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Greece and Europe: a family drama

Greece and Europe: a family drama

Less austerity, more growth-enhancing reforms

by Plutarchos Sakellaris in Athens

Thu 19 Feb 2015

We are living through the denouement of a family drama. A thoroughly dysfunctional family is furious at a child who broke all the rules and lived for decades beyond his means, subsisting on gifts and loans from his richer siblings. For five years now, the child has been trying to clean up his act, but at the same time has had to put up with severe punishment. Now, under the yoke, the child is finally rebelling at what he regards as unjust treatment.

Europe is at an impasse. The Eurogroup of finance ministers demands that Greece should respect the existing bail-out programme. The Greek government resists accepting the status quo that it was elected to overturn. 

Greek people are emotionally charged. They exude national pride. Yet they are consumed by angst about the future. They have risen up against the austerity policies of the past five years. Yet they have not been given a clear vision. The big question is: How can Greece stay within the family, abide by its rules and yet still prosper?

Alexis Tsipras was voted in to bring change. For the left around the world, the new prime minister is an iconic figure. Now he has to deliver. The task is to slay the monster of the domestic establishment that has kept society hostage. The state and the political elite are Scylla and Charybdis intertwined.  The new government must operate between these two extremes.

For decades Greece developed its economy on an outdated model. The state absorbs resources from the private sector to feed the needs of a political elite, its voters, special interests and some oligarchs. Tsipras has not previously been in government; he is outside the system. He has but a few months to prove that he can prevent his government from becoming absorbed by battles of yesteryear. Should Tsipras achieve that goal in a lasting manner, he will go down in history as the reformer of the modern Greek state. 

Tsipras was not voted in to bring back the drachma. He has to abide by the European mores that require mutual compromises to achieve a consensus. The prime minister has to promote, with his peers, a faster move towards fixing the European governance deficit. For the common currency to survive, further euro area political, fiscal and economic integration is necessary. In parallel, Tsipras has to convince his fellow Greeks of the need to develop a modern and productive economy based on a thriving business environment. Domestically, this will involve rolling back some pre-election promises. 

There are many performers in this drama, combining the roles of spectator, actor, and playwright. Can trust be rebuilt? Will the family survive intact? To enable these positive developments, a deal must be struck: less fiscal austerity coupled with more growth-enhancing reforms. The next few days will show whether we are on the right track. I am hopeful that this will be the case.

Plutarchos Sakellaris is a professor at Athens University of Economics and Business and former Vice President of the European Investment Bank.

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