LONDON (Reuters Breakingviews) - For aficionados of financial-political-economic crises, Greece’s near-exit from the euro zone in 2015 was a classic. Two journalists have told the story as a bureaucratic page-turner.
“The Last Bluff: How Greece came face-to-face with financial catastrophe and the secret plan for its euro exit” largely narrates six months of meetings, speeches, popular votes, meetings and more meetings. Remarkably, Viktoria Dendrinou and Eleni Varvitsioti convey the excitement and tension felt by the protagonists.
As is often the case in dramas, the ending is predictable – but only with the benefit of hindsight. Viewed from today, it is clear that in the beginning of 2015 German Chancellor Angela Merkel would guide the Europeans towards a deal with this wayward member of the European single currency.
The Greeks would ultimately cooperate, since output and employment were starting to recover, and a large majority of Greek voters were committed to keeping the euro. Something resembling the compromise which was finally reached just before 8 a.m. on July 13 of that year was pretty much inevitable.
Dendrinou and Varvitsioti, respectively journalists at Bloomberg and the Greek newspaper Kathimerini, make clear that it did not feel that way at the time. The election of Alexis Tsipras as Greece’s prime minister in January 2015 created real dramatic tension.
The inexperienced radical politician had promised voters that he would resist the latest demands of the country’s creditors, represented by the European Commission, European Central Bank and International Monetary Fund. Tsipras was popular, because many euro-loving Greeks hated the harsh reforms and fiscal austerity that the “troika” had imposed. Tsipras’s choice of finance minister increased the chances of catastrophe. Yanis Varoufakis was a Marxist economist with no relevant experience and unlimited self-confidence. As it turned out, Greece barely avoided crashing out of the euro.
“The Last Bluff” follows the twists and turns of the story with admirable clarity and concision. Varoufakis was sidelined; Merkel and Francois Hollande, the French president, took charge; the International Monetary Fund slowed progress; Greece defaulted and imposed currency controls; the Europeans secretly planned for Greece to leave the single currency. Most importantly, Tsipras learned that he was far too weak to bully the European Union. Throughout, the EU’s leaders, Donald Tusk and Jean-Claude Juncker, were mostly helpful, and a large cast of senior and junior bureaucrats kept track of the seemingly endless details.
Varoufakis has written his own version of this story, but Tsipras is the most interesting character in this account. His political coming-of-age required jettisoning long-cherished left-wing populist dreams. That was hard, but the prime minister eventually learned that dogma is less productive, both politically and economically, than painful compromise. He ended up ignoring the result of a referendum that he himself had called, showing great personal courage as well as some political cunning.
While Dendrinou and Varvitsioti steer clear of grand historical analysis, one great theme does emerge – the value of the European project to its participants. The EU’s politicians and civil servants were not happy about dedicating so much time to one small country and its truculent and often ill-informed politicians. But everyone was willing to make a huge effort to keep Greece onside, simply to avoid jeopardising an organisation which had become so central to peace, prosperity and identity.
The last dramatic scene shows how this almost instinctive loyalty tipped the balance in favour of what only now looks like a pre-ordained ending. The all-night negotiations seemed to have failed. An exhausted Merkel stood up, declaring, “Then it’s over. Greece will leave the euro zone.” But Tusk blocked the door, asking her: “Do you really want me to say that the euro zone broke up over 2.5 billion euros?” She sat down again for another half hour of talks.
The results were what Dendrinou and Varvitsioti call “a typical European fudge”. Europe may be a high ideal, but its flexible politics can be pretty low.
The leading American economists who called on Tsipras to embrace currency flexibility by abandoning the euro did not understand the single currency’s political and cultural importance. They also overestimated the economic value of a national currency for Greece.
A new drachma would only reduce the pressure on future Greek governments to address what the authors describe as “the real, deep problems of the state in areas such as justice, competitiveness, tax evasion and the functioning of independent authorities”. After the last fudge, the European authorities also lost interest in tackling these problems. The European vision may be noble, but the execution is often flawed.
British readers of the “The Last Bluff” will undoubtedly compare the Greek experience to their country’s negotiations to leave the EU. On the EU side, the approach is remarkably similar. Internal differences are smoothed over and the good of the Union is paramount. However, neither Theresa May nor Boris Johnson, the two British prime ministers involved, seem to have Tsipras’s ability to recognise what was really at stake.
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