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دويتشه بنك عن تطورات الاوضاع اليونانية
Three new developments
A few more weeks have passed since our last update on Greece with little change to the status quo: stalled negotiations, an ongoing drain to the Greek government's cash position, and persistent pressure on the Greek banking system. Last Friday's Eurogroup publicly confirmed this lack of progress, attributed to both procedural difficulties and more importantly large gaps on substance. Despite this, we consider three recent developments in domestic Greek politics as finally turning a little more positive. First, opinion polls* have started to turn. After the first few weeks' honeymoon period, the electorate is turning more cautious on the administration's negotiating strategy, reflected in declining approval ratings for both the government and PM Tsipras himself. Most significantly, even as tensions rise, polls show continued and overwhelming public support for a European solution: between "rupture" or "agreement", opinion polls consistently point to more than 70% support for the latter. These trends matter because the government's political narrative has been strongly reliant on a perception of broad popular backing. As approval ratings decline, accompanied by a desire for a "European solution", so does the pressure on the government. The second development is that the government's negotiating team has been re-shuffled. Talks have suffered from the Greek government's lack of negotiating experience as well as persistent operational difficulties: the mission heads of the three institutions (formerly Troika) have been negotiating at arms' length from Brussels or Paris, with the technical teams in Athens facing ongoing difficulties in their access to data and line ministries. Officials more closely aligned to moderate deputy Prime Minister Dragasakis (including Oxford-educated deputy foreign minister Tsakalotos) have now been given a greater role, and the overall team has been expanded in size. These changes may help negotiations, but are not a game-changer: the biggest obstacle to an agreement is the distance in matters of substance, most notably collective wage bargaining, pensions, and fiscal measures for this year. Still, the change after intense pressures from Europe at the margin signals a move towards a more moderate direction, at least in terms of approach. Third, and most importantly, PM Tsipras gave a wide-ranging interview to a Greek TV news channel yesterday evening. The deadlock in terms of sticking points was confirmed, yet the PM's statements on the government's negotiating strategy were more important. When asked on the way forward if an agreement violating electoral promises is required, the Prime Minister signaled that a referendum would be his preferred route, ruling out a general election. We consider this important for two reasons. First, it signals that an agreement that crosses the government's red lines is likely being actively discussed. Second, this is the first time that the PM has provided what we consider to be an internally consistent strategy in breaking the current deadlock.
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