Compromise on the Horizon

The meeting of the Eurogroup Finance Ministers on Wednesday ended without surprise, and without a joint declaration. Given that Tsirpas just a day earlier successfully asked for parliamentary support for his plan to move out of any Troika program, it would have been political suicide to  accept an extension of the existing program. The game of chicken is not at an end but it seems that the European partners were miscalculating Greek stubbornness. What exactly are possible scenarios? Let me make a courageous prediction.

Scenario I: The Greek coalition gets scared about its own courage and fears that the Eurozone members are willing to let them go. Given that according to Eurobarometer about 60% of Greece’s population are eager to stay in the Eurozone and money is running out soon, Syria accepts with gnashing teeth an extension of the current program and thus a continuing role of the Troika. The Eurozone partners indicate the possibility for a changed program in early summer of the Greek government had the time to showcase its serious reform efforts. (Probability 10%)

Scenario II: The Eurogroup eventually gives in and accepts the demands of Syria. Greece is allowed to move out from the program and will still get conditional bridge funding that will be supervised by a non-Troika organization. (Probability: 0%).

Scenario III: Both sides stick to their positions. Greece is defaulting soon, and will have to leave the Eurozone (and maybe even the EU). A defaulted country without access to IMF funding or any EU-related funding will urgently need to look  for alternatives, with serious geopolitical repercussions . (Probability: 10%)

Scenario IV: Both sides are willing to give in and to compromise, not least because they fear potentially uncontrollable repercussions. Greece will commit to follow through with a bit more then the 60%-share of demanded reforms (Varoufakis) and in exchange will get access to the last tranche plus get payed its share of the ECB-profit on Greek bonds. Both sides agree to jointly develop a alternative program in summer 2015. (Probability: 80%).