Our Opinion: 2015

Still no deal in Greece

Greece is hoping to secure a deal with its creditors to unlock €7bn of rescue package funds by the end of May. But there were few signs of progress this week.

Greece also warned that it is likely to default on €1.6bn of loan repayments to the International Monetary Fund (IMF) due in four separate tranches between 5 June and 19 June.

Bookmaker Paddy Power this week was quoting 11/10 on Greece leaving the euro, the shortest odds ever.

The two sides in this negotiation are far apart on critical issues. Syriza, Greece’s left-wing populist government, came to power promising no tax increases and no cuts to pensions and wages. But Greece’s creditors want immediate cuts to supplementary pensions and a faster timetable for boosting the retirement age to qualify for full pensions from 52 to 67.

Larry Elliot, in the Guardian, summarized the basic problem well by saying “politically, Greece likes the idea of being part of Europe”. All the polls so far show that people want to remain in the single currency. But they don’t want to accept any more of the economic strictures that come with membership. The problem is that ending austerity and staying in the euro at the same time “is not an option”. Will Prime Minister Alexis Tsipras negotiate “a surrender”? And if so, will he be able to sell it to the Greek people?

Perhaps a way out of this deadlock is another election. Unless Tsipras gets a fresh mandate – for a new long-term bailout programme, not just for a stopgap – creditors won’t trust his promises. After the last four months of dispiriting talks, they will continue to think that he will just take the money and fail to push through unpopular reforms. If that’s the case, Eurozone governments won’t be able to persuade their parliaments to disburse new money.

Meanwhile, if Tsipras makes clear to the Greek population that they would have to make compromises if they really want to stay in the euro, he would have a freer hand in negotiations. This would give Tsipras a chance to purge the ultra-left rebels within his Syriza party, who are flat out refusing to entertain even the tiniest compromise.

I am visiting clients in Greece in the middle of June and I know how much they need to receive certainty for their future. After years of economic failure and concern, the country needs to know where its future lies so it can face the difficult challenges ahead.