It’s all Greek to me
The son of a friend asked me to help him out with an essay he has been asked to write on lessons learnt from the Greek crisis. He cheekily told me: “I just cannot understand what is going on. It is all Greek to me”. Everything that had to be said on the Greek crisis has probably been said, but there are certainly some lessons we must never forget.
The first lesson that must be learned is that economic crisis on a nationwide level can never be solved on purely economy theory and practice. Political solutions are often the only way out of a major national economic crisis.
Whatever agreement the EU leaders will have reached with Greece will be flawed because the reality is that Greece was, and still is, bankrupt. Unless more than half of its national debt is written off it will never be able to repay its creditors over the next century and beyond.
Today it is not fashionable to declare sovereign states bankrupt, especially if they are members of the European Union or Nato. In the case of the Greek crisis, Europe’s political leaders made very reasonable political calculations: that if Greece were left to sort out its own problems, Russia would step in and probably be granted a military base in the Mediterranean in return for helping out Greece sort out its debt problems. This, of course, was a no-no scenario for the EU and Nato.
So will Greece return to the negotiating table in a year’s time to ask for more money? The answer is probably ‘yes’, even if I do not exclude that EU leaders, with some nudging from the US, will try to come up with some Marshall Aid-like plan to boost much needed cash and investment directly in the Greek economy.
I also recommend that my student friend include a section in his essay on the ineptitude of EU politicians to think, plan and act long-term. Many are sick and tired of watching members of the European Parliament pontificating on grandiose solutions to the eurozone’s obvious structural weaknesses. It does not hurt them a bit if – to indulge in this pontificating –they have to take the trouble to travel weekly to Brussels and Strasbourg.
Their colleagues in the European Council are just as ineffective in underpinning the eurozone with sound fiscal, economic and monetary governance principles. Many EU leaders should include in their CVs the following skills: ability to ‘extend and pretend’; expertise in ‘kicking the can’ down the road; and high competence in covering structural cracks with paper agreements that will never work. Yes, fudging is a necessary survival skill for many of our EU leaders.
Another lesson that needs to be learned from the Greek crisis is the limit of negotiating ability.
In my student days I followed closely the writings of Gavin Kennedy, professor at Edinburgh Business Schools.
In his book, The New Negotiating Edge, he writes: “Many authors present negotiating as a choice of manipulative ‘tactics’ and aggressive ploys, delivered by the so-called ‘tough’ wise guys: the red style. In the real world negotiation is not so simple. No matter how ‘tough’ you try to be, waiting round the corner is a tougher guy.”
The Greek negotiating team projected a macho image of itself to the world media. The persona of Yanis Varoufakis the Greek economist and, until recently, finance minister will undoubtedly be the most iconic symbol of the long Greek financial crisis.
With his leather jacket, high-speed motor cycle, a grey T-shirt and a colourful crash helmet, he endeared himself to millions of hard hit European citizens who resent the stale image of financiers who only seem interested in getting richer. Some have already dubbed Varoufakis the Che Guevara of Europe.
The sad reality is that deep-rooted economic weaknesses both at a national and EU level will never be solved by flowery oratory and rhetoric like that of the present Greek leadership and much less by self-congratulatory happy talk flowing from EU leaders’ mouths and writings.
The Greek crisis will not be the last one that will shake the eurozone from its foundations.
As long as fiscal and economic union remain a distant prospect, the eurozone and the EU itself will continue to be an area of high economic and political seismic risk.
I hope my student friend now understands a little better some lessons learned from the Greek crisis.