How will it end?

A game of chicken

Who will blink first - Alexis Tsipras or Angela Merkel? Possibly neither, worries Paul Demarty

One of the best little illustrations of the notion of commodity fetishism is the anthropomorphism of ‘the markets’.

The markets have reactions. They even have moods. Under the pressure of events in Greece, many of the poor creatures are currently prone to fits of the vapours and wild mood swings. I wrote last week that many on the left were less than pleased with Syriza’s choice of coalition partner, the right-populist Independent Greeks (Anel), but it is worth noting that analysts were not exactly chipper either.

From their point of view, Syriza had a choice - either go with a ‘centrist’ party such as To Potami or Pasok, signalling a wish to compromise with the European powers; or go with a hardliner - the viciously anti-European Communist Party of Greece, if the latter had been remotely willing, or Anel in the event - and thereby declare themselves to be playing hardball.

Sure enough, the markets took fright. As Alexis Tsipras was sworn in as president, and his cabinet announced, stocks in Greek banks took a huge hit. A few days later, with more soothing sounds from the government about negotiating with European powers, the slide was halted and began to reverse. As I write, the Greek stock exchanges have closed 11% up, in response merely to the formal announcement of finance minister Yanis Varoufakis’s bond-swap proposal (which can hardly have come out of the blue).

His scheme aims to skirt around notions unacceptable to the northern European economies - principally, debt write-offs and ‘haircuts’ - by converting bailout loans into bonds indexed to Greek GDP: the higher the growth, the higher the yield. Private debt bought up by the European Central Bank would be converted into ‘perpetual bonds’, which would amount to a write-off by any other name.

The latter proposal in particular will likely provoke outrage among fiscal hardliners in the EU core. There is a carrot to go with the stick, however: Syriza is prepared to compromise on its own platform of public spending to run a budget surplus. (The latter, naturally, will be entirely impossible if Greece remains in its current chokehold.)

Cracks in the consensus

More ‘good news’ for Athens comes with apparent attacks on the principally German-imposed austerity policy in the EU periphery. There was, first of all, the brazen snub of the ECB’s announcement of quantitative easing - ECB boss Mario Draghi unveiled a huge programme, which will print over €1 trillion, and was received frostily in Berlin.

There was also the Davos intervention of Mark Carney, chief of the Bank of England, who recommended fiscal risk-sharing across the euro zone. Carney is hardly an impartial observer, as technocrats attached to central banks are imagined naively to be: his, after all, is the Bank of England. Moreover, he is an alumnus of the infamous ‘great vampire squid’, Goldman Sachs (whose role in cooking Greece’s books in the run-up to euro entry is no small matter in the current dispute): thus, we may take him as some kind of proxy forAmerican interests here. If Germany resists such fiscal union, it is because it will be weakened. Nonetheless, he is hardly the first person to make such comments; his views will be echoed by many in Europe.

So is everything hunky-dory? Has a euro zone catastrophe been averted once more? It is, alas, too early to tell: and the signs are not necessarily good.

The first issue is that, for all the criticism of her policy, Angela Merkel’s government does not look like it is in any mood to relent. No debt will be forgiven, she insists: there will be no quarter in ‘negotiations’. Behind her, egging her on, are the vile creatures of the Springer press, perpetually outraged at the idea of those ‘lazy Greeks’ taking tax money out of German pockets, or - worse - devaluing Germany’s currency.

More importantly, however, her reluctance is not merely a matter of mean-spiritedness or ideological dogmatism, or even the basically semi-colonial relationship beginning to develop between Germany and the euro zone periphery. Berlin’s room for manoeuvre is restricted. It is often pointed out, by soft lefts and capitalists alike, that bailing out Greece is not so very terrible: its economy is only 1.5% of the EU’s GDP, and its total national debt is barely a third of the value of Draghi’s QE programme, let alone that component of the debt which results from the bailout.

