In his new book Terrorists at the Table, Jonathan Powell discusses the difficulties working with inexperienced negotiators and underscores the problems this presented for the UK in reaching agreement with the IRA prior to the Good Sunday Accords. Neil Irwin, in the New York Times “Upshot” column on July 2, 2015, outlines the Greek government’s negotiating strategy under SYRIZA and explains, to a certain extent, why it failed – leaving the country in what can only be seen as a Never-Never land at best and a disaster at worst. (Temple of Nike, Acropolis, Athens by WJ Kushlis 1981.)
What went wrong? Here are some thoughts not necessarily in priority order.
1. Inexperience on the part of the Greek government negotiators: Although Irwin doesn’t so state, neither the new Prime Minister Alexis Tsipras nor his finance minister Yanis Varoufakis, an academic, had prior experience in government let alone as government negotiators. Their expectations in what they could accomplish in dealing with the Troika were inflated - built more on wishful thinking than on hard cold reality. Their seeming erratic and volcanic behavior sat poorly with the Germans and other Europeans with whom they were negotiating.
Various sources indicate that Varoufakis’s approach to the negotiations was grounded in his reliance on game theory – but as Powell and Lawrence Freedman point out, game theory – and its ensuing brinksmanship - is not effective in real world negotiations. It is, in reality, not a negotiating strategy. Far better to read Getting to Yes, Getting Past No or Powell’s new book Terrorists at the Table. Negotiations are about give and take, splitting differences, and best of all – and especially in the Greek case - finding creative solutions for mutual benefit.
2. Intransigence on the part of creditors who upped the debt payback ante by substantially raising interest rates instead of allowing the Greek economy to gain firmer ground before insisting on higher pay back.
The negative effects of the deep five year depression and expectation of continued high unemployment resulted in the election of the far left SYRIZA much less willing to work with the Europeans and the Troika than previous more moderate and internationally experienced governments were. The result: vastly increased chances of a Greek exit from the EURO and an ensuing government default that will result in a no-win situation for the creditors, the Greeks and more broadly, Europe as a whole. The prospect of potential disarray in the wider EURO-zone and beyond is real – although we’re told this is far less likely than when the Greek economic crisis first emerged in 2009. But just from a political standpoint a fragmented Europe will have far less influence and power internationally than a cohesive one. Mr. Putin, who is doing his best to help bring about this weaker Europe for his own purposes has undoubtedly taken note.
3. The stark cultural and behavioral differences between Southern and Northern Europeans - British educated Varoufakis should have been able to recognize and factor in such stark behavioral differences and use them to his advantage far better than he did. Instead, both he and Tsipras unnecessarily angered Troika negotiators reportedly turning even potential friends into opponents. (Varoufakis just resigned as Minister of Finance and Tsipras plans to return to the negotiating table presumably bringing Euclid Tsakalotos, Varoufakis’ replacement. If, that is, a negotiating table still exists.)
4. Ideological and historical baggage: both sides have painted themselves into ideological corners for domestic political reasons - the leftist position of SYRIZA’s Greek constituency versus the conservative austerity-driven position of Angela Merkel’s Christian Democratic constituency. Yet, even the far more moderate Greek center-right and center-left leaders had been unable to meet the Troika’s stringent requirements: to turn government finances around through the restructuring of public hiring, reform of the pension system, raising the retirement age; improvement of taxation policies and more effective tax collection; and an overall reduction in government spending including privatization of government assets without throwing the country into a deep depression and unbearable unemployment. The leaders of the major Greek political parties have now agreed to support Tsipras through a statement of national unity announced July 6.
Sadly, the Greek economy was finally predicted to grow by about 2.5% in 2015 after a deep five year depression. It had begun to turn around two years ago. Today’s unfortunate predicament had its origins in a much earlier conservative government’s deceptive economic reporting and profligacy due to the sudden availability of low interest bonds as a result of EURO-zone membership which the government took advantage of. But the precarious financial situation has been exacerbated in good part by externally imposed excessively stringent austerity measures that have, in reality, not only kept several European economies from rebounding as they might have after the 2008 financial crisis but also the election of leftist SYRIZA in Greece (and the far less reported rise of the far right Golden Dawn party) this past spring.
