Last scene of the fourth act

[Hindsight note: This prediction was wrong.]

Most people won’t realize how serious this is until it happens. Within a week.

June 26th was the Greek tragedy’s third act: The conflict couldn’t be resolved short of a catastrophe. The Greeks wouldn’t accept the lender nations’ conditions, the lender nations wouldn’t lend without that conditions, neither side would fold  and without further lending Greece would be screwed.

Then the first scene of the third act: Tsipras calls a referendum. The Eurogroup hopes the Greeks will fold with a yes vote. The Greeks hope after the commitment of the No vote the Eurogroup will have to fold. For a week both sides have some hope but neither side actually folds.

Second scene: Tones of reconciliation. The Eurogroup makes some fuss about still being willing to negotiate and and the Greeks seem to be trying for some goodwill points with Varoufakis resigning.

Third scene: This last Friday were hearing about the French helping the Greeks with there proposal. Then the Institutions make some noises about taking it seriously. And it looks like both sides may be able to call it a victory: The Greeks could claim victory over debt relief, the lender nations about even harsher austerity then they had demanded. For a brief moment it looked like the catastrophe could be averted. I was surprised.

Fourth scene: Conflict in Eurogroup but basically the decision is to demand more specifics and improvements of details. That sounds basically like a return to the third act, where Greece would have a rephrased “new” proposal every few days and then the Eurogroup wold demand specifics and improvements, to which Greece would respond with a new proposal, etc. But actually it’s the transition to the fifth act: Sometime next week the Greek banks will run out of money. There might be some pretense of negotiation until that moment, but basically all the fourth act’s hopes are shattered.

There are still some plot strings to resolve in the fifth act:

The narratives of blame are already being set up: The creditor narrative is that the Greeks never were willing to admit their wealth had been smoke and mirrors, tried to weasel out of that realization by refusing to commit to anything specific, blew away their best chance at the polls and then continued to make new demands drunk with overconfidence until the very moment they got crushed. The Syriza narrative will be that the creditors never were really willing to help them even when they would have swallowed a complete and humiliating defeat days before the collapse.  The ECB’s narrative will be that they didn’t decide this and helped delaying the reckoning as long as possible until both sides’ politicians ran into the wall that had been plainly visible for weeks. All these narratives are basically true and have been since the day Syriza won the election. But now they will have to be worked out into actual blame.

Connected to that is how the Greeks will apportion blame between their government and the creditors. Most of the people who voted No just a few days ago expected to get a better deal out of it, which is what their government loudly promised them over voices to the contrary. If most of the internal blame goes to the creditors, Greece may manage the transition peacefully. If it goes to the government that lied to them and will be paying its pensioners and  civil servants in scrip, there might be a revolution.

And the nature of the scrip isn’t quite clear yet: It may be drachmas or, more likely I think, it may officially be Euro IOU’s.

Basically both sides expected to win so neither side really planned for what everybody should have expected. In a few days, the Greeks will be living in interesting times. Oremus.

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