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.