End to Greek rollercoaster ride looms

The rollercoaster is a much overused analogy, but it seems appropriate for the talks on the Greek bailout programme. Tensions have been building between Athens, the EU creditor countries and the key institutions, and then appearing to ease a little as Greece promises to push ahead with reforms.

Behind it all lies a choice for the Syriza-led government: abandon a large part of its pre-election commitments or head towards the euro exit door. Central to the Tsipras government’s calculations will be the immediate costs and disruptions a euro exit would cause.

With the government quickly running out of funds, Athens is again promising to produce the required reform measures, with speculation that EU finance ministers could meet in the next week to green-light the release of cash. The tone taken after a meeting yesterday between Tsipras and German chancellor Angela Merkel appeared more conciliatory.

Politically, for Tsipras the question is whether he can sell an initial back-down on the basis that he wanted to safeguard Greece’s euro membership and that more may be won in the months ahead.

There has been speculation that if new ECB funding is not granted, Greece may need soon to impose capital controls. Beyond that lies the risk of default and euro zone exit.

There is an argument that Greece cannot survive in the long term in the euro. The problem is how to exit. The Greek people would be left with a massive initial hit to living standards; and it is not clear who would lend the government money, in the short term at least, raising the prospect of difficulties keeping the country going.

There is an argument that, after exiting the euro zone, Greece would eventually stabilise and that an independent currency would help it in the long term. But the short-term price could be chaos and instability. How bad this would be or how long it would last is anyone’s guess. It remains to be seen whether Tsipras and his colleagues are prepared to find out.