On the subject of Greece, this column has left its readers time to reflect. Our bulletin has provided all the information on the results of the talks in Brussels on the night of Monday to Tuesday, both in terms of the detailed contents of the decisions made (with the text of the Declaration of the Eurogroup) and the explanations provided by Jean-Claude Juncker (who chaired the work) and the other participants. After this, everyone had Tuesday and Wednesday to get to grips with the comments and reactions from all sources, many of which differed depending on the nationality and political views of those behind them. Here are the conclusions and what I feel are the lessons to be learned, over and above the technical details and complex terminology of the world of finance.
Some believe, others don't. Some of those responsible for the final compromise are of the opinion that Greece is in a position to respect all of the commitments it has made; others do not believe this at all. The latter are avoiding any clarification, even off the record. These differences in the assessment of the decisions made jointly are confusing, at first sight.
The optimists (in any case, moderate optimism) believe that the conditions, precautions and supervision set in place are such that Greece will not be able to get round them. The pessimists and the cautious observers take the view that Greece will not be able to comply with the commitments made Why, then, did they agree to the support programme and heavy financial commitments linked to it? The answer lies in the conditional nature of the financial support to Greece: the gradual release of the financial support is subject to Athens respecting the commitments it has made. If, in theory, the new Greek Parliament, soon to be elected, and the new government resulting from these elections, do not keep to the programme, the Brussels compromise will no longer be valid and the Community payments will cease; in practice, this means that Greece's membership of the euro will end or be suspended under conditions to be clarified when the time comes.
Why agree to a project you don't believe in? It is quite natural to wonder why the sceptical governments have agreed to a plan they feel is unworkable. In my view, it is for a number of reasons to be taken together:
1) A fear superseded. The first reason is that the fear that Greece's hypothetical departure from the eurozone will contaminate other countries of the zone seems to have been superseded. If Greece's departure is properly managed, and if the other struggling countries take the correct actions, there will be no contagion. A number of political figures have stated this explicitly (with subsequent disclaimer if needed), others think it. The basis for this position obviously lies in the theory that Italy and Spain will in the meantime have consolidated their gradual return to a reasonable budgetary balance. It is therefore preferable that Greece's departure is not immediate but that, if it is unavoidable, it comes a bit later in the day, once the aforementioned countries, France included, have made enough progress. It is better to delay the Greek departure until a more convenient moment.
2) Athens' delay. Greece has not achieved all the objectives it had previously committed to. Certain shortcomings are practically a matter of folklore: for example, satellites show that there are 17,000 private swimming pools in Athens, but the tax office has records of just 370. More seriously: the inexistence of a land registry, capital bank in Switzerland, military expenditure, etc. All of these elements call for reforms which will take time and patience.
3) Participation in the progress of the European single market. Greece does not seem to be in a position to be to take an active part in the economic recovery recommended by the letter of the heads of government of 12 member states, which I commented on in this section 2 days ago and which was reproduced in the annex to yesterday's bulletin (no. 2561 of our EUROPE/Documents series). The Greek economy will, of course, benefit from the recommended recovery measures as a member state of the EU, whether or not it is also a member of the eurozone.
The scepticism of the experts. Most economists who have spoken on the subject are of the opinion that the plan laid down is unrealistic. It is based on risky hypotheses and a strict timetable that even something very minor could derail. Another year of recession, a delay in a budgetary objective, will spell failure. Greece must make radical reforms, but these cannot be improvised; apart from the time needed (notably in the taxation area), it needs economic growth. Given the unrealistic nature of the plan, some economists have even wondered whether the objective of several member states is not precisely getting Greece out of the eurozone. If that is the case, they are called upon not to hide the fact: let those who believe that the eurozone would work better without Athens say so.
I should add that a number of political leaders share this stance fairly broadly, the most outspoken of them being Guy Verhofstadt, leader of the Liberal group at the European Parliament: “the Greek economy needs revising from the bottom up. But it is not by clobbering the private sector, socially and fiscally, that the Greeks will achieve this. The country is suffering from hypertrophy of the public sector, brought about by political system based on patronage (…). To start with, the entire employment market needs to be reformed, removing the administrative and regulatory barriers which restrict economic activity; then, public companies must be privatised as soon as the economic situation becomes stabilised enough, to avoid selling off the national assets cheap.” This analysis may be widely shared; but it is a long-term programme, which is clearly incompatible with the timetable of the current European plan. .
The radical rejection theory. The position of the political forces, in Greece or in the EU as a whole, which will radically reject the official plan, remains to be stated. Their reasons are essentially political. Louka Katsell, former Employment Minister of the Papandreou government and internationally-acclaimed economist, who was sacked by Pasok for voting against the Brussels plan as a Member of Parliament, has said: “For the first time, we have a government which has got rid of all rights, including constitutional rights, which has renounced its powers and its prerogatives.” She, and others, hope that after the April elections, the current majority political parties will be minority parties.
It is true that Greece is currently in a limited sovereignty regime: public finances have been placed under supervision, budgetary autonomy is non-existent. But how can we forget the deadline of 20 March, when 14.5 billion in Greek treasury bonds expire, and the fact that the state would have defaulted without Community funding? Nor must we forget that the discipline of the eurozone as a whole is exceedingly supranational in nature, the public finances of all euro countries are subject to control. The European Central Bank recently stated that the monetary union is only the start of political union (see this section in EUROPE 10557), and this is true of all countries of the euro.
Staying in the EU is vital. We must never forget a fundamental truth that is often overlooked or forgotten: coming out of the eurozone does not mean leaving the European Union. Being a member of the euro is possible only if its disciplines are respected. The case of Greece proves that the smallest member state can blow away all the integration that has been achieved if it doesn't play by the rules. But funding, support, European loans, come under the heading of membership of the EU; Greece is the most-subsidised country and benefits from all the advantages of the single market; it will not be abandoned. But it should not be responsible for the implosion of the euro. (FR)