Greece's final countdown – bailout or bust

From bailout to default, then referendum and lack of a bailout, Greece and the eurozone’s troubles continue. While Greece has been on the brink of exiting the eurozone as numerous deadlines have passed, the country’s creditors have signalled Sunday June 12 to be the final deadline for a deal when there will be a full EU summit to discuss Greece’s proposals.

With the final gathering of the 28 EU leaders the seemingly perpetual “will they, won’t they?” question should be resolved one way or the other. And, now that Greek prime minister Alexis Tsipras has submitted an economic reform plan that accepts many of the creditors demands in exchange for a €53.5 billion bailout, a deal could well be on the cards.

A renewed mandate

Following the Oxi win in the July 5 referendum on the terms of the (expired) bailout deal, the Syriza government was provided a renewed mandate for negotiation. However, the point that seemed to initially fail Tsipras and his newly appointed finance minister Euclid Tsakalotos as they met in Brussels on July 7 was the need to secure a negotiated resolution. Instead the pair, with freshly sketched hotel notes in hand, made no concession. With the clock ticking, however, a plan was put together that gave in to a large number of the austerity demands previously rejected and submitted two hours before the July 9 deadline for a proposal, ahead of Sunday’s summit.

The Greek government has no doubt been strengthened by the announcement of the IMF that there is a need for comprehensive debt restructuring – a prospect that has been strongly suppressed by its creditors. Moreover, additional bailout funds are likely to be necessary if Greece is to remain part of the eurozone. Greek allies, such as the French, have sought to champion a deal to keep the EU together, although other leaders have proved less sympathetic. Despite ongoing attempts to make the numbers add up, the problem is about more than finance.

Alexis Tsipras has submitted new proposals but his stance to date has challenged the eurozone’s ideology and unity.EPA/Laurent Dubrule

Beyond debt

We have previously highlighted that the crisis cannot be tackled by cutting government spending and that a wider programme of economic reforms are necessary to become competitive again. This is certainly the case. But more than reconfiguring economic institutions, there is a need to address the institutional environment at large. While much debate has focused on the Syriza government’s politics, the crisis is not about Left-Right politics.

The political question is about how different institutions across the eurozone align. Interestingly the alignment that matters is seemingly with the ideology of the European project as opposed to aligning each other. For the Greek government the politicking is now as much about challenging the inertia of the European project as it is about managing Greek debt. And the potential threat that Syriza pose to the political and economic orientation of the EU is seemingly as important as the prospect of a Grexit. Therefore the negotiations have also become about ensuring that any challenge to the ideology of the eurozone must be seen to fail for the creditors.

On the brink

Although Tsipras may urge the EU not to abandon hope, this now hinges on the plans for reform that are expected before the end on the week. While a combination of economic reforms and concessions pave the way for debate, if the meeting on Sunday is to see Greece remain part of the EU, Tsipras and his EU counterparts need to address if not reconcile the conundrum of economics and ideology.

As the moment of truth in testing the European experiment dawns, the immediate outcomes will be either a Grexit or another bailout. The philosopher Slavoj Zizek, paraphrasing Stalin, recently described both choices as bad. However, more than no option for Greece there is a growing danger that this will translate to no good outcome for the eurozone or EU either.

While constructive Greek proposals are a prerequisite to resolution, it is important that the EU reforms itself. It is not simply about Greece realigning itself with the troika, but also the EU and other member states evolving to ensure the future of the of the European project.

The authors do not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond the academic appointment above.