Advice for Greece: Never play chicken with Germany

July 2, 2015
Anti-austerity protesters burn a euro note during a demonstration outside the European Union offices in Athens, Greece

Anti-austerity protesters burn a euro note during a demonstration outside the European Union (EU) offices in Athens, Greece June 28, 2015. REUTERS/Alkis Konstantinidis

A graffiti message scrawled in blue paint on a metal wall in downtown Athens reads: “Mrs. Merkel, We still love you. – Greece.”

While magnanimous, that graffiti writer seems to be in the minority. Roughly 80 percent of Greeks want to remain in the EU. But many of them don’t agree with or understand the logic of German Chancellor Angela Merkel and other European Union leaders, who insist that Greece maintains structural reforms and austerity measures before monetary aid continues.

Merkel and her finance minister, Wolfgang Schäuble — as leaders of the largest and, arguably, healthiest economy in Europe — have been driving the negotiations about Greece’s future. And they have taken a firm stance in the last five years on the need for fiscal reform in Greece. Germans typically think that Merkel and Schäuble are trying to preserve the European Union, to improve the Greek fiscal structure, to punish southern European economies for profligate spending and to protect German taxpayers who are helping to fund the bailouts.

Yet the average Greek citizen believes that the cold, frugal Germanic approach has helped push Greece’s unemployment rate to 25 percent and beyond, and has led to homelessness, poverty, hunger and other deprivation. A minority of Greeks — mostly educated, upper-class businesspeople — believe that the country should adapt away from its bloated, socialist past and migrate toward a lean public sector and a more limber, market-driven economy.

During a recent visit to the country, my fourth in the past four years, I saw signs that Greece was and is making progress. And it seems most prudent for voters to pass the referendum on Sunday, supporting more economic reforms that should allow the country to stay in the EU. It’s a tough pill to swallow right now, but also the antidote to future fiscal crises and the source for political reform and economic growth.

The 2008 global financial crisis exposed fiscal problems in Greece that required massive loans — $274 billion since 2010 — and has led to a debt crisis. That crisis is at a pinnacle this week as Greece, after missing its $1.7 billion debt payment on Tuesday to the International Monetary Fund, awaits this Sunday’s vote. Many believe the vote will determine whether Greece will remain in the EU monetary union and, longer term, in the European Union itself.

After Athens missed its I.M.F deadline, Greeks flocked to ATM machines, forcing banks to close and limited ATM withdrawals. Greece is now in a club with poor and chaotic nation states that have missed payments to the I.M.F. such as Sudan, Somalia and Zimbabwe.

Greek Prime Minister Alexis Tsipras, of the left-wing Syriza party, is playing games of poker, chicken and Russian roulette simultaneously. He is playing poker with EU finance ministers, hoping they are bluffing and won’t actually turn off the spigot of loans, bonds and possible debt relief flowing into Greece. Tsipras seems to believe Merkel and other leaders would encourage the troika — the International Monetary Fund, the European Central Bank and the European Commission — to release the final scheduled $8.1 billion bailout payment to Greece, the cradle of democracy.

He’s playing chicken with the Greek people. In so doing, Tsipras is stepping on the gas and letting 11 million Greeks take hold of the steering wheel of the country’s fate. Just hours before the I.M.F. payment deadline, Tsipras tried to secure a temporary bailout from other EU currency countries. But Chancellor Merkel said no deal with Tsipras’ government could be negotiated until after Sunday’s referendum.

And by putting the next round of austerity measures to a vote by Greeks, Tsipras is playing Russian roulette — taking a revolver to the temple of his own political career, his political party, and perhaps the country itself — and spinning the cylinder. On Thursday his finance minister, Yanis Varoufakis, said he would resign if voters pass the referendum on Sunday.

So far, the poker-faced Frau Merkel and Herr Schäuble are not bluffing. They have maintained their steely resolve since the Greek debt crisis began in 2010

 

“You can’t spend hundreds of billions … in a bottle without a bottom,” Schäuble said in April, during a speech in New York, where he blasted Syriza party attempts to roll back reforms made in the last five years. The 72-year-old, seasoned sage of German politics has held a tough line on the need for fiscal reform and economic austerity measures in Greece — as has Merkel.

Many Greeks blame Germany, Merkel and Schäuble, and believe they have intentionally pushed the country toward the exit, or at least have not done enough to keep Greece in the euro currency. “This is what the Greeks were misled to believe by their governments over the last five years, not just the current Syriza regime. Germany was the easy target,” said Gerasimos Gasparinatos, a lawyer in Athens.

