The Tsipras disaster

Marc Champion of Bloomberg writes:

What has Alexis Tsipras achieved for the Greek people?

Monday morning, after 14 hours of talks among the euro area’s finance ministers and an additional 17 hours among the group’s leaders, the Greek prime minister came away with a much worse deal than the one he just persuaded Greek voters to reject. Now he must sell it to his parliament and people.

It takes a special level of incompetence to reject a deal, urge your country to reject it, get them to reject it, and then sign up to a far worse deal. This is what happens when you elect people who are good at rhetoric, but crap at actually making difficult decisions.

Right now, however, it is Tsipras whom Greeks should blame. Consider where the country was a little more than a year ago, when his political party Syriza burst onto the scene by winning Greek elections to the European Parliament. The party argued that, were it not for the supine approach that the country’s then centre-right government was taking toward its creditors, could end austerity measures, return to prosperity and keep the euro. That was not true, but it was attractive.

The equivalent of you can have your cake and eat it also.

They promised we can continue with high level of spending, not pay back our debts and stay in the Euro. They lied.

Times were still very tough for Greece in 2014. In April of that year, however, the country returned to international bond markets for the first time in four years, selling 3 billion euros worth of five-year securities at an interest rate of 4.95 percent. Unemployment, having hit a high of 27.5 percent in 2013, was falling. By April 2015, the latest available figure, the jobless rate was 25.6 percent.

Economic growth had also returned to positive territory, hitting 1.7 percent in the fourth quarter, a rate substantially higher than the 0.9 percent euro area average, according to Eurostat.

I’m not arguing here that all would have been rosy, were it not for Tsipras and Syriza. The euro area needed then, and still needs, to come to terms with writing off Greek debt. Yet it’s hard to call what has happened in Greece over the past year anything but a self-inflicted act of economic vandalism.


Tsipras gambled with his country’s fortunes, betting that the rest of the euro area would be so fearful of creating a precedent for an exit that they would capitulate to his demands and write him a blank check. The strategy reached its apogee with his absurd July 5 referendum, in which he asked Greeks to vote against the latest bailout proposal, while again promising that this would not put Greece’s euro membership at risk. He has now capitulated, apparently aware that he has no mandate to leave the euro. And so his lie is exposed, together with its cost to the Greek people.

Greeks have ample reason to be mad at their euro area partners, but they should hold their own prime minister responsible for destroying their economy in a reckless political experiment. Regrettably, this is not over. As a result of the prime minister’s actions and Europe’s brutal response, Tsipras – – or a successor Greek government — may yet get a mandate to abandon the euro.

It is a lie that will cause immense hardship to many ordinary Greeks. I feel sorry for them.

And sadly things will now probably only get worse.

Iain Martin writes at Capx:

In exchange, for a further bailout and support of Greek banks, Greece will get some debt relief (with debt maturities being extended) once the Parliament has approved the package of tax rises and proposed privatisations.

As security, 50 billion Euros of Greek government assets will be ring fenced, with some sold off and some “reinvested”.

But are there really 50 billion Euros of proper state-owned assets in Greece, in any meaningful sense? And even if there are, who are the buyers for this stuff going to be when it comes to privatisation?

A key point – you need the assets to be there, and you need people wanting to buy them? Would you want to buy a Greek SOE?

Of course, there is almost always someone risk hungry prepared to buy, even in an emergency. That is capitalism. The seller with limited options and a poor record is not in a strong position, however, because anyone buying anything from the Greek government will only take the punt if the risk is minimised, which means them getting it very cheap. Again, that is how markets work. The smart person taking the risk seeks to insulate themselves by getting a fire sale price in the hope that their financial and management skills can unlock value, making them a profit eventually.

You don’t need to be a Marxist to work out where that leads politically in the case of the Greeks, after everything that has happened so far. It probably leads to populist anger in Greece about the country being flogged off cheap in a German-run auction. How popular is that going to be? And how easy will the other reforms be to implement against that backdrop, especially with a government dominated by the hard left, with some of its members out to smash the market system? Not easy, one suspects.

Buyers will be wary that a future Government may renationalise the assets without compensation. Also a risk that Greece may descend to mob rule, and the assets may be made inoperable.

The bottom line is they are unlikely to get the $50 billion they need from any asset sales.

What a disaster this crisis, and the Euro more broadly, has been for the Greek people from the start. There has been poor leadership by Angela Merkel and the Euro elite desperate to save their project, even if it means Greek pensioners weeping outside banks. Meanwhile, hysterical Europhiles have been so dedicated to the rackety EU that they are happy to let Greece “go” (one wonders where they want them to go?) while talking pompously about supposed solidarity. And then the Greeks were driven into the arms of the Marxist Syriza, its rise facilitated by the behaviour of the Euro elite. Now this bunch are together, going to resume a privatisation programme. Good luck. It’ll be a miracle if this deal holds more than a few months.

A year perhaps?

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