Tuesday 20 November 2012

Greece. The Endgame?

Δημοσιεύτηκε Ελληνικά στο News247

In the next few days we would know the exact timetable of when the Troika is going to release the 44 or so billion to Greece. Just as a reminder this is the money that Greece was supposed to get right after a successful PSI and implementation of reforms plus the next two installments.  The delay was due to the unnecessary double elections that were caused by Mr Samaras (4th PM since 2010) in his efforts to put the premiership on his otherwise lame and vacuous CV.  There is no doubt that Greece is going to get this money perhaps with some more strings attached to it.

Would this money be enough to save Greece? Would this money be enough to save the coalition government in Athens and Mr Samaras? These are some of the questions that are being asked. Let us ponder for a while.

Would this money be enough to save Greece?
This is a typical question that many repeat every day. It has many variants, like “can Greece be saved”, “would Greece leave the Eurozone” etc. In my humble opinion a more fundamental question should be asked, and that is “What exactly is worth saving?” Unless this is defined and answered money and possibly lives would be wasted. Reading the published, and detailed plan that Troika has for Greece and the actions that it recommends/enforces one gets the feeling that a whole new country is being built. There is hardly any Greek institution or side that is in no need of a total reform or scraping. In fact, if anyone wants to create a new country from scratch it has the perfect blueprint in the reports produced by the EU and the IMF. It is mindboggling. The level of detail and the actions recommended are unprecedented whether it is the economy, the labor market, the health service or education.
In other words, the Troika plan implicitly but unequivocally answers the question “What exactly is worth saving?” There is nothing worth saving from the old Greece. Everything includes the political ruling class. But this is harder to do. So far they managed to kill PASOK and the next in line is the conservative party (ND) and no doubt the left (SYRIZA) would also suffer the same fate.  Changing everything or jump starting a country is not an easy job. In order to do so you need at least two prerequisites. First you must have the support of the people and second there must be a political party capable of inspiring the people and the country to change. None of these two conditions are present in Greece. All the parliamentary parties are against the reforms but vote for them because they want to get the money from Europe. It is no wonder that people feel mistreated, betrayed or occupied by some malign European power or believe in conspiracy theories. 
So, the money that the Eurogroup would release is not going to save Greece. They are just buying some more time.

Would this money be enough to save the coalition government in Athens and Mr Samaras?

The triple coalition government in Athens is ostensibly very fragile and this is perhaps its biggest strength. Every member of the coalition knows that causing elections is equivalent to political death. The left party (SYRIZA) would in all probability be the clear winner with the possibility of the Nazi party being third or even second if things get out of hand. This is a very powerful incentive for the coalition members not to leave the government. Their only hope is to keep getting the money from Europe and try to find a window of opportunity to make a graceful exit.
Herein lies the conundrum.  In order for Greece to get out of the hole and rejoin Europe a new pro-European political power is needed that does not carry the sins of the past. But any political change currently passes through SYRIZA. There is no new center party capable of picking up the pieces and holding the country together. Put simply, the danger is in the transition. If SYRIZA does not quickly transform itself to a pro-European, Troika friendly force then all possibilities are open. Leaving the Eurozone for example may, by that time, be a very benign outcome. Leaving Europe altogether and becoming a divided failed state is not improbable. 
This brings a second realization into light. Greece does not have rooted institutions that can guarantee a smooth political transition at times of stress. Democracy in Greece is malfunctioning for many years now as is capitalism and the free market. History is not very encouraging. Most of the political changes happened through catastrophical events (1922 war, 1946-49 Civil war, 1967 Junta, 1974 Cyprus invasion and division). It is exactly for this reason, that in 1979 the then PM Karamanlis forced Greece into the EEC (European Economic Community, the predecessor of EU) against fierce opposition from the left (PASOK and Communist). His overriding reason was political stability through Europe’s institutions and not economic. Unfortunately, events have turned otherwise.
So, Europe would have to keep on supporting the coalition till SYRIZA bows or till a new party claims the center of politics.

Greece is fast approaching the endgame. By endgame I mean a big paradigm change not the end of Greece. No-one can predict how events would unfold simply because the players and the unknowns are too many. For example, could a rise in tensions in the Middle East change once again the geopolitical weight of Greece? Would the people of Greece tolerate a harsh winter of discontent? The next year would probably be a make or break for Greece. The hope that the Greek problem is going to be solved once and for all by a Eurogroup summit, this or next week is simply laughable.  No spat between Lagarde and Schauble can resolve the realities on the ground.