Sometimes
it's hard to tell whether history is repeating itself as tragedy or as farce.
Greece, after all, has had plenty of both over the past eight years.
Greek Prime Minister Alexis Tsipras just
touted the fact that his country's unemployment rate has fallen from 26.5
percent to 24.9 percent, and that there was a month last year in which Greece's
industrial production grew faster than anyone else's in Europe.
When life doesn't even give you lemons, you
have to pick cherries instead. Greece might not even be able to do that,
though, if it starts fighting over its bailout terms again. That would bring
back the fear that it wasn't going to stay in the euro zone, and, consequently,
the incentive for people to pull all of their euros out of the country's banks
before they could get turned into drachmas that wouldn't be worth anywhere near
as much. Its underwhelming recovery would become none at all.
And that brings us to the bad news. Greece
is, in fact, squabbling with the International Monetary Fund over the bailout
that the two of them and the European Commission agreed to agree to last year.
But - this is where it's hard to tell tragedy from farce - it's not for the
reason you might think. It's the IMF that wants Greece to do less austerity,
and Greece that wants to do more as long as those cuts don't hit the poor. In
other words, up is down, black is white, and dogs and cats really are living
together.
But let's back up a minute. How did Greece
get here in the first place? Easy: its government spent too much during the
boom, but its creditors have forced it to cut too much during the bust without
giving it any way to grow. That means it not only has a big pile of debt to pay
back, but also that it's less able to do so since its economy is so much
smaller - about 25 percent in total - than it used to be. That's how you get
debt that's 179 percent of your gross domestic product.
Now, Europe's dirty little not-so-secret is
that Greece is never going to pay all this back. It'd need a lot more inflation
for that to happen, which isn't a possibility as long as it's part of the euro
zone. But politicians, of course, can't exactly say that. So instead, they've
resorted to a pair of lies: that Greece can and will pay back its debt. And
that's where things get tricky. To maintain this fiction, Greece has needed one
bailout after another to be able to pay back what it owes today, and put on one
austerity budget after another to be able to pay back what it owes tomorrow -
or at least say that with something resembling a straight face.
The question, then, is how believable this
second part is. The IMF doesn't think it is at all. Consider this: Greece is
supposed to push through big tax hikes and spending cuts that, excluding its
interest payments, will get it to a surplus of 3.5 percent of gross domestic
product by 2018 - and then stay there for decades. But the problem with that,
as economists Barry Eichengreen and Ugo Panizza point out, is that barely any
countries have been able to do something like that for 10 years, let alone 20
or 30. It would take, as IMF Managing Director Christine Lagarde puts it, a
"heroic" effort just to hit this target for the next few years, but
it's "highly unrealistic" to think that it could "maintained for
decades."
Here's the easiest way to think about what's
going on. There are three sides to these bailout talks, and three totally
different set of priorities. Greece cares, in this order, about: 1) getting its
debt written down, 2) keeping any cuts from striking its poorest people, and 3)
keeping the surplus it's supposed to achieve as small as possible. The cynical
- or is it sensible? - idea is that since their lenders will never forgive any
of their debt, it's better to focus on minimizing pension cuts that will always
hurt rather than budget targets that can be always be missed.
The IMF, meanwhile, is focused on: 1)
keeping the surplus Greece is supposed to run as realistic as possible, 2)
getting some of its debt written down, and 3) insofar as it doesn't conflict
with this first goal, keeping any cuts from being unnecessarily regressive. The
simple story is that the IMF is tired of giving its imprimatur to deals it
knows won't work, as it all but admitted was the case with the first Greek
bailout. That means today's cuts must be kept at a reasonable level, and the
debt must be too so that tomorrow's are as well. And while nobody wants to put
even this smaller burden on the poor, what will help the most, the IMF says, is
a program that works and an economy that's growing.
Then there's the European Commission, which
is basically Germany. Its objective is: 1) not writing down Greece's debt, 2)
keeping the surplus Greece is supposed to engineer as large as possible, and 3)
keeping any cuts from harming the most vulnerable. In their view, they've
already done a lot to reduce Greece's debt burden - which is what matters more
than the debt level - by refinancing it at rock-bottom rates and giving Athens
decades rather than years to pay it all back. Going further by reducing the
face value of the debt would, they say, be too much. Their voters would revolt.
The same would supposedly happen if Greece was allowed to run a smaller
surplus. That would lay bare the fantasy that it would ever pay back what it
owes. But, at the same time, Germany doesn't have a big problem with Greece
doing austerity the way it likes as long as it's the amount of austerity it's
told to do.
You'd think that Greece and the IMF would be
allies here. Both of them, after all, want more debt and austerity relief. But
that's not what's happened. Believe it or not, Greece is actually denouncing
the IMF for saying that it should only shoot for a primary surplus of 1.5
percent of 3.5 percent of GDP in 2018. Why is that? Well, the disagreement
comes down to this: the IMF thinks Greece's proposed tax hikes go too far, and its
pension cuts don't go far enough. So even though it wants Greece to do less
austerity overall, it wants Greece to do more of the kind of austerity that
Greece doesn't want to do. And Athens, for its part, would rather keep what it
thinks would be the social harm to a minimum rather than the economic harm. So
the upshot is that Greece is siding with the people who want it to cut more,
but never want to cut its debt. At least they'll let Greece slash the deficit
the way it wants to.
In the second-worst case, this would make
the IMF walk away from the deal, and it would fall apart. But even worse than
that is what's actually going to happen. They'll all agree to some kind of
fudge, and then, when that doesn't work, negotiate a new one a few years from
now. At that rate, though, it might be another 8 to 10 years before Greece's
economy is back to being as big as it was in 2008. It's enough to make you cry
till you laugh or laugh till you cry.
Πηγή: washingtonpost.com
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