If Greece Defaults Next Week, Don’t Blame Us

Greece’s far-left leaders have done everything they can to ruin their country’s chances of a deal.

A Greek flag in Athens, October 11, 2008
A Greek flag in Athens, October 11, 2008 (Ananabanana)
Another crisis summit of European finance ministers broke up on Thursday without a deal to save Greece from bankruptcy.

It was the latest in a series of a failures to convince the Greeks to stick to their word and carry out the budgetary changes and economic reforms they committed to in the past.

Without a deal this weekend, the country would probably be unable to pay off a €1.5 billion loan from the International Monetary Fund and enter default.

That could trigger a bank run and capital controls — which would be the first step toward a Greek exit from the eurozone.

If it comes to that, the Greeks can only blame the amateurism and far-left zealotry of the leaders they elected in January.

Their refusal to honor the terms of Greece’s bailout made it extremely difficult — if not impossible — for especially hardline creditor states, like Germany, to find a compromise.

Greece’s creditors have moved from their original position that it should simply carry out the reforms it promised to do. Other European countries and the IMF have already accepted a reversal in Greece’s privatization policy. Now they are reportedly willing to relax the country’s deficit targets and accept less dramatic pension reforms and a lower sales tax than originally envisaged.

For Greece, it’s still not enough. Its ruling Syriza party spent the last five months abusing its creditors, complaining that the measures Greece agreed to enact in exchange for €240 billion in financial support were “absurd”, “inhumane” and what not — and alleging that some governments even wanted it to fail so as to discourage crypto-Marxist parties in their own countries.

The theatrics accomplished nothing. Yet a poll published in the Avgi newspaper last month showed that 58 percent of Greeks did not want their government to give in at all.

Most Greeks back Syriza’s all-or-nothing negotiating strategy. Yet a majority also wants Greece stay in the euro.

Greece has repeatedly been warned that the two can’t go together but it seems to have convinced itself that the rest of Europe must be bluffing.

Before the January election that brought Syriza to power, German officials urged Greece to keep their commitments and Finland’s prime minister warned that the far left’s demands for relief from austerity and debt were “simply unacceptable.”

When Syriza’s Alexis Tsipras took office and canceled the privatization of Greece’s largest seaport and its public power utility in violation of the bailout, Sigmar Gabriel, the German economy minister and Social Democratic Party leader, said the new prime minister should have discussed his plans with other European countries first. “Citizens of other euro states have a right to see that the deals linked to their acts of solidarity are upheld,” Gabriel said.

The Netherlands’ Jeroen Dijsselbloem, who chairs the meetings of eurozone finance ministers, lamented, “Taking unilateral steps and ignoring previous arrangements is not the way forward.”

Halbe Zijlstra, the parliamentary leader of the ruling Dutch liberal party, said he was exasperated by the new Greek government’s intransigence and urged them to decide: “In or out of the euro.” If they wanted to stay in, he said, “they must make good on their agreements.”

Days later, Greece asked for a six-month loan extension from the European Union while dumping the bailout altogether. It wanted more money without any conditions.

Tsipras said he would not accept an “ultimatum” from the rest of Europe and was in “no rush” to find a deal.

When the Greek request was predictably turned down, however, Tsipras’ government did submit some reform proposals to try to release funds. But the IMF was critical, saying Greece’s promises did not convey “clear assurances that the government intends to undertake the reforms envisaged.”

Syriza had gone back on Greece’s word once. The creditors naturally wanted assurances it wouldn’t do the same thing again.

Greece did the opposite of giving reassurance. It was saying one thing and doing another. On paper, it was talking up reforms. In reality, it was preparing and enacting legislation that would dismantle much of what the bailout had achieved: a more flexible labor market, privatizations, an affordable pension system and a tax regime that was fairer and actually collecting revenue.

Instead of finding allies in other struggling euro states, like Portugal and Spain, Tsipras berated his fellow Southern Europeans, claiming they were determined to “topple or bring our government to unconditional surrender before our work begins to bear fruit and before the Greek example affects other countries.”

Spanish prime minister Mariano Rajoy, a conservative, rejected the criticism. “We are not responsible for the frustration generated by the radical Greek left that promised the Greeks something it couldn’t deliver on,” he said in March.

Greek ministers proceeded to threaten to flood Europe with migrants, even terrorists, if their government didn’t get its way. They said they might seek aid from Russia instead and Tsipras flew to Moscow twice where, most recently, he defied his NATO allies to agree to the construction of a Russian gas pipeline on Greek soil.

By the end of March, Tsipras still insisted Greece was “not obliged to implement recessionary measures.” He said, “Greece will submit its own structural reforms which it will implement.”

It didn’t. Rather, the country came up with another list of spending priorities that left out significant cuts and liberal reforms.

By the end of April, Dijsselbloem was warning the Greeks, “It is a matter of weeks rather than months before the money runs out.”

Tsipras lashed out. “The lack of an agreement so far is not due to the supposed intransigent, uncompromising and incomprehensible Greek stance,” he argued.

It is due to the insistence of certain institutional actors on submitting absurd proposals and displaying a total indifference to the recent democratic choice of the Greek people.

The radical leader still seemed to be under the impression that the rest of Europe would eventually accept that the Greeks had changed their minds about the bailout — and oblivious to the democratic wishes of some other Europeans, like the Dutch and the Fins and the Germans, who had been prepared to let Greece exit the euro even before Syriza came to power.

By June, Germany had had enough. Greece’s biggest creditor and the deciding voice in the eurozone was starting to prepare for a Greek default and eurozone exit. Various media reported that Wolfgang Schäuble, the finance minister, had given up hope of a deal while Gabriel told the Bild tabloid, “We will not let the exaggerated electoral pledges of a partly-communist government be paid for by German workers and their families.”

Tsipras and his party still didn’t get the message. They are five days away from default and Greek savers are pulling billions of euros out of their bank accounts, overwhelming the country’s financial sector. But they still seem to think everyone else will bend to their wisdom in the end and give them their free lunch.

If other European leaders want to stand any chance of reelection, it’s just not going to happen.

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