The numbers don’t add up
I recently posed the following question to a senior European official with knowledge of how decision-making centers normally operate: “Let’s assume that a leader was elected in Greece who would be willing to see through a package of ambitious reforms that would do away with many of the obstacles putting off investors. Would European governments be willing in return to give him a deal that would bring Greece’s budget surplus target down from 3.5 percent to a more reasonable threshold?”
I did not receive a very encouraging response.
The official began with the usual Northern European grievance about how Greece still lacks the necessary credibility that would allow it to make any ambitious claims. The Germans, Dutch and other Europeans believe that as soon as the budget surplus target is brought down, Greek governments will return to their bad old habits like providing handouts to their political cronies. It’s hard to blame them as our corrupt political DNA has proved hard to erase.
As they see it, a new Greek government would have to be tested to show that it is serious about seeing through the reforms passed in Parliament. Only after its genuine intentions have been clarified could further talks be held. If the crisis years are any guide, our Northern European neighbors are not very good when it comes to the carrot approach. Nor do they realize that the straitjacket of high budget surpluses has a regressive effect on the economy, causing a vicious cycle of poor morale.
There is however one more crucial issue. Having a Greek prime minister sit down with one or two leaders to negotiate a new deal is not an option. German Chancellor Angela Merkel does not have the same power as she used to. French President Emmanuel Macron has other, more important things to go after in its relationship with Berlin. The European Commission is always positive and good with wishful thinking, but it does not cast a vote in Germany’s local elections.
Prime Minister Alexis Tsipras accepted a very painful compromise to keep Greece in the eurozone after his irresponsible antics. Some people put some numbers on a piece of paper and passed it on to him, without caring if they added up or not. Official data may suggest some improvement, but the overall feeling is that, for a big chunk of society, the numbers do not add up and that the economy will continue to drag.
It’s high time that Greece’s partners and lenders stopped looking for excuses as they kick the can down the road.