The prime minister’s dilemma

Tuesday, June 9th, 2015
Last Update: 11:17

By George Pagoulatos *

The political capital of Prime Minister Alexis Tsipras is largely the product of a big misunderstanding. Public surveys in the past few months have indicated that he remains Greece’s most popular politician, having convinced voters that he can keep the nation in the euro area while bringing austerity to an end. Like every collective delusion (or, some will say, like every political fraud), his pledge has so far managed to survive with the help of political obfuscation and creative ambiguity. But it will not be able to stand the inexorable power of facts. The time of truth is upon us.

Tsipras is faced with a painful albeit unavoidable austerity package. He may manage to extract an improved proposal, but only in its details. That is firstly because this is currently the dominant European policy, one which is applied at home by the bloc’s other member states; second, because Greece has borrowed money from its partners and it must meet its obligations; and third, because since January, the Greek economy has switched back into recession mode and the fiscal gap has grown – mostly as a result of government policy. Our partners had appeared willing to help Greece stay in the eurozone given the sacrifices it had made. Now the mish-mash of populist, dogmatic and colorful figures that is the SYRIZA-led government has tarnished Europe’s trust in Greece. The premier has made genuine efforts to build bridges with key European players, but the lack of confidence comes with a price.

The dilemma facing Tsipras is much deeper than whether he will resist the (necessary) zero deficit clause on auxiliary pensions and the (unfair and recessionary) VAT on electricity bills or not. His ultimate decision will not only determine his own political future but also whether Greece will remain firmly anchored in the Western world, if it will sustain a meaningful expectation of recovery and, not far from now, enjoy the normality of a prosperous and developed Europe, or whether Greece will sink into the gray area of perennial instability and insecurity, into the status of a failed state, with a wrecked economy and a dismantled society plagued by brain drain.

A so-called rupture with foreign lenders would inevitably win support from the self-interested, the hot-tempered and the naive; it would spark cheer and nationalist delirium. However, the collective boost to come from a rejection of the lenders’ ultimatum, as it were, would only last for a few days, maybe hours. Remember the ephemeral euphoria after the resounding “no” of the Cypriot Parliament before the destruction of tens of thousands of unsuspected depositors in March 2013, or the one-week tenure of President Adolfo Rodriguez Saa of Argentina in December 2001 after he announced his bold plan to introduce a new currency and suspended foreign debt repayments amid voices chanting “Argentina!” Saa collapsed a few days later at the announcement of capital controls and mass protests by angry depositors.

Tsipras is no longer just leader of SYRIZA. Choosing an “honorable compromise” will be an uphill one-way path. It will cost him some of his old comrades. The leftist leader will suffer the anger of voters who feel betrayed. But he will have a chance to elevate SYRIZA out of the political margins into a hegemonic force in the Greek as well as the European left. Both choices will undermine his political power. But the former will also entail a national disaster.

The outside world shows the way. Tsipras is fortunate because the timing does not even offer the delusion of cozy alternatives. The Venezuela of Hugo Chavez collapsed amid anarchy, chaos and an epic inflation rate. Russia built an economy which was overdependent on natural resources that made it overly vulnerable to price fluctuations. Greece’s broader region – the Balkans and the Middle East – has been the source of exported violence, conflict and millions of devastated refugees. There are no alternatives, nor other alliances, with the exception of those which teem in the confused brain of Dimitris Stratoulis, SYRIZA’s alternate social security minister. More than ever before, it’s “the West or nothing.”

In Europe, the austerity vs growth dilemma is no more. For the first time, austerity policies are offset by the ECB’s zero interest rate policy and a significant investment boost. Critics of austerity, who were right in other respects, appear to have forgotten this crucial parameter. The rest of Europe is on a rebound. Spain is seeing a surge in job creation. Eurozone governments are taking steps toward closer economic integration. They plan to move ahead only with those who have the desire and the ability to do so. (By the way, is the Greek government participating in the ongoing debate on EMU reform?) The opportunities are there for the government to take – lots of funding, growth packages and debt relief – provided it can keep Greece on the path of economic adjustment and reform.

Tsipras’s dilemma is, in fact, a non-dilemma. It’s Europe versus nothing.

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* George Pagoulatos is professor of European politics and economy at the Athens University of Economics and Business and a visiting professor at the College of Europe in Bruges, Belgium.

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