A deal was reached on the early hours of 22 July between Greece and its international creditors, regarding the former’s request for debt relief, on the occasion of the end of its macroeconomic adjustment program.
Both sides issued statements of satisfaction after the deal, with Klaus Regling, the head of the Eurozone’s bailout fund, going as far as to call it “[…] the biggest act of solidarity that the world has ever seen.”
The negotiations were anything but easy, in fact, German reactions to any sort of debt relief for Greece turned almost every other Eurozone country against Germany, but I think I (somewhat) understand them. This is because back at the Greek home front, PM Tsipras will no doubt try to exploit this (bad for Greece – I explain further down) deal politically, come next election time, claiming that he was the one that gave the country back, the capability to manage its own finances. This will render him a dangerous precedent should any other country ever face similar difficulties. I am sure the voters of PM Tsipras’s political party (SYRIZA) have already forgotten by now the fact that this government was the reason why the third macroeconomic adjustment program was imposed to Greece in the first place, not to mention that the country would have gotten debt relief earlier as per the Eurogroup’s statement back in November of 2012, prior to the SYRIZA government taking over.
Unfortunately, once again the future of a country is sacrificed in the face of political opportunism. Even worse, this opportunism is evident on both sides of the negotiations table. Much less than an end to Greece’s crisis, this deal is just providing for what every other deal on Greece has, thus far: Kicking the can further down the road.
And I mean, really, really, really, down the road: Up to 2060! The Europeans say that their Greek debt sustainability analysis is based on “very realistic” projections, but the IMF is still (rightfully) skeptical. (If anyone really has the ability to forecast with accuracy that far into the future, please send me your CV. I will hire you… yesterday!) After all, by 2060, none of those people who prepared these projections will be around to be held accountable in case material errors surface later on. In the absence of accountability, we can all be as confident as we like, right?
The core of the problem however (in my eyes at least – I haven’t seen any other analyst comment on this) is that subsequent reviews of Greece’s performance will be based solely on quantitative metrics. I, on the other hand, am a fervent believer of the fact that overperforming on qualitative metrics related to the swift and correct application of rule of law, increases trust on local institutions, which makes it easier to attract investments and ultimately improve upon quantitative metrics as well. Indicatively, ICAP Greece published a research last week, related to the unending brain-drain that Greece is suffering from, over the last decade. Upon asking young people who have left the country, of the reason why they did so, most of them didn’t say because of the financial situation. They said they left because of the corruption that exists in Greece.
Neither the Greek government, nor its Eurozone counterparts are inclined to tackle corruption in Greece. Because doing so would be hard work. And hard work takes time. And as time passes, political representatives of the various countries may not be around to take credit, which is what they live for (apparently.)
And so, they decided to lure the big bad monster in a cave and lock it up there, hoping that it may never get out. But I know it will. And you can be sure, that God permitting, I will do my best for everyone involved in this deal to be held accountable, by reminding people of the bad deal of June 2018.