Monday, March 16, 2015

Greece's Alexis Tsipras is coming to Berlin next week

The specter of a disintegration of the eurozone seems to be focusing some minds and panicking others.

Which reaction turns out to be the most sensible depends on the results. The reasoning from either focus or fear that leads to the abandonment of the Hebert Hoover/Heinrich Brüning austerity policies will be the one most likely to save the eurozone.

Angela Merkel has invited Greek Prime Minister Alexis Tsipras to Berlin for Monday of next week for talks with her. (Merkel lädt Tsipras nach Berlin ein Süddeutsche Zeitung 16.März.2015)

In general, Tsipras meeting with Merkel to discuss solutions to the Greek depression is a good thing. As Jamie Galbraith told Roger Strassburg in January (Mark Thoma, 'The Prospects and Consequences of a Possible Syriza Government' Economist's View 01/23/2015; Greek Prime Minister Tsipras to visit Germany Deutsche Welle 16.03.2015):

Speaking now, as I have been all along, for myself here, I've always as a general rule felt that one negotiates with people you disagree with, not with people you agree with, and you negotiate in good faith. It's an obligation on both sides that you negotiate in good faith, otherwise there's no point in having the negotiation. And I would always choose as a negotiation partner a political authority that has real authority. Certainly the leader of Germany is a person in that position, I would say the most successful and dominant political personality in modern Europe. When you're negotiating, you negotiate with the top person. That makes you more likely to have a favorable result than if you negotiate with someone who is in a very weak internal position, and not able to make changes in policy. [my emphasis]
Merkel via the nominally independent ECB has been putting new pressure on Greek officials over the last week to knuckle under to her maximum demands, which would result in keeping the severe Greek depression going indefinitely.

Paul Krugman wonders if Merkel and the other Very Serious People in the EU hierarchy aren't badly misreading their real situation. In Things To Do When You’re Dead To Davos 03/13/2015, he writes:

A few years ago, debtor-country governments might have gone along with austerity in the real belief that it would pay off in the form of a strong recovery. But the alleged technocrats of Brussels have lost all credibility on that front. Furthermore, while center-right governments are in some cases managing to hold on politically by posing as the only people who can do the painful but necessary stuff, center-left parties that take on the role of agents of austerity have imploded, in some cases essentially disappearing from the scene.

That said, as I’ve noted before, individual politicians — center-right especially, but center-left in some cases — may do OK personally even if their policies are wildly unpopular; they can become fixtures at Davos, look forward to appointments at the Commission or other European institutions. This has, I’d argue, acted as a deterrent to feeding the populist backlash voters are ever more ready to endorse.

But the current Greek government isn’t center-left, and its leading figures are never going to reemerge as Davos Man. For them, success must come in the form of support from their own voters rather than an international elite.
And he says of the current situation in which Merkel still seems to be trying to crush Greece into submission, "this is getting dangerous."

The arrogance of Merkel and her subservient Social Democratic partners in European affairs is illustrated in this report, Schulz: Greek ruling coalition 'a mistake' Deutsche Welle 15.03.2015. Martin Schulz is the EU Parliamentary President as is part of the European Social Democratic party caucus. His home party in Germany, the SPD, is the junior partner in Angela Merkel's coalition government. And Schulz is a loyal Angie-bot. The Deutsche Welle article reports:

The German-born president of the EU Parliament, Martin Schulz, says he thinks the coalition of left and right-wing parties in the Greek government is not working. The EU is locked in drawn-out talks over Greek reform. ...

"I think the current coalition of the left party with these right-wing populists is a mistake," Schulz told the Frankfurter Allgemeine. The radical leftist Syriza, the party which swept to victory in January and which Tsipras leads, governs Greece with the right-wing Independent Greeks.

The Independent Greeks leader, Panos Kammenos - Greece's defense minister - on Saturday accused Germany of "interfering" in its domestic affairs. His criticism was aimed at German Finance Minister Schäuble, who earlier warned of a "Grexident," which could push Athens out of the euro.
This is standard political mischief, with Schulz trying to tar Tsipras and his SYRIZA Party with the "right-wing populist" label. SYRIZA has 149 seats in Parliament, two short of a majority. The Anel junior partner party has 13. As I wrote when the governing coalition was formed, both parties are pro-European and both opposed to Merkel's ruinous austerity policies. (SYRIZA makes a governing coalition in Greece/Alexis Tsipras sworn in as Prime Minister 01/26/2015)

If Greece were to dissolve the current government and hold new elections, it's likely that SYRIZA would win a solid majority in Parliament and could govern on their own. In fact, Finance Minister Yanis Varoufakis has suggested that as an option in the last few days, and his German negotiating partners understand that as a threat. They certainly don't want a SYRIZA government with an even stronger domestic position than it has now. So Schulz is just blowing smoke with that rhetorical tack.

Donald Tusk, current President of the European Council, also seems to think (in Krugman's words), "this is getting dangerous." (Interview mit Präsidenten des Europäischen Rats: Tusk befürchtet Katastrophe für die EU Süddeutsche Zeitung 15.03.2015)

Tusk says it would be an "idiotic scenario" to push Greece out of the eurozone.

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