Next move?

Photographer: Angelos Tzortzinis/AFP/Getty Images

Tsipras Overturns the Chessboard

Leonid Bershidsky is a Bloomberg View columnist. He was the founding editor of the Russian business daily Vedomosti and founded the opinion website Slon.ru.
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It's difficult to imagine a decision more irrational than Prime Minister Alexis Tsipras's call for a referendum on whether Greece should accept its creditors' latest bailout proposal. Tsipras is attempting to abdicate responsibility for what could have been the toughest decision of his career. One can only hope the Greek people will be more responsible on July 5, if the referendum goes ahead.

Tsipras told Greek citizens in a televised address Saturday that the creditors presented his government with an ultimatum Thursday that would add "new unbearable weight to the shoulders of the Greek people" and "undermine the recovery of the Greek economy and society -- not only by fueling uncertainty, but also by further exacerbating social inequalities." Therefore,

We are facing a historic responsibility to not let the struggles and sacrifices of the Greek people be in vain, and to strengthen democracy and our national sovereignty -- and this responsibility weighs upon us. Our responsibility for our country’s future. This responsibility obliges us to respond to the ultimatum based on the sovereign will of the Greek people. Earlier this evening, the Cabinet was convened and I proposed holding a referendum, so that the Greek people can decide.

Tsipras spoke as if he hadn't himself submitted a very similar proposal to the creditors on the very same day. Comparing it with the creditors' version is like poring over a spot-the-difference puzzle. Is the mole on the princess's left shoulder or the right one? Are the lapdog's eyes blue or brown?

Greece's Fiscal Odyssey

It's hard to argue that a value-added tax of 23 percent on hotels, rather than 13 percent as Greece proposed, and "phasing out" rather than "replacing" a bonus plan for the poorer pensioners would constitute "unbearable weight" for the Greek people. Yet such is the nature of the few remaining sticking points that have prevented Greece from making a deal with the European Union, the European Central Bank and the International Monetary Fund. To get to that point, Greece made reluctant compromises, and so did the creditors. Creditors' demands for a primary fiscal surplus are no longer unreasonable: They asked for 1 percent of gross domestic product this year and 2 percent in 2016, compared with 3 percent and 4.5 percent in the original bailout plan. Greece agreed. 

As Tsipras conducted the negotiations, he led the creditors -- and everyone else who watched the tortuous process, including Greeks -- to believe that he was making and accepting concessions in good faith. It looked as if he was playing chess. Now it turns out, either he was just pretending to make moves to waste everybody's time, or he didn't really understand what he was doing on the board. In either case, unhappy with the outcome, he has just swept the pieces off the board.

His referendum proposal is similarly pernicious. He may think that, in the words of his coalition ally Panos Kammenos, he's "doing a Kougi" -- blowing himself up as the defenders of a Greek fortress did rather than have it fall into the hands of the Turks in 1803. In fact, Tsipras is playing havoc with the law of his country and the chances of its economic survival.

"The question on the ballot will be whether the institutions’ proposal should be accepted or rejected," Tsipras said. Such a question would contravene the Greek constitution, which says in Article 44 that a referendum cannot be held on fiscal matters. The creditors' proposal is all about fiscal matters. It makes no sense to ask the Greek people whether they want higher taxes, and the drafters of the constitution clearly agreed.

Even if the referendum as envisioned by Tsipras were legal, the date, July 5, requires that the current bailout be prolonged past June 30, when Greece is due to repay 1.5 billion euros to the IMF -- money it most likely doesn't have. Given Tsipras's surprise move, the creditors are unlikely to provide such an extension. Even if they do, Greeks will use the week before the vote for a final bank run: The risk of an exit from the euro is too real to leave any remaining euros in a Greek bank. Lines at cash machines throughout Greece on Saturday proved it. Along with the referendum announcement, Tsipras should have imposed capital controls. As it is, Greeks are being told to vote for a proposal that may not even be on the table by the time they come to the polls. 

Even if Greeks wanted out of the euro -- which they don't: Opinion polls show they are overwhelmingly for keeping the common currency -- they would be wrong to vote with Tsipras's grandstanding, chessboard-overturning government. They need someone more capable to oversee a transition out of the euro and probably the EU: Surviving as just another Balkan nation will be tough.

Syriza's performance in the last five months, culminating in Tsipras's surprise move, clearly shows Greece misfired when the party was elected in January. The referendum, if it is actually held, gives Greeks another chance. If they refuse to back Syriza in it, there will probably be an early election. Whomever it empowers will need to start from scratch with the creditors: They will still want to do some kind of deal rather than have Greece walk away from all its debts. It's OK to move the deadline again: The Greek people deserve a chance to get it right.

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:
Leonid Bershidsky at lbershidsky@bloomberg.net

To contact the editor on this story:
Stacey Shick at sshick@bloomberg.net