Monday, 13 July 2015

A-Greek-ment: the day after

The medicine Greece has to take now is very unpleasant and aggressive. The way it is being administered by the Eurozone - even if they had objectively speaking all the reasons to do so - shockingly humiliating.

But let's not forget that it was Syriza who put Greece in its hopeless negotiation position. Greece was the fastest growing Eurozone economy in 2H2014. It was running a primary surplus. A current account surplus. The economy was turning the corner. And debt relief via maturity extensions & lowering of interest rates (plus refinancing of ECB held bonds and IMF loans) after June 2015 was implicitly on the table. 

But Tsipras & Varoufakis were not on top of the numbers. Otherwise, they wouldn't have put debt relief at the top of their Eurozone agenda after all the debt relief that had already taken place since 2012 ( And the one that was implicitly agreed to take place after June 2015. The priority should have been to implement reforms, win the other Eurozone's countries trust, and then ask for additional, substantial, debt relief.

The key assumption on which Syriza based their entire Eurozone strategy - a Grexit would lead to massive financial contagion and therefore force the Eurozone/Troika to make material concessions - was flawed. And, once again, they were not on top of the numbers. Otherwise, they could have falsified and rejected the assumption by running them ( Or, more philosophically, by simply asking themselves what was the worst that could happen if their assumptions proved wrong. And if there wasn't an alternative strategy that offered similar upside in case of success but much more limited downside in case of failure. But they didn't. Now we have a sad story to tell.

However, as sad as the story may be, let's not fool ourselves: the main responsibles for it are Tsipras / Varoufakis / Syriza and their very, very poor strategic decision-making. At the receiving end of the now needed additional austerity will be ordinary Greek citizens - the ones Syriza allegedly wanted so much to help and protect.

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