First you say you will, and then you won’t. First you say you do, and then you don’t. Let’s call the whole thing off. Or on. Well, it seems that, despite all the talk, Greece is staying in the Euro Zone for now. It certainly comes as a shock to many – not least those in his own party – that the Greek Prime Minister has accepted almost all of the terms that seemed to have been rejected in a referendum a mere week ago. What does it all mean?
First and foremost, that referenda are lousy ways to make national policy. It is one thing to have a vote on whether to borrow money to build the new community hall, it quite another to use public yes/no votes to determine the nation’s entire economy. In places where referenda are widely used, like California, people frequently vote for two contradictory things on the same ballot. Much of California’s troubles come not from bad government but from knee-jerk responses to poorly worded referenda questions. Populism at its finest.
What did the results of last week’s vote mean anyway? Man in the street interviews (hardly a valid sample) seemed to suggest that the general view was that it was a vote to stay in Europe. Say what? Well, a vote to stay in Europe but not on the terms demanded by the rest of the European countries. No-one, it appeared, wanted to go back to the drachma or the instability of life outside the Eurozone. But no-one – or very few – wanted to continue with the crippling austerity of the last five years. But that’s exactly the price being demanded to stay in the Euro – with a Wednesday delivery date.
So what use was the vote to Greece? It bought time. Tsipras could go to Brussels and say – look people have democratically declared their unwillingness to accept these terms. You respect democracy, don’t you? The vote did let the Europeans off the hook too. There are a whole bunch of both economic and geopolitical reasons to want Greece to stay in the Union. Yet at the same time, there was some reluctance to continue to extend more loans. Europe had painted itself into a corner. Having gone this far down the austerity road – a policy that in all likelihood was extreme and unproductive – it was hard to turn aside. Other countries, with their own debt issues, were watching. Other countries – outside Europe – were looking for a way to extend their influence.
It is for the same reason they – especially the Germans – don’t want to consider a debt forgiveness approach. Greece is not the issue – Spain, Ireland, and, worst of all, Italy (both a lender and a borrower) all have their own debt and spending issues. Still, the lenders are being a bit disingenuous. It’s not as if they didn’t know that Greek debt was suspect, even risky. The international bond agencies had been cutting the country’s credit rating for years and the lenders had responded by raising the interest rates Greece had to pay. It’s how the market measures risk – by providing a higher return on the possibility you might lose it all. It is unreasonable now for lenders – public and private – to declare they didn’t know. Unreasonable both in the sense of unfair and beyond the realm of rational thinking. Greed – and its salve, money – acts on the brain much like cocaine, it seems.
So now, Greek Parliament has been asked to agree to more austerity in exchange for loans to carry them through 2018 and, perhaps, a chance to renegotiate the terms. Some members of the PM’s left-wing party will vote against it while others may abstain as they did in the last vote – raising doubts about the long-term stability of the government. But time was what both parties wanted. Eventually, negotiations must lead to either debt forgiveness or more favorable repayment terms (one way out would be to eliminate all interest – and let inflation deliver the forgiveness) while Greeks will continue to feel the pinch of austerity. Ultimately – in light of Russian adventurism – no-one in the west wants to see Greece fail and all of southeast Europe thrown into uncertainty. And the Greeks do not want to see themselves as the failures of Europe.
And that’s slightly more than ten minutes.