Tuesday, April 7, 2015

Mr Tsipras goes to Moscow

April 7, 2015

Alexis Tsipras, Greece's prime minister, heads to Moscow this week with his country's future in the euro zone hanging in the balance. Greece's negotiations with its creditors over the release of €7.2 billion ($7.8 billion) of bail-out money are still going nowhere, even as its coffers run dry. The government is raiding state kitties and delaying payments to suppliers in order to meet its obligations to creditors, most urgently a €458m payment due to the IMF on April 9th and €700m in treasury bills held by foreign investors, which are unlikely to be rolled over at maturity next week. But before long it will need a proper financing strategy.

Some Europeans fear that Mr Tsipras thinks Russian money can solve his problems. The EU's 28 member countries must unanimously agree to renew their sanctions on Russia over its aggression in Ukraine before they expire in July. Greece has historic ties to Russia, its largest trading partner, and Mr Tsipras has described the EU's measures as a "road to nowhere". Might he offer Vladimir Putin Greece's veto in exchange for a bail-out?

Probably not, for three reasons. First, Russia's economic problems mean it is not in a position to provide Greece with more than token financial assistance. Second, despite his public bluster, behind closed doors Mr Tsipras has not seriously threatened to undermine the EU's joint position, according to European officials. And third, Europe's leaders will probably discuss whether to extend their sanctions at a summit in late June. Coincidentally, the bail-out extension agreed with Mr Tsipras's government in February will expire a few days after that, and Greece faces bond redemptions in July that it will not be able to meet without further help. Its creditors will not be minded to provide a third bail-out with Greece threatening to blow up the EU's Russia strategy. Mr Tsipras has not proved himself the canniest of operators, but even he must have a better sense of timing than that.


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