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Focus on the big picture to save the Eurozone

Posted by (Author) on February 13th, 2015 - 8 Comments

As is often the case in situations of conflict, each side tends to see the problem exclusively through its own lens. The problems of Greece are to be found in Greece not elsewhere, remarked recently the German Finance minister Mr. Schauble. Austerity imposed by its lenders destroys society and must be stopped, the newly elected Greek PM Mr. Tsiprasargued in parliament.

They are both right. If each one could accept this, they would start thinking differently – more like visionary statesmen, less like stubborn politicians. There is no doubt that Greece has several institutional flaws that not only made it the weakest link of the Eurozone, but have multiplied the harsh effects of austerity imposed on it by its bailout. At the same time, there is no doubt that, as even the IMF has acknowledged, the austerity imposed on Greece has been too severe for any society to endure, comparable only to the Great Depression in the 1930s.

As long as each side sticks to its own view of the problem, it will lose sight of the big picture. And the big picture is the need to preserve the Eurozone. A break up would be catastrophic economically. Politically,it would plunge the continent into chaos, reversing the ambitious post-War project of ever closer cooperation among European nations.

To act with the big picture in mind implies that each player will behave in a way that is self-restrained, since it can now acknowledge the right of the opposite side. This, in turn, means that the interests of both sides will be best served if each is willing to modify its view rather than merely assert its own right. Germany needs to acknowledge that the Eurozone is an ill-designed structure. The euro is not supported by a political community that is willing to share risks.The austerity imposed on Greece by its lenders has generated consequences far more adverse than envisaged.

Greece ought to accept that it has dragged its feet on structural reform for too long; it has been living on borrowed money and EU subsidies for decades, postponing modernization for the sake of preserving a clientelist system. Modernity has not fully arrived in a country whose state administration is captured by party political cronies, whose rule of law has often been perverted to the rule by oligarchs, corrupt politicians, and powerful special interests.

To preserve the Eurozone, its members must seek to better balance its two main pillars (economics and politics) and, thus,gradually form a political community capable of sharing risks. Germany needs to be more risk-sharing and open-minded. But for a political community to be viable certain institutional norms must be enacted and respected. Greece ought to embrace reform – not simply economic but institutional.

If the right of the opposite side is acknowledged, new possibilities open up. It is not only the other side that must change, but one’s own side too. Principled compromise becomes possible. The classic tragedians were aware of this.

In Antigone, Sophocles shows the devastating consequences of self-righteous stubbornness.  On the one hand there is the right of Creon, the King of Thebes, to enforce the law. On the other hand, there is the unwritten right of Antigone to bury her dead brother, even if he was a traitor to his city and, according to law, should remain unburried. By each one stubbornly sticking to his or her right, Creon and Antigone bring tragedy to their city. At the end of the play, having lost his son and his wife, Creon realizes his poor judgment. Tragedy taught him wisdom, but, alas, it is too late! The play ends with the Chorus noting that “the mighty words of the proud are paid in full with mighty blows of fate. And at long last, those blows will teach us wisdom”.

Here is the Sophoclean challenge for our politicians: true statesmanship is finding the courage and having the intelligence to be wise without experiencing tragedy – to see the big picture, to acknowledge the right of the other side, to craft space for compromise. Can Eurozone decision makers live up to that challenge?

Haridimos Tsoukas ( is a Columbia Ship Management Professor of Strategic Management, University of Cyprus. He has co-edited the volume From Stagnation to Forced Adjustment: Reforms in Greece, 1974-2010 (Columbia University Press, 2012).

Categories → Οικονομία

  1. avatar
    IoannisTakis on February 14, 2015 - (permalink)

    Η ικανότητα να βλέπεις την μεγάλη εικόνα απαιτεί την ενεργή παρουσία και μεγάλων ηγετών που θα διαθέτουν όραμα αλλά συνάμα και την θέληση, την επιμονή και τις δυνάμεις για να παλέψουν με το στενόμυαλο κατεστημένο που διοικεί σήμερα την Ε.Ε. ώστε να καταφέρουν να επιφέρουν τις αλλαγές που χρειάζονται για μια καλύτερη Ευρώπη, για έναν πιο δίκαιο κόσμο και ένα ελπιδοφόρο μέλλον.

