July 28, 2015

0

Where it could still go wrong

The probability of a split within Syriza increased yesterday when Panagiotis Lafazanis’ left platform held a rally at a central Athens sports stadium, drawing hundreds of supporters including several senior Syriza party officials. It looked suspiciously like an election campaign rally, says Greek Reporter, where Lafanzanis challenged Alexis Tsipras. He made a leadership appearance in a crowd waving 'No' banners and in his speech where he basically used the same rhethoric as before the election, Lafazanis said the government should carry out its anti-austerity mandate, and respect the result of a July 5 referendum in which Greeks overwhelmingly rejected creditor demands for more cuts. It looks like we are up for another showdown, this time inside Syriza, which could lead to elections with the Left Platform going a separate way, and where Grexit is the dividing line. The likelihood of this scenario depends on whether the Left Platform remains a minority in Syriza, as Tsipras wants it, or whether there is a momemtum here, as seen yesterday. With the troika talks starting in Athens now, watch out for developments. 

Tsipras called for an emergency party convention as soon as possible at Syriza's political secretariat yesterday. According to Greek Reporter there are three questions he would like an answer to: Whether the government did everything it could or made mistakes, whether there was a realistic and viable alternative and what that would look like, and finally, what should the Left do with the power it possesses. Lafanzanis, on the other hand, prefers a congress similar to the founding congress in 2013, To Vima reports. Syriza’s central committee will decide on the matter today.

The Varoufakis conspiracy, meanwhile, continues to command much attention. The FT has now obtained the official transcript, which has some further details about how Varoufakis sees the crisis evolving from now - which is the bit that interests us the most. He predicts that the Greek parliament will now do whatever is asked of them, but the real obstacles are the creditors. We had a hint of that in the Kathimerini version, which we discussed yesterday. But the official transcript has a lot more details of how Varoufakis views the complex relationship between Wolfgang Schauble, Angela Merkel, the IMF and the European Commission. The opponents here are Schauble and IMF on the one side, and Merkel and the Commission on the other. 

"... at the end of the day, the ESM and the IMF will not be able to coordinate so as to provide that huge loan. Not that I want that huge loan to be provided…but I think there is a major battle between the institutions, the ESM, the European Commission, the IMF and Dr Schäuble.

Dr Schäuble and the IMF have a common interest: they don’t want this deal to go ahead. Wolfgang has quite clearly said to me he wants Grexit. He thinks this extended attempt is unacceptable. This is the one point where we see eye to eye. I agree with him, too, for completely different reasons, of course. The IMF does not want an agreement because it does not want to have to violate its charter again and to provide new loans to a country whose debt is not viable. The Commission really wants this deal to go ahead, Merkel wants this deal to go ahead. So what has been happening over the last five months is now projected into the very short term, only it is on steroids – that is this complete lack of coordination between the creditors." 

Talks with the institutions, meanwhile, started in Athens and some logistical questions have been solved, according to Kathimerini. Talks will take place in the hotel where the technical staff are staying. They, in turn, have access to the accounting office, the finance and the economic ministry. The institutions also wished to access other ministries, but the government is keen to limit access.

The press also found a new name for the institutions, Quadriga, thanks to the addition of a new member, the ESM. Whoever invented that name, it is highly symbolic: Quadriga is a chariot with four horses, a symbol of victory, also to be found on top of the Brandenburger Tor in Berlin.

Our other stories

Today we also have stories on the debate over the future of the eurozone; looking at the handling of capital controls; whether underlying inflation is turning around; the IMF and the eurozone crisis; and France's decoupling from Germany.

Eurointelligence Professional Edition

For premium access, please log in or register 
for a free 3 day trial access to the Eurointelligence Professional edition. The best independent intelligence on the eurozone in a fast and easy to read format.

A message from Wolfgang Münchau

Welcome to the eurointelligence.com homepage.

Since 2006 we have been providing our readers from central banks, European and international institutions and the financial sector with our daily morning newsbriefing, each morning, at 9am CET, Mondays to Fridays. We are independent from governments and institutions, so you get our honest, sharp and frequently humorous take on the news and the debate. The subjects we are currently focusing on are all the issues relevant to the eurozone - the discussion about Greece naturally, on quantitative easing and its various effects, the incipient eurozone recovery, relations between the eurozone and the world, as well as important developments in member states, with a repercussion on the rest of the eurzone. 

Many people were surprised by the re-emergence of the eurozone crisis. Eurointelligence readers would not have been. We have given our readers an honest assessment of what and what has not been resolved, at a level of a detail that has no match in the published media. Eurointelligence is the place to go to keep ahead of events in the eurozone.

I would like to invite you to register for a free 3-day trial, without commitment, so you can judge for yourself.


Wolfgang Münchau
Director Eurointelligence