Tsipras and Greeks Come Together as the Eurozone Blinks

Greek Prime Minister Alexis Tsipras put a new, but unspecified, proposal on the Eurozone/Eurogroup table early today, personally phoning EU leaders, including German Chancellor Angela Merkel. Rumors in Europe suggest that the Tsipras proposal is for a 6-month extension in the current accord with the payment of the next tranch of the bailout to Greece to keep it afloat and avoid debt default while talks continue to find a long-term solution that would support Greek economic growth, as well as debt restructuring and repayment. Greece’s Eurogroup met for an hour today and then broke up, saying that Greece's creditors have called for more time to study the latest plan from Athens. Jeroen Dijsselbloem, the Dutch finance minister who chairs the Eurogroup of 19 Eurozone countries, said the aim is to reach an agreement later this week, but that the Greek plan is “a basis to really restart the talks again and really get a result”, he said, although officials need to assess whether “the economic reforms [proposed] are enough for the economy to take off again.” Both the To Vima Greek media outlet and the Guardian report that the new Greek proposal responds to creditors’ key demands, including raising VAT and making changes to the country’s pension system that would eventually raise the retirement age to 67. USA TODAY reported that a senior aide to Claude Juncker, the European Commission president, Tweeted early today that the proposals by Tsipras' government were a "good basis for progress." The potentially significant development comes as European leaders are set to hold an emergency summit in Brussels that is expected to continue late into the night, as both sides seek a way out of the stalemate. And, Giorgos Stathakis, Greece's economy minister, told the BBC that he expects Eurozone governments to confirm later today that the broad outlines of a deal have been agreed, paving the way for vital funds for Greece. ~~~~~ Today's apparent movement toward a Greek deal is clearly a response to political pressures felt by both the EU leadership and the Greek government. The Fiscal Times today reported a source as saying that : “Paris is now moving as far as she can toward compromise with Greece, without breaking contact with Berlin. Merkel is twisting and turning to move toward compromise without provoking a revolt in her party. Rome is aligned with Paris.” The source is quoted as adding that the IMF has turned a little "schizoid" amid these emerging alignments : “The IMF is now speaking with two tongues, one demanding still more concessions, the other saying that Greece needs a deal which substantially reduces the debt it took on to bail out northern European banks....My friends at the IMF tell me they’re completely fed up with the EU for ‘stonewalling' on everything.” ~~~~~ Much of the political problem is in Germany. Spiegel International reported last week that rumors suggested Finance Minister Wolfgang Schäuble was as good as gone; that he had fallen out with Chancellor Merkel and was planning a coup. But, of course, Merkel didn't throw Schäuble out, despite the widening rift in the German government. According to Spiegel, insiders who know Merkel well say "the Chancellor has to answer one of the hardest questions she's had to face since assuming office, namely, should Greece be allowed to remain in the Euro, or should the whole drama be brought to a spectacular close with a Grexit." Spiegel sources say Merkel would like Greece to remain in the Eurozone and is prepared to pay a high price. The political problem is that Schäuble is not -- he thinks a Greek withdrawal from the Eurozone is in Europe's best interests. Merkel's political power comes from her popularity as the backbone of the EU. Schäuble's political power comes from members of the German parliament, who are fed up with having to approve one Greek bailout package after another. Schäuble and Merkel agree that everyone must abide by the rules, but Merkel fears that a Grexit could upset the financial markets in unforeseeable ways. She is also reluctant to risk looking like she prioritized German national interests and undermined the founding principles of the EU. Spiegel says : "It's an emotionally-charged disagreement that reflects the complex relationship between two politicians who do not completely trust one another. Schäuble is something of an éminence grise in the German government : he became a member of parliament in 1972, when Merkel was preparing to graduate from high school....Although she's the one in charge, he intermittently makes it clear that he remains his own man; that he doesn't kowtow to anyone." It will be hard for Merkel to secure majority support if Schäuble opposes her, so her fate is effectively in his hands, according to Spiegel : "Both of them understand the stakes, which is why they are both at pains to keep their disagreement under wraps." Government spokesman Steffen Seibert, meanwhile, insisted that "the Chancellor and the Finance Minister have an excellent working relationship that is both friendly and trusting." ~~~~~ It's hard to sustain the argument for Schäuble's Bundesbank-style austerity when every single statistic and every malnourished, unemployed Greek citizen indicates that the Schäuble-Merkel austerity is the problem, not the solution. On the Greek side, Tsipras and Yanis Varoufakis, his finance minister, have been doing all the compromising since talks started last winter. When Tsipras faced his own political problem as his governing Syriza party started to fracture a month ago, it became clear that he had compromised as much as he could without risking political collapse and a new election. This accounts for the significant change in Tsipras’s tone lately -- his words now are about dignity -- and he sounds as determined as EU officials were early on. Tsipras told the Syriza bloc in parliament last week about increasing regressive consumption taxes : “I would like to make clear that deciding who will pay taxes in this country is the sole competence of the Greek government because the time has finally come for the bill of the crisis to be footed by oligarchs, not workers." On demands for more cuts in pensions and salaries, Tsipras said : "Salaried workers, pensioners and independent professionals won’t foot the bill.” ~~~~~ Dear readers, it seems that just as the Eurogroup/Eurozone and the IMF are beginning to splinter into groups with differing ideas about how to proceed, Greece and its Prime Minister Alexis Tsipras have found their voice. Last Thursday, a Eurogroup meeting in Luxembourg fell apart in less than an hour. Athens had signaled that it was not going any further and the EU blinked. Also, Tsipras had spoken earlier in the day at the St. Petersburg Economic Forum of his determination to “sail distant oceans, uncharted waters, in search of safe harbors.” This was surely in part intended to make the US keep up pressure on the EU to cut a new deal. After formal talks with Tsipras Friday, Russian President Putin said he hoped a proposed pipeline from Russian gas fields to Greece would help Athens service its debt. That was when the ECB announced that it would raise the amount of emergency liquidity available to Greeks banks by $2 billion, to $10.1 billion - the ECB headed by Mario Draghi also blinked. The inflexible Shäuble seems to have been politically out-maneuvered as the EU summit convenes later today. So, while economics always wins out over politics, what we are now watching is the time-honored use of political skill, especially by Tsipras, to pull politics and economics into the same boat. No matter how the Greek question is resolved this week, it marks the moment when the long dream of European union lost its otherworldly glow and reality may finally have set in. The crowds in front of the Greek parliament building since Friday are betting on Tsipras to win the day...and save their future.