EU crisis: Mediterranean Game of Thrones

The real story of Greece's talks with the EU on austerity is of a massive climbdown by the supposedly anti-austerity Syriza. In this game of thrones the Germans have outgamed the Greeks, and will do the same to Spain, all because of their addiction to the euro

German Finance Minister Wolfgang Schauble (left) and Greece's Varoufakis
Tom Gallagher
On 23 February 2015 09:32

Last Friday, there was an epic climb-down by the Syriza government of Greece. In January’s election campaign, Alexis Tsipras’s party had promised to sweep away the existing austerity based on the repayment of loans from the troika.

It was going to hold out for a minimum 50 percent write-off of Greece’s debt under the EU-supervised bail-out (currently standing at €175 billion).

Privatisations would be halted. There would be no more dealings with the hated  troika of EU Commission, European Central Bank and IMF. Greece would hold out for a 6-month bridging loan  which would enable it to handle major debt repayments due in the summer. 

An opaque, agreed statement offered cosmetic concessions. Finance Minister Varoufakis returned to Athens, stating that he had a formula for ‘recovery and growth’.

But the austerity programme is still in place. There is no word of reducing the debt burden, Greece will continue to negotiate with the troika though it is no longer to be called that, and the current programme is to be extended by only four months during which Greece will be required to show its commitment to reforms, not least the collection of  taxes.

The communique released by the EU states: ‘The Greek authorities reiterate their unequivocal commitment to honour their financial obligations to all their creditors fully and timely’.

This climb-down exceeds Francois Mitterrand’s retreat from state-led capitalism in the early 1980s or Ramsay McDonald’s surrender to the Bank of England’s rigid and blinkered approach to tackling the 1930s depression. France and Britain did not lurch towards revolution but in Greece there is bound to be fury at the scale of the retreat, especially  given the defiant rhetoric beamed around the world by Messrs Tsipras and Varoufakis in recent times.

Years of crisis have radicalised many and some of the angriest people are in Syriza’s coalition of mutually distrusting left-wing factions. The country’s challenging geography has been a recipe for factional strife since ancient times and Syriza hardly looks like a force capable of welding Greece into a united country.

It may well be that a collapse in talks  was averted due to the intervention of President Obama who feared that a messy exit of Greece from the Eurozone could have dire consequences for his floundering foreign policy in Eastern Europe and the Middle East.

Certainly the agreed statement was studiously vague and seems likely to breed fresh misunderstanding.

Progressive, bien- pensant Europe is split about just what it all means. In Britain, op.ed pieces, blogs and BBC interviews were soon promoting the line that  finally the EU was taking Syriza seriously and trusting its leaders.

Robert Peston, economics editor of the BBC, Greek-born Vicky Pryce, radical  interpreter for BBC listeners of events in her forlorn country, Ambrose Evans-Pritchard of the Daily Telegraph, and the much-followed financial specialist Frances Coppola each drew solace from the new methodology for future negotiations that seemed to be opening up.

The German hegemon was retreating before EU pluralism and in some quarters there was excitement about Commission chief Jean-Claude Junker’s announcement that the latest events showed the need for a Eurozone elected assembly. Fiscal and political union could still snatch a memorable victory argued Coppola.

Much was made of the ex-troika’s willingness to consider Greek Government proposals for amending the austerity agreement. Indeed, Varoufakis and his colleagues were given a few days to come up with a list of reforms that will need to be approved in national parliaments.

This is the famously superficial EU policy-making process which has given rise to so many botched decisions that have weakened Europe’s strength and influence during the ascendancy of this dysfunctional entity.

It is impossible not to feel some level of sympathy for Professor Varoufakis. This renowned games theorist has been out-gamed by his German counterpart Mr Schauble, and indeed others.

He is required to come up with a list of reforms which are the opposite of what was promised, on the electoral trail,  to the Greek trade-unions and the clients of the previously dominant party of the left, Pasok.  In a thread on the Economist someone aptly remarked: ‘The Greek finance minister lived in Texas but never learnt the first rule -- don’t challenge others to a gun fight when you hold nothing but a butter knife’.

The hapless Varoufakis may term Friday’s agreement as a ‘contract for recovery and growth’. But sober  financial analysts, leaning towards the left, such as Larry Elliott of the Guardian  view it as a punitive ‘Carthaginian surrender’:

‘He accepted that he would have to swallow most of the conditions demanded of him by Greece’s eurozone partners but asked for a few concessions to sugar the pill’. None were forthcoming.

The money flooding out of Greece places even an anti-capitalist government like Syriza’s in a vulnerable position. Elliott’s advice to  Tsipras is to call an election around the theme, ‘who governs Greece’, impose capital controls and threaten to withdraw from the Euro.

This is unlikely to happen unless Syriza is intent on playing revolution for real. Ultimately it involves managing a country, and the far-leftists have little experience of managing anything. The best solution remains a managed exit of Greece from the Eurozone with a partial write-off of debts which the country  will never be able to pay.

Alas, the ruling Greek far-left has simply  too much invested in the utopian Euro project. So does the rising Podemos party in Spain. Its leader Pablo Iglesias is an aficionado of the gory television drama of medieval power struggles, Game of Thrones.

He has even found the time to write a book called ‘Win or Die – Political Lessons from the Game of Thrones’. Having triumphed over games theory, it remains to be seen if the grim occupant of the German finance ministry Wolfgang Schauble can tame a Spanish Castro who has renounced Don Quixote for this very real game of thrones.

Even if they are electoral winners, Germany has Syriza and Podemos over a barrel as long as they refuse to contemplate a future beyond the Eurozone.

A close analysis of the Mediterranean Greek dimension of the Eurozone crisis can be found in Tom Gallagher’s Europe’s Path to Crisis, published in paperback by Manchester University Press last October

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