Reva Bhalla: Hello my name is Reva Bhalla and today I am joined by my colleague, Adriano Bosoni, who is calling in from Frankfurt, Germany, to discuss the latest in the Greek saga. So, Adriano another big day. We had the Greek government push off its International Monetary Fund payment to the end of the month, which effectively buys them another three weeks or so of negotiations with its creditors. At most, what can we expect in terms of a deal by June 30 and do you expect a deal?
Adriano Bosini: Well, the Greek crisis has entered a purely political phase. It does not mean that the financial details are not important, but both parties have realized that it is time for a political agreement. That having been said, the best they can hope for at this time is a temporary agreement, some kind of settlement that provides Greece with just enough money to make it through the summer without defaulting. You know that Greece has to face substantial debt repayments to the European Central Bank in July and August. So if they can solve that problem, then it would be a temporary victory for the European Union. That, however, does not mean that Greece’s problems are over. Actually it would be the opposite, I would say.
Reva: Right, so even if we do get a temporary agreement and I agree with you that is the most likely scenario here, that is still a situation in which the Greek government is finding that any revenue that it raises is going primarily to its creditors, not to the Greek people. You have persistently high unemployment, very dire economic situation overall. Under those circumstances, how can a Syriza government survive?
Adriano: We have to keep in mind that this is a government that was elected on a platform to keep Greece in the eurozone, to stop introducing austerity measures and to renegotiate the country’s debts and it cannot achieve all of those goals simultaneously. At some point the Greek government will feel that it no longer has an electoral mandate to keep introducing the measures that its lenders are requesting. So this is leading to early elections. It could happen next month, it could happen later in the year when the European Union and the International Monetary Fund push for a more comprehensive agreement. But, in the current situation, the government is so fragile and so fractured internally that there is no way it can hold for longer if it continues to be under such a massive amount of pressure from the outside.
Reva: So, if you are sitting then in the camp of creditors and you are negotiating even a short-term deal, an extension of the current bail-out that gets them through the summer, how exactly do you even negotiate that deal knowing that a) any of the promises that the Greek government is making are likely not going to be kept and b) you may not even have a Greek government to actually implement any of the reforms that are part of a deal?
Adriano: From the creditors’ point of view it is interesting that we have seen a change of position, particularly coming from Germany. Germany started the negotiations with a heavy focus on the fiscal part of the problem and the financial impact of a Grexit. We saw members of the German government saying that if Greece left the eurozone, the financial or economic impact would not be that big. Over time, Germany changed its position to a more geopolitical approach, becoming increasingly worried about the geopolitical consequences of a Grexit, which run from Greece facing significant social unrest and political fragility, Greece turning to Russia for help, Greece becoming a harbor for extremist groups. So, we have seen the Germans and to a certain extent the Americans worry about the geopolitical implications of a Grexit. And from the Greek point of view we could see a very interesting situation. There is a chance that the austerity measures that are being proposed to Greece cause a break in the Greek parliament and some members of the ruling Syriza party decide not to vote for it and at the same time some members of the opposition decide to support it. So there is a chance that the Greek crisis ends in a situation where the deal is approved but the government collapses anyway. I don’t think that Prime Minister Alexis Tsipras would like to be a hostage to the opposition so if he does not get enough votes form his own people he will probably call early elections.
Reva: And that is of course a scenario that the Germans are looking at very closely and as you say, the weight right now is really behind that geopolitical argument: that it is going to be too risky to risk a Grexit at this phase of the crisis and so when Germany in stark contrast to the Greek situation actually has some political room to maneuver, Merkel has the ability to manage dissent within her coalition, it is really on Germany to make the sorts of concessions to allow a deal to move forward. Even then if we get these short-term deals to last us a few months more, that does not at all preclude a Grexit beyond this year. Would you agree?
Adriano: Exactly. Greece is in a deep crisis. Greece has massive levels of unemployment that will not go back to the pre-crisis level any time soon. Greece still has a large part of its population that lives on a couple of hundred euros per month. Greece still has an economy that is in a very deep recession and will not improve any time soon, so even in the likely case that we see a temporary deal now or maybe a more comprehensive deal later in the year, there is still fertile ground for protest parties to emerge. There is still fertile ground for political leaders questioning Greece’s membership in the eurozone, questioning Greece’s debts so the crisis is far from over and we will continue to talk about Greece in 2016 and beyond because the danger of a Grexit will not disappear any time soon.
Reva: And not just Greece. We have elections approaching in 2017 for both France and Germany where Euroskeptical parties in France are talking about renegotiating their position in the eurozone. We have the United Kingdom trying to renegotiate its position within the European Union. Other establishment and anti-establishment movements in Spain and elsewhere all questioning the European framework overall. So this is a much bigger problem that Germany is going to have to contend with. So, while the Greek crisis is going to certainly absorb a lot of attention as it should be at this phase, there is still much more to come in this overall European crisis that I am sure you will be watching closely for us, Adriano. Thank you, Adriano for your insight today and thank you all for joining us.
