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Two options for Greece’s government: Capitulate to Lenders or Early Elections

The Eurogroup meeting on Thursday ended for Greece as expected: highly stubborn creditors putting immense pressure on Greece to legislate austerity measures that will be implemented in after 2018 now. The finance ministers of eurozone demand with superabundant insolence from Greece what they would never do in their own countries: to present measures ensuring budget targets set for 2018 and the following years. And this despite the government objections as the Greek Constitution forbids such actions.

The creditors do not care. It is not in the logic of the technocrats of the International Monetary Fund or the small German accountants to care about constitutions and other democratic procedures. Seven years of bailout agreements have shown that constitutions and democratic procedures can be nicely stampeded in the name of economic crisis, austerity, debt repayment, the hijacking of the weak by the powerful.

Weren’t strict austerity measures imposed with sole presidential degrees and ministerial decisions replacing the Parliament? Wasn’t the first bailout Prime Minister George Papandreou ousted by the creditors in November 2011 and replaced by a non-elected prime minister who had the sole duty to implement the creditors’ demands? Wasn’t the result of the Referendum in 2015 simply ignored when creditors put the knife on the throat of Prime Minister Alexis Tsipras snarling Grexit now and at any cost?

Two years earlier, on 25. January 2017,  SYRIZA was celebrating its huge victory in the elections. Two years later, on 26. January 2017, SYRIZA is at the same point his predecessor Antonis Samaras was when in November 2014 negotiations for the program review deadlocked. Prime Minister Samaras surrendered to pressure and decided to throw the hot potato of the second bailout in the hands of his successor.

Two years later SYRIZA finds itself in the same position: the second review of the third bailout program is stalling, creditors demand the adoption of more austerity measures. The blackmail mantra sound the same as many mantras before: adopt additional austerity measures like more pension cuts, lower tax allowance for employees and pensioners and crash any leftovers from labor rights or see the end of the bailout program.

These additional measures are required by the International Monetary Fund (IMF) as a condition to remain in the program. The European lenders have endorsed them unanimously as they did about the necessity of the Fund being part of the Greek program.

Eurogroup head Jeroen Dijsselbloem said on Thursday that the IMF’s presence in the program was “not negotiable at this point”.

The German Christian-democrats, the party of Chancellor Angela Merkel and finance Minister Wolfgang Schaeuble, went even further and threatened clearly: Without the IMF, no German aid for Greece.

Christian von Stetten, CDU MP and businessman, told economic newspaper Wirtschaftswoche that if the IMF considers the Greek debt unsustainable then there should be no more financial assistance for Greece. “If the IMF leaves, Germany should leave too.”

What the 46-year-old CDU hardliner von Stetten did not bother to mention was that the IMF considers the Greek debt as “unsustainable” because of the long-term 3.5% Primary Surplus target von Stetten’s party and Schaeuble imposed on Greece in the third bailout agreement.

But this is peanuts for populist von Stetten, a fierce supporter of Grexit, temporary as Schaeuble proposed or permanent. However, it is also indicative for Schaeuble’s stance in the review negotiations.

What now?

According to reports, Greek finance minister Euclid Tsakalotos went to Eurogroup in Brussels with two letters outlining proposals for the program review. “But creditors said they were insufficient. As a consequence, the creditors’ experts can still not go back to Athens to prepare the second review agreement.”

They can come and go and play with time and the Greek government.

The creditors’ formula is clear:

Without additional austerity measures and without the IMF there is no conclusion of  program review.

No conclusion of program review means no new bailout tranche to Greece.

KTG wrote on Thursday, that the IMF cannot decide about its participation in the Greek program before the meeting of the board of directors on February 6th and before the new US administration of Donald Trump clearly unfold its position to the future role of the IMF.

What will the Greek government do?

Given the circumstances, there seem to be two options for Greece’s government:

Capitulate to creditors and accept their demands


Raise the revolution banner, snub the creditors and go for early elections. A honorable exit, so to say. But early elections is also a form of capitulation as Greek voters would most probably send the left-wing government home – blame the pressure campaign and the promises of major opposition party New Democracy.

The option of a Referendum would trigger a loud laughter globally.

There might be a third option of which I am not aware of.

Having closely followed the Greek economic crisis, the bailout agreements, the countless meetings of the Eurogroup and the series of asphyxiating tough negotiations for seven years, I never saw the creditors to have stepped back an inch from their demands.

The Budget Office of the Greek Parliament issued a report on Friday in which it warns either conclusion of the program review in reasonable time or a fourth bailout in 2018.

“The conclusion of the review in reasonable time will enable the participation of the country to the Quantitative Easing of the European Central Bank” the report writes noting positive development in restoring economic growth rates in 2016, unemployment decrease and achievement of Primary Surplus higher than the year target.

