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Saturday, February 7, 2015

Can Greece Make a Deal with Europe? Part 1: Why and When a Deal Must Be Struck

RealTime Economic Issues Watch | Can Greece Make a Deal with Europe? Part 1: Why and When a Deal Must Be Struck

As the economic realities tighten, Tsipras’s government may have no choice but to ask for the review extension, buying time for negotiations before the June deadline. A request should buy perhaps three months of negotiating time until the end of June. It makes no sense for the euro area to extend the review beyond the hard deadline of June/July—unless they are willing to release money to Greece to pay back the ECB without getting anything in return.
Part 2: What Kind of Deal Can Greece Hope For?
All told therefore, even if it looks like the coming months will be very volatile for Greece, a deal is not impossible. It would even hold great potential benefits for Greece, Syriza, and the euro area. The Greek economy would avoid another crisis, Syriza (with Tsipras at its helm) would replace PASOK as the mainstream center-left party in Greece, and the euro area would neutralize new radical leftwing political movements elsewhere in Europe. Forcing Syriza toward the center would be far better than laying waste to its economy to teach a lesson to leftists in other countries, including Podemos supporters in Spain.
Can Tsipras deliver? Hopefully yes. But if not, a new government that can will have to be formed in Athens. 

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