Greece should vote yes and Europe should be ashamed


If I had a vote in today's referendum in Greece, which way would I cast it? With a heavy heart, I'd vote yes.

Greeks are being asked whether to support the terms for further financial assistance offered to their government a little over a week ago by the European Union and the International Monetary Fund. Prime Minister Alexis Tsipras is calling on them to say no. He promises that if they do, he can get them a better deal in short order.

Recent polls say the vote could be close. I'm not convinced it will make much difference. Whether Greece votes yes or no, Tsipras (though apparently not his finance minister) is aiming to stay in charge. The vote doesn’t change the calculations that the respective sides will have to make about long-term consequences. It will still be in both sides' interests to come to an agreement. For five months, that hasn't been enough — but at some point, even now, sanity may prevail.

It's even possible that the no vote Tsipras is asking for might, as he says, elicit a new and better offer from the European side. But it's a balance of probabilities, and voting no involves the greater risk. Some European officials are ready to see Greece default and exit the euro system. If Greeks vote no, that view may gain ground and the chance of Grexit certainly goes up. For the past week the country has been getting a foretaste of the disruption this would cause.

If the voters say yes, there's a better chance that the EU and the ECB will offer help to stave off both default and Grexit. At least in the short-term, yes is the better path to less economic pain.

There's another thing. A no vote would be a vote of confidence in Tsipras and his team. It would leave them in command with a heightened sense of being right. Managing Greece's exit, if it came to that, would test even the most skillful leader, and Tsipras sure isn't that. Having him in charge under those conditions hardly bears thinking about.

If I were Greek, I'd want Tsipras gone. A yes vote wouldn't guarantee this, but would make it more likely. Tsipras's departure also wouldn't guarantee that a better government takes over, but again it seems worth a try.

By submitting to the EU, Greece might incline the creditors to be generous in victory. Europe might finally concede what Tsipras has long been demanding and what has always made sense from the creditors' own point of view — to bundle debt relief and a milder profile of fiscal consolidation into a third bailout program.

The rational choice is therefore to vote yes. The challenge, and I flinch at it, would be to contain one's disgust at handing Europe and the IMF this win. All the more so, if the least-bad scenario I've just described comes to pass.

Consider: In that scenario, Europe would arrive at terms not that different from those Tsipras was ready to accept weeks ago. If Greece is to stay in the eurozone, begin to recover and avoid social disorder, there's little alternative. Stabilizing Greece's fiscal position and restoring economic growth will be much harder now than before. So why was the deal not done?

Tsipras, of course, is one answer. He seemed to deliberately enrage the creditors. But for all his bluster, he soon abandoned his election promise of no more programs, no more conditions. Months ago, the gap between the severe fiscal conditions required by the creditors and what Tsipras was willing to take was small. In that sense, Europe had already won.

The sticking-point was debt relief. Here too, less than you'd think was at stake. Concessional terms had already been granted in an earlier deal. Further relief raised no great issue of principle, and according to the creditors' own calculations would help to make the debt sustainable — which is in their interests as much as Greece's. But Tsipras wanted debt relief on the table now, as part of this negotiation, not later, as part of another set of talks.

Week after week, the creditors said, that's not how we do things. Incredible as it seems, this narrow procedural objection to talking about debt relief now rather than later is why the talks collapsed.

Tsipras may be erratic and infuriating, but is he really so hard to understand? The creditors, throughout, insisted on his overt capitulation. They've shifted on details of the terms, but not on anything Tsipras can boast about. Talks about debt relief now rather than later have been his only hope of telling Greeks he'd won them something. The concession would have cost the creditors nothing — less than nothing, measured against the costs they now face. Yet they refused it.

In the beginning, I think, this was out of ordinary bureaucratic mulishness. Rules are rules. By degrees, and under great provocation, this characteristic EU trait became a determination to show Tsipras who was boss.

The right thing was to help Tsipras lose with dignity — to show a little respect to the Greeks who'd voted him into office out of despair.  Any instinct of that kind gave way to the view that Tsipras and his supporters had to kneel. That would encourage future backsliders to get in line, and Greece had it coming anyway. That mindset, in turn, formed itself into the idea that the euro system, and maybe the EU itself, might be better off without Greece.

Resolving this crisis, strengthening the euro system and reviving the wider European project required statesmen. If Europe still has any, they kept quiet. Small leaders and pettifogging bureaucrats called the shots. And now Greece, for its own sake, has to tell them they won.

[Bloomberg View]