During the depths of the financial crisis, Sunday became Monday.
Finance ministers and central bankers were inept at saving the global economy during normal working hours. They inevitably toiled through the weekend, unable to make decisions without the pressure of the opening of markets in Asia to focus their minds.
Here we go again.
The standoff between Greece and its creditors—the European Commission, the European Central Bank and the International Monetary Fund—will extend into the weekend. Athens needs a lifeline to cover the almost US$2 billion that it owes the IMF on June 30. The creditors are taking a hardline on the conditions that will come attached to the money. Greek Prime Minister Alexis Tsipras, who was elected five months ago on a promise to end austerity, is finding it ideologically and politically difficult to meet their demands.
Europe’s leaders were assembled for a previously scheduled meeting, but refused to let Greece distract from their agenda. They instead ordered finance ministers of the euro zone to assemble Saturday for a meeting that German Chancellor Angela Merkel said would be “decisive.” It would surprise no one if there still is no agreement when the clock strikes midnight on Saturday.
The stakes for international investors aren’t as high as they were in the aftermath of the bankruptcy of Lehman Brothers and previous examples of European bailout negotiations. Those episodes were terrifying because policy makers were making things up as they went along. That was especially true in Europe, where the architects of the euro had designed a currency union without giving much thought about what to do in an emergency.
Bailout procedures now are in place. Investors appear confident those will prevent a calamity. Greek equity markets ended the week higher, even as the news—which was all good on Monday after Tsipras made his first real concessions to creditors since becoming prime minister in January—became steadily more discouraging by the day. The sight of each side talking seriously remained a more positive development than the discouraging rhetoric and gamesmanship that followed. But it is Europe’s new safety net that is providing buoyancy. Stock values would not have held up if investors believed the worst-case scenario—failed negotiations that trigger an effective Greek default—would lead to mass panic.
It is reasonable to expect a breakthrough. Judging by the various offers leaked to the Financial Times, Tsipras and the Troika are at least in the same neighbourhood. The institutions want Greece to overhaul its pension system and commit to surplus targets. The Greek prime minister appears willing to do so, only not (yet) to an extent the other side deems satisfactory. But that is the nature of a negotiation. It was probably unreasonable to hope, as many seemed to earlier in the week, that a resolution would come easily. They always knew they had the weekend.
And so the world waits—but only for another episode, not the finale.
Any resolution likely will contain things that Tsipras’s left-wing Syriza party dislikes, and elements could opt to abandon him in parliament. The prime minister could seek help from centrist parties, an outcome that some observers say would be a good thing. German and other European legislatures will also have a say. Preserving the euro has been enough to sway support for Greek rescues in the past, but political conditions could have changed. That no doubt is one of the reasons the Troika so hastily rejected Tsipras’s initial offer.
But as difficult as it is to defend bailouts, it would be even more trying for a European leader to explain why he or she allowed the euro and/or the union itself to dissolve on his or her watch.
Politics trumped economics to bring the continent closer together, and there is every reason to think politics will continue to defy economics now. It just may take more Sundays to do so.
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Kevin Carmichael is a journalist and senior fellow at the Centre for International Governance Innovation. He has written about economic policy and the men and women who make it for almost two decades from Ottawa, Washington and, currently, Mumbai. Follow him @CarmichaelKevin