Tieless But Clueless

The Times lays bare the brutal truth about the negotiating tactics of the Syriza-led Greek Government which has completely wasted the opportunity to put forward a credible package of economic reforms that can inspire confidence at home, while building trust with its European neighbours.

Government is not about political grandstanding, but that's all Syriza has been doing for the past three months as if the rest of Europe owes Greece a living - a message that will not go down well with other countries like Ireland, for example, which dug itself out of a similar financial hole.

To govern is to choose, they say, yet so far Syriza has chosen to do next to nothing.     

Syriza’s Dead End

Instead of reforming a sclerotic economy, Greece’s government espouses fantasy

Yanis Varoufakis, the Greek finance minister, declared last week that his government’s task was to “convince our partners that our logic is sound”. He at least cannot be faulted for the grandiosity of his ambition. Since the left-wing Syriza party took office three months ago, it has comprehensively lost the confidence of Greece’s partners in the European Union, depositors in Greece’s banks and investors in Greece’s financial markets.

This flight of capital is not some nefarious capitalist plot to thwart the will of the people. It is a rational response to the flailing of a government that has no idea how to resolve the country’s crisis and which appears to imagine it an effective negotiating strategy to threaten self-immolation. Greece’s government should pipe down and propose credible, detailed structural reforms to an economy that does not work. Then, and only then, will Greece’s partners and creditors have a moral obligation to parley with them seriously.

In their brief period of office, Alexis Tsipras, the prime minister, and Mr Varoufakis have thus far resolved no structural economic weakness. Their sole achievement is to have damaged their own credibility through obfuscation, political grandstanding and diplomatic incompetence.

Greece faces imminent deadlines to pay its creditors. It needs to pay the International Monetary Fund €950 million in two instalments by the middle of next month. It is rapidly running out of money and is thus likely to seek a postponement.

A measure of how incompetent is its negotiating stance is that absolutely no other EU member-state supports it. Nor should they. The history of Greece’s economic troubles is dismal, yet Syriza’s response merely demonstrates that left-wing populism is no solution to pressing financial constraints. Europe’s single currency was a fundamentally bad idea to start with, yet the decision to allow Greece to join the eurozone was a wound that might easily have been avoided. Greece’s chaotic budgetary position was fudged in order to allow it membership. With a fall in interest costs, it went on a splurge of borrowing and spending.

Yet having joined the euro, Greece has no exit. Nor would this help. Greece’s exports might in principle be improved by adopting a new (and devalued) currency, yet the trade balance is not the source of its weakness. Instead, its economy does not pay its way. Mr Tspiras needs to set out the privatisations and reforms to the pensions system and the labour market that will address that problem. Because he will not do so, the Brussels group of creditors (the IMF, the European Central Bank and the European Commission) will not release €7.2 billion in pending bailout funds.

That is why Greece is running out of time and money. The government’s obduracy is being compounded with duplicity. It has continually failed to give proper information about Greece’s financial position. The outcome is predictable: capital is flooding out of the Greek banking system for fear that deposits will be frozen or changed into a devalued currency. Meanwhile, the economy may well have fallen back into recession.

Greece’s government has been operating under the assumption that the threat of leaving the EU would panic its creditors. Instead, the tactic has merely hardened positions. Syriza is playing politics with a proud nation’s livelihood and place in the world. It should turn back; the road to a socialist utopia is always and everywhere a dead end.