Stretched too far

Kathimerini English - - Front Page - BY STAVROS LYGEROS

Aweek ago, se­nior Euro­pean of­fi­cials were wor­ried about unchecked po­lit­i­cal de­vel­op­ments in Greece. They gave re­as­sur­ances that the fifth in­stall­ment of aid to Greece would be re­leased, and that a new bailout loan was un­der way. When the risk of col­lapse was no longer there, for­eign of­fi­cials came back with fresh warn­ings, but they are mostly bluff­ing. Even those who is­sue these warn­ings ad­mit that the Greek cri­sis poses a huge sys­temic risk to the eu­ro­zone. As a re­sult they are obliged, for their own good, to avert a Greek de­fault. That does not mean to say that Greece must ex- ploit the sit­u­a­tion to avoid fis­cal re­form. It does mean how­ever that Greece is not to­tally with­out its bar­gain­ing chips, as the cheer­lead­ers of the mem­o­ran­dum would have us be­lieve. The gov­ern­ment failed to ne­go­ti­ate the deal or meet its com­mit­ments. As a re­sult, it tar­nished its cred­i­bil­ity at home and abroad. Troika of­fi­cials – from the Euro­pean Com­mis­sion, Euro­pean Cen­tral Bank and the In­ter­na­tional Mon­e­tary Fund – were happy to see Ge­orge Pa­pan­dreou and Gior­gos Pa­pa­con­stanti­nou, then fi­nance min­is­ter, ac­cept their de­mands with­out too much fuss. At the same time, they were an­gry at their in­com­pe­tence and in­con­sis­tency. But these were in fact two sides of the same coin. The midterm fis­cal plan does not lead to the cre­ation of a pri­mary sur­plus, which must be the goal. It will just sink the econ­omy fur­ther into re­ces­sion. A sus­tain­able growth pro­gram has to com­bine the tidy­ing up of pub­lic fi­nances (which has to start from scratch), bet­ter use of the coun­try’s dor­mant growth po­ten­tial and a re­struc­tur­ing of Greece’s debt. It is ob­vi­ous that the coun­try’s debt is not ser­vice­able un­less there is a “hair­cut.” If the eu­ro­zone wants to avoid that, for its own rea­sons, it should work to find an al­ter­na­tive so­lu­tion. Solu- tions do ex­ist; what does not ex­ist is the po­lit­i­cal will to im­ple­ment them. Caught up in con­tra­dic­tions, for­eign of­fi­cials are is­su­ing warn­ings al­though the midterm plan is set to pass. Greece is not the black sheep of the bloc. It is the weak­est link in a weak chain. If Greece were to re­turn to the drachma, the cri­sis would hit other weak links. Greece is on the front line, but it is not the front. It is vi­tal that the Greek prob­lem is tack­led in a Euro­pean con­text. Warn­ings, hu­mil­i­a­tion and pun­ish­ment are only mak­ing mat­ters worse. When you stretch things too far, some things get bro­ken in the process.

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