Regardless, even 2.5% growth would have been unlikely to make a major dent in the country’s astronomical unemployment figures which have hit youth (by over 50%) the hardest – hence the expectation of continued labor unrest and reduced tax revenues.
Furthermore, it's hard to imagine that any democratically elected Greek government would have had the political strength to meet the creditors’ seemingly ever tightening conditions.
5. Systemic Greek structural problems – patronage, high unemployment and tax evasion: Greek governments – left, right and center as far back as the founding of the country – have used public service positions as patronage to keep themselves in power. These positions have not normally been lucrative but they have provided steady employment to the otherwise unemployed in a country beset by chronic high unemployment and less than optimal labor productivity – certainly in comparison with Northern Europe. Meanwhile, Greek public service unions have been strong – protecting and enhancing employee rights and privileges. Counter-productively, however, they also produced far too early retirements, too many labor strikes and an unqualified and hence less than competent work force than in most, if not all, other Euro-zone countries.
6. Greeks have traditionally emigrated and succeeded abroad when the domestic economy could not support them including many who worked in German factories in the 1960s helping to bring about the post war German economic miracle. Successive Greek governments have also traditionally devalued the currency - increasing revenue-generating exports and bolstering the lucrative tourism sector while decreasing expensive imports. This has helped meet previous budget shortfalls – but, of course, this economic tool is unavailable because of the EURO.
7. The problematic Greek tax system: When I worked in Greece in the 1980s, the Greek tax code favored micro-businesses like small family restaurants, shops, businesses and hotels. It also exempted the very wealthy. A tax code combined with too labor-friendly employment laws impeded the growth of small businesses into middle sized ones which could and should have formed the basis of a vibrant private sector economy.
Moreover, the tax code has long favored the wealthiest because, let’s face it, the chances of any government collecting tax revenues from companies and individuals able to move or keep profits abroad in tax havens like Switzerland or the Cayman Islands – or in the case of the shipping industry – to reflag their ships in countries of convenience – such as neighboring Cyprus or far away Liberia is slim. Greece is not the only country with vexing tax evasion problems (just look at perennial US tax dodging by US headquartered international corporations which keep profits off-shore or Germans who keep their savings in Swiss banks). Yet because of other systemic weaknesses including ties to the EURO Greek tax short-falls are far more acute.
Sensationalist stories headlined in the world media of wealthy tax-dodging Greek ship owners have been used against the Greeks. Such stories do not, understandably, sit well with voters elsewhere in Europe. But then, how many European countries provide safe havens for the same ship owners, their families and their assets?
8. Finally, the $64,0000 question: What will the “No vote” in the Greek referendum on Sunday and the Troika’s response on Tuesday bring?
It seems to me this is the time for all involved to step back, take several deep breaths, reassess and reevaluate their positions with eyes to the betterment of Europe's future. A fractured Europe means a weaker Europe which in tenuous times like these opens itself to pressure from a leader in the Kremlin intent upon restoring the outer-reaches of earlier Russian/Soviet Empires.
It also seems to me that both the Tsipras government and the Troika need to think long and hard not just about diffusing the emotion-fueled roller-derby course upon which they are embarked but about how their intransigence affects the people who are the hardest hit. In the long run, I wonder whether the Tsipras government is really looking out for the best interests of Greece’s most vulnerable by imposing strict currency controls and shorting them of the essentials of life to keep itself in power and score negotiating points?
But I also wonder whether the shortsighted righteousness of the Troika’s (especially the Germans) continued implementation of controversial strict economic austerity policies makes either good economic or human sense not just in the short run for Greece but in the longer term in helping countries (and not just those in the EURO-zone) reduce unemployment and get their economies moving again?
Additional reading: Mathew Inglesias, "11 Things about the Greek Debt Crisis You Need to Know," Vox, June 30, 2015.
"Greece and Spain Helped Germany Recover," The Guardian, February 27, 2013.
Wikipedia, Greek Government Debt Crisis.
Gabriel Steinhauser and Andrea Thomas, "Germany Stays Tough on Debt Relief for Greece," Wall Street Journal, July 6, 2015.