Greece plays ‘game of chicken’
Nation, creditors entrenched on issue of debt
As the standoff between Greece and its international creditors continues, the only thing certain is that the country’s financial situation will continue to worsen as each side sticks to its hard-line stance.
Prime Minister Alexis Tsipras said Greeks made a “brave choice” Sunday in voting by more than 61% to reject harsh bailout conditions demanded by the International Monetary Fund, European Central Bank and European Commission (eurozone governments).
It’s up to the creditors to decide whether to soften their demands or stick to their tough terms for massive new lending.
In the interim, Greece’s fiveyear debt crisis appears to be going from bad to worse. The creditors’ strategy “has been counterproductive,” said Sean Egan, chief executive of EganJones, a ratings firm.
“The hard line they have taken has resulted in a run on Greece’s banks, a closing of its banks, a closing of the stock market and a paralysis of Greece’s economy,” Egan said. Last week, Greece missed a $1.8 billion loan repayment to the IMF.
German Chancellor Angela Merkel and French President François Hollande, leaders of the eurozone’s two largest economies, said they are open to negotiations with Greece. Merkel, Europe’s leading advocate for austerity, stressed the importance of Greece taking “responsibility” for reforming its economy, while Hollande adopted a softer tone, saying Europe needs to show “solidarity” with Greece.
Tuesday, representatives of the 19-nation eurozone, where the euro is the official currency, will hold an emergency summit in Brussels to discuss the next steps.
Angelos Chryssogelos, an expert on Greek politics at the London-based think-tank Chatham House, said Greek voters may have underestimated the resolve of the creditors to reach an accord on their terms. “If someone is seen getting preferential treatment, then someone else will want that treatment,” he said, referring to other eurozone debtors such as Ireland and Portugal.
Kevin Featherstone, director of the Hellenic Observatory at the London School of Economics, said it’s in the interest of both sides to reach a compromise because the costs of concessions would be far less than a scenario that sees Greece ejected from the eurozone.
“We’ve had five years of strategic mistakes on both sides,” he said. “What we now have is the epitome of those mistakes. In the next few days, we’re going to see who is going to blink first in this dramatic game of chicken.”