Guest blog post by Stelios Christopoulos, former EU Official.
For many desperate Greeks, the young and energetic PM Tsipras and his Game theory-addicted Minister of Finance had represented the last chance to see the back of the austerity that accompanied the bailout money and ruined their lives. When on 13 July, a week after the referendum of 5 July, the new in principle agreement for a third bailout of more than 86 bln Euros for 3 years finally came through, everyone realized that it was worse than the one the Eurozone had proposed last February and that at close to 200% of the Greek GDP by the year 2020, the overall debt is absolutely not sustainable. It makes Sisyphus look like a child in a play ground. This was mainly due to the similarly significantly worsening of both the public finance and the real economy situation of Greece during the same period. Instead of the timid signs of a small primary surplus that had started to appear last year, now Greece and its creditors have to cope with a recession that might reach up to 5% of its GDP. Moreover, since the end of June, Greeks had to cope with closed Banks that opened on 20 July only after the ECB approved a new if modest Emergency Line Assistance that was followed by a bridge loan from the Eurozone of more than 7 bln Euros to allow Greece to cope with the approaching deadlines for repayments of loans to ECB and the IMF. However, the capital controls imposed by the end of June are there to stay for sometime so as to remind Greeks that whoever sows a wind ends up reaping a storm.
By now, most Greeks, including PM Tsipras, also know that there is not really any other real alternative to having Euros in their pockets. However painful this waking up to the real world may be, this by itself is really a big deal.
Concluding an agreement as the one of 13 July, was a good thing…
Implementing it would be better, and it actually represents an excellent opportunity to restore confidence between Greece and its partners. But…can Tsipras Government deliver? How can he do it if he publicly admits that the agreement was not good and that it was forced on him? So, is the situation hopeless?
Not necessarily. Because the Greek crisis meant the end of the illusions era not for Greece only but also for the Eurozone. Indeed, if by now Eurozone’s Heads of State and Government have not yet realized that they cannot go on risking endless and sleepless nights of repeat summits to avert a crisis or limit its effects, they must be stupid. And if they managed to get themselves elected, stupid they cannot be. This crisis must have hit them like a revelation. They had been asking for the truth. Now they must demonstrate that they can handle the truth.
When it comes to the common currency, sovereignty must find its limit to survival and competitiveness. Yes, but what about the treaties? As Angela Merkel has repeatedly said during this crisis, when there is will there is a way. The existing EU institutions are either sufficient or they can be stretched to allow for automatic procedures of both day to day management and crisis management or they are obsolete and will have to be updated. President Holland and other EU leaders made concrete suggestions for the Governance of the Eurozone. They include a Eurozone Government and Parliament.
As for Greece, Eurozone’s main challenges are now to make the debt sustainable and to convince Tsipras that further to the conclusion of the agreement he must also sell to the Greek people its implementation. Is this possible? Yes, it is. Are these two things very different between them? Not really!
If the Eurozone leaders really mean what they say about the Euro being much more than a simple currency union, then the time has also come for them to prove it. To this end they must agree on a specific, measurable and results-oriented programme of reforms in Greece against debt restructuring and relief. True, the reduction of the state is not on SYRIZA’s agenda. However, debt relief is. Trust Tsipras that he will find the way to sell this trade of realism to Greeks. As all good traders, Greeks, even when they are desperate they still know they need to be pragmatic.Blogactiv Team