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| Greece bailout talks: an intractable crisis with three possible outcomes | Greece bailout talks: an intractable crisis with three possible outcomes |
| (about 4 hours later) | |
| The threat of Greece welching on its debts by the end of the week is concentrating minds. After a mini-summit in Berlin attended by the heads of the European commission, the European Central Bank and the International Monetary Fund, the so-called troika is preparing a fresh bail out offer. | |
| Related: Greece's creditors rush to finalise 'take it or leave it' debt offer | |
| Alexis Tsipras’s government was denying all knowledge of a new plan to break the deadlock, but one thing is certain: this Greek drama can end in only one of three ways. | Alexis Tsipras’s government was denying all knowledge of a new plan to break the deadlock, but one thing is certain: this Greek drama can end in only one of three ways. |
| Option one is that Greece leaves the euro, by accident or design. Greece could decide that the troika’s terms are too harsh. The troika could lose patience and throw Greece out. | Option one is that Greece leaves the euro, by accident or design. Greece could decide that the troika’s terms are too harsh. The troika could lose patience and throw Greece out. |
| Related: Greece vows not to be blackmailed by creditors after emergency summit - live updates | Related: Greece vows not to be blackmailed by creditors after emergency summit - live updates |
| Euro exit could prove the least bad economic choice for Greece, which would devalue and write off a large chunk of its debt. Life would be tough, but the pain might be less prolonged than under seemingly endless externally-imposed austerity. | Euro exit could prove the least bad economic choice for Greece, which would devalue and write off a large chunk of its debt. Life would be tough, but the pain might be less prolonged than under seemingly endless externally-imposed austerity. |
| A Grexit now would probably cause fewer economic shockwaves than it would have done two or three years ago, but there would still be knock-on effects on Europe and the wider global community. The political ramifications would be more serious. Greek departure would embolden anti-austerity parties across Europe, most notably Podemos in Spain. It would be the first setback to ever-closer European integration over six decades and would cast a shadow over David Cameron’s renegotiation of Britain’s EU membership . | A Grexit now would probably cause fewer economic shockwaves than it would have done two or three years ago, but there would still be knock-on effects on Europe and the wider global community. The political ramifications would be more serious. Greek departure would embolden anti-austerity parties across Europe, most notably Podemos in Spain. It would be the first setback to ever-closer European integration over six decades and would cast a shadow over David Cameron’s renegotiation of Britain’s EU membership . |
| Option two is a Greek cave in. Tsipras has been trying to ride two horses at once : the desire of Greek voters to both end austerity and stay in the euro. The moment is rapidly arriving when Tsipras has to decide which of the two goals is the more important, because it looks as if he can’t achieve both. But if Tsipras is going to capitulate, he is showing little sign of it. The late-night meeting in Berlinsuggests the troika is worried. Angela Merkel hosts a meeting of the G7 in Bavaria this weekend and does not want it to be overshadowed by Greece. | Option two is a Greek cave in. Tsipras has been trying to ride two horses at once : the desire of Greek voters to both end austerity and stay in the euro. The moment is rapidly arriving when Tsipras has to decide which of the two goals is the more important, because it looks as if he can’t achieve both. But if Tsipras is going to capitulate, he is showing little sign of it. The late-night meeting in Berlinsuggests the troika is worried. Angela Merkel hosts a meeting of the G7 in Bavaria this weekend and does not want it to be overshadowed by Greece. |
| All that points to option three, a good old-fashioned euro fudge. This would involve Greece’s creditors watering down their austerity demands and providing the bridging finance that would allow Tsipras to meet the series of debt repayments due this summer. This would provide the breathing space for a referendum to be held on whether the Greeks believe yet more austerity is a price worth paying for staying in the euro, and for negotiations on the big long-term issue: the need for some of Greece’s debt to be written off. Athens would give a solemn commitment to step up the pace of economic reform; the troika would say that any backsliding will result in the money being cut off. | All that points to option three, a good old-fashioned euro fudge. This would involve Greece’s creditors watering down their austerity demands and providing the bridging finance that would allow Tsipras to meet the series of debt repayments due this summer. This would provide the breathing space for a referendum to be held on whether the Greeks believe yet more austerity is a price worth paying for staying in the euro, and for negotiations on the big long-term issue: the need for some of Greece’s debt to be written off. Athens would give a solemn commitment to step up the pace of economic reform; the troika would say that any backsliding will result in the money being cut off. |