#ThisWasNotACoup

By Hugo Dixon

Alexis Tsipras is either a liar or a resident of Lalaland.

ATHENS — Late on Sunday the Twitter hashtag #ThisIsACoup went viral around the world. Many observers became convinced that Germany was bullying Greece into submission and forcing its prime minister to sign up to humiliating measures its people had just rejected in a referendum.
But this was not a coup. It was Alexis Tsipras, not the other European leaders, who rejected the wishes of his people. The others leaders — who, in any case, are responsible to their own people rather than to the Greeks — were resigned to Athens leaving the euro. If Tsipras was humiliated, that was largely his own fault.

He called a referendum the previous week. He stoked up the people’s feelings of affronted pride and urged them to say “no” to a bailout program that was less harsh than the one he ultimately agreed to. He told them that doing so would increase his bargaining power.
Tsipras was either lying or living in Lalaland. The referendum left Greece with two choices: quit the euro or beg for mercy. The same night that Tsipras won his plebiscite, he performed a volte-face and decided to sue for peace.
But didn’t the creditors rub Tsipras’ nose in the dirt when he realized the errors of his ways? The truth is that Germany’s Finance Minister, Wolfgang Schäuble, did — a bit. He put forward an idea that Athens should park €50 billion of assets in a Luxembourg company he happened to chair. He also proposed that, if Tsipras didn’t do a deal, Greece should take a five-year time-out from the euro — as if the people would want to re-enter the eurozone after going through all the agony of quitting it.

The referendum left Greece with two choices: quit the euro or beg for mercy.

Schäuble should never have made these insensitive suggestions. But they were ultimately rejected. The final deal was fairly reasonable, albeit tough and fraught with danger.
But didn’t the creditors close the Greek banks in order to bring Tsipras to heel? Didn’t the European Central Bank deliberately instigate a bank run when, in fact, its responsibility is to act as a lender of last resort?
In one word, no. Although The Daily Telegraph’s Ambrose Evans-Pritchard, among others, has argued that the ECB deliberately provoked a bank run, he has not provided a shred of evidence to back up this extravagant claim.
It’s not quite true, either, that the ECB must always act as a lender of last resort. Central banks only do this if banks that need cash can provide adequate assets in return.
The snag is that the Greek government has guaranteed many of the assets its lenders have been pawning to get cash. When Tsipras urged the people to vote No in the referendum, the risk of Athens going bust shot up. It was, therefore, virtually impossible for the ECB to say honestly that the assets pawned by the banks were worth as much. So the banks were closed.
It is true that this outcome could have been avoided if the eurozone governments had agreed to extend Greece’s last bailout program, which expired on June 30. The ECB might then have been able to argue that the banks should be kept open until the result of the referendum was known. Although it might have been wiser if the eurozone had done this, it is quite understandable that they didn’t given that Tsipras was calling for a No vote.
The Greek prime minister should have known the closure of the banks was a risk when he proposed his referendum — which, by the way, was a travesty of democracy in that the question was obscure and it was held with just eight days’ notice.
But aren’t the creditors partly responsible for Greece’s plight? They should have never lent it all that money in the first place. Quite so. Because of this, they certainly have a duty to help clear up the mess.
That said, Tsipras is in a terrible bind largely because he made wild promises he couldn’t keep, was not on top of important detail, wasted time with inflammatory rhetoric and made a series of bad miscalculations. He is not the victim of a coup.