Analysis: The Greek Debt Crisis- Chronicle Of A Struggle

A European Union flag flying next to the Greek flag.
A European Union flag flying next to the Greek flag.

A European Union flag flying next to the Greek flag.

Since taking office in January, Greece’s radical-left government has been a model of inconstancy and incoherence. Yet one of its messages have 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 bailout money to stay afloat. In exchange, it’s 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 starring into the abyss might be drawn to apocalyptic imagery. But Hemingway’s chipped 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 Joseph 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 payments, Mr Tsipras flew to Brussels, where he was presented with detailed reforms drawn up by the three institutions that monitor Greece’s bailout: 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 with Greece informing it’s creditors that it would bundle four looming IMF payments into one, to be paid by the end of June. Talks will continue. Outright rejection of reform plans  could spell disaster for Greece, as deposits flee banks 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  would 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 sustainability of it’s debt pile, which at 18% of GDP is far bigger than it was ever meant to be. A third bailout 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.

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 bailout, 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 it 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. That is what passes for strategy inside the eurozone these days. Kafka’s tales often follow their own spiral of logic towards grisly, even tragic conclusions. The final chapter of Greece’s story remain to be written. An author is desperately needed.

About The Author

Chukwunonso Azinge is a Public health parasitologist whose variety of intrests ranges from international news reportage, writing articles on current world issues and of course football. Follow me on Twitter @azingelfc and on Facebook- Nonso 'King Kenny' Azinge.

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