Rumours abound that the new Greek government is likely to take emergency actions as it faces critical negotiations with the EU and the Eurogroup this coming week. The concerted effort by Tsipras and Varoufakis to engage in some fancy “debt engineering” for Greek loans have roused a lot of goodwill and engendered encouraging statements from politicians and intellectuals across the world. The government has failed to present a united front however. A number of cabinet members have, on the record, called on their government to stick to their pre-election manifesto and stop servicing international debt. Standard & Poor’s has dully downgraded Greek state debt to a B-.
Positively for the Greeks (and the Spanish, Portuguese, Italians and Irish) a consensus is emerging among economic commentators of a substantive flaw among traditional thinking on the effect of government debt to productivity and growth. There is call for moving away from debt level to debt flow economics. Sounds to me as a shift to network-flow interpretations of socio-economic processes. Will the Greek political elite be able to ride this heterodox shift in macro-economics?
My main concern with current Greek politics is that it speaks the language of hope and pride, couched within a “regaining honour” narrative. The last successful Greek populist that used the same language was Andreas Papandreou on gaining power in 1981. As a kid I remember him declaring “Greeks will not become the waiters of Europe”! Three elections later, high levels of corruption, crippling bureaucracy, chronic underdevelopment and a ballooning public debt determined bad waiter options for future generations of Greeks. So, I am weary of political statements that evoke dignity and pride. The best case scenario is that the many are asked to pay (i.e. take the risk) for the ideals of the few. The worst case scenario is too painful to contemplate. I had a glimpse of Ostrich-behaviour when last week, I asked a Greek bank manager to inform me of her bank’s policy on the contingency that the euro is no longer state currency. You may not be surprised to know that no such contingency appears to exist. This is sailing too close to the wind for my liking. There is no plan B? Seriously?
At the same time, there is a glimmer of hope that Greek debt servicing can become viable with some fancy re-definition of what constitutes serviceable debt. So, I offer here my strong support to the team that attempts to achieve this. And hope my optimism does not make me what the Greeks would call aetherovamon.
PS1. I am curious on how long before members to the present government exercise a volte face. A number of them led a campaign of civil disobedience and refused to pay property taxes last year. The new minister of public receipts, has declared that debts to the state will not be tolerated. Hmm, lets see.
PS2. Of course rehiring 15000 civil servants, reversing privatisations and a threat to confiscate properties for infractions to the state has not exactly improved business confidence. I hazard a guess that over the last five years, those with high net asset values and those with business activities easily taxed, have shifted assets abroad. Any new tax drive can only milk the “landlocked” and the waged. The usual suspects will be called to, yet again, pay the piper.
PS3. And a neo-Marxist critique of capitalism by Varoufakis.