Greece is creating room for deal with euro zone

February 10, 2015

By Pierre Briancon

The author is a Reuters Breakingviews columnist. The opinions expressed are his own. 

Greece has the choice between a climbdown and a showdown. It may be leaning towards the former. After two weeks of scaring financial markets and raising the hackles of its euro zone partners, the country’s inexperienced leaders go to Brussels this week with proposals that can at least be the basis of a reasonable discussion.

The plan is a far cry from the inflamed rhetoric which Prime Minister Alexis Tsipras deployed in parliament just two days ago. Instead of pouring universal scorn on the euro zone bailout programme, as he did during the campaign that put his Syriza movement in power, the Tsipras government now seems ready to accept part of it. Even a large part, judging by news it would accept about 70 percent of the bailout plan monitored by the infamous troika – the European Commission, the International Monetary Fund and the European Central Bank.

It is unclear how such metrics can be applied to a complex, granular programme. But this is at least an indication that, as Finance Minister Yanis Varoufakis put it, Athens doesn’t want to “tear up the memorandum.”

However, Greece is also pushing demands in line with Syriza’s programme. It wants to run a smaller primary budget surplus, agree a debt swap with the country’s creditors, and confirm measures already taken to deal with the “humanitarian crisis” brought upon by the austerity programme.

Greece’s European partners will try to assess this week whether Tsipras is serious enough to do business with. Sceptics, led by Germany, will want to know exactly how the primary surplus will be maintained if Athens rolls back state-sector reforms for “humanitarian” reasons. And Berlin will want to make sure that any debt swap deal is cosmetically designed to avoid uproar in the German parliament.

Tsipras will have to make concessions if he wants his country and his banks to be funded beyond the official end of the current bailout at the close of the month. The problem is, he will then have to explain to Greeks how that squares with the platform on which he was elected.

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It is a game of poker, surely? And the Troika didn’t blink previously when Greece had the opportunity to do far more damage than now so Greece is unlikely to get much softening. But they might get some for two reasons. One is that excessive austerity and joblessness is getting the EU a bad name, and EU leaders like anyone else prefer popularity. The other is that a country with a flourishing economy is obviously better able to pay off its debts. If Syriza made a convincing case for both saving and spending money in the right places they might emerge with a face saving agreement that would also do some good.I remain optimistic!

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