To listen to Greek government ministers addressing the outside world during their breaks from negotiations with eurozone leaders this week, it would be easy to form the impression that Greece had a mighty economy upon which all other eurozone countries were pathetically dependent. ‘Europe is going through the difficult process of understanding that Greece has a new government committed to changing a programme that has failed in the eyes of everyone who doesn’t have a vested interest,’ said finance minister Yanis Varoufakis.
The reality is that Greece is the dependent country, propped up by its creditors, and it is Greek government ministers who are having trouble in understanding the situation in which they find themselves. A mandate from their electors does not allow them to dictate the terms of their country’s bailout.
The Syriza-led government is right about one thing, however. Greece’s debts have reached the point at which it has become all but impossible for the country to repay them. Moreover, while you cannot blame the current government for the debts built up by its predecessors, there is scant sign that, given the chance, the Syriza administration would do anything other than emulate those which have gone before.
Restructuring Greece’s debts will just shunt the problem down the track so that we have an even bigger crisis in a couple of years. The threat of default and an exit from the single currency will hang over Greece until it actually happens. The sooner that is, the better. At present, a Grexit seems to be treated as the ultimate disaster which all sides must unite against in order to prevent. What it should be is the inspired solution which offers a route out of the mess.
Twenty-three years ago a British exit from the Exchange Rate Mechanism was similarly seen by many as the disaster which had to be avoided at all costs — even if it meant interest rates rising to an economically ruinous 15 per cent or beyond.
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