  2. avatar
    Φεραίος on February 15, 2015 - (permalink)

    Κε Τσούκα
    Μπορείτε να χρισημοποιήσετε όλη την σοφία της επιστήμης σας, όχι μόνο εσύ, όλη την εμπειρία σας, να μας μάθατε με τα αρθρα και τα σχόλια σας προσεγγίσεις θεμάτων που μας ήταν αγνωστα, να έχετε όλοι σχεδόν οι ακαδημαικοί ορθούς και λογικούς τρόπους αντιμετώπησις αυτών των προβλημάτων, αλλα εδώ αναδείχθηκε ένα άλλο προβλημα.
    Καθαρά κοινωνικό? ή δεν είμαι σίγουρος πώς να το πώ..
    Οταν ένας λαός διαδηλώνει στους δρόμους, με μόνο αίτημα να δανειστεί
    λεφτά με τους όρους τους δικούς του και πιστεύει ότι δικαιούται καί νομιμοποιείται να το κάνει, έ τότε κάτι δέν πάει καλά!!!
    Εάν οι ηγέτες της Ευρωζόνης, όπως λές, βάλουν νέρό στο κρασί τους για να τα βρούν, να συμβιβαστούν, που πολύ πιθανό να το κάνουν, για να μείνουν εστιασμένοι στην μεγάλη εικόνα, το ίδιο η παρόμοιο πρόβλημα θα τους περιμένει στην γωνία μετά.

    Εδώ υπάρχουν ανισότητες, και διαφορετικότητες νοοτροπιας, κουλτούρας και γενικά βαθειά ριζομένες αντιλείψεις για τον τρόπο ζωής των διαφόρων κοινωνιών της Ευρώπης. Εκεί είναι το πρόβλημα.

    • avatar
      Φεραίος on February 15, 2015 - (permalink)

      Για να ολοκληρώσω. Ο κάθε λαός της Ευρώπης θα πρέπει να αναπτυχθεί, να παράξει πλούτο σύμφωνα με τες ικανότητες του ή αν θέλεις σύμφωνα με τα φυσικά του χαρίσματα, των κλιματολογικών συνθηκών του και άλλων τοπικών ιδετεροτήτων. Ίσως η ΕΕ και η Ευρωζώνη είναι απο εδώ που πρέπει να αρχίσει να βλέπει την μεγάλη εικόνα και όχι σε μια προσπάθεια να πείσουν οι μέν να αλλάξουν τους δέ.

  3. avatar
    Erol Riza on February 16, 2015 - (permalink)

    The problems of the Eurozone are the product of political decisions taken to allow countries into the zone which were not fit for purpose; their economies and institutional set up had not converged to the core of the EU. The Germans agreed to give the D Mark under pressure from the French in their quest for more political union. This has had benefits for some including all the south European countries which has double digit interest rates when they had their own currency. Following entry into the Euro most countries saw a collapse in the cost of borrowing and governments, corporates and households went on a borrowing spree unprecedented in history and a low cost as we say spreads in 2007 for Greece at less than 50 basis points over German debt.
    Now we see the growth of the debt mountain which banks are to blame since if they had done their credit evaluation correctly the borrowers would not be so heavily indebted; sounds familiar for Cyprus! The PSI addressed the issue of the private sector indebtedness of Greece and it was possibly wrong, with hindsight, to leave OSI out at the time. If we accept that the ECB cannot take a hair cut then the Greek Kinister of Finance is right “cannot pay and will not pay”. This has not gone down well with Irish, Spanish and Portuguese but not so bad with Italy.
    Hence the Eurozone leaders will need to make a political decision again whether to patch Greece for a short time and face the music in a couple of years (the debt is unsustainable and Mr Varoufakis is right) or address the issue head on: the Eurozone will come up with a fudge of a solution because this is how it works and hope it will find a way out later since it will not wish to endanger the current stability of the financial system. If politicians do not use the art of the possible then we could see a non agreement and whatever this may mean for Greece.
    Clearly the seasoned observers in the FT like Walter Munchau, argue that the German medicine is not working and Greece should stick to the changes it requires on austerity and one hopes it will succeed as the people of southern Europe are not just numbers. The debt will have to be reduced whatever decision is taken and whether it is debt relief in terms of present value (extending all debt to 50 years) or annulling is a matter of choice and how the Eurozone political leaders will sell it to their voters. Greece was a unique case in the PSI why not in the OSI?

