Chronicle of a Grexit foretold
Update (CET 21:00). The ‘negotiations’ have broken down. Let’s quote Varoufakis (considering the way the ‘negotiations’ broke down some people are genuinely afraid of something, maybe it is this, emphasis added):
“I am often asked: What if the only way you can secure funding is to cross your red lines and accept measures that you consider to be part of the problem, rather than of its solution? Faithful to the principle that I have no right to bluff, my answer is: The lines that we have presented as red will not be crossed. Otherwise, they would not be truly red, but merely a bluff.
But what if this brings your people much pain? I am asked. Surely you must be bluffing.
The problem with this line of argument is that it presumes, along with game theory, that we live in a tyranny of consequences. That there are no circumstances when we must do what is right not as a strategy but simply because it is … right.
Against such cynicism the new Greek government will innovate. We shall desist, whatever the consequences, from deals that are wrong for Greece and wrong for Europe. The “extend and pretend” game that began after Greece’s public debt became unserviceable in 2010 will end. No more loans — not until we have a credible plan for growing the economy in order to repay those loans, help the middle class get back on its feet and address the hideous humanitarian crisis. No more “reform” programs that target poor pensioners and family-owned pharmacies while leaving large-scale corruption untouched.
Our government is not asking our partners for a way out of repaying our debts. We are asking for a few months of financial stability that will allow us to embark upon the task of reforms that the broad Greek population can own and support, so we can bring back growth and end our inability to pay our dues.”
In ‘Chronicle of a death foretold‘ Gabriel Garcia Marquez tells the story of twins who, as they have to save their face, have to kill another man. Or at least have to show in a credible way that they intend to do so. So they set up an ambush. And tell everybody that they will kill this other man, hoping – trusting, as they live in a small village – that somebody will tell this other man to change his normal ways and to avoid the place of the ambush. An unbelievable but true string of coincidences however prevents this from happening. And the other man walks, like every other day, towards the place of the ambush. Which makes the twins run out of options and they have to kill him…
The Eruozone saga increasingly reminds me of this story. The Greek do have the nuclear option and may be forced to use it. And others who just can’t believe that a government seriously contemplates the option to leave the Eurozone. But Yanis Varoufakis has a ‘Best Option withour Agreement‘ (or so he believes): Grexit. And he tells everybody. And everybody knows this and states that there are very good reasons to believe that he really believes this. The statisticians show that by far the largest wage cuts in the Eurozone only led to crisis and deflation without end. Even exports of goods are, despite all assurances of Troika economists, not improving. None of the ‘structural reformers’ shows any kind growth led by exports of goods, by the way. This idea – export led growth caused by a decline of the price level – is disreputed anyway, as shown by Gurdgiev. And Coppola argues that a German style high rate of savings caused by a low level of investment may be the true ‘kicking the can down the road‘ policy which leaves future generations with a variety of unpaid bills. Despite this, official pres releases of the German government state that cutting investment is the way to go, while also making the weird mistake to assume that Greece, a country with a current account surplus, a government primary surplus and 25% unemployment is living ‘beyond its means’. No, it isn’t. To the contrary. It is endangering the health and future prosperity of its inhabitants as enormous amounts of potential are wasted. Consider an interview with Stubb, prime minister of Finland (which does not fare well, at the moment, despite its embracement of structural reform policies), who states that the Greek have to suffer as others made stupid mistakes which made them suffer, too. In this case, Schauble clearly is ‘the other man’. The man who, as for many reasons none of all these clear messages reached him, did not change his routine despite the obvious risk and may soon have as his most important accomplishment that he forced the Greek to knive the Euro – as this will be their only way left way to a brighter or at least more dignified future. Honor.
The end of the Marquez novella is even more unbelievable than the killing. But, literally, a true story. And might show the way ahead.