Article published by José Alberto León Alonso in El Día on 07/05/15.
Just two weeks ago I was asked how I thought the negotiations between Greece and the Institutions (formerly Troika) would end, and I responded that I believed they would reach an agreement, since it was reasonable, given that both would benefit from the agreement and both would be harmed by the disagreement. But then he added, “but, yes, the Greek government has a point of madness that can throw everything overboard.” Well, it seems that point of madness has finally prevailed and brought his country to the very brink of the abyss.
Its President, Tsipras, in a gesture of enormous political cowardice, has decided to use his people as a shield and take refuge behind them by calling a referendum, due to the difficulties of selling at home that what was promised during the electoral campaign (the end of adjustment) was going to remain in vain. He did it with the support of his party, that of the ultranationalists and that of the neo-Nazis. What travel companions. It is not that referendums are bad, but they have to pose a clear question that ordinary people can understand, and the referendum question refers to a very complex text full of technical details that the vast majority of Greeks will not be able to understand. If we add to that that this proposal has already been withdrawn, it turns out that the Greeks are being asked their opinion on a proposal that they do not understand and that no longer exists. What nonsense.
In reality, the Greek government has no interest in knowing what its people think about the negotiations with the EU, but rather wants to save its own head. He wants them to get him out of the dead end he has found himself in. Hence the chaos of contradictory messages and schizophrenic behavior that Tsipras has engaged in in recent days, one day showing himself willing to accept almost all of the Troika's measures, and describing them as blackmail a few hours later. The entire ceremony of confusion that has been unleashed since the negotiations were broken by calling the referendum is nothing more than a maneuver to foist its own failure on the Greek people, making them responsible for a decision that could plunge the Greeks into the most absolute misery.
The worst thing about the matter is that the negotiations were close to an agreement and the discrepancies were minimal, but for the Greek government its electoral interests have taken precedence over those of its people. His negotiating strategy was to demand a ransom to stop threatening his suicide and the debacle in Europe. But Greece no longer represents a serious threat to the rest of Europe. The bad news is that Tsipras has not found out. He seems to sincerely believe that Europe needs Greece as desperately as Greece needs Europe, and that is not the case. The new ability of the European Central Bank (ECB) to issue money to support banks and governments has reduced the danger of a Greek contagion to insignificance. Its sovereign bond purchasing program has transformed the ECB from a passive observer of the euro crisis to a suitable lender of last resort, so that the ECB can ensure that the eurozone does not suffer financial contagion.
What will happen now? Whatever happens with the referendum, capital controls in Greece are here to stay. Once the corralito is imposed, it will be difficult to lift it, since the Greek banks will continue to depend on the possibility of an agreement and this will not be quick, and the Greeks would rush to withdraw all their money from the banks as soon as the capital controls are lifted.
If the “no” wins, the ECB will stop providing liquidity and the corralito will tighten and, despite this, some banks will fail. Savers will lose part of their deposits, since neither the other banks nor the Greek state will be able to guarantee them. Without euros in the country, without credit to grant, many companies will begin to fail, and pensioners and public employees will stop receiving pay. The Greek government will have no choice but to leave the euro (and the EU) and create a new currency; or remain nominally in the euro (and in the EU) by issuing promissory notes that would become, in effect, a second currency that would be devalued by no less than 50% with respect to the euro. So to all of the above, rampant inflation would be added.
The “yes” is not much more flattering. The country would be plunged into a political vacuum for a time, since the normal thing would be for elections to be held again with a very uncertain result. It is likely that during this time the ECB would maintain financial assistance, but, given the prevailing lack of confidence, it would be limited to preventing bank failure, not the corralito. And signing up for a new rescue program will take time. The economic situation has deteriorated so drastically that previous calculations are no longer useful. And finally, this new bailout would have to be approved by at least six European parliaments, and the circus put on by the Greek leaders this week will not make it easy. The problem is no longer the referendum, it is that the minimum trust necessary to negotiate has been broken and it will not be easy to rebuild it.
Syriza has led its country into the abyss with its negotiating incompetence. He could have closed an advantageous agreement months ago, but with his strategy he is going to turn Greece into a failed state and the second developed country in history (after Argentina) to regress to “developing” status. Experiments in economics always end in poverty. I think Tsipras will end up taking Greece out of the euro and the EU. After a brief period of tension in the markets, it will be good news for Europe and for Spain because it will be a catalyst to accelerate the economic, financial and fiscal integration of the eurozone, with sovereign debt mutualization included. If so, the Greek tragedy will ultimately be positive for Europe. For the Greeks it will be a disaster. That's what happens when you elect a crazy preacher as President.
U!
