot keep on squeezing countries that are in the midst of depression. At some point there has to be a growth strategy in order for them to pay off their debts to eliminate some of their deficits,â he said.
via Greece’s leaders stun Europe with escalating defiance – Telegraph.