Facing abject humiliation at the hands of the German finance ministry, Alexis Tsipras arrived at Sunday’s Eurosummit a broken man.
Having gambled his country’s future in the eurozone on a referendum he might well have expected to lose, the Greek PM found himself in a completely untenable position last Monday. Greeks had overwhelming rejected Europe’s latest proposal, sending the country’s economy into a veritable tailspin and leaving Tsipras to contemplate how he might salvage Greece’s place in the EU without betraying Syriza’s constituency.
It was an impossible task.
On Thursday, Tspiras submitted a "revised" version of the proposal Greeks had rejected at the ballot box. The revisions were insignificant to the point of meaninglessness, leaving voters with a feeling of betrayal. The silver lining was supposed to be that by the end of the weekend, Greece place in the eurozone would be secure, a new bailout program would be in place, and Greek banks would be on their way to reopening by mid-week. But Germany had other plans. Indignant at Tsipras’ brazen referendum call and incredulous at the prospect of putting German taxpayers on the hook for a recap of Greece’s banks, German finance minister Wolfgang Schaeuble (with the implicit blessing of Chancellor Angela Merkel) did not accept Tsipras’ surrender and instead rallied his fellow finance ministers around a new term sheet that outlined a set of draconian measures which Tsipras must now pass through the Greek parliament and enshrine into law by Wednesday or else face a five-year “time-out” (i.e. Grexit) from the EMU.
Likely realizing that Greece faces a euro exit or political upheaval as early as Thursday, Tsipras did his best to fight the good fight on Sunday evening (via Bloomberg):
Greek Prime Minister Alexis Tsipras and German Chancellor Angela Merkel aired differences during meeting they held in Brussels on Sunday on a possible new aid program, Greek government official said.
Tsipras and Merkel were at odds over issues including the treatment of Greece’s debt and the role of the International Monetary Fund in a possible third rescue package, the official told reporters on the condition of anonymity during a meeting of euro-area leaders
French President Francois Hollande, who also attended the meeting with Tsipras and Merkel, took positions more supportive of the Greek government, according to the official.
European Central Bank President Mario Draghi has played a very supportive role with regard to Greece's lenders during aid discussions, the official said.
A battle is taking place over a document sent to the euro- area leaders on the basis of talks earlier among the region's finance ministers.
Tsipras seeking 4 changes to EG note: 1 No IMF involvement 2 Stronger statement on debt 3 Signal to ECB to maintain ELA 4 Scrap 50bn idea— Tom Nuttall (@tom_nuttall) July 12, 2015
But EU leaders now appear to be just as divided as their respective finance ministers with "Ireland, Italy, France, and Cyprus in favour of reaching a deal with Greece today while others such as Portugal have shifted from negative to neutral," MNI says.
Meanwhile, there are questions about what the new timeline means for Greek banks which were supposed to be cut off from their liquidity lifeline on Monday morning.
As MNI reports, "Germany and its countries of influence want Greece to legislate a series of measures and reforms by Wednesday and then begin discussions for a new lending agreement [but] that would deprive Greece from the European Central Bank's Emergency Liquidity Assistance support." Draghi is apparently still supportive, but has "asked the leaders for a 'clear political commitment for progress of the discussions in order to continue' ELA." In other words, "a strong signal must be given to the ECB on Monday in order to maintain the Emergency Liquidity Assistance," MNI adds.
Tsipras' move to begin purging Syriza of those who are likely to oppose the passage of the new term sheet indicates the PM intends to get the measures through parliament even it means selling his soul and leaving the Greek people in a perpetual state of apathetic disbelief. But Greece has run out of time financially if not yet politically, which means some manner of stopgap measures will be necessary to see the country through the next few weeks. "The total amount of funds available for Greece is an issue. There could be a transition period with a small amount under the existing laws of ESM and funds that were transferred from the EFSF to the ESM when the Greek programme ended on June 30," MNI quotes an unnamed official as saying, adding that "another option speaks of a funding of a few weeks so that the ECB and IMF obligations which total E9 billion including interest payments until the end of August, will be paid and Greece would avoid a default."
In short, Tsipras now faces a political and economic nightmare which will either see him morph into his predecessors marking a tragic abandonment of his party's mandate and complete betrayal of everything Syriza stands for or else simply do as we suggested earlier today and resign.