Ultimatums Will Only Aggravate Greece’s Problems di Hugo Dixon
Should Greece’s creditors give the country an ultimatum?
Some pundits say yes. Simon Nixon of The Wall Street Journal, for example, argued last week that talks between Athens and its lenders were going nowhere, so the eurozone and the International Monetary Fund should present Greece with a take-it-or-leave-it offer, set a deadline and say they would cut off its banks if it didn’t agree.
This is a bad idea. Such an ultimatum is probably unnecessary, because negotiations between Greece and its creditors are making progress, albeit still too slowly. And an ultimatum could play into the hands of Greek nationalists, who would argue that foreigners were again bullying Athens. Dictating to the Greeks would make any breakup between the two sides particularly bitter.
Even if such tactics made Athens come to heel in the short run, the government would have no ownership of the program, meaning there could be little confidence that it would implement it properly. Delivering on any agreement is even more important than reaching a deal in the first place.
There is, admittedly, no guarantee that Greece will reach an agreement with its creditors. Both sides will have to surrender more ground, and there is little time before Athens’s cash runs out.
The creditors’ most important concession so far has been that they no longer insist on Greece’s achieving an unrealistic 3 percent primary fiscal surplus — which excludes debt payments — this year and seem prepared for a target of around half that. Meanwhile, the leftist government, led by Alexis Tsipras, has agreed to “marginal changes” to sales tax rates and has acknowledged that privatization will proceed in some form.
The creditors clearly need to continue to explain what their bottom lines are on the remaining issues: pension and labor reform. They can even suggest solutions.
The eurozone and I.M.F. can also spell out the dire consequences for the Greek people of a default, namely that the European Central Bank will have no choice but to cut off liquidity to Greek banks, setting off a chain reaction that will lead to much misery and probably to Athens’s bringing back the drachma.
But this is different from the lenders’ writing a new set of reforms themselves and giving those reforms to Mr. Tsipras as a take-it-or-leave-it offer.
One of the reasons Greece has failed so miserably in the past few years is that the people never believed in the reforms they were being forced to adopt. Like a patient who takes the first few doses of an antibiotic and throws the rest in the trash, Greece never finished the treatment, with the result that the infection was not defeated.
Greece will never be a successful modern country until it makes rules for itself and then sticks to them. This is even more important than balancing budgets and liberalizing markets.
Germany, Athens’s most important creditor, should understand this. After all, Immanuel Kant, perhaps Germany’s greatest philosopher, made a critical distinction between heteronomy — following laws made by others — and autonomy.
If we are heteronomous, Kant wrote, we are ultimately slaves to our passions. It is only when we subject ourselves, to our own rational laws, that we are free.
Greece’s creditors are sometimes exasperated that Athens wastes time and cannot come up with detailed and bankable proposals of its own. But they must resist the temptation to interfere with the country’s autonomy.
It is easy to see how doing so would fit into the script told by Greek nationalists, both on the right and left, that foreigners are always dictating to it.
In the event of a rupture, the creditors don’t want to be caught putting a gun to Mr. Tsipras’ head. They should instead want him to decide what he thinks is the best out of a set of admittedly unpalatable choices.
More likely, there will soon be a short-term deal to stop Greece’s imminent bankruptcy. But that will be only the first step in a recovery.
Not only will Athens have to deliver on its promises, it will also need, in a few months, to reach a new multiyear bailout agreement, under which its creditors will lend it at least a further 50 billion euros, or $55 billion, and give it some relief on its mountainous debts.
In return, Mr. Tsipras will have to agree to more reforms and implement them over several years.
It is hard to be optimistic that Greece will be able to deliver over such a sustained period, particularly given the hostility to reform among numerous lawmakers in Syriza, Mr. Tsipras’ party. Still, there’s a chance that the prime minister may secure a fresh mandate for any deal he cuts, ideally by holding a new election, and that the people would then have ownership of the program.
By contrast, the likelihood of a successful long-term recovery is pretty small if Greece’s creditors undermine its autonomy by presenting it with a take-it-or-leave-it offer.