BofAML: Sobre Grecia (Euro Area Watch)

Redacción - Lunes, 06 de Julio

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Euro Area Watch: Greece: Time for the adults to speak •  We are already in the path of Grexit, with capital controls, limited liquidity and the odds of IOUs increasing •  After the "big no", a lot of mutual pride swallowing is needed to avoid Grexit. But it can still be avoided •  OSI conditional on delivering structural reforms could be a way forward, but conditionality likely to be tougher than before

A lot of mutual pride swallowing is needed to avoid Grexit 

The Europeans hated the idea of the referendum. They like the result even less. To public opinion in core Europe, already tempted by throwing Greece out of the monetary union, the "big no" may be seen as the last straw. Offering concessions now would be seen as weakness, handing Mr Tsipras a victory that may resonate throughout the periphery. Even the German social-democrats are now intent on "out hawking" Mr. Schaueble. Mrs Merkel's room for manoeuvre is now extremely tight. Finding a solution that keeps Greece in the monetary union would require the acceptance by the Europeans that more fiscal efforts have to be matched -- not "preceded" -- by explicit debt relief. This is, in essence, no different from what the IMF has been arguing for a long time, but one could argue -- along the lines of Dominique Strauss-Kahn's proposals -- that the Fund itself should offer Greece a delay, a complicated manoeuvre that would entail swift US action. The "snag" here is that the Troika also needs to trust the Greek government's willingness and capacity to implement said fiscal measures. For a deal to work, Germany has to acknowledge that it cannot dither on debt relief, and Tsipras must give up his fiery rhetoric, and probably re-jig his coalition to let "pro-programme" parties in. That's a lot to ask in a short time span.  

It takes two to tango 

Always ready for procrastination, the European governments may be tempted to let things simmer further before finally extending help, in the hope that the ongoing disintegration of the Greek economy, now that the "no" vote makes it next to impossible for the ECB to inject more liquidity there, will finally bring to power an entirely different team in Athens. If this does not work, then "Grexit" will follow. Such approach would also work as a stark warning to the radical left in the rest of the periphery that, for the anti-austerity camp, there can only be "pyrrhic victories". It is a risky approach though, and some centre-left governments (Paris in particular) may start feeling domestic pressure in favour of more speedy help for Greece, as well as a more combative relationship toward Berlin. In addition, the Europeans would still need to "care about Greece", within or without the euro. It will still be an EU member, with a key geopolitical role, facing major social and political upheaval. Germany was probably ready to trade "debt relief" against being rid of the current Greek government. This option seems to be closed at this juncture. It would have to be debt relief AND Mr Tsipras. On the other side of the fence, for Tsipras, the risk is "hubris" after his referendum win, forgetting that his country's economy - and potentially his own political future - needs, at this stage, the euro's anchoring. 

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