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Europe’s False Hope Moment?

Even if there is a deal with Greece, it may very well not last.

July 12, 2015

Even if there is a deal with Greece, it may very well not last.

Now all hopes are on Sunday. Let us assume that by quite an unimaginable thing happens — a new eurozone deal with the Greek government. (See TG’s recent coverage of Greece here)

And the deal, as reported, does not bode well as a real solution. What Tsipras presented is a “French-doctored” program. The program is long on “fixing” the budgetary dimension — but falls far short of what Greece urgently needs in terms of making its labor and product markets more flexible.

The most important question, of course, is not whether there will be a deal, but whether that deal, if it materializes, will last. The odds on that are not good. Many Greek people are quite mad. They feel their referendum vote was cast in vein, as their “oxi” vote was turned in to “yes” by the government.

Any agreement is always first and foremost about the implementation phase. If the past six years have shown one thing, then it is the profound unwillingness of any Greek government to actually implement the deal that it can get.

For all of the current focus on the shenanigans of the Syriza government, there has been a long string of previous Greek governments of various political stripes that — usually at the last minute — always proved willing to sign on the dotted line.

Why did they do so? Because they badly needed continued financial support. And then, just as soon as the money flowed, there were all of a sudden implementation problems.

The excuse often given was that the Greek bureaucracy was either not equipped well enough to handle a certain reform — or that it did not have appropriate or sufficient staff to handle the task. Most often, successive Greek governments just hoped that their European partners would let it slide.

It is this charade on successive Greek governments’ part that made even Greece’s biggest friends within the eurozone very wary — and doubtful of trusting Greek promises.

For that reason, one must assume that whatever deal materializes on Sunday, if it does (and that is a BIG if), it will be one that is heavily conditioned. In practical terms, it means that Greece will receive little more than an initial flow of funds. The remainder will be made available based on the completion of commitments made.

Optimists will say that Greece underwent a collective reality shock over the past couple of weeks. They will argue that “this time, it’s different.”

One can only hope so. But if that came to pass, it would be a clear departure from a long-established arc. Throughout its independent history, Greece has operated on the basis of unsound, if not deceptive deal-making at home. And it has not treated its foreign partners any better or more reliably.

Is only Greece at fault?

True, these tendencies have often been encouraged by foreign actors. For example, Churchill’s ardent desire to reinstall the monarchy in Greece after the Second World War, including his systematic painting of the specter of Communism in Greece, did not exactly put postwar Greece onto a solid footing.

Another big dent in Greece’s democratic path came in 1967 when the United States largely looked the other way when Greek colonels staged a military coup.

And what about Europe, the European Commission and the ECB’s role? Despite mostly good intentions, there are no saints on this front either. They let Greek borrowing continue unchecked for far too long.

The Germans’ supposedly various faults with regard to Greece have certainly received a lot of attention in the public debate to date. Their state banks did some irresponsible lending — a move that justifiably cost the German taxpayer dearly.

However, the crucial fact that has largely sailed unnoticed in the coverage thus far is the role of French banks. They probably did by far the most reckless lending to Greece. That makes the French government’s current advocacy for Greece either an act of particular chutzpah or of undeclared contrition.

Even so, while there is thus plenty of blame to go around in the entire western camp, one point trumps all of them: It is ultimately the responsibility — and elementary self-interest — of any nation to rectify its own state ship.

And this is precisely when a real Greek tragedy sets in. In his excellent three-part series on The Globalist, Heinz Richter, professor of Hellenic Studies (and no relation to this author), has shown with great acumen and detail how long the lines of unfortunate domestic deal-making and costly clientelism go back in Greek history.

Greece’s never-ending blame game

It is fair to say that Ottoman rule, foreign interference and military governments put modern Greece onto a bad footing. But other nations have had bad starts or profound problems in their initial set up as well.

The Greek habit, to this day, four decades after the arrival of true self-governance, has remained to blame others/outsiders for Greece’s own problems. At some point, or so one would assume, nations have to take their fate into their own hands.

If there was ever a moment in time when the Greeks should have come to the collective realization that this is so, that moment is certainly now.

And yet, with the behavioral patterns set in place over the past several centuries, the prevailing habit largely remains the same.

Blame the Germans. Or blame capitalism. (As if the two were analogues of each other.) Or blame the Europeans. Or Brussels. Or the ECB. The list goes on. The only thing you don’t find there is either Athens or the Greek politicians.

Looking ahead, the real referendum signal is that 80% of young Greeks voted “no.” That does not augur well with regard to the population embracing a reform program that truly aligns Greece with other European economies.

Strong ideological leanings

What does not help the reform effort either is that there is a strong leftist — and even anarchist — tradition that still plays a major role in Athens to this day.

Remember the times when the financial crisis was playing out in Greece? It was essentially only in Greece where this turned into a prolonged, self-destructive trend, with many downtown stores destroyed. Athens experienced yet another heyday in the eternal battle against rapacious capitalism.

What may very well happen in Athens under those circumstances is that, not least within the councils of Syriza, there will be quite immediate demands for the deal to be restructured.

In the end, what the entire experiment this week — and potentially in coming weeks — is all about is this: Is conditionality something that has to be met by any and all debtor nations unless they are called Greece (and perhaps Argentina)?

For all of the current Greek government’s hope to represent the vanguard of a global revolutionary movement, the overwhelming odds are that it will find few friends abroad.

At best, a long and winding road lies ahead, one which presents many opportunities to crash along the way.

The writer of this article truly hopes that the Greek people and the Greek government will prove him wrong on most of the assumptions as well as the ensuing analysis presented above. Nothing would make him happier.


Throughout its independent history, Greece has operated on the basis of unsound deal-making.

German state banks did some irresponsible lending – a move that cost the German taxpayer dearly.

It is ultimately the responsibility and self-interest of any nation to rectify its own state ship.

Syriza’s demand would be: Debt relief before any domestic reform measures are contemplated.

Does conditionality have to be met by any and all debtor nations unless they are called Greece?