Greece’s Suicide Run

By Tom Rogan

Tuesday, July 07, 2015

Last week, I suggested that Greek prime minister Alexis Tsipras had thrown his country off a cliff. On Sunday, Greek voters endorsed his idea.

Rejecting an offer from international creditors for sustained fiscal support in return for economic reforms (albeit a defunct one), Greeks seem to believe that they’ve scored a great victory for national pride. But they’ve also shot themselves in the foot.

The facts simply are not on Greece’s side: The country has run out of time. Greek banks desperately need a new infusion of European Central Bank (ECB) cash. With ATM withdrawals already limited at a daily 60 euros per person and the ECB now tightening the rules for Greek banks that need help with liquidity, the country has a big problem. According to the BBC’s Robert Peston, one of Greece’s top four banks has “almost run out of cash”

Put simply, the home of the Parthenon is on the verge of becoming a failed state.

Of course, the fanatical left-wing ruling party, Syriza, is celebrating. They regard Sunday’s referendum as an endorsement of their strategy. According to a Greek government spokesman, “The mandate from the Greek people is for the government to defend its own proposal and its own positions. The real negotiations must start from tonight.”

Not so fast.

This referendum isn’t going to help Greece get better terms from its creditors. In fact, considering the intransigent position set out by European leaders on Monday evening, the Greek government may have to make even more concessions. It’s clear that by holding the referendum in the first place, Mr. Tsipras has set fire to his relationship with the European Union and, most important, with Germany.

Under Angela Merkel — who places great emphasis on trust and reliability — Germany has lost patience with Mr. Tsipras’s games and his attitude (for example, his implicit portrayals of Merkel as an heir to Nazism). Tsipras’s triumphalist post-referendum tone has only made matters worse. Tsipras seems to think that he’s the only politician in Europe who has to deal with populist pressures. He’s not: Understandably, the German people are growing especially impatient with Tsipras’s arrogance. In turn, that opinion has fueled Merkel’s distaste for further concessions. Thanks to Tsipras’s attitude, what was once a political disagreement now involves personal antagonism.

It isn’t just Tsipras’s attitude in the way of compromise, though — it was the very idea of the referendum. The Greek leader has put himself in a no-man’s land between popular delusion at home and the structural reforms demanded by creditors abroad. Greece’s creditors know that any deal without structural reforms would be pointless, so they are only hardening their strategy, while Tsipras pretends he can make a deal. Tsipras is gambling that, as he addresses EU leaders today, he’ll force his creditors to yield and accept paying unreasonably costly penalties for Greece’s societal irresponsibility. His political calculation assumes those leaders will put the EU’s supra-national project before any consideration of the ECB’s rules of fiscal responsibility.

But with European banking institutions having taken steps to insulate themselves from a Grexit (efforts given credibility by yesterday’s confident reaction on the markets), Tsipras’s game of blackmail — mutually assured chaos — may not be what he’d hoped.

The ultimate truth is that Greece has by far the most to lose. Forced to return to the drachma amidst a collapse in external investor confidence, Greeks would find their material wealth shredded overnight. Social chaos would almost certainly follow. But these are radical socialists — reality has never been their main concern.