Tsipras isn't the only one getting weary.

Photographer: Angelos Tzortzinis/AFP/Getty Images

Subplots Cloud Greek Drama

Mohamed A. El-Erian is a Bloomberg View columnist. He is the chief economic adviser at Allianz SE and chairman of the President’s Global Development Council, and he was chief executive and co-chief investment officer of Pimco. His books include “The Only Game in Town: Central Banks, Instability and Avoiding the Next Collapse.”
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Successful television series engage viewers by studding a long-running storyline with discrete subplots that usually are resolved within an individual episode. These shows often falter when the underlying plotline gets lost in the subplots.

QuickTake Greece's Fiscal Odyssey

Until now, the Greek drama has met the criteria for a successful show: The theme was the country's commendable quest to stay in the euro zone -- and, critically, to do so while meeting the legitimate aspirations of its citizens and avoiding becoming a long-term ward of Europe. This narrative spoke to Western Europe’s regional integration project, which has played a central role in transforming a conflict-torn region into an admirable oasis of peaceful coexistence and cooperation. It is relevant to the stability and prosperity of the global economy. And it acts, both in reality and in perception, as a counter to multiple external threats to Western democratic values.

The main protagonists of this central storyline are the tireless political leaders who, time and again, have managed to overcome distractions and successfully meet last-minute deadlines -- thereby securing a new season for the Greek drama. They unite, usually at the 11th hour and, despite recurrent disappointments and unmet promises, skillfully manage to win over their skeptical and sometimes restive constituents, including easily rattled financial markets. 

But this powerful and, until quite recently, predictable formula is running into serious trouble. Specifically, it is threatened by five subplots that may be about to hijack the main storyline:

  1. By the end of last week, critical working relationships had devolved into fierce public acrimony, fueling increasingly stinging partisan rhetoric. Having entered the week urging the country’s creditors to be “realistic,” Greek Prime Minister Alexis Tsipras informed parliament Friday that the proposals he had been presented by creditors were “absurd.” Further, he suggested that the offer his European partners had made in writing departed significantly from what they had earlier indicated to him orally. As a result, he said he hoped the proposal “was a bad negotiating trick and will be withdrawn."
  2. Seeking to strengthen its own negotiating stance, Greece decided Thursday to postpone a 300 million euro payment to the International Monetary Fund, one of the world's very few “preferred creditors.” It buttressed its case by invoking an obscure clause -- used only once before by Zambia in the 1980s -- that allows IMF members to “bundle” payments and delay them until the end of the month. In the process, Greece defiantly signaled that its willingness to remain a fully cooperative working member of the international community was in doubt, along with its financial capacity.
  3. These Greek provocations led the usually polite European Union president, Jean-Claude Juncker, to deliver a rather blunt warning to Tispras over the weekend. “Friendship, in order to maintain it, has to observe some minimal rules,” Juncker said Sunday. This reaction is notable because the EU president has gone to enormous lengths to maintain a working relationship between Greece and its more demanding creditors -- from the growing number of hardline euro zone countries to two powerful institutions, the European Central Bank and the IMF, which under political pressure have taken on significant financial and reputational exposure.
  4. The Greek gambit was particular embarrassing for the IMF, which had confidently stated that the country would make its scheduled payment. Managing Director Christine Lagarde traveled to Berlin early in the week to hammer out a unified position with Greece’s other official creditors. In the process, she compromised on a few conditions that many in her organization believe are critical components of a durable solution to the crisis, including more debt relief from EU members and a more credible fiscal-reform and adjustment effort on the part of Greece. 
  5. Witnessing this dysfunction, ordinary Greek citizens scrambled to do more to protect their dwindling savings. Partial indicators point to continued withdrawal of bank deposits, capital flight and a growing consensus that capital controls will soon be required.

These five subplots could divert the main storyline away from the struggle to reconcile differing views of what Greece needs to do to remain in the euro zone, including the right mix between budgetary austerity, structural reforms, debt relief and emergency cash.

Related: Greece Default Watch

Facing an intensifying trust deficit and worsening coordination failures, the leading actors -- the region's political leaders -- increasingly risk being relegated to secondary roles. Meanwhile, the ensemble in this drama -- citizens subjected to a protracted and suffocating economic and financial crisis -- is increasingly taking on more of the decision-making role on the ground. The more this occurs, the greater the probability that a new and very different storyline will impose itself -- one that focuses on the uncoordinated, disorderly and uncontrolled exit of Greece from the euro zone.

This column does not necessarily reflect the opinion of Bloomberg View's editorial board or Bloomberg LP, its owners and investors.

To contact the author on this story:
Mohamed A. El-Erian at melerian@bloomberg.net

To contact the editor on this story:
Max Berley at mberley@bloomberg.net