Stratfor — Greece and Europe Begin Bargaining For Their Future

The European Central Bank's track record of threatening member states with economic collapse if they do not comply with bailout programs is well known. Ireland, Spain and Cyprus all received letters to this effect at sensitive moments in their recent history, and each decided not to call the bank's bluff. It is sometimes forgotten though, that the bank does not act unilaterally in these situations. If Draghi threatened Greece in a similar manner and then followed through with his threat to collapse the Greek economy, ultimately forcing a Greek exit from the eurozone — which could unravel the entire union — history would look unkindly on the unelected central banker who collapsed the European Project. Therefore, it is only with the support of Europe's governments that the European Central Bank can act so aggressively. Europe's finance ministers will hold an emergency meeting Feb. 11, and the heads of state will meet the following day. The future of Greece — and Europe — will be decided at these meetings.…

Germany and Greece's negotiating positions sit at either end of a scale. At one end, Germany would like to see a continuation of the status quo — for Greece to extend its bailout program, continue to undertake economic reforms to increase competitiveness and pay off its debt over time. At the other end, Syriza would like to reverse labor reforms, increase spending and write off some of its debt (though Varoufakis has stepped back from this last request). If the two sides cannot find a compromise somewhere along this scale, a Greek exit (colloquially referred to as a "Grexit") is inevitable. Varoufakis, an economist versed in game theory, should be well equipped to navigate these waters.

According to the party line, the German position is simple: If Greece wants to leave, let it go. A German economist on the BBC's Today Show on Wednesday morning described Greece as a man standing on a roof threatening to jump, with Germany as a concerned bystander offering to help him with his problems. However, this description ignores that the bystander is tied to the potential jumper and is likely to suffer significant damage should the man jump.…

Stratfor | Geopolitical Diary
Greece and Europe Begin Bargaining For Their Future

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