Greek Prime Minister Tsipras Walks Tightrope in EU Negotiations

     The markets are up this morning in the hopes of a deal. 

      http://www.cnbc.com/id/102776138

  
     But it seems to me we've seen this movie before. The EU wants Tsipras to honor the agreement made by his predecessor, but there's a reason the Greek people voted out his successor and Trsipras has to be careful not to follow him. 

     "For a deal to work, Tsipras will need a solution that is acceptable to his party or else may be pushed to call a snap election or a referendum to secure a mandate for an agreement."

     "His Syriza party was due to hold a rally in Athens on Sunday to send "a loud message of resistance" against demands for more cuts and tax hikes in a country battered by years of recession."

     "Under the austerity measures imposed by the IMF, the European Union and the European Central Bank in two bailouts, Greece's economic output has fallen 25 percent, wages and pensions have been slashed, and one in four Greeks is jobless."

    "The Greek government has argued the austerity imposed on the southern European country had made the crisis worse. A senior Syriza lawmaker said on Sunday that previous ideas put forward by Juncker would have led to a "social holocaust."

    So how exactly does he get a deal that satisfies the EU's bottomless demand for austerity and his voters who have had enough austerity for 3 lifetimes? Squaring the circle is the way to describe it. 

     It still seems to me the way out may be the Iceland Example. 

    http://diaryofarepublicanhater.blogspot.com/2015/06/who-loses-if-greece-leaves-eruo.html

     http://diaryofarepublicanhater.blogspot.com/2015/06/for-ecb-iceland-is-sore-point.html

      Isn't the lesson of Iceland that there is life after the euro?  

     It's hard to say what a Grexit would really be like. Some are rather smugly declaring that Greece has to make a deal because it has terrible hand as their exit is not the threat it once was. 

     http://diaryofarepublicanhater.blogspot.com/2015/06/does-greece-have-bad-hand-in-eu.html

     This is true only if you fail to recognize that there is life after the euro after all. That belief could be part of the complacency-'Of course, there will be a deal, because Greece has no choice.'

     It may just be wishful thinking:

     "Investors are too sanguine about the potential for a Greek exit from the euro zone, which could turn into a blood bath, Partners Group Vice Chairman Charles Dallara said Friday."

     "Dallara led earlier negotiations between Greece and its creditors as the managing director of the Institute for International Finance, a post he held from 1993 to 2013."

     "I am somewhat concerned that investors are looking at this and thinking the Germans, the IMF, the Greeks, they're all rational players at the end of the day, and we can all hope that they will be," he told CNBC's "Squawk on the Street." "But right now it looks to me as if the markets are not prepared for a default and this could be a bloody bath if it happens."

      "Read MoreCramer: We're ready for a Greek default"

     "Such an event would not be an isolated incident, would effect the credibility of the euro zone and would put particular pressure on a few countries in Europe's southern periphery, Dallara said."

     "Let's face it. There are other economies in southern Europe, which while they are on the mend, still have massively high levels of unemployment," he said. "They still have political systems which are struggling to really gain credibility."

    "The word "nonsense" is "not a bad word to use right now" to describe the notion that the euro would rally if a Grexit occurs, he said. That belief is based on the premise that investors would come around to the idea that the euro zone is better off without Greece."

     "Frankly, I look at Europe today and I see there are a lot of attractive companies now, but there's just so much uncertainty surrounding the integrity of the euro, you cannot simply think that Greece will leave the euro and everything else remains in tact," he said.

     "Read More Gartman: Greece would be better off defaulting"

     Note there are 2 different questions:

      1. Is the euro better off without Greece? I'd argue that not if you're German exporters

       2. Is Greece better off without the euro? The case of Iceland suggests maybe so. This is Gartman's idea linked to just above. 

       UPDATE: As noted above, while the markets are up on a Greek deal, these hopes are again disappointed as the moment of truth is pushed back to Thursday. 

      P.S. If my theory is right-that it's the powers that be in the EZ rather than Greece who really need to keep Greece in the union then a not bad prediction is that the two sides won't come to an agreement because as usual the EU won't' compromise adequately-Tsipras just can''t be seen to be doing more of the same-and they will come up with another band-aid. 

    That's based on history-what's always been the outcome of D-day negotiations of the past. However for Greece, it may be better for them to leave ASAP and just take the band-aid off already.