In the negotiations between Greece and its creditors, the threat point was always Grexit. The Greeks could walk out, leaving a hefty bill behind. The creditors could cut the flow of cash. But, of course, threat points must be credible, and the Greeks were not ready for Grexit.
The only question was whether the creditors were willing to resort to such an aggressive move. The ferocity of the conditions imposed on Greece has shown that they are, and more.
What happens next?
The Greek Prime Minister, Alexis Tsipras, has clearly indicated that he does not believe that these conditions will bring anything good to his country so, one way or another, Greece will not deliver. The creditors are determined to impose their conditions. A new showdown is unavoidable. If he does not want to face another humiliating defeat, Tsipras should start preparing.
Preparation will make the difference. Exiting the Eurozone is considerably more complicated than a devaluation, and many things have to be done to reap the benefits of the regime change.
Si vis pacem, para bellum
It should be clear that Grexit remains a disastrous choice, but it has become the default option for both Greece and its creditors. Preparing for Grexit does not mean leaving the Eurozone. Paradoxically perhaps, a credible threat point may deliver a better outcome for both Greece and its creditors. The purpose of the exercise should be to make Grexit a plausible solution, then not to do it.