Aristides N. Hatzis, "A Split Verdict on the Blackmail and Bullying over Greece" (Financial Times, June 12, 2015)

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Aristides Hatzis
Alexis Tsipras, the Greek prime minister, understands the stakes and knows his options
here are two conflicting narratives about the deadlock in negotiations between Greece and its
eurozone partners. According to the first, Greece is governed by populist radical leftists who
blackmail the eurozone by threatening to explode the financial equivalent of a suicide bomb.
According to the second, Greece is bullied by callous partners who are only interested in making
an example of it. Both narratives are schematic but contain many elements of truth.
Despite his wooden language, Alexis Tsipras has matured more in the past few months than the
rest of his party. The Greek prime minister understands the stakes and he knows his options. His
problem is that they are all dreary. The brinkmanship cannot continue much longer. His
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2. Any improvements
in competitiveness will
be annihilated by
political turmoil and civil
strife
government’s looming cash shortage is horrifying. If he finds himself unable to pay public servants,
it will be the end of his career and his party.
Mr Tsipras cannot use “Grexit” — a Greek departure from the euro —
as a bargaining chip, or he risks creating severe hardship in a country that imports such essential
items as food, energy and pharmaceuticals. An exit would be detrimental economically but also
socially. Any improvements in competitiveness will be annihilated by political turmoil and civil
strife.
He cannot accept a new bailout agreement because that would signify that before the general
election he was either mistaken, opportunistic or fooled. Even a watered-down version of the
creditors’ proposal would embarrass him before the Greek people who gave him a clear mandate:
no more austerity.
Yet the Greek public, most of whom do not wish to jeopardise their membership of the eurozone,
are not the people who should worry Mr Tsipras most. Far more problematic is his party. Many of
his leading ministers are luddites. They live in the 1970s, dreaming of transforming Greece into a
mix of Cuba and Venezuela. They cannot seem to understand how a globalised economic system
works. Their dogmatism make them unsteady allies. He cannot trust them for an additional
reason: some of them have their own designs on power.
One could wonder then, why the rest of the eurozone is taking so much trouble to negotiate with
someone who, whether by choice or necessity, will not compromise. For two reasons. The first is
geopolitical; indeed, geography is Greece’s only solid ally. The EU has no desire to alienate a
country on its southeastern flank. The second is economic. European finance ministers sound
confident these days that the fallout from a Greek exit can be contained. But no one knows for
sure. So, for all the rhetoric, Europe follows its precautionary principle: if you cannot gather
enough information, do not experiment.
This does not mean that a compromise is out of the question. There is a
lot to be gained if some ill-advised red lines are discarded. The Greek
government is trying to avoid the bitter pill of pro-market structural
reforms and the restructuring of its rickety retirement system. This is
one of the most rigid and least open economies in the EU, yet some
Greek ministers consider it a neoliberal paradise. It is a shame that the
government fears the political cost of reforms and negotiates against the
long-term interests of its own people.
Disillusioned by the reluctance of successive Greek governments to cut spending, some in the
eurozone insist on unreasonable tax hikes and more labour reforms. Yet high taxes have already
strangled the private sector and the middle class, the Greek labour market is more flexible than
ever and labour costs have fallen sharply since 2009, and are well below the European average.
Greece’s partners fail also to empathise with the pain that five years of a futile austerity has
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inflicted on the average Greek citizen. If Greece fails it will be Greece’s fault. But it will also be
Europe’s guilt, if not regret.
The writer is an associate professor of law and economics at the University of Athens and a
co-founder of GreekCrisis.net
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