In more than 30 years writing about politics and economics, I have never before witnessed such an episode of sustained, self-righteous, ruinous and dissembling incompetence — and I’m not talking about Alexis Tsipras and Syriza. As the damage mounts, the effort to rewrite the history of the European Union’s abject failure over Greece is already underway. Pending a fuller postmortem, a little clarity on the immediate issues is in order.
Last Monday, European Commission President Jean-Claude Juncker said at a news conference that he’d been betrayed by the Greek government.
The creditor institutions, he said, had shown flexibility and sought compromise. Their most recent offer involved no wage cuts, he emphasized, and no pension cuts; it was a package that created “more social fairness.” Tsipras had misled Greeks about what the creditors were asking. The talks were getting somewhere. Agreement on this package could have been reached “easily” if Tsipras hadn’t collapsed the process by calling a referendum.
What an outrageous passel of distortion. Since these talks began five months ago, both sides have budged, but Tsipras has given vastly more ground than the creditors. In particular, he was ready to accede to more fiscal austerity — a huge climbdown on his part. True, the last offer requires a slightly milder profile of primary budget surpluses than the creditors initially demanded; nonetheless, it still calls for severely tight fiscal policy.
Premium content for only $0.99
For the most comprehensive local coverage, subscribe today.
In contrast, the creditors have refused to climb down on the question of including debt relief in the current talks, absurdly insisting that this is an issue for later. On Tuesday, Tsipras made his most desperate attempt yet to bring the issue forward.
Far from expressing any desire to compromise, dominant voices among the creditors — notably German Finance Minister Wolfgang Schaeuble — have maintained throughout that there was nothing to discuss. The program already in place had to be completed, and that was that.
Yes, the program had failed. No, it wouldn’t achieve debt sustainability. Absolutely, it was pointlessly grinding down Greek living standards even further.
Juncker says the last offer made no demand for wage cuts. Really? The offer says the “wage grid” should be modernized, including “decompressing the (public sector) wage distribution.” On the face of it, decompressing involves cuts. If the creditors were calling for public-sector wages to be decompressed upward perhaps they should have made this clear.
The creditors called for a lot else, too. Remember that the Greek economy is on its knees. Living standards have collapsed and the unemployment rate is 25 percent. Now read the offer document, and see if you think the advance in “social fairness” that Juncker stressed at his news conference shines through.
But I haven’t mentioned the biggest distortion of all. Noticing for the first time that Greece has EU citizens within its borders, Juncker addressed them directly on the subject of the July 5 referendum. Greeks will be asked whether they accept the offer presented by the creditors — an offer, by the way, that the creditors say no longer stands. “No (to the offer that no longer exists) would mean that Greece is saying no to Europe,” Juncker explained.
Nonsense. There’s no doubt that Greeks want to stay in the euro system — though I find it increasingly difficult to see why. If Greece leaves the system, it won’t be because Greeks decide to leave; it will be because Europe decides to kick them out.
This isn’t just semantics. There’s no reason, in law or logic, why a Greek default necessitates an exit from the euro. The European Central Bank pulls this trigger by choosing — choosing, please note — to withhold its services as lender of last resort to the Greek banking system. That is what it did.
Other options are foreclosed because the supposedly apolitical European Central Bank has let Europe’s finance ministers use it as a hammer to extract fiscal concessions from Greece.
Nobody ever imagined that a government default in Europe would dictate ejection from the euro zone. The very possibility would have been correctly recognized as a fatal defect in the design of the system.
If the Greeks vote no, a Greek exit is a possible and even likely consequence. But if it happens, the reason won’t be that Greece chose to go. The reason will be that the European Union and its politicized central bank chose to inflict exit as punishment.
Clive Crook is a member of the Bloomberg View editorial board.