Greece could now get its deal – but only if you believe the unbelievable

 

Greece's Syriza government likes to gin up its overheated rhetoric through the use of war metaphors, so let’s play along, as for once they are entirely appropriate. In political risk analysis, when there is an explosion from out of the blue as pivotal, dramatic, and deafening as the overwhelming No vote that just took place, the immediate problem is to quickly re-discover one’s intellectual bearings. Once thrown off your game, it becomes almost impossible to separate the important from the immediate. So before we try to right the European ship of state, a deep breath is absolutely in order.

 

Here is the foreground. Prime Minister Tsipras has called Europe’s bluff in decisively winning his referendum, forcing (and quite possibly splitting) the EU into deciding if it will go the extra mile for Greece with better terms than were on offer days ago (it seems like centuries). In getting rid of the detested (from an EU bureaucrat’s point of view) finance minister Yanis Varoufakis, Tsipras has signalled that he is genuinely ready to talk, ruthlessly ditching the most annoying man in the room. 

 

At the same time, all the other major Greek political parties are now – in the wake of the crucial plebiscite – behind him in a way they never were before. This may well presage the formation of a true government of national unity, which would make accepting the creditor’s sure-to-be harsh terms far more palatable for Syriza. When you throw in the IMF’s definitive break from the other creditors in terms of the absolute need for debt relief, there is genuine hope a deal can be done, and done soon.

 

But before we break out the champagne and ride off with Varoufakis into the sunset (don’t weep for him, his book will make him a rich man, and all without having to govern), it is past time for us to look at the far more gloomy background. For the odds are still entirely stacked against the crisis being “solved” in such a way that Europe will have mastered its existential moment. 

 

First, as I’ve said fully a dozen-plus times, the crisis will only be mastered when there is debt relief in return for genuine structural reforms in Greece. Specifically, that means labour market reform, a radical streamlining of both the size and efficiency of the public administration, and a massive and successful anti-corruption campaign. And here we see absolutely no evidence whatsoever that Syriza is prepared to do much of anything meaningful, let alone radical. The austerity debate has always been a red herring, distracting attention from the real problem – the woeful lack of structural reform. 

 

And what have we learned these past momentous days? After electing the snake oil salesmen Tsipras and Varoufakis in January, on the false premise that Greece could stay in the euro and not have to endure any more austerity (let alone embrace true structural reform), the Greek people – pushed to the wall by gormless EU bureaucrats who really ought to know better – have voted to live in a fantasy world where they are not bound by conditions, yet want to take other European countries’ money. Well, I also want to live in a world without consequences, but of course, sadly, we don’t. As the great Janis Joplin put it, “Freedom’s just a word for nothing left to lose”. And Greece shows zero signs of a willingness to reform. As such, nothing has been solved, debt relief or not (and I strongly favour it).

 

The second background imperative is that we are running out of time. The EU simply doesn’t do “fast” or “decisive”, which is a major reason the whole project is in absolute decline. Contrary to the departed Varoufakis’s fatuous and wholly misleading assertion that a deal with the EU could be done in a day or two, we cannot get European leaders to assemble, let alone reach a decision, in that amount of time. The EU is glacial, yet Greece is out of money, and now. 

 

If they are to surmount these two hurdles, we must believe that both sides are capable of doing something wholly out of character: Greece agreeing to real reforms, and Europe moving quickly and decisively. Keep this in mind as a “deal” may well be done. But never for a second confuse this with the thought the crisis is over; I fear the Grexit vampire is far from dead.