The conclusion first! Greece will stay in the Euro. Agreement with the creditors will be reached and it is not difficult to see how it will look. The challenge is to trace how to get there. It will probably be a bumpy ride, messy flavored with mutual accusations, disagreement among Eurozone members, drama, walk outs, and statements that 'now it is all over' - but it isn't. With a lot of good luck a solution may be found over the coming week-end, but it is possible that it will take three months. There may be a need for tempers to calm down and a cool appreciation to replace hot tempers on both sides. Greece can stay formally in the Euro over three months even if steps casting doubt over membership - and causing raised eyebrows in the Eurozone - are taken to keep the economy going albeit at a slow pace.
It was never realistic to expect a solution before the absolute deadline. Both sides had to show how hard they fought to defend interests against a stubborn opponent. Both sides have parliaments and an electorate to keep in mind.
An agreement will be forged around two axes. The first one is measures to reform and restructure the economy in a convincing way - that will be implemented and work. The second one is dexterity with regard to the debt burden. Many parameters such as interest rate subsides or scheduling of repayments can be brought into play reducing the debt burden without writing off much of the debt. The problem, which has harassed the negotiations from January 2015, is that the two sides do not trust each other therefore demanding too much and insisting on a vocabulary that prevents a bit of blurring, a trick often mobilized in diplomacy.
Such a solution cannot and will not be the final words in the Greek drama. It is a kind of breathing space lasting a couple of years. Both sides will be able to judge how well the Greek economy performs and how trustworthy the other side turned out to be. Thereafter the time will come for a longer lasting plan to change Greece from a country with a non-viable economy into an economy that works or if that proves impossible for the Eurozone to decide whether it will continue to support Greece. Already now transfers from EU-funds is running at 3 percent of Greek Gross Domestic Product (GDP) and a hike with one or two percentage points is by no means impossible.
Prime Minister Tsipras won a resounding victory with 61 percent of the electorate following his appeal to vote no. Paradoxically that puts him under pressure. The voters will say 'we did what you asked us to do, you promised that if so everything would be all right and a better deal obtained. Now you must deliver'. If he comes back from the week-end summit (11-12 July 2015) without a deal, voters will question his judgment. This feeling will be accentuated if banks keep closed and capital controls remain in place.
Recalling his political past on the extreme left the uncertainty about his policies is not easy to discount. Officially numerous statements in his name have stressed that Greece should stay in the Euro, but with a better deal. There is, however, not much evidence to support that he worked to achieve that. Maybe he planned from the start to take Greece out of the Euro, but the majority of Greeks preferring to stay in the Euro blocked that road. Alternative theories attribute to him the goal of forcing the left wing of Syriza out of the party allowing him to form a center-left coalition, but again there is little evidence to support this view. There is no real basis for judging what he wants - obscurity and contradiction suffuse the agenda. Going into negotiations without communicating the final objective - an achievable one - is a grave mistake. The art of diplomacy consists of mapping out a course of actions taking the country to the final objective through a step by step approach patiently and cautiously weeding out obstacle after obstacle. Neither the domestic audience nor opponents around the negotiating table should be surprised by the final result. It emerges as the natural outcome; decision is taken when time has come and the fruit is ready to be picked. The chain of events over the preceding six months is an illustration of violating all of these principles whoever is to blame.
From the Eurozone perspective the lack of dedication to 'Europe' has played a crucial role. Prime Minister Tsipras has never conveyed convincingly that he feels committed to Europe and wants to keep Greece in the Euro and the EU to take part in building a Europe reflecting the phrase from the treaty preamble 'an ever closer union among the peoples of Europe'. Apparently Greece under Prime Minister Tsipras and the Eurozone do not look upon each other as fellow members of the Eurozone, but conceptually as 'some of us inside' and 'one of us outside' and the one outside not subscribing to the survival of the Euro as the principal and common objective for ALL of them. That being the case a good deal of European politicians asks how much should be done for Greece? The EU is a political and economic enterprise and if Greece represented by Prime Minister Tsipras exclusively see it as an economic enterprise to fund a persistently weak Greek economy the gap in political beliefs may be too deep to bridge.
Observers and commentators point to the geopolitical role of Greece as a Western ally (EU and NATO membership) in the Eastern Mediterranean and at the southern tip of the Balkans - traditionally a powder keg. This is not wrong, but if Greece does not feel it is part of the EU and the Western alliance, how much can it be counted upon if or when a crisis calls for its support to allies and partners? How much does Greece weighs as an ally if it is not member of these organizations by conviction, but by convenience? Prime Minister Tsipras meetings and communications with President Putin and especially the timing immediately before summits are at best bizarre for a member of EU and NATO.
Over the coming days, weeks, and months the Eurozone will look for a convincing stance by Prime Minister Tsipras that Greece belongs in the 'Western' camp. If such communication is forthcoming negotiations will be smoother, much smoother.
This may well prove to be a decisive factor and lift the problem from economics to politics. Then it is solvable.
If on the other hand such statements are not put forward it is possible that the negotiations end with Greece leaving the Euro and a question arises over its EU membership. The consequences for the rest of the Eurozone and the EU will not be dire as maintained by some observers who predict severe negative repercussions. For the simple reason that Greece has signaled that it is not a European country sharing common values with the other member states.
Joergen Oerstroem Moeller Visiting Senior Research Fellow, Institute of Southeast Asian Studies, Singapore. Adjunct Professor Singapore Management University & Copenhagen Business School. Honorary Alumnus, University of Copenhagen.