Greece: Everybody be cool

There is no doubt that it has been a tumultuous start for the new Greek government. The first week revealed its inexperience and often uncontrolled enthusiasm. The personalities of certain government members may have caused a clash with the idiosyncrasy, mentality or political orientation of certain Northern European colleagues. Rhetoric or certain symbolic moves were not fully understood or may have sent the wrong message. All this might be absolutely true but I still find it impossible to buy into the idea that this noise is reason enough to convince anyone that the appropriate path from here on is for the eurozone to gradually choke Greece and force it out of the euro in a disorderly fashion.

The US still regrets having let Lehman Brothers collapse and Timothy Geithner admitted having told Wolfgang Schaeuble that if the Americans had another chance they would have never let it happen. How has it become the prevailing view that leaders and figures that proclaim themselves to be Europhiles will take on the responsibility of causing an economic and social crisis of underrepresented proportions by kicking Greece out of the eurozone?

Regardless of what has happened over the last two weeks, I have not seen any convincing evidence that it is not in the best interests of everyone involved to work out a sensible solution. Merkel herself had once claimed that a compromise leads to a solution with which neither side is satisfied. There is the possibility here to reach a compromise that will lead to neither side losing much face and leave them in a position to deal with the domestic political repercussions.

There is so much more that keeps Greece and its lenders together than actually separate them. At least there is nothing of significance that does not allow the gap to be bridged.

Following an unprecedented effort to wipe out a primary deficit of 25 billion euros at the end of 2009, Greece has now been in surplus for two consecutive years. It is universally acknowledged, though, that the primary surplus target of 4.5 percent of GDP over the next decade is unachievable. It served its purpose back in 2011 and 2012, when a figure was needed to make the Debt Sustainability Analysis add up. But it now needs to be reviewed downwards into something more sensible and achievable.

With two years of primary surpluses confirmed, the eurozone just needs to honour its commitment to provide additional debt relief to Greece as per the November 2012 Eurogroup agreement. This is not a move that requires any eurozone government to invest huge amounts of political capital and can be easily managed. It does not require anything that the eurozone has not done before with regards to Greece. The first bailout package consisted of 3-year loans with interest of Euribor plus 3 percent and a handling fee. Now, these loans do not have to be repaid before 2020 and the margin is down to 0.5 percent.

The end of the troika is here regardless of what Alexis Tsipras wants. The European Central Banks has taken on so much more since it assumed its role in the troika in May 2010 that there are serious concerns over conflicts of interest. Stepping down is a natural development for the ECB.

It is also accepted that the micromanagement of the Greek programme by the troika over the last four years was counterproductive and just caused unnecessary friction over insignificant issues and measures that otherwise would be a rounding error. Everyone agrees a broad framework of interventions and the enhanced supervision by the Commission on fiscal compliance would suffice to keep any government, including the “unruly” leftists, in check.

If these key issues can be resolved easily, there is ample room to negotiate the little details and get from Tsipras the compromises that would probably satisfy Northern european countries and calm down Spain, where the rising Podemos is giving Mariano Rajoy headaches.

Although some consider Tsipras a Marxist maverick, they should not underestimate the political instincts of a man who took over a radical party polling around 3 percent at the age of 33 and seven years later has managed to become the prime minister of Greece. He will see the need to make many small concessions so he is able to get back to Greece and offer people the debt relief that he promised them, along with the end of the troika and potentially the end of this sad story in about a year’s time.

Five years of the euro crisis have shown us that the solutions were never dictated by economics but always by politics. Usually there have been small tactical short-term fixes, just enough to allow everyone to move on with a manageable domestic political aftermath.

Having come such a long way and with the possibility of a respectable and relatively painless compromise so close, it is beyond logic that those in control of the situation should choose to go down in history as those who ruined a nation.

Follow Yiannis: @YiannisMouzakis


About the Author

The Corner
The Corner has a team of on-the-ground reporters in capital cities ranging from New York to Beijing. Their stories are edited by the teams at the Spanish magazine Consejeros (for members of companies’ boards of directors) and at the stock market news site Consenso Del Mercado (market consensus). They have worked in economics and communication for over 25 years.

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