But like many educated, upper-class Greeks, Gasparinatos supports the austerity measures demanded by Germany. He speaks German and is having his children learn German.  He marches in pro-EU rallies to counter Marxist-style rallies that sometimes compare Merkel to Hitler and compare Germany’s current economic leverage to the Third Reich’s military invasion of Greece in the 1940s. “No one [in Greek politics] has the guts to tell the truth and to explain to the people that the measures are necessary to render the economy more competitive,” Gasparinatos said.

Pro-growth and pro-business Greeks like Gasparinatos want to see resolution and forward movement. They worry that the economic brinksmanship will destroy the progress the country has made. Austerity measures were painful but were starting to create fiscal order. Between 2012 and 2014, “things had started to move in the right direction,” said Gasparinatos. Budget surpluses were starting to appear. GDP growth was positive in the second half of 2015. Athens was cracking down on tax avoiders. Even unemployment dropped to 25 percent from 28 percent.

Aris Kefalogiannis, chief executive officer of Greek Olive Oil maker Gaea Products SA, said for several years Germany has been its top customer, buying 25 percent of his premium olive oil products. Normally, his company saw more than 10 percent annual sales growth in Germany. He says this year he has seen overall growth globally but a softening of sales by 3 percent in Germany as the Syriza party leaders “have started to annoy the European partners and allies.”

Kefalogiannis largely agrees with the direction of EU leaders such as Merkel and Schäuble. He is pained by deepening rifts between the two countries and within the EU. He says an outright boycott of Greek products isn’t taking place, but he is detecting “a little bit of distancing” by German customers when they look at Greek products on the shelves of German supermarkets.

Kefalogiannis and Gasparinatos disagree with the majority of Greek citizens who voted for leftist parties in the last election and who generally think the EU should continue to fund Greece’s ongoing bailout without imposing fiscal restraint. “You have a terrible contradiction,” Gasparinatos said. “It shows you the Greeks are not taking the situation seriously. They don’t think the EU will throw us out of the euro[zone].”

By voting Tsipras into power, Greeks elected socialists to lead a country in the opposite direction its creditors want. Tsipras and Syriza leaders are now partly trapped. If they compromise with the EU, they look like liars to the Greeks who elected them.

In the villages of Greece, old men often sit outside their homes playing backgammon while drinking ouzo and smoking cigarettes. It is the past-time of pensioners, retirees and working class people in rural regions. Depending on the outcome of Sunday’s vote, it could be the new game Tsipras and Varoufakis are playing too.

 

 

 

 

 

 

8 comments

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They have made reforms, they just do not want to sell off all the assets of the nation at bargain basement prices for nothing. The Troika is offering no debt relief, just short term loans to pay back the interest. The greeks should vote to leave the Euro and flip the bird to the creditors who want to bully the country based on their own bad loans. Whatever happened to Capitalism? Now socialism is allowed only if you are a rich banker, not for ordinary people.

Posted by Benny27 | Report as abusive

They have grudgingly made reforms…all the while with people blaming Germany for their problems, denying responsibility, and now voting in a political party that told them what they wanted to hear. Chaos reigns and hardship multiples.

Maybe they shouldn’t have lied to get in the euro to begin with. The Greeks have reaped what they have sown.

Posted by distancematters | Report as abusive

@distancematters wrote:

Maybe they shouldn’t have lied to get in the euro to begin with.

They had some help with that.

Posted by Laster | Report as abusive

The Balkans United against the biggest evil ever EU.

Posted by Macedonian | Report as abusive

If the Greeks are expecting that funding (bailouts) will continue without the necessary changes, I think they are in for a rude awakening. Deception was the order of the day when they got in the Euro in the first place.
To continue to see improvement in the economy, they must make changes – otherwise continuing to do the same and expecting a different outcome is just insanity.
I say kick out Tsipras and start with a new party . . . a party that will create an economy for the new order.
If they want to be part of the modern world, they have to start behaving like they belong not the beggars on the street that they have become.

Posted by DragicaG | Report as abusive

Germany loses no matter what the outcome. Do the math. Merkel hopes she can retire before the SHTF.

Posted by johnmeyer | Report as abusive

obviously a German propagandist.

Posted by Tippytoe | Report as abusive

Austerity is coming whether Greece stays in or is pushed out. But austerity is going to be a whole lot more painful if they’re pushed out. Sadly, the Greek people are delusional and think the free lunch can go on forever, as is evidenced by their election of Tsipras and the overwhelming “no” vote yesterday. Question for you Greeks – after you default, who’s ever going to loan you money again?

Posted by daGeek | Report as abusive