If you are looking for an argument that the Greek "no" vote on this weekend's referendum doesn't mean Greece will end up leaving the eurozone, you won't do better than to read these tweets from Irish economist Karl Whelan.
The basic case is pretty simple: Getting some financial assistance from Europe is better for Greece than getting no assistance, and getting some debts repaid is better for Europe than getting no debts repaid. So as long as Greece wants to be in the eurozone and the eurozone wants to avoid a Greek departure, the rational thing is to cut a deal.
The referendum means Europe can't hope for a new Greek government
1. For all today’s wailing, I don’t think a Yes would have produced a better outcome. Would mean new elections which Syriza might have won.
— Karl Whelan (@WhelanKarl) July 6, 2015
2. Creditors will claim ref changes nothing but it does. The creditors’ "regime change" dream died yesterday. No election before a deal.
— Karl Whelan (@WhelanKarl) July 6, 2015
3. So creditors need to deal with Syriza or accept Grexit. Tsipras sober speech and absence of Yannis may help a little to rebuild bridges.
— Karl Whelan (@WhelanKarl) July 6, 2015
The contours of a deal are visible
4. Toxic rhetoric aside, the pre-referendum gap between sides on a deal was actually very small. Deal still there to be done.
— Karl Whelan (@WhelanKarl) July 6, 2015
5. But any new deal needs to accept new reality. Economy has been damaged and the banks need a significant recapitalisation.
— Karl Whelan (@WhelanKarl) July 6, 2015
End austerity in exchange for serious reform
7. If EU wants to avoid Grexit or the crisis lasting forever, significant debt write-downs & politically sustainable surpluses are required.
— Karl Whelan (@WhelanKarl) July 6, 2015
8. Tough conditionality and necessary reforms that EZ require can be sold if Tsipras can sell deal as end of austerity without end.
— Karl Whelan (@WhelanKarl) July 6, 2015
A deal is a win-win
9. Claims that Greece is ring-fenced are bluster. Can’t even begin to imagine the economic, political, diplomatic implications of Grexit.
— Karl Whelan (@WhelanKarl) July 6, 2015
10. Grexit would also minimise recovery of loans made. So economics and morality point same way: Do the deal and keep Greece in euro. 10/10.
— Karl Whelan (@WhelanKarl) July 6, 2015
The question: Does Europe want a deal?
What's unknown here is whether Europe really wants a deal. Whelan says the eurozone hasn't truly been "ring-fenced" against the consequences of a Greek departure. That's not something everyone agrees with. And in the eyes of many northern Europeans, all that's happened over the past month is that the Greeks have proven themselves to be untrustworthy partners whom one doesn't want to be in business with. And in the eyes of many southern European politicians, if Greece's special pleading gets them a better deal that will make their own strategies look ridiculous.
