When it comes to the future of Greece in the Eurozone, the confusion has never been greater thanks mostly to the actions of one entity: Greece itself.
While on one hand the Greek promises it will never default - a step which crushes all of its negotiating leverage before any negotiations even take place - and the state pillages its pension and other public funds to repay the IMF (money which is then promptly sent to Kiev to repay Gazprom), at the same time the new Greek government, seemingly in a desperate bid to remain in the public's good graces and pretending to put the very population whose funds it takes to repay the IMF, takes a hard line approach toward all European demands if only internally, while engaging in none of the reforms demanded by Europe (this has been the case for the past 5 years).
And then there are the negotiations.
According to Germany's Frankfurter Allgemeine Sonntagszeitung, cited by Reuters [12], the bankrupt nation shocked at Eurozone officials with its failure to outline plans for structural reforms at last week's talks in Brussels where the Greek representative behaved like a "taxi driver".
As previously reported, in a meeting of deputy finance ministers on Thursday Athens was given the latest "ultimatum" and told it has a six working day deadline to present revised economic reform plans before euro zone finance ministers meet on April 24 to consider unlocking emergency funding to keep Greece afloat.
From Reuters:
Euro zone sources told the Frankfurter Allgemeine Sonntagszeitung that they were disappointed and shocked at Athens' lack of movement in its plans, and in particular its reluctance to talk about cutting civil servants' pensions.
The mood between Greece's leftist government and its euro zone partners, especially Germany, has deteriorated in the last few weeks, with personal recriminations flying between ministers and calls from Athens for Berlin to pay war reparations.
It gets better: apparently after five years of delaying the inevitable, Greece has finally realized that the endgame has arrived, and is acting appropriately. According to FAS, at last week's meeting the Greek representative just asked where the money was "like a taxi driver", according to sources, and insisted his country would soon be bankrupt.
One can only imagine the stunned looks on Eurocrats' faces. Their response: creditors do not believe this is the case and that it would be a domestic political issue if Athens is unable to fully pay salaries and pensions. Well, yes: it would be a domestic issue if civil war breaks out in Greece. The question si what happens when it becomes an issue for the Eurozone, whose poorest member is now so hopeless it is unafraid to act like a "taxi driver"
Which brings us to a second Reuters piece, [13] one whose purpose it appears is to set the stage for the Grexit. According to Reuters' Paul Taylor, "even if it survives the next three months teetering on the brink of bankruptcy, Greece may have blown its best chance of a long-term debt deal by alienating its euro zone partners when it most needed their support."
Prime Minister Alexis Tsipras' leftist-led government has so thoroughly shattered creditors' trust that solutions which might have been on offer a few weeks ago now seem out of reach.
...
Tsipras' denunciations of EU-prescribed austerity, demands for German war reparations and cosying up to Russian President Vladimir Putin, and Varoufakis' foot-dragging on reform negotiations and initial calls for a "haircut" on Greek debt, have dried up the reservoir of sympathy for Athens.
Since the ECB has made it clear it will not backstop Greek debt indefinitely, and affords it just enough ELA to keep the banks fractionally solvent as the Greek deposit run accelerates ever more, private creditors have no backstop when it comes to buying Greek bonds. As a result, there is no private demand for Greek debt. And as Reuters adds, since Greece is stalling on its program and lacks market access, the only way it could pay off 24 billion euros owed to the IMF and redeem 27 billion euros of bonds held by the ECB would be for the euro zone's rescue fund to lend it the money.
That in turn would require euro zone governments to convince their parliaments to risk more taxpayers' money than the roughly 170 billion euros they have already lent Greece in two bailouts totalling 240 billion euros.
Many economists and euro zone officials believe Athens will anyway need a third bailout of around 30 billion euros this year, even though Tsipras insists Athens does not want that.
Unfortunately for the Greek, as much as the new government wants to avoid talkin about it, what is virtually assured in the coming weeks are capital controls in Athens: "Tsipras had put himself in a near impossible position by making election promises incompatible with keeping the confidence of Greece's creditors. He needs to change the politics fast to have a chance of fixing the economics without resorting to capital controls, paying civil servants with IOUs or defaulting on foreign governments and being forced out of the euro zone, they argue."
However, as noted earlier, for Greece it is now too late to roll back the rhetoric, because even Europe is shocked how now that it has lost everything, Greece would still rather hold out hope that someone will come to its rescue.
A referendum asking Greeks if they want to stay in the euro at the price of painful economic reforms, or a quick coalition change to bring in pro-reform centrists, may be his best options, even if they split his Syriza party.
Greece's official creditors meanwhile are torn between wanting to keep it in the euro zone to avoid the precedent of a country exiting, and fearing that if Tsipras manages to roll back austerity and secure debt relief, he could embolden like-minded political forces in Ireland, Portugal and Spain. "So they want Greece to prosper and stay in the euro while at the same time wanting the new administration to fall on its face and become an object lesson for other electorates who may be toying with the idea of rebellion," Daly said.
Which , as they say, "is impossible." As is preserving the myth that the latest monetary union experiment will end in anything but tears,
