Status Quo in New Clothes

On Wednesday last week one could get the impression that Greece wanted to leave the Eurozone and only needed the right culprit. The same could be said of the eurogroup finance ministers who seemed to be unwilling to move an inch towards the Greek position. Of course, all this was only posturing as both sides had a lot to lose. The Greek offer of the time indicated a healthy dose of pragmatism without giving up the core demand no longer to subscribe to the ‘extend and pretend’-logic of the past program. The document read not as all as a radical text. Actually, Varoufakis made the point in his speech to the eurogroup that he could easily continue with the practice of the previous government and promise high privatization receipts, even though he and everybody else knows that all previous promises were never met. Rather, so his argument, he wanted to end this practice and to move to more realistic policies. This, however, would have needed the support of the eurogroup. The Greek government did not receive this support, mainly for two reasons. First, the eurogroup has rarely been so united on a policy issue as it is on regards to Greece. As a matter of fact, Greece has not a single supporter for its case. Second, the Greek government has maneuvered itself into a corner that is difficult to leave. At home, Greek voters were fed with high expectations. Abroad, the Syriza government was much too unfocused and never created a image of a government that had a concrete plan to achieve a limited number of goals. Rather, the impression was that the new government wanted special treatment without accepting reasonable demands from the creditors.

The outcome is a far cry from Greece’s hopes. As a matter of fact, Greece’s situation has only marginally improved. It is a ‘debt colony’ (Varoufakis) that got a bit of breathing space only to avoid a immediate collapse. The eurogroup was helped by this part of the Greek population that one day before the critical negotiation started moved an additional one billion Euro out of Greece’s banking system. Even the most economically illiterate politician must have understood the threat. The finance ministers used this situation merciless. This victory may present itself as a cuckoo’s egg, though.  It can be expected that the Greek malaise will not be turned around with the continuation of a only slightly modified program. Syria may seriously have to weigh the advantages and disadvantages to stick to the Euro. Given the stubbornness of the eurogroup a orderly Grexit may be a politically advantageous option.