Two sides of the same coin

In June Greece?s lenders turned the disbursement of the fifth loan tranche into a cliffhanger. But as Prime Minister George Papandreou?s Socialist government appeared to come apart as a result, senior European officials sought to assure observers that Athens would receive the money and that a fresh bailout loan was under way. When the risk of collapse eased, European officials resumed their previous tune.

Over the past few days, we have witnessed a twist to the play. When Papandreou and his Finance Minister Evangelos Venizelos halted their talks with the troika representatives in Athens, foreign officials reacted by directing their wrath at Greece — with some going as far as to warn that the country would be kicked out of the eurozone.

The Greek government was forced to meet the pressing demands of international creditors, announcing a fresh raft of belt-tightening measures.

What foreign officials failed to consider however was that scolding Greece in public would have side effects.

There?s more actors on the stage. The markets had good reason to react negatively, which invited an intervention from Washington. The Obama administration reminded officials in Brussels, Berlin and Paris what they already knew: that the Greek crisis poses a big systemic risk to the euro area.

As a result, the Europeans have an interest in preventing a Greek collapse as that would trigger a catastrophic domino effect on European banks and other fragile economies in the eurozone.

That does not mean to say that Greece must take advantage of this to avoid a fiscal makeover. But it does mean that it has its bargaining chips. The first mistake made by the Papandreou government was that it did not negotiate a sustainable comprehensive plan for shaking up the Greek economy while it still had the chance. The second mistake was that it tried to sneak its way out of the agreement. As a result, it squandered people?s tolerance at home and its credibility abroad. Greece?s international creditors were pleased to see that the Papandreou government accepted its orders without too much hassle.

But they soon became annoyed by Athens?s incompetence and procrastination. Which, of course, are two sides of the same coin.