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Wolfgang Schäuble
German finance minister Wolfgang Schäuble during an IMF conference. He said ‘Nobody expects a solution’ to the Greek financial crisis. Photograph: Nicholas Kamm/AFP/Getty
German finance minister Wolfgang Schäuble during an IMF conference. He said ‘Nobody expects a solution’ to the Greek financial crisis. Photograph: Nicholas Kamm/AFP/Getty

Syriza can't strike Riga deal and keep poll promise

This article is more than 8 years old

Germany seems prepared to take the risk on Greece leaving the eurozone – but the consequences of a Grexit for the single currency’s survival are impossible to predict

Never ignore eurozone leaders’ capacity to conjure a fudged deal at the 11th hour. For all that, the astonishing yield of 25% on three-year Greek government debt is sending a clear message. The home straight has arrived and the choice for Athens and the governing Syriza party is becoming simple: capitulate to the rest of the eurozone’s demands for economic reforms, or leave the euro.

“Nobody expects that there will be a solution,” said Germany’s finance minister, Wolfgang Schäuble, on Wednesday, referring to next week’s meetings in Riga, billed as a make-or-break moment for agreement on releasing bailout cash to Athens. Ten days ahead of talks, the remark amounted to yet another reminder from Schäuble that Germany thinks the eurozone could cope with the fallout from a Greek exit.

As it happens, Berlin’s judgment looks far too breezy. A Greek default can only damage the eurozone. Two bailout agreements and four years of diplomatic shuffling would have failed, with unknown long-term consequences for the survival of the single currency. But Germany seems to have made its choice: it will accept the risks.

Over in Washington, the International Monetary Fund’s Christine Lagarde avoided downbeat remarks about Riga, but said nothing remotely cheerful for Athens. “We have never had an advanced economy asking for repayment delay,” she said. In other words, the IMF’s hands are tied, and Athens should not ask for a delay in repayments. One of those payments, totalling €747m (£540m), falls next month. Time is running short.

Of course, it should not have come to this. Greece’s debt burden is unsustainable, and it was madness for lenders to impose bailout demands that shrank the Greek economy by 20%. But the reality for Syriza is that it faces an “impossible trinity”, as Morgan Stanley’s analysts call it. How do you stay in the euro, remain in power and undo the bailout programme? It can’t be done. Something has to give.

The Greek prime minister, Alexis Tspiras, doing his best to offset Schäuble’s remarks, said he is “firmly optimistic” that a deal can be reached in Riga. Good luck to him, but it is now very hard to see how any deal could be remotely consistent with Syriza’s electoral mandate to end austerity.

In that case, there would be three possible next chapters. In order of likelihood, they are: capitulation; a Greek referendum on staying in the euro; a rapid exit without a referendum.

Silent on Alliance

Another day, another voice calling for new directors at Alliance Trust. This time it’s US outfit ISS that says Dundee’s ancient investment house would benefit from some backside-kicking by outsiders, as proposed by 12% shareholder Elliott Advisors, an off-shoot of a US hedge fund.

The view here is the same as a fortnight ago. Many of the grumbles about Alliance – the high pay of the chief executive, Katherine Garrett-Cox, the middling investment performance, the “jam tomorrow” promises about two subsidiaries – are legitimate, but shareholders need to hear from the three men Elliott wants on the board.

Anthony Brooke, Peter Chambers and Rory Macnamara may be fine City chaps, but their silence is inexcusable. Why do they want to join Alliance? What assurances can they offer that they would be properly independent and wouldn’t act as Elliott’s placemen? Do they think Alliance requires a full strategic review? These are not hard questions to answer and this is an election. The candidates should speak.

The vote is on 29 April, which leaves little time for the grandees to introduce themselves belatedly. If they won’t, shareholders should hold their noses and back the current board.

Whisky sour

It’s still tough out there, said Diageo boss Ivan Menezes as the spirits and beer group unveiled a 0.7% fall in organic sales for the quarter.

Actually, life’s not so bad, said Unilever. “We are now starting to see more tailwinds than headwinds in our markets,” said chief executive Paul Polman. Underlying sales were up 2.8%.

A boss can only speak about his own company, but the difference in tunes is striking. For Diageo investors, the biggest worry is not emerging markets (always volatile), but the US, where the group still longs for the day consumers recycle their savings on petrol into purchases of whisky, vodka and rum. If the punters are instead preferring more Unilever deodorants and ice cream, something very odd is happening.

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