Two years ago this August, I predicted in The Mediterranean Quarterly Review that one of the following scenarios would come to pass in Greece by 2016.
Scenario 1: Stimulated by an event in Greece -- a Syriza victory, a dramatic increase in Golden Dawn's representation, or the outbreak of conflict in the streets, or all three -- Germany would adopt a more accommodating position and relax its demands for austerity. Suddenly, the element of illusion would drop out of the European political dialogue. Instead of being a family in name only, the EU would begin to act as one....
Scenario 2: Germany would refuse to relax its position on austerity no matter how bad conditions in Greece might become. Greece would edge ever closer to default. Civil unrest would grow to the point that a protest party defeated the then ruling coalition and destabilized the relationship between Greece and Europe. Voices in the rich countries -- Austria, Germany, and the Netherlands --would call for Greece's expulsion from the Eurozone. Greece would be expelled, or obliged to leave...
Scenario 3: Greece would break the taboo of thinking the unthinkable and openly reflect on the effects of an exit from the Eurozone while remaining in the EU. Even if the Greek government did not pursue such a course, the fact that it could seriously consider it would bring the increased respect of its citizens. At the same time, witnessing a willingness on the part of Greeks to choose between alternatives, Greece's creditors could be induced to offer better terms. This in turn would increase the government's stature in the eyes of its people. The downward spiral would be reversed and transformed into an upward one...To take such action, Greece would have to break its centuries-long habit of looking to others for its salvation, but in doing so, it would lay the groundwork for a reform of the Eurozone.* (*Elias Kulukundis, "Greece -- The Open Circle," Mediterranean Quarterly Review, Summer 2014.)
The Syriza government set its sights on achieving Scenario Three, but its vacillations nearly brought about Scenario Two. After Greece missed its payment to the International Monetary Fund earlier this spring, the European Central Bank limited the liquidity it provided to Greece's banks, the Greek banks shut their doors, and Greece was nearly forced to leave the Eurozone.
The main obstacle in the way of Scenario Three has been that Germany and its allies wanted to punish Syriza for its insurrection against the doctrine of austerity and were determined not to let it be seen to have any reward for its conduct. To give Scenario Three a chance of success, the Greek Government would have had to keep to its strategy to the ultimate conclusion and be prepared to call the Eurozone's bluff. Instead, at the crucial moment, Tsipras vacillated.
As we learned recently, Yanis Varoufakis, while still the Greek Finance Minister, had prepared a plan to issue an alternative currency based on a form of government IOU. Varoufakis's strategy was to avert the liquidity crisis and prevent the long lines at the ATM machines in spite of the capital controls which had been imposed. Prime Minister Tsipras would have been in a strong position to carry out such a move, in spite of predictable domestic opposition, because 61% of the voters in the referendum had voted to reject the creditors' terms. To anyone who opposed the plan, Tsipras could have answered, "But you voted no."
Why else would he have called the referendum if not to prepare that argument?
Varoufakis claims that Tsipras gave him the green light for the alternative currency but lost his nerve at the last moment. Swayed by the predictions of catastrophe if Greece left the Eurozone (although you could say the catastrophe had already happened,) Tsipras succumbed to Eurozone pressure and fired Varoufakis, in effect ceding the initiative back to the creditors.
Now the only one left working for Scenario Three is Panayiotis Lafazanis, the former Energy and Environment minister and leader of Syriza's Left Platform. An unregenerate Marxist who names his newspaper Iskra (meaning spark in Russian) after Lenin's paper in the last days of Tsardom, Lafazanis is mounting a rear-guard movement of opposition to Tsipras within his own party with the intention of undermining the government's latest round of negotiations with the Eurozone before it starts. The difference is that Lafazanis is not working to improve Greece's bargaining position within the Eurozone but actually to take Greece out.
The situation is further clouded by reports emanating from the International Monetary Fund that the Fund cannot participate in a third bailout because Greece does not meet the criterion of having a sustainable debt. That is more or less like the Vichy police chief in the film "Casablanca," declaring that he is "shocked, shocked" to find that gambling is going on in Rick's bar. The IMF had known since 2010 that the Greek debt was unsustainable but winked at the requirement because at that time Germany was afraid the Eurozone could not survive a Greek exit. Now apparently, Germany and the Eurozone are more confident. It may be that the IMF's recent announcement is the first indication that Grexit is a stronger possibility, and the scenario that comes to pass will be Scenario Two.
At any rate, it is clear that the chance to achieve Scenario Three has now been lost. Tsipras missed his moment to change history. After he had destabilized negotiations with the Eurozone throughout the spring, all that remained was for him to approve the alternative currency to call Germany's bluff.
If it is true, as Varoufakis maintains, that at the last minute Tsipras back-tracked, it is as though Tsipras had planned a prison break, in which all the factors for success were set, but at the last moment he was not willing to run across the open ground to the wall. He called off the break after it had already started, and in the process left Varoufakis, his lieutenant in charge of the logistics, stranded.
To use another analogy, one former Minister Lafazanis might well appreciate, it was as though in October 1917, Lenin had called the Bolsheviks off the streets, left Trotsky and the Red Guards to be arrested, and gone back to the Provisional Government to negotiate a solution.
Tsipras now talks of a party-wide referendum on the Eurozone's demands which may be a prelude to elections in September. We will see what the results will be, but it appears that whatever the pulse of the public may be at any given time, the long-range judgment of history should be hard on the Prime Minister. Tsipras is a clever politician who was able to ride the wave of protest a long way, but in the end he was not able to find a coherent destination, and at the present moment he is being buffeted by the waves, struggling to keep his board afloat.