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World View: Both Greece and European Leaders Seem Poised to Compromise

This morning’s key headlines from GenerationalDynamics.com

  • Both Greece and European leaders seem poised to compromise
  • UK advises all Britons to leave Tunisia

Both Greece and European leaders seem poised to compromise

Does Wolfgang Schäuble's broad grin mean that he's ready to compromise? (Kathimerini)
Does Wolfgang Schäuble’s broad grin mean that he’s ready to compromise? (Kathimerini)

It is not certain yet, but the Game of Chicken that Greece and the Europeans have been playing with each may finally be coming to an end, with both sides screeching to a halt before the collision.

Greek officials, led by prime minister Alexis Tsipras, submitted written reform proposals just minutes before the midnight (22:00 GMT) Thursday deadline demanded by the European leaders.

The proposals include tax increases on shipping companies, increases in VAT taxes, some privatizations, phasing out solidarity grant for pensioners by 2019, and defense spending cuts. The proposals are thought to contain around 12 billion euros worth of reform measures.

The package that Tsipras rejected before calling last week’s referendum, which is also the package that the referendum vote rejected, called for a smaller amount, 8 billion euros, of reform measures.

However, Tsipras is not being as generous as might first appear, and he is definitely not capitulating. As part of his proposal package, he is seeking 53.5 billion euros in a new bailout package, and a restructuring of Greece’s large debt burden. The restructuring would involve stretching out the payment timeline for decades, meaning that the current repayment amounts will be smaller.

The proposal will be reviewed over the weekend first by the Eurogroup of finance ministers, and then by an EU summit on Sunday. If it is not considered adequate, it will be rejected.

Even if the EU summit accepts it, it is still not a done deal. The package has to be approved by Greece’s parliament, and by several European parliaments.

It had previously been thought that Tsipras would never win approval for any such package because the communists and far left segments of his own Syriza party would block it. However, Tsipras is now allying with opposition parties, and he evidently has enough votes to get it passed.

As for the European parliaments, including Germany’s Bundestag, a lot will depend on what German Chancellor Angela Merkel and Germany’s Finance Minister Wolfgang Schäuble. If they support the package, then it’s thought that the parliaments will fall in line.

Merkel has said in the past that the “red line” for her was that there can be no “haircut,” meaning that no portion of Greece’s debt can be entirely forgiven. That problem is evaded in Tsipras’s proposal by keeping the nominal debt the same, but stretching out the payments so far that the debt, in actuality, will almost certainly never be repaid.

So it is believed that if Merkel and Tsipras can both personally endorse this proposal, then the national parliaments will fall in line.

You may recall, Dear Reader, that I said a couple of times in the past that my personal prediction (not a Generational Dynamics prediction) was that, one way or another, Greece would remain the in the eurozone. That prediction was really just based on a personal feeling. Since that time, I’ve been thinking about why I had that feeling.

I have been following news stories closely and writing about them for years, and one thing that has characterized the last 10-15 years, as opposed to the years following WW II, is that almost no one wants to make a hard decision, because they do not want to bear the responsibility of possible failure.

In this case, Tsipras and Merkel are being forced to choose. Neither of them wants to go down in history as the person responsible for the breakup of the euro currency union. Neither does anyone else. From that, the conclusion must be that, one way or another, Greece will remain in the eurozone.

Meanwhile, there will a lot of hard bargaining over the weekend, and it is still possible that the negotiations will collapse. Kathimerini and BBC and Kathimerini

UK advises all Britons to leave Tunisia

It looks like the terrorists have won, at least in Tunisia.

Just four days after Tunisia declared a ‘state of war,’ following a terror attack in Sousse on June 26, and an attack on the Bardo Museum in Tunis on March 18, Britain is advising all of its citizens to leave Tunisia because “a further terrorist attack is highly likely.”

According to the statement by the UK Foreign Office:

Since the attack in Sousse, we have been working closely with the Tunisian authorities to investigate the attack and the wider threat from terrorist groups in Tunisia. Although we have had good co-operation from the Tunisian government, including putting in place additional security measures, the intelligence and threat picture has developed considerably, reinforcing our view that a further terrorist attack is highly likely. On balance, we do not believe the mitigation measures in place provide adequate protection for British tourists in Tunisia at the present time and we have therefore changed our travel advice accordingly.

According to Tunisia’s Tourism Ministry, travel and tourism was 15% of Tunisia’s GDP in 2014. 473,000 jobs are supported by travel and tourism, 13.8% of total employment. It’s believed that the objective of the terrorist attacks was to cripple Tunisia’s tourist industry, and the terrorists appear to have met their objective, at least for the time being. UK Foreign Office and BBC

KEYS: Generational Dynamics, Britain, Tunisia, Greece, Alexis Tsipras, Germany, Angela Merkel, Wolfgang Schäuble
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