    • avatar
      Savvakis Savvides on February 16, 2015 - (permalink)

      Erol, In Greece it was the Government that was borrowing rather than the people. Unlike in Cyprus I am sorry to say, where the private is the biggest problem we face and there is no solution in sight. Also, Germany has gained a great deal from ditching the DM and dominating the Eurozone. It was creating liquidity in the European countries for selling its own products and bloating up the southern European Governments with debt. Now is payback time, perhaps. There is no way that the debt can be repaid and the Eurozone is a club which has increasing a negative net present value. Until there is a political Union, don’t hold your breath, Europe itself will not last. So, if Greece can do an Iceland and denounce/write off the debt while restarting its economy on a sound basis using its own currency, and I may add implementing most of the reforms as they are needed, then that would be the best way forward. The hardest part, I am afraid is in implementing the necessary reforms.

  4. avatar
    Erol Riza on February 16, 2015 - (permalink)

    I agree that there is an inherent fault line in the euro since it was mostly a political decision and the issue now facing the Eurozone is also political. Greece though has benefitted from the euro in indirect ways such as low interest rates, stable inflation and access to funding as a result of having the euro; the opposite was the case with Greek Drachma so many south European countries whose experience with their own central banks was bad preferred to give up their monetary policy to the ECB.
    European banks lent the Greek government and government entities without doing their job in terms of credit evaluation which is pretty similar to what Cyprus banks did; there ends the similarity.
    I agree the Germans benefitted from the weak euro and want the euro so all effort will be made to keep it.
    I am not convinced of the benefits of doing an Iceland since the success will depend on policies which will be followed. Left wing governments have a habit of not managing fiscal deficits well and hence the risks may be greater.

  5. avatar
    Επιλήσμων on February 17, 2015 - (permalink)

    Τα τελευταία νέα από το Eurogroup και δηλώσεις του κ. Σόιμπλε, μου θύμισαν το τραγούδι της Ρίτας Σακελαρίου (στίχοι Γ. Παυριανού, μουσική Νίκου Τερζή) “Εγώ δεν πάω Μέγαρο θα μείνω με τον παίδαρο”.
    Φυσικά η Ρίτα εννοούσε το Μέγαρο Μουσικής ενώ τώρα μάλλον το Μέγαρο Μαξίμου θα εννοούν οι αδελφοί Έλληνες και Ελληνίδες.

    Ακολουθούν οι στίχοι

    Έδωσα δέκα καφετιά
    κι έκλεισα πρώτη θέση
    στο Μέγαρο για μια βραδιά
    να πάω όπου μ’ αρέσει.
    Είχα χτενίσει τα μαλλιά
    και φόραγα τακούνια
    κι ο παίδαρος απ’ τα παλιά
    χτύπησε τα κουδούνια.

    Εγώ δεν πάω, δεν πάω Μέγαρο
    θα μείνω με τον παίδαρο.

    Έδωσα δέκα καφετιά
    μα τώρα τα πετάω
    στο Μέγαρο δεν θέλω πια
    μονάχη μου να πάω.
    Κι άμα θελήσω μουσική
    πηγαίνω στο κρεβάτι
    εγώ κι ο παίδαρος εκεί
    ακούμε την Ενάτη.

    Είναι προφητικό (?) ότι τα καφετιά είναι τα χιλιάρικα (δραχμές) που όσοι
    θυμούνται ήταν το χαρακτηριστικό τους χρώμα. Δεν μπορώ φυσικά να γνωρίζω εάν οι κύριοι Τσίπρας και Βαρουφάκης θα επιλέξουν να επαναφέρουν τα ίδια χρώματα που είχαν τα χαρτονομίσματα της δραχμής πριν της κατάργησης της.

  6. avatar
    Alkis on February 20, 2015 - (permalink)

    Ο κ. Τσίπρας λέει ότι σε έξι μήνες θα αλλάξει την Ελλάδα αν του δώσουν τον χρόνο και ότι θα κτυπήσει συμφέροντα που οι προηγούμενοι δεν τολμούσαν να κτυπήσουν. Αυτά είναι όμως λόγια και δεν είναι σίγουρο αν έχουν αντίκρυσμα. Γιατί δεν μένει στο πρόγραμμα και να πάρει τα μέτρα που λέει ότι θα αυξήσουν τα έσοδα του. Όταν θα έρθουν τα αυξημένα έσοδα, να χαλαρώσει και το πρόγραμμα. Μόνο απτά αποτελέσματα είναι πλέον δυνατό να γίνονται αποδεκτά από την Ελλάδα διότι από υποσχέσεις χόρτασαν όλοι. Όσο ταλαντούχος και αν είναι ο καινούργιος θίασος που ανέβηκε στη σκηνή, η εμπιστοσύνη χάθηκε.

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