Monday 24 October 2016

It's Europe that has suffered a reputational catastrophe in Greece

Ambrose Evans Pritchard

Published 04/07/2015 | 02:30

People queue to buy groceries in a shop in Athens
People queue to buy groceries in a shop in Athens

Oxi Day has totemic significance in Greece. It commemorates the defiant Greek 'No' to Mussolini's ultimatum in 1940, and the heroic acceptance of war against a bigger military machine.

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It is the same word that will top the ballot sheet when Greeks vote in a snap referendum tomorrow on creditor demands. Prime Minister Alexis Tsipras is not shy in evoking the same spirit of wartime resistance.

His speech to the nation this week was peppered with talk of ultimata. He accused "extreme right-wing circles" of forcing the closure of the Greek banks and the imposition of capital controls through liquidity asphyxiation.

He lashed out at "authoritarians" in charge of the IMF and EU institutions.

He spoke of attempts to blackmail the Greek people.

He vowed to campaign against the creditor package, deeming it the "destruction of Europe".

Where this will take him, and take Greece, is anybody's guess. Polls show the two sides neck and neck.

We can already see that the EU itself has suffered a reputational catastrophe on several fronts. This is of far greater importance than the daily twists in Athens.

It has brought about a state where a member of the eurozone has become the first developed country to default to the IMF.

This default is doubly shameful given that the original IMF-Troika loan in 2010 was not intended to save Greece. The extra debt was imposed on an already bankrupt Greek state to buy time for the euro, against Greek interests.

Leaked documents leave no doubt the real purpose was to save monetary union and the European banking system at a time when the eurozone had no defences against contagion.

It is too soon to conclude that Syriza will buckle to creditor demands. It is certainly hard to read the real intentions of Mr Tsipras.

His stand is starkly at odds with the letter he sent EMU officials and the IMF on Tuesday that seemed to make big concessions. But nothing is ever what it seems in this weird drama.

"Those who say we have a secret plan for Greece to exit the euro are lying," he swore, with an impressively straight face. He denied that a No vote implies Grexit, knowing few Greeks are yet willing to take such a step.

Yet one might suspect that he and Syriza's inner circle concluded in April that they could not do business with an EMU regime that acts solely as the enforcement arm of the creditors.

They may have concluded they would do better to default and restore a Greek sovereign currency. If so, they cannot admit it. They must make it appear that the decision was forced on them.

Syriza officials are fully aware that the likely consequence of a No vote would be a parallel currency - or IOUs - along with the nationalisation of the banks. Such action implies a quick return to the drachma.

The Greeks would continue to insist that the country remains a member of the euro, with full legal rights - blaming the creditors and EU bodies for acting illegally. Only by doing so could they ensure that the full losses from Grexit fall on the ECB and the EMU bailout funds, while the assets of Greek citizens remain protected in foreign accounts.

If you were of a suspicious mind, you might wonder whether Mr Tsipras has not lured European leaders and officials into a legal trap.

His Byzantine negotiating tactics may make perfect sense after all. (© Daily Telegraph, London)

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