‘Grexit’ averted (for now)

‘Grexit’ has been averted. Some may be asking for how long, since there remains understandable scepticism about the Greek government’s willingness and ability to push through the agreed reforms in the parliament and more importantly to implement them as agreed. When push came to shove, Greece backed down. It seemed that the other eurozone countries were prepared for ‘Grexit’, or at least gave such impression: the plan for a temporary exit of Greece from the single currency floated by the German Ministry of Finance sounded very fanciful, but it might have been a useful negotiation ploy. It was a game of political brinkmanship, and one may perhaps wonder what would have happened if Mr Varoufakis had still been the Greek finance minister.

It is an odd situation. A prime minister, who had been elected on an anti-austerity platform in January, who had continuously sought better terms for the expiring second bailout, who had promised to the electorate that he would obtain a better deal after the expiration of the second bailout, who had called and won a referendum rejecting austerity as legitimation for his position earlier this month, will now have to convince the people of Greece that a more draconian set of agreements reached in Brussels early this morning is a success for him and for Greece. It remains to be seen if Mr Tsipras can pull that off and actually implement the agreement: if he does, it would be remarkable. Given that sections of Syriza – which is a more a coalition of various strands of the left i.e. a movement than a traditional political party – are now in open revolt, Mr Tsipras will need to rely on the opposition parties in the parliament. Whether this would lead to a government of national unity of sorts or to a new election is still unclear, but Mr Tsipras cannot rely on a parliamentary majority from the current coalition.

Trust was lost between Greece and its lenders and it needs to be built again, and it is going to take time. It has become abundantly clear that words are not enough, and trust must be built on actions. The reforms will have to be implemented and the implementation checked, which is a very bitter pill to swallow for Greece, and at any time, lack or delay in implementation, or some other non-compliance, could be met with a threat of ‘Grexit’. It seemed that some if not many eurozone countries were prepared for ‘Grexit’, presumably that meant a detailed contingency plan, and it would be interesting to see what that entailed, as such a plan would be another stick for the lenders to wield to ensure Greek compliance.

The longer the crisis rumbles on, and the longer Greece is cut off from the markets, the less systemic risk and contagion Greece and its banks represent, the better prepared the eurozone is in case of ‘Grexit’, thus the likelier and easier ‘Grexit’ is in case of perceived or actual non-compliance. Predicting the future is a fool’s errand, and if I knew what is going to happen next, I would be a very rich man. ‘Grexit’ has been averted today, but when will politicians meet again to talk about it again? It could be very soon, it might be a while, but I somehow doubt we have heard the last of ‘Grexit’.