Greece: wake up, Anantha

It so happened that the stuff I read over the weekend was all in favour of the so-called ‘underdog’ Greece. Or, in other words, the source from where I got these links has cherry-picked links that are sympathetic to Greece, perhaps. One should keep in mind – how all these biases creep up.

That recognised, let us dive into the links. Yanis Varoufakis writes a smart piece.  He invokes the ‘speech of hope’ that America’s Secretary of State James Byrnes gave in Stuttgart in September 1946 that effectively launched America’s resuscitation of Germany. He wants Angela Merkel do that for Greece. Very clever of him to invoke that parallel. Greece’s fiscal and other sins of corruption pale in comparison to what Germany had done, prior to WW II. Yet, Germany was offered a speech of hope. Can Greece be worse? Very persuasive.

He finds good support from Ambrose Evans-Pritchard who passionately tears into IMF position on Greek debt. On this occasion, I agree with him. He also does not spare other creditors. However, two months ago, when Jean Claude-Trichet was here in Singapore, he said Greek civil service salaries rose more than 100% in the decade after single currency whereas they rose just 20% in Germany. He defended the ‘Troika’ line stoutly.

At the same time, German and French unwillingness to be bound by the same rules of the ‘Fiscal Stability and Growth Pact’ vastly undermined their credibility. Germany fell foul of the rule in 2003 but bypassed paying a fine. Where is the leadership? That is why I doubt if Angela Merkel would oblige Varoufakis and deliver a speech in Greece.

Alistair Heath and Joseph Stiglitz would not be too welcome in Brussels either or, for that matter, in Berlin.

How would Greece fare outside the Eurozone? It is hard to hazard a guess. Evidence from within Greece during the inter-war years is not encouraging. But, Asian economies and Mexico eventually recovered after their currencies collapsed in 1997-98 and in 1994 respectively. But, Greece has other issues. Will Greece govern sensibly? That is a big IF. Many leaders in the Eurozone think that all that Tsipras and his party Syriza want is a big debt relief and that they have no intention of reforming the economy. The usual lack of trust and credibility problem.

This is what an European friend wrote me:

It is obvious that the debt cannot be (fully) repaid, and everyone knows it, also Germany. But the idea that this government made up of a mix of (also) naïve socialists – generally spoiled brats from the upper class -, orthodox Communists and – amazingly – ugly right-wing nationalists will reform the country is completely absurd. The only way to get them to do that is to force them via the EU process to implement these reforms. If they are let off the hook now, they will turn out to be just as corrupt and miserable as all the previous governments Greece has had. Dear Anantha: Wake Up!!!

That was pretty clear, I must say.

Perhaps, Alex Andreou would respond to my friend better than the incoherent response I managed, wildly waving the white flag.

The saga is not over. At the minimum, it would drag on at least until the end of the month. Alex Andreou had summed up the situation rather well. I am not sure how it would end. Positions have become harder and not malleable, over the last few months.

The sight of a radical left party such as Syriza or Eurosceptic conservatives, such as Britain’s Tories, extracting concessions from the rest of Europe could boost similar parties across the continent, making the EU even harder to manage. As a result key governments in Europe, in particular Germany, are more willing to contemplate Grexit and Brexit than the Greeks and British may have realised. [Gideon Rachman in FT – link]

 I am not sure if I am the only one who needs to wake up on Greece.

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