Galery

1

On the first working day after the Easter vacation, the Greek government has categorically denied the publication according to which it is preparing to suspend payments on the foreign debt service if no agreement is reached with the creditors. It was published in the British Financial Times economic magazine that refers to sources who are aware of the intentions of Athens. According to the article, the suspension of payments means that Greece will not pay any loans to the International Monetary Fund in May and June, which amount to around 2.5 billion euro. The newspaper also notes that the other euro zone member states in turn are angry with the negotiating tactics of the Greek government and are already drawing up plans for the possible bankruptcy of Greece.

Despite the efforts of the government of Alexis Tsipras to underestimate the seriousness of the moment, analysts warn that Greece’s bankruptcy will be inevitable if the attempt to reach an agreement with the creditors by the end of April fails. And there are several paths that lead to it, as Greek analyst Kostas Stoupas states in his analysis for the economic edition capital.gr:

"Taking power by SYRIZA, the representative party of the corporate interests that have occurred over the past 34 years and that are responsible for the viscous practices and the collapse of the country, is the last act of the Greek tragedy.

The bankruptcy of Greece in the hands of SYRIZA might put an end to the left illusions and to all distortions in the country. The collapse of the ruling party in the coming months will probably be the beginning of a complete rearrangement of the political scene.

Of course, Greece will pass through the Symplegades in the coming months and the probability of it clashing against the rocks will be great.

The possible scenarios over the coming weeks and months are as follows:

a) Internal suspension of payments: It is already a fact with regard to suppliers and can transfer to salaries and pensions. If this happens, it will probably trigger turmoil on the political level*. For those people who are generally aware of the state of the Greek economy this scenario is almost certain. The question is when it will occur and what will be its probable side effects.

b) Credit event: The inability of paying part of the maturities on Greek government bonds over the coming months will trigger a credit event, because of which banks will collapse and the economy will "suffocate". This will lead to a decline in revenues and an inability to pay salaries and pensions, i.e. to internal suspension of payments. Such a development will increase the risk of Greece exiting the euro zone.

The credit event can be avoided by an agreement under which the creditors undertake to pay the debt. So far, everything indicates that this is the most likely scenario. It seems that the creditors want internal suspension of payments to occur in Greece, as it will impose a total reorganisation of the social security system, public administration and the economy. This scenario aims at keeping Greece in the euro zone.

c) Control on the movement of capital: This is a very likely scenario. A lot of market factors are wondering why it has not been applied, considering that there is capital flight on a daily basis. When this happens, the current difficulties of the real economy will intensify and continue for many months ahead. This scenario will also lead to political changes*.

d) Deposits haircut: After the crisis in Cyprus, deposits are considered as another source of bank recapitalisation after shareholders and creditors. The question is what deposits have remained in the Greek banks in addition to the small amounts, salaries and the amounts withheld to service the loans. The probability of applying the scenario of deposits haircut is becoming great with each passing day of uncertainty for the Greek economy. The reason is that this continuing uncertainty is increasing the risks for banks.

e) Grexit: Greece has not yet been forced to leave the euro zone, primarily thanks to the intervention of the US, the reason for it being the geopolitical uncertainty which can result from the destabilisation of the country. However, the risk of Greece leaving the euro zone remains high, in the range of 30-40%. Leaving the euro zone is the most catastrophic scenario for Greece, both in the short and long term and no political force can deal with it.

These are the likely Symplegades through which Greece and its economy have to pass in the coming months.

* Possible political events

The occurrence of each of the above "accidents", either separately or in combination, could cause political turmoil, the most likely among them being the following:

Early elections 1: The government of SYRIZA is still enjoying considerable public support, causing many commentators to believe that, before entering into an agreement on the implementation of a new memorandum, it will announce early elections. It will thus "clear" the internal dissent and apply a mixture of reforms under "left denominator".

The problem is how the government will manage to cope with the extreme rhetoric against the memorandum, which has brought it to power. Mr. Tsipras has not indicated how he can successfully cope with this metamorphosis... Moreover, if elections are held in a situation of internal suspension of payments or a restriction of withdrawals from ATMs, nobody can guarantee their outcome.

Early elections 2: The government will prefer the collision with creditors as well as exiting the euro zone because the internal opposition has surrendered to the "left current". It will use the rhetoric of xenophobia and national populism, combining the common points in the rhetoric of the extreme left and the extreme right. They already have many common positions that are much deeper than the superficial outer shell. In view of the fact that 70-80% of public opinion supports the euro, this scenario will hardly pass through elections.

Early elections 3: SYRIZA will announce early elections after the imposition of suspension of payments and control on capital movement, losing them by a wide margin. The early elections, however, will cause a total economic collapse and the winner will actually collect what has been left... The uncertainty about the day after the election is great in this case too.

Government of National Salvation: The government will try to push the new memorandum in parliament with the support of other parties. This means that it will lose its lead, thus causing political rearrangement.

The majority of SYRIZA will move to the centre-left space and create a new pole of power. The rest will form a new party on a communist base, which will be positioned between the far-left Antarsia and the Communist Party of Greece.

Each of these scenarios is likely and there is a great risk for Greece, because it is ruled by a cabinet the majority of which is hostile to Europe, bourgeois democracy and markets.

The contrasts, contradictions and the lack of experience in the government of SYRIZA pose risks too as well as the apparent inability of Mr. Tsipras to give the party and the government any direction to be adopted by all sides.

The hope for Greece remains the fact that it is totally dependent on Europe and its Western allies, in terms of both imports of basic commodities and of national sovereignty.

Therefore, even for the implementation of the best scenarios in the coming months, the country will need seatbelts and seasickness pills..."

According to Stoupas, the fact that the Greek stock market has been in a state of coma for many months now is indicative of the state of the Greek economy. "If any agreement with the creditors is reached over the coming days, the market will react positively and the reaction of the banking sector will be most apparent.

The duration of this reaction cannot be foreseen. The Greek Stock Exchange will cease to "scrape the bottom" when the social and political majority arises and presents a new social contract and the foundations of political and economic stability over the next 10-20 years."