All this is true; writing off Greek debt would be possible, and restructuring it to be paid off over two, three, four times the current schedule - more so, were Greece the only struggler in the euro zone. Bailing out Greece is one thing: bailing out Greece, Portugal, Ireland, Spain, Italy and even France is quite another. The latter three are far more significant components of the EU economy, and printing enough money to throw at them would give rise to serious issues.

If Greece is - as it were - bailed out of its bailout, what will the mood in these countries be then? They will surely all want a piece of that action. Indeed, the centre is - after a fashion - failing to hold already in several of them. The left-populist Podemos is floating around pole position in Spanish opinion polls; Sinn Féin is in with a shout in Ireland.

Odd couple

What appears to be developing is something of a game of chicken. Merkel and co are digging in, fearing that debt forgiveness - indeed, simply giving quarter to any Greek demands - could open Pandora’s box. Tsipras and the Greek government, on the other hand, declare that their country cannot continue to be collectively punished for the convenience of Germany, and that such punishment is in any case based partly on corruption in arms and industrial deals which directly benefited Greece’s creditors.

We know Merkel can afford to call Tsipras’s bluff: though Greek exit from the euro would not be pleasant for the rest of the member-states, they could weather it. The question is perhaps more about the Greek side: will they stand firm?

Here, we must discuss the character of the Greek government. What has resulted from the election is a popular front peculiar by European standards, where they have traditionally comprised ‘official communists’, social democrats and small ‘progressive bourgeois’ parties. (Not uninterestingly, in the anti-colonial people’s fronts, alliances between the left and more rightwing and traditionalist ‘patriotic bourgeois’ forces were more common.)

Going into government with Anel was a warning to Europe - but not to everyone. Domestically, it must be interpreted as a mollifying measure towards threatening social forces. An ultra-Orthodox organisation, Anel’s presence in government is reassuring, surely, to the state church. Moreover, Panos Kammenos, Anel’s somewhat eccentric leader, has been given the defence portfolio, which may send the right messages to a Greek army with a history of murky interventions in politics. These actions are among many that suggest that Tsipras and his colleagues are keeping their options open, should European negotiations turn sour.

Though Greece voted to continue sanctions against Russia, it voted against escalation: an olive branch to the Putin regime, which has not gone unnoticed among Syriza’s rightwing critics abroad. Explanations for this move on the basis of Orthodox Christianity, and a fortiori some residual ‘official communist’ nostalgia for the days of the Soviet Union, surely fall to Occam’s razor - this is pure expedience (although Kammenos is rumoured to have connections to the Russian far right).

We must say that Syriza is playing a clever game here, but it is also a dangerous one. There are many plates to keep spinning. Emblematic is Kammenos’s first significant action as defence minister, consisting basically of military provocations against Turkey. It is an unwelcome reminder of the fierce, irrationalist nationalism undergirding Anel’s politics.

More broadly, Anel will act as bourgeois forces in all popular fronts do, no doubt as Syriza’s leading right faction intended, and - indeed - as Kammenos’s bizarre election broadcasts promised. That is to act as a limit on the actions of the government: stopping it from going ‘too far’. In many areas of policy - including hot-button issues on the left, such as migrants’ rights - ‘too far’ is not so very far at all.

Syriza is formally committed to separating church and state, but it will not do so if it wants these partners on board. Syriza wants an amnesty for migrants, but has had to stop well short of that so far. Syriza wants - no, needs - all the friends abroad it can get, but must tolerate Kammenos’s sabre-rattling over Turkey and other nationalist grievances, such as the Macedonian question.

In lieu of domestic policy successes, then, Syriza is all the more reliant on getting a result in Europe. Capitulation is plainly political suicide. (We are not so cynical as to remove the appalling suffering of their compatriots from Syriza’s leaders’ calculations either.) Who will blink first - Tsipras or the troika (whatever he decides to call them)? It is hardly impossible that neither will, and this particular game of chicken will end in a wreck.