If the review conclusion fails, “Greece will need to borrow again and this will risk a fourth bailout,”  The Budget Office stresses.

A review conclusion, yes, but at what economic and political cost.

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  1. First of all there are no creditors. There is the ESM who draws money from the markets and states which give guarantees. No state has paid any real money.
    Second, these Euro morons know they can demand whatever they like. There are highly paid Quislings here to satisfy any demand, after a bit of theatrics for the idiots. No case for elections; there is still rich pickings to be had; why should Kyriakos have them?
    Third, no way the 4th Reich will pull out of the Greek “programme”. The more memoranda the better: with each new memorandum every Greek asset goes down by 20-30% (look at the rate of decline of real estate) and every Greek is equally impoverished. In short: more free land and more slaves for the Reich.

    • If Greece remains in Monetary Union she is condemned to stagnation and depression, and the Greek people have only emigration as an alternative to poverty and starvation. The longer this crap goes on the worse it will all be.

  2. what continues to boggle my mind here is two things. on the one hand, every seems to be acting like these ‘creditors’ have greece (and everyone else) completely by the nose.. and yet these memoranda are always about obtaining some tiny amount of new loans which are a fraction of annual revenue – a few billion whereas the greek state still manages to squeeze 50-60 billion a year out of the greek people.. if the state would merely cut its appetite by a rather small amount (given that there’s been some cutting already it’s not like they’re unwilling to do this though curiously overall spending keeps going up) they would have no need to borrow new funds and could then tell them all to take a hike. On the other hand they could simply default and without interest and debt service the rest of the budget is in surplus already, see above for telling them all to take a hike. Yet the politicians adamantly refuse to go near this route- they only know how to increase spending because it is their JOB to keep every country in debt! like the previous commentor pointed out, the more memoranda the better!

    • Absolutely correct anon! And why do these “politicians” don’t do the obvious as you say? Because the money is too much!

    • No the issue here is because GR doesn’t have its own currency, if they don’t pay their dues, they will be forced out of the Eurosystem.

      However, if they had their own currency, then yes they can do what you are saying, but their currency would be worthless, so would need a ‘Marshall PLan’ to help them cover essential imports.

      Greece would have money, but only for domestic use. No one would sell them anything in Drachmas, and Greek exports are not nearly enough to have any sort of foreign currency reserves.

      • Giaourti Giaourtaki

        Greece does not need a “Marshal Plan”, Greece didn’t start the war but the Krauts will need one after 4000 Greek tanks get the war debts out of them.

      • The problem actually is that the Germans will not pay their dues. They have made hundreds of billions out of the eurozone and refuse to help the economies that suffered from the corrupt and incompetent design of the eurozone. The design by the expert team of Prof Michael Artis was rejected, and the Germans put their own economics asshole to fuck up Europe.

        It has been stated in economics journals since 2001 that the eurozone would fail and would badly damage Greece and others, while benefiting Germany. The lying Krauts pretend that this is not the reality, and the fault lies with Greeks.

    • well stated Anon, I agree 100%!

  3. Third and only option: leave the eurozone !

  4. There is a third option; follow Britain and leave the EU altogether.

  5. It is very dangereous to use in such cases the ceteris paribus principle the liberal economic science is based on. Should GREXIT lift its head again, this will have large impact on other Eurozone countries. Trump will congratulate Grexit, italians may rapidly introduce alternate currency. People here in North will fall in total panic and ran to exchange EUR agains USD. The Eurozone will start wobbling in very few days. Then each country inside will realize that who leaves the first, wins – because of not attracting the circulating EUR, especially cash.

    The people here in Bloodlands will panic even if the smallest crack will appear in EUR edifice.

  6. Giaourti Giaourtaki

    One should make a survey about the motives of normal folks demanding Grexit.
    I mean, after 8 years? This sounds ridiculous and it reminds of the idiot Dr.Sinn – I guess he retires now and writes a “book” – who was always hiding from the public that the main reason he was forcing for Grexit was that he wishes his Deutsch-Mark back like he was a in a black forest lost child.

    I bet 80% of them are just the normal “losers” and get their money paid in Euro and dream of being hippie-pensioner king and queen of Greece with Euro against Drachma then.

    One could talk about this seriously but not if millions will come… this sounds horrific

    Even very smart unemployed will come to live at the beaches

    It’s now the 8th year trying to force Greece out to make the sell-out become like this, cheaper and cheaper and even more cheaper until it makes no sense to sell

    I mean the only argument I find is that Drachmas would be nice for tourist kids to learn something but who needs any currency at all when most people are just too poor to have any money, then it’s much better to live without currency.

  7. Lets ask Mr Trump what he would do