I listened to Greek Prime Minister Alexis Tsipras on Tuesday, speaking at the Regional Development Conference for the South Aegean. He once again referred to Greece’s need for “[…]a clean exit[…]” from its third (and hopefully? last?) economic adjustment program, set to conclude on 20 August 2018.
Those of you who have been following my posts for a while, are probably quite aware of my disbelief in Greece’s capabilities to continue on its own, post the 20th of August. The periodic analysis prepared by the EC in liaison with the ECB, may continue to show that under the baseline scenario Greece will be in a position to support itself in the long term, but the amount of assumptions included therein, coupled with the significant sensitivity of the end result to even small adjustments on the underlying assumptions, as well as the inherent uncertainties related to forecasting 20 years into the future, make me quite skeptical as to the success of the program in the long run.
Debt relief is a prerequisite for any clean exit. On the other hand, it is very much understandable that EU governments will not be very willing to provide said relief now, out of fear of Greeks assuming that the only reason they got the relief, was because of the bellicose, hardline rhetoric of the current government, against the international institutions. And come election time, it can be certain that the current government will present any concessions made by Greece’s counterparties, as directly linked to the policies followed.
If there is one thing that we can all bet on, is that no one in any international institution, having the best interests of Greece in mind, wants to see a re-election of the current Government.
It is my estimate therefore, that the “clean exit” will not come prior to 2020, after the national elections next year, and after ensuring that the newly elected government can be considered a credible partner to the international lenders.
A clean exit might sound as a simple term to conceive, yet we often disregard its importance, despite it having applications to nearly every facet of our lives: US and UK’s lack of a clean exit strategy after their intervention in Iraq (under President Bush and PM Blair) over the alleged use of chemical weapons (that were later proved to be non-existent) for example, led to a power vacuum and the eventual rise of ISIS. Similarly, the inability of many professionals services providers to exit from a vicious cycle of generosity towards their clients, leads to a never-ending scope creep. These are just two quick examples to prove the principle of the importance of planning a clean exit well in advance. I am sure you can come up with many more, applicable to your own lives.
Although choreographing every step of the way after an exit may be equally unproductive to not having an exit plan to begin with, I do not think any of us is allowed to refer to an “exit” of any sort, prior to having effectively tackled the root causes that brought about the “entry” to a problematic state. And it is mainly for this reason that I think PM Tsipras has (once again) played his card too early.
PS: The “?” next to the word “hopefully” on line three, is not a typo.