Mark Blyth in Europe's World:
Marx has that famous line about the unfolding of events being “first tragedy, then farce”. Europe’s handling of the Greek crisis surpasses farce and shades into absurdity.
Let’s recap where we are. A country that can’t pay back what it owes, and that has shrunk by nearly a third, is to be given more money on the condition that it shrinks its economy still further. On the other side, the creditors, those who are so concerned about getting their money back, are committed to giving that country another €86 billion to pay the debts they have already accrued, thereby adding massively to a debt pile that will never be repaid.
The IMF eventually declares what its own research arm has been saying for three years, that the whole thing unsustainable, but refuses to do anything positive about it. Meanwhile, deprived of the ability to pass any legislation without the approval of ‘the institutions’, the Greek government sits in a five-month limbo while the economy shrinks. It is then roundly blamed for a decline that has been ongoing for five years.
The European Central Bank, whose main mandate is to promote financial stability in the eurozone and ensure the proper running of the European payments system, has been creating financial instability in the area by systematically choking off liquidity to the Greek banking system and bunging up its payments system. The end result of which is, according to the IMF, “a further significant deterioration in debt sustainability relative to what was projected in our recently published DSA (debt sustainability analysis)”. Meanwhile, the man who rode a 61% referendum vote to reject austerity is now trying to implement an agreement that is worse than anything he could have signed in the prior five months.
Now, forget for a moment how utterly absurd all this is. Discount for now quite how provisions such as the deregulation of the Greek bakery sector (really, it’s in there) and a rise in regressive taxes will produce a turnaround in growth and just say ‘it’s a deal’. Prime Minister Tsipras has gotten these things the creditors want through the Greek Parliament, so now what?