A Greek Drama, London Actors, and a European Stage

  • Specter of Varoufakis’s failures is haunting U.K. strategy
  • Vague proposals, clash with bureaucrats ring familiar bells

Barnier Says Brexit Progress Far From Sufficient

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When David Davis used the words “constructive ambiguity” to describe the U.K.’s negotiating strategy last month, a sense of déjà vu struck European Union officials. 

The term -- coined by Henry Kissinger in reference to the use of ambiguous language as a negotiating tactic -- was often deployed by former Greek Finance Minister Yanis Varoufakis in 2015 when defending the brinkmanship that nearly led his country to default and exit the euro area.

Yanis Varoufakis

Photographer: Kostas Tsironis/Bloomberg

Ever since the Brexit referendum in 2016, Varoufakis has been a frequent commentator in the U.K. on how best to negotiate with the EU. His book published earlier this year, "Adults in the Room -- My Battle With Europe’s Deep Establishment," has been read widely in British political circles.

While the Brexit talks are fundamentally different from the Greek ones in terms of scope, objective and significance, there are some aspects that bring back memories in Brussels.

Political Negotiation

Throughout 2015, Greece often tried to circumvent the official format for bailout negotiations, arguing that this was primarily a political discussion that should be raised to the level of EU leaders. Greek Prime Minister Alexis Tsipras often reached out to then-French premier Francois Hollande and German Chancellor Angela Merkel to break deadlocks in talks with bureaucrats but was always rebuffed, and told that he should instead be discussing this with the institutions overseeing his country’s bailout. 

In the end, and after talks at all other levels failed, Tsipras got what he wanted: a summit of EU leaders to strike an eleventh-hour deal. But by that time his exasperated counterparts had lost any appetite for goodwill and forced him into a deal that was much more painful than originally anticipated.

People familiar with how the Brexit talks are progressing in Brussels say the U.K. plan may be to intentionally string things out until a summit of EU heads of government in October, where British Prime Minister Theresa May will seek a grand bargain with her continental counterparts. Veterans of the Greek crisis’s “political negotiations” would advise May to be careful what she wishes for.

Theresa May

Photographer: Jasper Juinen/Bloomberg

Missing Deadlines

Unlike regular EU trade negotiations, which usually have no strict deadline and can go on for years, the Brexit talks, like the Greek ones, have a very finite end date. While in the case of the U.K. this deadline won’t come in the form of large debt payments falling due, it still leaves open the possibility that if a deal is not struck, Britain will be exposed to consequences, including a business exodus, regulatory chaos, and even severe flight disruptions.

It also means that like with Greece, in Brexit, too, the negotiating party under pressure is the one that stands to lose more if the talks run out of time, putting the EU in a more powerful position. “Their leverage increases as time passes and therefore they are in no hurry to strike a deal,” said John Wraith, head of U.K. Rates Strategy at UBS.

Problematic Proposals

Ahead of this week’s round of negotiations, the U.K. published 11 documents outlining its positions in areas that need to be settled as part of its withdrawal from the EU, ranging from data protection to nuclear safety and customs arrangements. None of these were deemed sufficient by the EU.

“I’ve read all the position papers produced by Her Majesty’s government and none of them is satisfactory,” European Commission President Jean-Claude Juncker said. What the papers ask for “is simply impossible,” the bloc’s chief Brexit negotiator Michel Barnier seconded.

The first six months of 2015 saw countless back-and-forths of proposals between the Greek government and its international creditors on the reforms needed in exchange for rescue loans. The drafts were repeatedly rejected by the euro zone and the International Monetary Fund as being insufficient and too far off from what any likely compromise could look like.

That was often the case when the proposals presented were somewhat more unorthodox than what the EU wanted to see. A plan by Varoufakis in March 2015 to employ tourists as undercover tax inspectors as a means of tackling tax evasion drew scorn and laughs in Brussels. But even more serious efforts to present drafts on pension and labor reform were often dismissed as insufficient, sometimes even sent back to the Greek negotiators with track-changes comments in red. 

Inflammatory Rhetoric

Discussions between the EU and Greece were often set back by statements of ministers or members of the government in Athens, who would say things or launch policies that were not in line with what was agreed in the negotiations, further complicating the talks. Meanwhile, inflammatory rhetoric coming from Greece, often directed at the EU, worsened the atmosphere in the negotiations and chipped away at the goodwill of its partners.

“We can’t be blackmailed into paying” a divorce bill, U.K. International Trade Secretary Liam Fox told ITV News on Friday, echoing similar warnings by Greek government ministers in 2015 against German “blackmail.” And U.K. Foreign Secretary Boris Johnson said in July that EU leaders can “go whistle” if they expected Britain to pay “extortionate” amounts to leave the bloc.

Domestic Rift

The Greek cacophony also created the perception that the Tsipras government wasn’t clear on what it wanted, making it more difficult for the negotiators to identify the outlines of a possible compromise.

European officials have expressed similar puzzlement with the U.K. "To be flexible you need two points, our point and their point," Barnier told reporters on the sidelines of talks in Brussels on Wednesday. "We need to know their position and then I can be flexible."

The government in Athens, like the one in London, also had to deal with different factions within the ruling party, some of which took a more aggressive approach toward the country’s euro membership and risked pulling their support if the Greek side compromised too much.

Tsipras’s capitulation to European demands triggered a mutiny within his own party, forcing him to rely on opposition support in his bid to strike a compromise. Similarly, May could find herself stuck between hard-Brexit backers and moderates, as her party, like Tsipras’s Syriza, lacks an outright majority in parliament.

Kindness of Strangers

Throughout its fraught negotiations, Greece tried on several occasions to reach out to non-EU partners such as Russia and China for help. The hope was that by doing so, the government would strengthen its position in the talks, ensure a flow of cash to deal with the threat of default and create a safety net in case negotiations with creditors didn’t work out. 

None of these efforts proved particularly fruitful, however, with most third countries viewing the growing uncertainty in Greece and the euro area caused by the standstill as an inhibiting factor. Instead, Athens faced mounting pressure by non-EU countries such as the US to strike a deal with its partners quickly, in order to avoid an event that would create instability in the area.  

This week, Japanese Prime Minister Shinzo Abe pressed the U.K.’s May for a “transparent and predictable” British breakaway, adding to signs that the Brits are unlikely to find allies among the world’s great powers in their quarrel with the EU.

And even potential euroskeptic backers like U.S. President Donald Trump could pressure the U.K. on accepting the EU’s terms on issues such as agricultural and financial regulation in return for a trade agreement.

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