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2015-06-05 07:04:53
Agonising over a short-term fix for Greece must not hide longer-term problems
Jun 6th 2015 | From the print edition
Timekeeper
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.