Three interesting philosophical questions have arisen this evening in regards to Greek negotiations.
The three questions I ask at the bottom of this post are based on statements made by a global foreign exchange strategy chief at UniCredit bank and two negotiation demands by Greek Prime Minister Alexis Tsipras.
I highlighted in red and italics the source of my questions. Stop at the questions and think about your answers before reading further.
Greece Rift Wider Than Expected
An 11th hour meeting between Greece and creditors takes place on Monday. But a larger than expected Gap Still Yawns Between the Parties.
Weekend talks uncovered a bigger-than-expected gap between the two sides, setting up a difficult stand-off between Yanis Varoufakis, the Greek finance minister, and his eurozone counterparts when they meet on Monday night.
Wolfgang Schäuble, Germany’s finance minister, is determined that Athens should stick to its rescue programme as a condition of further financial assistance. Dogged resistance to such demands from Alexis Tsipras, Greece’s prime minister, has seen his poll standing soar at home, with thousands taking to the streets on Sunday in a support rally.
Panagiotis Lafazanis, leader of Syriza’s far-left faction, adopted a less-emollient tone, saying he would not allow his party’s economic plans to be “chopped up, subdivided or split into good and bad”.
“If our so-called partners insist on an extension of the current programme in one form or another — the sinful memorandum — there won’t be an agreement,” he said on Sunday.
Germany wants Greece to stay in the eurozone, but not at any price. “If we go deeper into the [debt] discount debate, there will be no more reforms in Europe,” said a senior German official. “There will be joyful celebrations in the Elysée and probably in Rome, too, if we go down this path.”
Ahead of Monday’s meeting, Vasileios Gkionakis, global foreign exchange strategy chief at UniCredit bank, wrote to clients: “I think it is fair to say that . . . the irresistible force will be meeting the immovable object.”
Germany and other creditors have agreed that the three organisations supervising the bailout programme — the International Monetary Fund, European Commission and European Central Bank — will no longer be called “the troika”, in a nod to Greek demands. But Berlin insists the same bodies will continue as Greece’s watchdog, even if renamed “the institutions”.
Berlin is also open to easing Greece’s fiscal straitjacket. Athens wants a reduction in the proposed fiscal surplus from 4.5 per cent to around 1.5 per cent. In Berlin’s view, around 3 per cent might be possible.
“Dignity Not Negotiable”
Reuters reports Greece, Confident Sticks to No-Austerity Pledge
Prime Minister Alexis Tsipras told Germany’s Stern magazine that Athens needed time to implement its reforms and shake off the mismanagement of the past.
“I expect difficult negotiations; nevertheless I am full of confidence,” he said. “I promise you: Greece will then, in six months’ time, be a completely different country.“
“The irresistible force will be meeting the immovable object,” Vasileios Gkionakis, head of global FX strategy at UniCredit, wrote in a note.
Greek government spokesman Gabriel Sakellaridis showed no sign that Greece was backing off on its core demand.
“The Greek government is determined to stick to its commitment towards the public … and not continue a program that has the characteristics of the previous bailout agreement,” he told Greece’s Skai television.
He later said: “The Greek people have made it clear that their dignity is non-negotiable. We are continuing the negotiations with the popular mandate in our hearts and in our minds.“
Some of the problems facing the Eurogroup are semantic. The Greeks, for example, will not countenance anything that smacks of an “extension” to the old bailout, preferring something new called a “bridge” agreement.
Wave of Anger
This is political. Tsipras rode into power on a wave of anti-austerity and anti-bailout anger last month and would have a hard time explaining a row-back so soon. Thousands of Greeks massed outside parliament in Athens on Sunday to back his strategy.
But even a cosmetic change of labels could have practical consequences. An “extension” may not require many national ratifications unless it involves additional financial commitments from euro zone governments.
Any new bailout program, on the other hand, might require several national parliamentary ratifications and could also bring Germany’s Constitutional Court into play.
Crunch Time and Domestic Rallies
Bloomberg reports Greece Faces Crunch Talks After Show of Domestic Support
Finance Minister Yanis Varoufakis leads a Greek government delegation back to Brussels Monday buoyed by a demonstration of support in front of Parliament in central Athens the previous evening that police put at more than 20,000 people. His goal is to secure a bridge accord that allows Greece the time and financial space to negotiate a post-bailout era.
“The stakes are high, but I doubt tonight is much more than theatrics,” Daniel Gros, director of the Centre for European Policy Studies in Brussels, said in an e-mail. “The real showdown will come much later.”
While fellow euro-area countries will “of course” discuss Greece’s debt levels, “it is out of the question to cancel the debt, we can discuss its maturity,” French Foreign Minister Laurent Fabius, told Europe 1 radio Sunday.
While Tsipras’s Syriza-led government has no natural political allies around the table on Monday, his support at home remains solid. Sixty-one percent of 1,015 Greek people polled by Kapa Research for To Vima newspaper this weekend said they approved of the government’s approach.
- Does “Troika” by any other name stink as bad?
- Is there any meaningful difference between “bridge” and “extension”?
- What happens when “the irresistible force meets the immovable object”?
Think carefully especially about question number three before reading further. There is a correct answer to question number three that will likely surprise some.
- Beauty is in the nose of the beholder. But logically, the answer is yes.
- The question is ridiculous. In fact, it’s impossible. By definition if there is such a thing as an “irresistible force” then by definition, there cannot be an “immovable object”. Likewise, if there exists an “immovable object” then by definition there cannot be a an “irresistible force”.
The “irresistible force vs. immovable object” analogy by Vasileios Gkionakis, head of global FX strategy at UniCredit, is logically ridiculous.
Vasileios Gkionakis pinged me with this email…
I do not take your comment as “being ridiculous” personally but here is the point: alluding to something that is indeed impossible to exist is a way to show that the only way we can get a deal is if there is a step back in either side…otherwise no deal!
I am somewhat disappointed on the attention that was attracted on this specific phrase in a piece which I think discusses a number of important points such as the balancing act between economic stimulus and tidying up Greece’s public finances, privatisation, productivity and tax evasion.
Thanks Vasileios, that’s a point understood, in advance, actually. I did not mean anything personal. It’s just that few understand the illogical nature of that often-repeated saying. Had you said “between a rock and a hard place” I would have been in agreement.
Actually, I believe we are pretty much in agreement from a practical as opposed to a philosophically logical perspective.
Mike “Mish” Shedlock