Greece made the wrong choice

July 17, 2015
Greek Finance Minister Euclid Tsakalotos attends a parliamentary session in Athens

Greek Finance Minister Euclid Tsakalotos attends a parliamentary session in Athens, Greece, July 15, 2015. REUTERS/Christian Hartmann

Former Greek Finance Minister Yanis Varoufakis  has, as Macbeth put it, “strutted and fretted his hour upon the stage.” But he will still be heard some more. 

While Prime Minister Alexis Tsipras pleaded for support Wednesday for a European Union “rescue” plan in which he said he didn’t believe, Varoufakis was busy ripping it apart. In a widely circulated blog, Varoufakis boiled down his belief to this: Greece had been reduced to the status of a slave state.

While his words were clearly driven by anger and spite, he’s not entirely out of line. The agreement is, as Tsipras said, a kind of blackmail. The economist Simon Tilford described it as an order to “acquiesce to all our demands or we will evict you from the currency union.” Pensions will be cut further, labor markets liberalized, working lives extended, collective bargaining “modernized,” and hiring and firing made easier. For a government that takes its inspiration from Karl Marx, this is a neo-liberal dousing.

There are few enthusiasts for the deal: the most important of the skeptics is the International Monetary Fund, which called for the euro zone creditors to allow a partial write-off of its 300-billion-euro-plus debt, or at least permit a repayment pause for 30 years. In an ironic twist, the IMF, the creditor the Tsipras government most despised, is now its (partial) friend.

Skeptics have focused not just on the impossibility of debt repayment, but also on the deepening poverty that will result from the agreement. Francois Cabeau, an economist in Barclays Bank, told the French daily Figaro that the economy would continue to shrink by between 6 and 8 percent a year. Because the Greek economy has so few sectors where significant value is added other than shipping and tourism, it depends heavily on consumption — which is being further cut, thus prompting a vicious cycle and a further immiseration of the poor, elderly and sick.

These conditions validate Varoufakis’ analysis. Greece is a country so firmly under the unremitting pressure of its creditors and so tied to foreign demands, that it may soon resemble an East European communist state in the high tide of Soviet power. Like two of these states — Hungary in 1956, Czechoslovakia in 1968 — Syriza made a failed attempt at a revolt, and was crushed.

Could such a state make a convincing effort to find the internal strengths and discipline to mount the kind of recovery it needs? Discipline has not been the hallmark of Greek economic management for the past 14 years since it joined the euro. Rather it has behaved like a spoiled child, taking all that low interest loans could deliver, padding the state bureaucracies with political clients and allowing the rich, the holiday-destination islands and the Orthodox Church to avoid paying taxes. Creditors happily advanced the loans, winked at the corruption, ignored warnings of unsustainable debt, and now, after decades of indulgence, they turn on the hapless little state with a whip.

So should it leave the euro zone? The objections to a Grexit are twofold: first, that its currency — presumably a newly issued drachma — would be walloped by an unfavorable exchange rate as a result. Foreign goods and foreign travel would be priced out of many families’ reach. At the same time, as euro zone leaders have warned continually, a Grexit would also shake the euro to its foundations — and though the remaining 18 members could be protected, a precedent would be set that this is a contingent currency, with membership dependent on national conditions.

That it would be bad is certain: but how much worse than staying in and swallowing bitter medicine? As for the future of the euro, it would no longer be the Greeks’ problem. What, they may say, has the euro done for us?

A Grexit would allow Greece to focus its national pride on reviving the economy — rather than railing at Germany — tempting the most talented members of the wide Greek diaspora to come back to be part of a patriotic project, digging deep into the wells of national talent to fashion a new image for a country that has great beauty, the richest of histories and an economy waiting to be energized.

To accomplish this would require a few self-mandates: for starters, an all-out assault on corruption and a determination to make the oligarchs of shipping and the hierarchs of the Orthodox Church pay their fair share of taxes. Socialism would not be part of it: Syriza would have to be disabused of that notion. Tsipras has shown he’s flexible enough to bend every which way, and if he is as attached to power (and skillful in keeping it) as he seems, then he may yet prove a useful politician, a late convert to social democracy.

The Greeks say that they are a “proud people.” But that’s been somewhat hollow through the years of free riding. Now, nothing could make that boast more concrete than taking control of their own destiny, and showing Europe that the country is not the pain in the backside  it has proven to be this past year, but a nation, once again, of creators.

The euro has crushed them, and other small and relatively poor economies have taken note. But Greece can step out of all of that. The cause that the British romantic poet Lord Byron made his own in the early 19th century should be revived. Liberation for the Greeks!


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Mr Lloyd, can you please make up your mind! Should Greece stay in the Euro, or leave? Because those are the only two choices the Greek people had. Two very bad choices.

What is your articles point? That Greece should stay in the Euro and try to save its way out of debt (impossible), or should they leave the Euro (poverty)???????

Posted by No_apartheid | Report as abusive

They would have been better off leaving. This is just another example of the weakness of the left. They have irrational fears and mostly they fear hard work. They prefer to have someone save them and take care of them. By the way, don’t equate the left with liberalism, the left is not liberal. They are just as hateful and conniving and controlling and greedy as conservatives. The difference between the two is really only a function of who they both manipulate to get power.

Posted by brotherkenny4 | Report as abusive

Greece is intentionally (by its creditors) and effectively in “debtors’ prison”.

Posted by lifeisadimensio | Report as abusive

John Lloyd has at least one thing right. Leave or stay, the Greeks have to efficiently grow their economy for anyone to do well. That is why I am disappointed that the Greeks and their creditors did not focus more on getting and rewarding growth. Moreover, greater attention should have been given to specific Greek problems instead of just the usual macro/money solutions. The only area where I am where specific attention was given is the corrupt tax system. However, things like tapping the pool of employed, some of whom are skilled and well educated, apparently were never discussed. Funding small business expansion, creating synergistic partnerships with other European companies, and supplying technical help to Greek companies also received little attention. The list is things to do is much bigger, but the point should be clear. Get Greece growing and both the Greeks and their creditors can win; turn the Greek economy into a moralistic lump of coal and everybody loses.

Posted by relmasian1 | Report as abusive