The Heat is On: Framing and Leakages

Great times for journalists. I can’t recall a time where so many supposedly confidential documents of EU-related affairs were leaked. Nor can I recall a time where active politicians were so tremendously willing to share sentiments with media as frequently as today. To some degree this reflects the practices of Syria politicians who use the public domain as a policy tool. More importantly, the increase in leakage indicates the tensions in the EU and between Eurozone members about its dealing with Greece. Over the weekend, The Financial Times published the annotated transcript of a 45-minute interview with the chairman of the eurogroup and Dutch Finance Minister Dijsselbloem in which he carefully made his case, and at the same time disavowed Greek Finance Minister Varoufakis. Greek PM Tsirpas opened up his own strife by accusing Portugal and Spain as a new anti-Greece axis in the Eurogroup. Based on Dijsselbloem’s uttering I sense that resistance against a extension of the Greek program did not come from those two countries but from the small Eastern members of the Eurozone who are arguing that Greece should undergo the same pain as they did rather then getting a kind of free lunch. Spain’s finance minister in the meantime contemplated over the weekend in public about the next Greek rescue program which he calculated with about Euro 50 billion. Tsirpas reiterated that Greece will not ask for a third program at all. In any case, what used to be quiet diplomacy has turned into open debates, kind of. To be clear, all this is not about an increase in transparency then it is about framing.

So, what will happen with Greece after June 2015? Don’t expect a big bang-kind of decision. As a matter of fact, the EU or the eurogroup are in no legal position to retire Greece’s membership in the Eurozone. This is up to Greece, and will depend very much from domestic policy preferences and the level of frustration of the Greek electorate with the EU. The most recent program extension hinted to the willingness of the electorate to swallow quite some toads. This may change as soon as it becomes clear that the extension will not solve the underlying problems. If the Greek coalition government decides to selectively no longer serve its debt (it will try hard to deal with its debt with the IMF and the ECB), then the ECB will have to quit any financial assistance of the Greek banking industry. By then the Greek government will already have introduce capital controls in order to fight capital flight. Greece will then have to substitute Euros with a new-old currency or currency-like advise in order to keep things running. This currency would immediately start to depreciate, and make Greece’s exports (including its tourism exports) more attractive; it may even encourage foreign direct investment in some sectors, assumed that the Greek government is willing to cater foreign capital. Whether the EU will retaliate and try to kick Greece out of the EU will to be seen. Like in real life, a acrimonious divorce would be only second choice. We know from experience that divorces tend to be messy, and currently many signals point to a coming divorce: Either Syria divorces from its campaign and program promises or Greece divorces from the eurozone.