DOING the same thing and expecting different results, Einstein is supposed to have said, is the definition of insanity. In the euro zone it is the ordinary line of business. For despite thetwists and turns of the Greek drama over the last few weeks the fundamental contours of the dispute have not changed. The new Greek government, priced out of private markets, needs financial help from its euro-zone partners but insists it will leave behind the bail-outs and "fiscal waterboarding" to which its predecessor succumbed. The euro zone, led but in this case not dominated by Germany, demands that the price of such help is an extension of the current Greek bail-out, which expires at the end of the month, and that beyond that there can be no help without some form of “conditionality” (i.e. telling the Greeks what to do).
Over the last week optimists have sought heroically to discern room for compromise. It has not been easy. During a speech to the Greek parliament on Sunday Alexis Tsipras, the new prime minister, struck a tougher line than ever on austerity and the bail-out; for good measure he raised the possibility of Germany paying war reparations to Greece. Three days later, at a disastrous meeting of the Eurogroup (the finance ministers of countries that use the euro), the 18 non-Hellenic countries lined up one after another to tell Yanis Varoufakis, Mr Tsipras’s finance minister, that Greece had to offer something in return for its demands. (One complained that the sums his country had lent the Greeks exceeded its annual overseas-aid budget.) Mr Varoufakis agreed to a statement that referred vaguely to the possibility of exploring an extension to the bail-out. Thinking their work done, Wolfgang Schäuble, Germany’s finance minister, and others left the meeting, only for Mr Varoufakis to change his position after a phone call to Athens. The two sides, it appeared, could not even agree to disagree.
A day later it was the turn of the heads of European Union governments, meeting in Brussels, to discuss the problem. Mr Tsipras’s audience was no less hostile than Mr Varoufakis’s had been a day earlier, although Angela Merkel and others were keen not to get into the details of bail-outs and reform measures. The Greeks at least agreed to begin technical discussions with European officials on where there may be room for negotiation on structural reforms; thin gruel, indeed, though after the previous night’s imbroglio this development was hailed with hallelujahs in some quarters.
Greece says it wants a short-term “bridge arrangement”, in the form of permission to issue more short-term debt and in the release of profits from an old Greek bond-buying programme carried out by the European Central Bank, which are currently sitting in the bank accounts of euro-zone member states. But officials from the ECB and euro zone have indicated that neither can happen if Greece insists on leaving its bail-out.
All eyes now turn to a second Eurogroup meeting, on Monday. This probably represents the last chance for Greece to secure a bail-out extension, given that such a change would have to be approved by several euro-zone parliaments. The Greeks, though, have expressed no sign that they are willing to budge, publicly or privately. Jeroen Dijsselbloem, the doughty Eurogroup president, has downplayed expectations of a deal.
The question is then what happens after February 28th. The Greeks have not indicated clearly when they would run out of money: as soon as March, some say, while others insist they can carry through until the summer, when various bond redemptions are due. There is no immediate prospect of default (although markets may be spooked when Greece leaves the strictures of a bail-out programme for the first time in five years). But sooner or later some accommodation will have to be found if Greece is to stay in the euro. Some European officials have begun speaking of forgetting both the idea of a bail-out extension and a bridge arrangement, and instead beginning talks now on a comprehensive third programme for Greece. But nothing changes the fundamental difficulty: how Greece can be helped if it continues to reject the proposition of conditionality for money.
The irony is that some of the larger problems—how to handle Greece’s debt stock, how tight a fiscal ship it must run, what reforms the government should work on—look soluble. Greece’s creditors will be ready to extend debt maturities to reduce further Greece’s (already-low) servicing costs; to allow it to run a primary fiscal surplus lower than the 4.5% mandated (from 2016) in its bail-out agreements; and to respond to a vague Greek proposal to stick to “70%” of the reforms agreed by the previous government. But the basic demand from the euro zone remains the same: no deal outside of a bail-out. When Mr Tsipras and his band of merry men took office, some feared that they might play a risky game of chicken with the euro zone, before eventually buckling. That now looks like the best hope.
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