COMMENT

The way forward

By James K. Galbraith *

The Greek government is in Brussels to discuss the full range of economic issues with its European partners, including budgets, debt and structural reforms. At issue is whether funds will be available to keep paying the bills, on policy terms that Greece can accept.

Two factors complicate this issue. The first is the past Memorandum, alongside a set of tight deadlines, created by the previous government in part to entrap the new one. The second is the European decision-making process, which gives great apparent weight to governments of small countries, many of whom are internally insecure. The easiest path for them is to insist on no changes; anything else amounts to self-rejection.

So far, the Greek achievement consists of stating raw truths in rooms full of self-serving illusions. This exposes contradictions, bringing on facile ripostes, easily rebutted. It also brings on threats and menacing gestures, intended to test resolve. The Greek government seems to have met that test.

It can now proceed to the next step.

The next step is to define carefully what may be accepted. As for reforms, as much as 70 percent of the previous memorandum is (and always has been) common ground. That which is not – fire-sale privatizations, destructive labor market liberalizations and the unreachable 4.5-percent target primary surplus – can be spelled out. Reasonable language to describe the process of discussion to follow may be found.

When this is done, the final decision will be up to Europe – and to Germany, above all. Will Berlin continue to squeeze, in order to pressure, and so risk bringing on a Greek collapse? If so, it will be better to know soon. But Europe may well decide, if not from pragmatism then from a larger strategic vision, that Greece cannot be allowed to fail. In that case, agreement may be reached and the revival of Greece may begin.

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* James Galbraith is the author of “The End of Normal: The Great Crisis and the Future of Growth.”

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