Friday, January 30, 2015

Between a Rock and a Hard Place

I don't think we're considering all the options that Greece's new Syriza government has in coping with their debt crisis. What if Greece turns to Russia?

The new, left-wing Greek government doesn't like the deal with the EU that it has to emerge from fiscal crisis:

Leftist Greek Prime Minister Alexis Tsipras threw down an open challenge to international creditors on Wednesday by halting privatisation plans agreed under the country's bailout deal, prompting a third day of heavy losses on financial markets.

The Greeks are very unhappy at the prospect of running surpluses to pay their massive debts to Europe (and others, but overwhelmingly Europe).

But the Greeks have a problem, since pushing for debt relief that matters could push Greece out of the EU, something Greeks want to remain in:

An open collision between the new government and its creditors could trigger a massive flight of deposits from Greek banks, in a context in which the ECB will feel justified in not propping them up with liquidity support. Then Mr Tsipras would come up against the hardest constraint of all: the will of the vast majority of Greek voters (80% according to a January poll) to keep their country in the eurozone.

This article says that Greece may negotiate a deal (perhaps putting most debt payments weighted to the future to allow stimulus today), they may default on the debt while using their budget surplus to limp along while negotiating a deal to pay some debt, or they may exit the eurozone and abandon the Euro currency.

But what about a fourth option? What if Greece leaves the West--by quitting the EU and NATO, too, and hopes for Russian (and by association, Chinese) money to start over?

It would be expensive for Russia. But so is the Ukraine adventure. And the chance to "stick it" to the West over many sins, real and (mostly) imagined, might be too powerful for Putin to resist.

Ah, the joy of a Russian base at former American facilities in Crete, eh?

On the foreign side, the new Greek government is making a statement, too:

A toughly worded statement on Russia issued Tuesday by European Union heads of governments didn't have the consent of Greece’s new Prime Minister Alexis Tsipras, according to two Greek officials.

Which is odd, really. Perhaps somebody should explain to Tsipras that Russia is no longer the Soviet Union. It's like the Greek leftists believe any militaristic dictatorship opposed to America that was once communist is okay with them. Odd, no?

Of course, we have that problem, too. I've mentioned them before.

But I digress.

Sort of.

There is enough anti-Americanism in the Greek left to think that sticking it to America would lift public support enough to bridge a gap of difficulties in moving from the West to being a recipient of Russian aid to make up for the lack of Western money.

Perhaps Greece sees hope in Russia's efforts to build an alternative to the Western banking system?

As the EU wrings its hands over what to do about renewed fighting in Eastern Ukraine, Russian bankers are opening a new front against the West: by threatening to build a financial transfer system that Western sanctions can’t throttle.

This is in reference to the SWIFT system that we may deny Russia use of to punish them for aggression against Ukraine.

Russia's attempt to build an alternative is at least an improvement over the possibility that such an economic punishment would be so grave as to seem an act of war to Russia.

Perhaps the reality of Russia's limited military power made for cooler heads on that score.

And for Greece under a new far left-far right coalition government, embracing Putin may be a fourth option in their financial crisis. Even if this just buys time because Russia can't afford to prop up Greece for long, with few good short term options, that might be good enough for the Syriza-led Greek government.

As the SWIFT alternative post from The American Interest notes, "lots of ne’er-do-wells like Venezuela, Argentina, or perhaps a Syriza-led Greece would love to join an alternative system thinking that it offers them new chances to stiff a new set of creditors."

Indeed. The fourth option might be too tempting to pass up.

UPDATE: Russia said they would consider providing aid to Greece. The EU extended sanctions on Russia, although Greece had the language toned down and expressed disapproval of sanctions. The EU parliament's president said he expects Greece to ultimately work with Europe.

But Syriza has been fairly pro-Russian on the Ukraine issue.

UPDATE: Greece ruled out seeking Russian aid:

Greek Prime Minister Alexis Tsipras ruled out seeking aid from Russia and said on Monday he would pursue negotiations for a new debt agreement with European partners but met little sign of compromise from Germany.

So was earlier talk just trying to get leverage with the European Union?

Given the stakes and avoiding capital flight, such a flip would have to be a surprise, no?

And even if Tsipras is sincere, if negotiations with the EU fail to provide terms acceptable to him, Russia might be their only option.

UPDATE: I would not be surprised if Greece's new rulers took the Russia option:

The depth of pro-Russia feeling within Syriza is evident in the history of its new foreign minister, Nikos Kotzias. Mr. Kotzias is a former Communist, and in 1983 he wrote a book praising the Communist dictatorship in Poland and attacking the Solidarity movement and its leaders. As late as 1987, he advocated violence and civil war as necessary means to bring about social change in the world. In recent years, Mr. Kotzias seems to have developed a deep understanding of Mr. Putin and his policies.

In his writings, Mr. Kotzias sees Russian actions in Crimea and Ukraine as the normal reactions of a superpower “encircled” by the U.S. and destabilized by Germany. According to the Athens Review of Books, Mr. Kotzias introduced a 2013 lecture by Alexander Dugin, a leading Russian intellectual, at the Piraeus University of Athens where Mr. Kotzias held an appointment. Mr. Dugin is one of the warmest advocates of a Russian military invasion of Ukraine and has repeatedly called for the extermination of the “Kiev traitors,” although Mr. Kotzias himself has not endorsed those views.

Nor is Mr. Kotzias the only Syriza official with such a pro-Putin bent. Kostas Isichos, the new deputy defense minister, last year described EU sanctions on Russia as “neo-colonial bulimia” and saluted the “impressive counterattacks” of Russian-backed militias in eastern Ukraine. Echoing Russian propaganda, he said the Kiev government was guilty of tolerating “neo-Nazi abominations.” Last week in an interview with a Danish newspaper he denounced NATO as “not a peace-loving institution,” although he claimed that leaving NATO “is not among Greece’s first priorities.”

Sure. Business before pleasure, and all that. But it is clear where there hearts are.