Dancing on a volcano

8/6/2015

Alexis Tsipras's manoeuvres to placate his radicals while dealing with Greece's creditors look increasingly risky

Alexis Tsipras, Greece's prime minister, knows that time is running short for his country to reach a deal with its creditors. This makes it all the more remarkable that, on June 5th, he made a speech in parliament denouncing the creditors' latest set of proposals. Mr Tsipras stated that “there isn’t a specific deadline for an agreement”. The country’s bail-out monitors (the European Commission , the International Monetary Fund and the European Central Bank) are growing impatient with the Greek government's delaying tactics—most recently postponing a €300m ($337m) debt payment to the IMF, then missing a deadline for presenting a revised set of negotiating proposals to Jean-Claude Juncker, the Commission president. It may be politically necessary for Mr Tsipras to demonstrate his independence from Greece's creditors and postpone a deal until the last minute, but he is taking his country frighteningly close to the edge.

Mr Juncker was long seen in Athens as Greece's only ally among the bail-out monitors, nudging Mr Tsipras towards a deal with promises of a €35 billion aid package over the next seven years. But by now he, too, has grown annoyed with Greek stonewalling. He turned down Mr Tsipras’s request for a telephone conversation at the weekend, then complained publicly at the summit of the Group of Seven (G7) economic powers that the premier had misled the Greek parliament over a draft proposal submitted by the creditors. Mr Tsipras called the suggested measures “absurd”, implying the document was a final offer, when it was in fact not.

The premier’s speech to parliament was intended to soothe his increasingly restive Syriza party, whose extreme left faction opposes any compromise with the creditors. It was received abroad as a fiery rejection of the latest proposals. In fact, it sounded mild by comparison with his previous rants against the “barbarous” bail-out. Mr Tsipras even said he believed an agreement was “closer than ever.” On Monday, he despatched Nikos Pappas, a minister of state and his closest political aide to Brussels, along with Greek technical experts, to resume negotiations.

In case the creditors thought Athens was prepared to give some ground in the talks, Yanis Varoufakis, the combative finance minister, turned up in Berlin the same day. His conversation with Wolfgang Schäuble, his German counterpart, was more friendly than their previous encounter in February, but they still disagreed on how to tackle the crisis. Mr Varoufakis then blasted the creditors’ proposals for a deal, telling a German newspaper they were “the kind of proposals you make if you don’t want an agreement.”

Greece’s own revised proposals should be ready in time for Mr Tsipras’s meeting on Wednesday with German Chancellor Angela Merkel and French president François Hollande. Optimists in Athens argue that if the EU leaders make a firm commitment to restructuring Greece’s bloated public debt, now an unsustainable 180% of GDP, Mr Tsipras will be willing to make concessions on protecting pensions and wages. He has previously called these “red lines that cannot be crossed.”

Even Greeks who normally enjoy the spectacle of Mr Tsipras going head-to-head with Europe’s leaders are growing weary after weeks of brinkmanship. An opinion poll published at the weekend suggested that 45% of Greeks would accept a deal that kept the country in the eurozone, regardless of the cost.

Whatever the premier says, this month marks a tipping point. On June 30th, the current bail-out extension signed in February runs out. There is talk of extending it again, but without an agreement in place, Greece would still be unable to unlock €7.2 billion of desperately needed aid. Moreover, an extension would have to be approved by the Bundestag, the German parliament, where lawmakers are increasingly inclined to blame the Greek government for the continuing crisis.

On June 30th, Greece is due to repay €1.56 billion to the IMF after requesting to bundle four smaller instalments into one big payment. The only other IMF member-state ever to have made such an arrangement before is Zambia, in the 1980s. Some Greek financial analysts fear that with monthly tax revenues shrinking at an ever-faster rate, the government will be unable to meet its obligations to the IMF as well as pay pensions and public sector wages at the end of the month. Mr Tsipras says the latter will be a priority: Greece’s looming cash crunch may prove to be the catalyst for a deal. But Mr Tsipras is now dancing right on the lip of default. One poorly-judged move, and he could take Greece over the edge.

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