Chronicle
of a struggle
Agonising
over a short-term fix for Greece must not hide longer-term problems
by Charlemagne /
The Economist
SINCE taking office
in January Greece’s radical-left government has been a model of
inconstancy and incoherence. Yet one of its messages has been
admirably consistent: that Greece’s problems belong to the entire
euro zone. Over the past four months Greece’s creditors have become
wearily accustomed to batting away grandiose proclamations by Alexis
Tsipras’s band of merry men. But as their talks with the Greeks
approach a crunch, this is a proposition they should take seriously.
Excluded from
capital markets, Greece needs bail-out money to stay afloat. In
exchange its creditors demand reforms and budget cuts designed, as
they see it, to put Greece’s finances on an even keel. Elected to
reject such austerity, the Syriza government began negotiations with
smiles and good cheer. Yanis Varoufakis, the finance minister, toured
Europe to explain that the euro zone would work for the benefit of
all if only its leaders would abandon their self-defeating obsession
with austerity. But as the mood has soured and talks have gone
nowhere, the message has taken on a darker tone. In an opinion piece
for Le Monde this week Mr Tsipras declared that the strategy adopted
by Greece’s creditors risked “the split and division of the euro
zone, and consequently of the EU”. Those who wish to maintain this
approach, he suggested, should re-read Hemingway’s “For Whom the
Bell Tolls”, a brutal account of the Spanish civil war.
It is understandable
that the leader of a country staring into the abyss might be drawn to
apocalyptic imagery. But Hemingway’s clipped sentences do not quite
capture the absurdity that has marked the latest episode of the Greek
saga. A better guide is surely Kafka. For the Greeks, the
impenetrable “institutions” they have encountered, seemingly
impervious to reason and answering only to their own mysterious laws,
resemble the bureaucracy that breaks the spirit of Josef K in “The
Trial”. Euclid Tsakalotos, a senior Greek negotiator who has a
Marxist background, likens the creditors’ robotic insistence on
demand-killing labour reform to the intransigence of Soviet
pen-pushers.
For Greece’s
euro-zone partners, by contrast, the experience of dealing with Mr
Tsipras and Mr Varoufakis after years of more-or-less pliant Greek
governments recalls the shock delivered to the family of Gregor Samsa
in Kafka’s “Metamorphosis”. One day they wake up to find their
hard-working son inexplicably transformed into a hideous insect,
whose attempts at communication reach their ears as incomprehensible
screeches and squeals. No efforts to accommodate the creature
succeed; ultimately only its expulsion or death will do.
With luck, Greece
can avoid that fate. On June 3rd, with Greece’s reserves running
perilously dry ahead of some hefty debt repayments, Mr Tsipras flew
to Brussels, where he was presented with detailed reforms drawn up by
the three institutions that monitor Greece’s bail-out: the European
Commission, the European Central Bank and the IMF. Mr Tsipras’s
agreement, and the Greeks’ implementation of the measures, would
unlock the funds Greece needs to stay afloat. But that would require
painful Greek concessions, particularly on pensions, which Syriza has
vowed to protect. The meeting ended without a deal; talks will
continue.
Outright rejection
could spell disaster for Greece, as deposits flee banks (see article)
and the ECB reduces liquidity support. That in turn might mean
capital controls, the first step on a road that could lead back to
the drachma. It has become fashionable among some euro-zone
politicians to suggest that a Greek exit from the euro would be
manageable. But this complacency is not shared by the OECD, a
rich-country think-tank, which has warned that failure to resolve
Greece’s problems could hurt growth and imperil the public finances
of other euro-zone members. The Americans have also started to voice
concerns. An initial deal within the next week now looks quite
likely, although plenty of hurdles would remain, such as ratification
in difficult parliaments like the Bundestag. Mr Tsipras would also
face resistance at home if Syriza backbenchers sniff capitulation.
But the arguments
over resolving Greece’s liquidity crisis have made it harder to
focus on larger challenges such as the sustainability of its debt
pile, which at 180% of GDP is far bigger than it was ever meant to
be. A third bail-out may nod towards this by, for example, further
extending debt maturities. But there is no real vision for Greece’s
economic future. The large primary surpluses demanded of the
country—creditors have asked for 3.5% of GDP from 2018 in
perpetuity—bear witness to intellectual exhaustion in the euro
zone.
Wanted: a vision
The Greeks must
shoulder much of the responsibility for their predicament. Mr
Tsipras’s strategy has been back-to-front: to find an audience for
his views on European democracy, he needed first to earn the trust of
his creditors rather than shatter it. Unlike every other country that
has received a bail-out, no Greek government seems fully to have
accepted the need for reform.
But the Europeans
are hardly blameless. Presented with the first authentic democratic
challenge to their rules, they pettifogged on detail and fretted
about moral hazard. One problem has been the presence of the IMF,
which is more concerned to ensure its sums add up than to paper over
the political troubles of the euro zone. It is running out of
patience with the Europeans. But the Germans insist on keeping it
involved to counter what they perceive as softheadedness in the
commission. This is what passes for strategy inside the euro zone
these days.
Kafka’s tales
often follow their own spirals of logic towards grisly, even tragic
conclusions. The final chapters of Greece’s story remain to be
written. An author is desperately needed.
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