Greece’s neglected payment to the International Monetary Fund on Friday, June 5, has caused escalated tensions in the negotiation process between creditors and Greek Prime Minister Alexis Tsipras. As the pressure to settle on a deal increases, Greece decided last week that they would take the option, posed to them by the IMF, to settle all four of their June loan repayments at the end of the month. This has spurred unrest for the people of Greece, as well as its creditors and Troika.
After the announcement that Greece would be missing its scheduled repayment, Tsipras took the stage to address the Greek Parliament on the latest deal proposed by European Commission President Jean-Claude Juncker. The deal would provide Greece with a €7.2 billion bailout, which would require Greece to undergo major economic reforms. Tsipras notably stated that the deal proposed by the European Commission was “absurd” and labeled it as “irrational, blackmailing.” The European Commission officials were surprised by the complete rejection of their proposed deal.
Soon after, on June 8, President Obama announced in a press conference that, “What [a deal] is going to require is Greece being serious about making some important reforms, not only to satisfy creditors, but more importantly, to create a platform whereby the Greek economy can start growing again.” As pressure builds for Tsipras and Greek creditors, the world waits anxiously for one of them to cave.
It appeared that Tsipras had no intention of conceding any ground when Athensproposed another deal, on June 9, insistent upon debt relief. However, creditors came back with a stone-walled response: debt relief was off the table, and furthermore, that Greece must accept major economic reforms.
Tsipras seems to be testing the European Commission’s patience; the term “paperology” has been coined by the Commission to describe the Greek Prime Minister’s actions.
There has been speculation that Tsipras and Greek Finance Minister Yanis Varoufakis have been proposing trivial deals in order to buy Greece time. This in turn, has allowed the citizens of Greece to withdraw money from national banks.
As we turn the corner into the new week, negotiations have stagnated further. Greek officials were reported to have walked out of talks with the Troika on Sunday, June 14. The meeting lasted only 45 minutes, and left both sides empty-handed. The collapse of negotiations is likewise a result of the leftist Syriza party’s aversion to economic reforms coupled with Troika and creditor insistence on new economic measures.
Finally, a Eurogroup meeting will begin on Thursday, June 18 to address the state of the Eurozone and the Greek crisis as a whole. Varoufakis is scheduled to speak and promote his ideas; however, chances are slim that there will be improved negotiations or a deal to be brokered. Meanwhile, British newspapers have begun to editorialize that the time for Grexit is now, with The Telegraph arguing its caseyesterday.
At this point, it is hard to tell what Greece actually wants. We do know that German Chancellor Angela Merkel and her finance officials are hoping to keep Greece in the Eurozone. However, Tsipras and his party have yet to come out with a strong stance on whether staying in the Eurozone is a priority for them. Currently, it appears that Tsipras is looking to continue a hardline approach in order to stall negotiations in hopes of cracking Germany and the Troika.
However, if the Troika and Greece’s creditors maintain their likewise hardline stance on Greek economic reforms, Greece will likely be forced into accepting default. This will leave Germany and France collectively out of €160 billion.
This article originally appeared in Competitive Enterprise Institute’s OpenMarket.