The Greek Negotiations: Many Angry Words And No Way Forward - Forbes
▻http://www.forbes.com/sites/francescoppola/2015/06/19/the-greek-negotiations-many-angry-words-and-no-way-forward/3
Greece’s hand is much stronger than the creditors thought, and it has played it well.
The Euro is a fragile construction: as I have explained elsewhere, it is in reality a system of hard currency pegs rather than a true single currency. If Greece were to leave, others would be likely to follow, either because of speculative attacks as in 1992, or because of popular unrest and political change. This would threaten the very existence of the Euro. The oft-expressed view that the rest of the Eurozone is “firewalled” from contagion was never credible and is now evidently false: bond yields are already spiking in other Eurozone periphery countries. The ECB cannot be seen to force out one country while protecting the rest from contagion. That would destroy its credibility as an independent body immune from political influence.
The EU institutions dare not take the risk of the Euro unravelling. So they have no choice but to continue supporting Greece. All the Greek government has to do is shore up its domestic support, hold its nerve and wait for the creditors to cave in.
As I write, the ECB has raised the ELA funding limit for Greek banks. Despite all the rumours, there clearly is not going to be a bank shutdown and imposition of capital controls this weekend. And the Bank of Greece chief has attempted to repair the damage he has done, saying that the Greek banking system “remains stable” and is fully supported by the Bank of Greece and the ECB. Mr. Tsipras, too, remains cool, saying that “all those who are betting on crisis and terror scenarios will be proved wrong”.
The European Commission president has called an emergency summit for Monday, at which everyone will know – though no-one will admit – that as Grexit cannot be on the table, debt relief and alternative reforms must be. There will no doubt be a lot of posturing, and a lot of angry words, and no resolution as yet. But there will be a deal. Eventually.