A high-stakes game of political cat and mouse

ANALYSIS: The tension was palpable as leader after leader implored the Greeks to do the deed

ANALYSIS:The tension was palpable as leader after leader implored the Greeks to do the deed

FOR THE fourth time this year, EU leaders gathered in Brussels last night to plot the next step in the sovereign debt emergency. They have declared victory many times before. None is inclined to suggest they are winning now.

The mood is bleak. With Greece in the throes of political and financial crisis, French president Nicolas Sarkozy barrelled into the summit room with little enthusiasm for niceties with Taoiseach Enda Kenny.

Sarkozy took a seat alongside German chancellor Angela Merkel, his intense eyes darting around the room as they engaged in a quiet chat. It is the Franco-German duo, after all, that sets the pace and tone of Europe’s halting response to the debacle.

Another dangerous moment has been reached. Huge uncertainty surrounds the fate of a crucial vote next Tuesday in which Greek MPs will be asked to back a €78 billion austerity plan.

Despite confident signals from prime minister George Papandreou that he has an all-important majority in the bag, diplomats say the likely outcome remains too close to call.

This casts serious doubt over the release of the €12 billion loan Greece needs to avoid running out of cash in the middle of next month. A default would trigger chaos in markets, so Europe is unlikely to let Greece falter. Hence the high-stakes game of political cat and mouse between the EU authorities and the Greeks.

Already the severity of the Greece’s debt burden – and the widespread conclusion that the country cannot repay it all – raises serious and growing questions over Europe’s strategy. This is a conundrum, however, that EU leaders are reluctant to confront right now. Their preference is to follow a step-by-step approach, insisting that relentless tidal waves of austerity will bring the wayward Greek economy to heel.

Many analysts doubt that – and thousands of Athenians protest nightly at the unfairness of it all – but Europe is not inclined to change its mind.

It is clear that a negative vote would throw the entire rescue effort onto the rocks and with it the well-honed principle that rescue loans come with strict policy strings attached. The austerity and privatisation plan dies if a handful of MPs in Papandreou’s Pasok Socialist Party say No: the country’s centre-right opposition is resolutely opposed to the initiative. Thus the tension was palpable in Brussels as leader after leader implored the Greeks to do the deed. It was all they could do, really.

With the vote in the balance, it makes little political sense to engage in deep discussion or take final decisions over the parameters of the second bailout deal that Greece will need.

First things first. A positive vote next Tuesday would clear the way for the handover of the €12 billion after euro zone finance ministers gather on Sunday week.

If that goes well, the way would be clear for the ministers to hammer out a second Greek bailout on July 11th. That assumes no political accidents in Greece and a smooth political passage of the endeavour in places such as Germany, Finland and the Netherlands.

It was no surprise, therefore, that the interest rate on Ireland’s bailout scarcely figured.

The battle continues.