How politics will seal the fate of Greece

Forget debt ratios, fiscal balances, liquidity crunches and the rest. The EU and International Monetary Fund technicians negotiating with Athens are going through the motions. The Greek crisis was always as much about politics as economics. Now it is all about politics.

There are two theories of the Syriza government led by Alexis Tsipras. One presents a cast of bungling amateurs who have spent the past several months digging Greece into an ever deeper economic hole — all the while squandering the trust and goodwill of its eurozone partners. The other says the antics of Yanis Varoufakis, finance minister, are an elaborate political charade calculated to set Greece free from the shackles of merciless creditors


The first hypothesis is the most popular. The preening and pirouetting, the interviews in glossy magazines, the undergraduate Marxism and love of the limelight — all point to a colossal failure on Mr Varoufakis’s part to grasp the depth of Greece’s plight or the sensitivities of its European partners. Along the way, tens of billions of dollars have drained from Greek banks as citizens stash their savings elsewhere.

The conspiracy theory, though, also has its adherents. They start with the assumption that no one could be quite as witless as Syriza has often seemed. Mr Tsipras’s government knew from the outset that it could not reconcile its domestic promises with Greece’s international obligations. The problem was that Greeks had voted at once for an end to austerity and to stay in the euro. A crisis had to be manufactured to show the government’s hand had been forced. By the Germans, of course.

I lean towards the former theory, but it hardly matters. Even at this late hour it would be unwise to say that a deal with creditors is absolutely impossible. High-stakes politics occasionally demands that pigs are seen to fly. What strikes me, though, is how far the conversation in other capitals has moved on. The risk of contagion in the rest of the eurozone has long been discussed. The talk now is about the chaos that would descend on Greece after default and euro exit. Would it be manageable or would the EU be left with a failed state?

Two political impulses are at work. Most obviously, the rest of the eurozone has concluded that Athens is unable or un­willing — probably both — to implement an economic reform programme. The problem is not so much the debt, nor even the pace of deficit reduction, but Syriza’s refusal to embark on reform of the state. The words most often spoken to describe governance in Greece are clientelism, corruption, rent-seeking, special interests and favouritism. Without radical overhaul of the nation’s political and administrative capacity, no economic programme can work.


Greece’s partners also have their own politics to tend. The confrontation in the eurozone is most commonly framed as one between Berlin and Athens. Wolfgang Schäuble, Germany’s outspoken finance minister, lends credence to the idea with his sideswipes at Mr Varoufakis. Yet the real hardliners are to be found in Madrid, Lisbon and Dublin. These nations have already felt the pain of austerity and reform. They are beginning to see shafts of light. Their political leaders do not see why Greece should be let off the hook. To concede now to Syriza, they say, would be to legitimise the populists in their own countries. And they also have elections to fight.

The assumption in many capitals is that it is now probably too late to save Greece. And they are not sure Syriza wants to be saved. But the consequences of default and departure from the euro would be devastating. Economists will tell you that the big competitiveness gain from devaluation would over time more than cancel out a slump in living standards. Such calculations, however, rest on the assumption of a functioning government with the capacity to lock in the advantage. More likely it would be wasted in rising wages and inflation.

One option now is for creditors to force a showdown by tabling a take-it-or-leave-it-deal along the lines of that offered to Cyprus — with an expectation that Mr Tsipras would probably leave it. Yet for all the frustration and fatalism hanging over negotiations, no one is too keen to force the denouement. There is a delicious irony here: if politics is pushing Athens towards the exit, geopolitics is the only thing that can now keep it in the euro club.

Greece sits in the strategically vital southeast corner of the European continent. It provides an entry for migrants and asylum seekers fleeing the fires of the Middle East, and a potential stepping off point for Islamist jihadis seeking to bring their war to Europe. The Balkans are an area of intense focus in Russian president Vladimir Putin’s efforts to destabilise the western alliance. Greece is a member of Nato. Can Europe really allow the government in Athens to fall into the arms of Moscow? What would be the signal to the rest of the Balkans? What about divided Cyprus?

Such are the thoughts swirling in the heads of policy makers as Athens approaches each new payment date. Would the strategic cost of letting it go outweigh the political, and financial, burdens of allowing it to stagger on? These are matters for heads of government not technicians.

Either way, the story has an unhappy ending. Inside or outside the euro, with or without additional debt relief, Greece can recover only when it starts to build a modern European state




Philip Stephens


Fonte: FT