Decisions can still be reached, but could it be the derailment is inevitable?
Imagine finding yourself in the following situation. A train is travelling at high speed and up ahead in its path are ten people who cannot move. You are 200 yards away, standing at a switch that only you can operate that shifts the train to another track on which there is only one person, who also cannot move. You must decide whom to save. Do you sacrifice one person to save ten or vice versa?
This is the dilemma in which eurozone policymakers find themselves: do they save Greece again or let it go on hurtling towards the abyss? There is no third option, given that the country’s current state of limbo is unsustainable in the long run.
There are four leading characters in this dilemma. The first is the train, which represents the international markets. There should be no talk of speculation. There exist only more or less aggressive investments. And objective situations.
One of which is Greece’s current situation: high debt, low liquidity, a refusal to introduce the structural reforms requested in the bailout programmes, corruption, maladministration, scarce competition, low competitiveness and cronyism.
So far, Athens’ weaknesses have been concealed thanks only to the liquid capital pumped into the country by the European Central Bank (ECB) via President Mario Draghi’s quantitative easing plan of acquiring public and private sector securities through September 2016 to the tune of over €1 trillion. However, another derailment in negotiations with Greece, could play a crucial role in further eroding international investors’ trust.
The second lead in this story is Greece, the person on the second railroad track. In January, Alexis Tsipras, the leader of the Syriza party that was supposed to transform the country’s fate forever (and for the better), promised what he could not deliver. Namely, renegotiating the rescue programme begun in 2012, refusing to repay the troika (the International Monetary Fund (IMF), ECB and European Commission that is now called the Brussels Group), rejecting fiscal consolidation policies and asking that more EU money be invested in the country.
Essentially, the exact opposite of what international partners had called for in 2012 and to which Greece had duly agreed. Without implementing reforms, however, obtaining new loans is increasingly difficult. After all, there’s no such thing as a free lunch.
The third protagonist is the Brussels Group which has bailed the country out twice already. These creditors and the eurozone’s finance ministers, known as the Eurogroup, are the ‘person’ who must decide whether or not to operate the switch.
Doing so means sacrificing Athens. And there is no guarantee that this will not happen before the end of 2016 even. As the dialogue between the European authorities, Tsipras and Greek Finance Minister Yanis Varoufakis becomes increasingly laborious, patience is wearing very thin. So much so that a number of eurozone policymakers have stopped censoring their great exasperation over the brick wall that negotiations have hit and have been venting it to the media.
Last, but not least, comes the fourth character: the people stuck on the main track. They are the eurozone nations. If the Brussels Group and Eurogroup should decide to leave Greece to its destiny, even after the potential failure of a third financial assistance package, there is no saying what impact this could have on the entire European project. While a country cannot actually leave the eurozone — Article 50 of the Treaty on the Functioning of the European Union stipulates that to do so a nation must withdraw from the EU — there is growing sentiment that, sooner or later, an ‘accidental’ exit may occur.
In other words, a series of more or less induced, unfortunate incidents could push Greece out of the eurozone. The EU would show the entire world that it is unable to hold together. And while most of the blame for the failed debt negotiations and unsuccessful completion of the bailout programme rests on the shoulders of the Greek ruling class, a potential accidental secession could seriously undermine international investors’ trust.
And what countries would be next? The ripple effect could be used as leverage by the more populist European political parties to scuttle the foundations of the brainchild of Konrad Adenauer, Joseph Bech, Johan Willem Beyen, Winston Churchill, Alcide De Gasperi, Walter Hallstein, Sicco Mansholt, Jean Monnet, Robert Schuman, Paul-Henri Spaak and Altiero Spinelli.
Yet the other path is also risky. Saving Greece once again, especially when its government has shown little inclination to collaborate or reciprocate, means risking losing more face within the international community as a result of further unfulfilled promises, as has been the case so far.
The only certainties are that over the long run there will be collateral damage — and at least one certain victim. The problem is that the time left to decide to pull the switch or not is running out. And, the train is going full speed ahead.
Imagine finding yourself in the following situation. A train is travelling at high speed and up ahead in its path are ten people who cannot move. You are 200 yards away, standing at a switch that only you can operate that shifts the train to another track on which there is only one person, who also cannot move. You must decide whom to save. Do you sacrifice one person to save ten or vice versa?
This is the dilemma in which eurozone policymakers find themselves: do they save Greece again or let it go on hurtling towards the abyss? There is no third option, given that the country’s current state of limbo is unsustainable in the long run.
