Stumbling Into The Unknown
Can Russia Save Greece? Will It?


As the run on Greek banks accelerates in the wake of news that no agreement was reached yesterday, warnings are beginning to appear that Greek banks might not be able to open their doors on Monday. To remain open, those banks need access to ECB funds, but with Greece nearing default on its IMF loans and talks with the EU deadlocked, it’s not clear how the ECB could justify throwing more good money after bad. The Times of London:

During yesterday’s talks, Benoît Coeuré, an executive board member of the ECB, was asked by Jeroen Dijsselbloem, the Dutch chairman of the group of European finance ministers, whether Greek banks would open ­today. He replied: “Yes. Monday, I don’t know.”

And the bad news keeps coming. Tax revenue collapsed, widening the hole in Greece’s finances. And analysts are beginning to look at the consequences of a crisis for tourism, a mainstay of the weak Greek economy and one of the country’s most reliable sources of foreign cash. Should the government default and the money dry up, it’s likely that there will be widespread problems that affect tourists: ATMs won’t dispense money; workers in key industries and public offices will go on strike, quite possibly paralyzing transportation. No money, no banks, no tourists and a radical left wing government sitting in Athens—it’s not looking like one of Greece’s happier summers coming up.

But Prime Minister Alexis Tsipras has a plan: he has flown off to St. Petersburg to Russia’s biggest annual business conference to have a chat with Vladimir Putin.

Ahead of the Putin sit-down, however, his energy minister had already announced that Greece had signed on with Russia to build a section of the Turkish Stream pipeline on Greek territory. The financing for the project will come, at least in part, from the Russian state development bank, with participation from other smaller Russian banks also likely. The Russian gas giant Gazprom will not own the pipeline, with ownership stakes instead being being shared by Russia and Greece.

When asked whether Russia is considering offering other kinds of financial assistance to Greece, Kremlin spokesman Dmitry Peskov said that it was premature to speculate on such things as no request had yet been received from Athens. “Let us wait for the conversation,” he told reporters.

Business leaders attending the business conference were dismissive of the possibility of Russia being able to make a meaningful difference to Greece’s bottom line, however. “The size of the problem is so big, Russia can’t allow itself to give anything near what is needed,” one fund manager told the Financial Times. “Maybe they can give a symbolic amount but even that is difficult. I don’t see what Russia could possibly offer him.”

We shall see soon enough.

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