The euro and the Greek blackmail
We’re showered with information and comments on the Greek crisis, and rightly so. The Greek Prime minister Alexis Tsipras has called for a referendum on the terms offered by creditors to Greece. Then night talks between Mr Juncker and Mr Tsipras apparently triggered the hypothesis of a last minute deal – but it doesn’t seem that that will happen. Certainly not the week before the referendum, which is to happen on Sunday, Greek banks and the stock exchange are going to stay closed. Europe and the world have looked with anxiety at people queuing in front of ATM machines in Athens.
It might be worth remembering that, when Tsipras won elections a few months ago, the Greek situation certainly wasn’t all happy – but the IMF was estimating positive growth for this year. A few months of socialism and reckless blackmailing attempts by the European creditors have stripped Greece of any hope of returning to growth, however feebly, and have brought the country to the edge of disaster. One small point. Italian Finance Minister Piercarlo Padoan explained to Corriere della sera that the Greeks did not send “technical” personnel to do the bargaining with their official creditors until but a few weeks ago. They did plenty of political lecturing, but they abstained from dealing with the minutiae of possible agreements. Other top officials confirmed, at different stages, that the Greek government’s was a quintessential political game: no technicians in the room. You can’t manage a country like that.
My sense is now that Tsipras is basically hoping for his compatriots to vote “yes”, so that he can re-enter the negotiating room while blaming “the people” for having made the tough decision. Not an example of luminous leadership.
I find two comments of particular interest. Here’s Tyler Cowen’s on possible contagion and here are Guntram Wolff’s economic and legal observations on capital controls. Capital controls have been imposed in Greece now, as happened in Cyprus before. Of course this decision calls into question the very nature of a monetary union: but European authorities do not seem to be bothered, so far.
Tyler Cowen makes an important point: “If only for geopolitical and also humanitarian reasons, the EU cannot wash its hands of Greece.” I think AEI’s Dalibor Rohac said it very wisely in a tweet: now it is time to change the treaty, to make it possible for a country to stay in the EU even if it leaves the euro, which is currently impossible. This would help in dealing with the geopolitical concerns underlined by Cowen.
At the end of the day, the crux of the Greek problem is the lack of procedures for exiting the Euro club. Orderly procedures aren’t there: so expect a disordered development of the crisis.
Tsipras has attempted to blackmail the creditors, by agitating the spectre of a Greek default as the Lehman Brothers of the European crisis. The European authorities have acted so far seconding their instincts: that is, muddling through. But when push came to shove, they couldn’t just accept the Greek terms, because of their most likely political effects: that is, suggesting to the Portuguese and Spanish that a deal on any terms could be ultimately made, and thus voters could heedlessly vote for anti-austerity parties.
If the Euro could be exited without leaving the EU, at this stage things would be at least a bit easier. And yet the European leadership finds the perspective most frightening. “The Euro is irreversible” is one of their favourite sentences. But you can’t force people to stay in a club they feel they don’t belong to. This semi-religious Eurospeech is, I fear, as effective in reinforcing populist stances, as appeasing to the Greek blackmail would be.