Credit: Steve Swayne

The problem with Greece's negotiating strategy

Tsipras has done some wild things to get what he wants, thus far to no avail. Is he smart, stupid or just plain crazy?

by Adam Gale
Last Updated: 13 Jul 2015

Greek PM Alexis Tsipras certainly does like to keep people on their toes. Since storming out of bailout negotiations and calling a snap referendum, he’s denounced the country’s creditors as ‘blackmailers’, while simultaneously sending rather sweet letters to those same creditors, effectively accepting their original terms. Talk about mixed messages.

European leaders are having none of it. ‘We see no further grounds for talks at this point,’ said Eurogroup president Jeroem Dijsselbloem. ‘We will simply await the outcome of the referendum and take into account the outcome of that referendum.’

Tsipras had requested an extension of the old bailout until after the referendum, and then a fresh bailout under similar terms to the last one, but with delayed implementation of pensions reforms and tax exemptions for the Greek islands.

All things considered, it can’t have been surprising to Tsipras that Europe didn’t bite. So what’s his game, and how well is he playing it?

Bargaining chips

Tsipras has repeatedly said the reason for the referendum is to return to negotiations in a stronger position. How can Europe possibly deny the democratic will of the Greek people? They’d have to offer concessions, right?

If Tsipras’ end game really is a bailout with terms like the ones he and finance chief Yanis Varoufakis have been trying to get for the last five months, then this is a terrible way of going about it.

Even if it worked, the entirely predictable damage already done to the Greek economy by failing to extend the bailout is far, far worse for Greece than accepting the creditors’ original terms in February would have been. Its banking system is in ruins and its markets are grinding to a halt. It could take years to get them moving properly again.

Besides, there’s no reason to think that the creditors will make any substantive change to their proposals in the event of a no vote. It’s possible they’ll give some ground out of sensitivity to the Greek people, but they absolutely can’t appear to back down, and their willingness to do business with Syriza is now virtually non-existent.  

House of Cards

That, however, might be entirely the point. Tsipras’ mixed messages appear to European leaders as erratic, unreasonable and potentially disingenuous. They don’t want to deal with Syriza, and their own populations may not let them anyway.

What if the Greeks figured out that the creditors would never accept a deal they could live with? What if they deliberately set out to make any deal impossible, in such a way that to their own people, it would seem the fault of the unbending, cruel creditors and not their own government?  

Defaulting on all its loans and leaving the Euro would arguably serve Greece’s long term interests better than staying in under the twin burdens of a debt nearly twice as big as its GDP and enforced austerity keeping it in perpetual stagnation.

If Syriza did decide that a clean slate was its best option, it would need to convince the essentially pro-European Greek people that it had tried its best to come to a deal and keep them in the Euro, but that Eurogroup obstinacy got in the way.

‘They have closed our banks for the sole purpose of blackmailing what? Getting a 'Yes' vote on a non-sustainable solution that would be bad for Europe,’ Varoufakis said in a TV interview. The blame for the current catastrophe is clearly being placed at Europe’s door.

If – and this is of course speculation – this is what Syriza actually wants under the present circumstances, it could be quite a clever way of going about it. But it’s risky. The Greeks may well end up blaming their leaders for the current ruin, not Angela Merkel.

Ultimately, whatever Tsipras et al really want, going down the referendum route is a big gamble. If the Greeks vote yes to the creditors’ earlier bailout packages, Syriza is finished, and Greece will be far worse off than it would have been had they never been elected.


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