Merkel’s choice

The new facts since negotiations broke a week ago are:1. It became crystal clear that Tsipras will not blink and/or do a „kolotoumba”;

2. The creditors offered a sweetened deal that included a conditional debt restructuring in October;

3. IMF, pushed by the Americans, published a crushing assessment on the Greek debt unsustainability, and recommended a 30% haircut plus a 20-year grace period and extending maturities until 2055;

4. The Greek people didn’t respond to the terror and said a respunding NO to the old memorandum-style proposals.

Now EU (i.e. Merkel) has a clear choice to make:

– either to agree to a sweetened deal that includes debt restructuring and some growth ideas, or

– let Greece slip from the eurozone and into chaos.

The first choice would cost them some money that they are not able to recover anyway, possibly some manageable risks with other periphery countries down the road, and some political face which is manageable at this point, by pretending to let the French socialists take over and submit to their proposals.

The second choice comes with a lot of consequences: the reversibility of the Euro, contagion risks, the humanitarian crisis within the EU, geopolitical concerns of having a Greek failed state, loss of access to markets for their export-oriented economy but above all a serious blow their hegemony role in Europe.

Given all these, I bet that Merkel will take the first choice. This will prove Tsipras-Varoufakis right in holding out and playing the game until the end.

I’m just happy that the terror of closing the banks didn’t win today. Well done Greece!

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