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Reform is the only way

Reform is the only way

Avoiding the drachma’s inglorious past

by Denis MacShane in Athens

Fri 3 Jul 2015

Many European politicians who presided over the disastrous handling of the euro debt crisis have been, like José Manuel Barroso, Jean-Claude Juncker and Angela Merkel, from the centre-right. The most dramatic impact has been in Greece. In January the country elected a hard-left government. It appealed to 18 other euro member states for relief – and got a dusty reply.

The desire of the Greek people, expressed in opinion polls and repeated elections, is to keep the euro. Yet Brussels and the IMF cut lifelines to mainstream party leaders, first George Papandreou of Pasok in 2011 and then Antonis Samaras of New Democracy in 2014.

This resulted in the arrival of ex-Communist Syriza. But the party was elected on the pledge of keeping Greece in the euro. It is patronising for well-meaning London economists to tell the Greeks to return to the drachma and all their problems will be solved.

And it is contemptuous for flamboyant Greeks like Yanis Varoufakis, the finance minister, to insist that democracy and elections matter only in Greece. There are 18 other parliaments in the euro area. MPs of all parties refuse to give more money to Greece without clear evidence of reforms.

If Syriza stays in power with its anti-reform ideology it is unlikely to trigger a gold-rush of investment just because the drachma replaces the euro. Greeks have already begun voting in the referendum by queuing outside ATMs to get their money out. They have more confidence in the euro than in the drachma.

We shall see what Sunday’s plebiscite brings. A return to the drachma’s inglorious past cannot be the right path. The only way forward for Greece is to carry out real reform. For this, it needs a broad-based government of politicians ready to break with the clientelism and corruption of past economic management.

Denis MacShane is a former UK Minister for Europe and Member of the OMFIF Advisory Board.

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