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Eurozone – Brace for impact

Posted by (Author) on July 9th, 2015 - 4 Comments

Greece is on the way out of the eurozone and may be of the European Union. Trusting the Prime Minster Tsipras’ assurances, Greek voters overwhelmingly voted for two contradictory choices in last week’s referendum: against austerity and for Greek membership of the euro. However, the two parts of this mandate, rightly or wrongly, have turned out to be incompatible. Membership of the euro demands sacrifices (i.e. austerity and structural reform) for an uncompetitive economy operating in a badly
designed single currency with no common fiscal policies, nor common political institutions. Excruciating austerity made the Greeks identify the euro with economic misery, while the political system and organized interests have either opposed or at best grudgingly accepted reforming a clientelist state and a protectionist economy.

The recent referendum in Greece (in which roughly 2 out of 3 voters said ‘no’ to a bailout proposal involving more austerity and structural change) has made it difficult for Greek Prime Minister Tsipras to compromise with creditors. If he really wanted a better deal for Greece, he should have never called the referendum in the first place. Now, for his proposals to form a sound basis for negotiations with creditors, who narrow-mindedly stick to harsh austerity demanding unrealistic primary surpluses and refusing to consider seriously debt relief,Tsipras needs to accept austerity, especially if a commitment to  debt relief is given to him. But austerity is what emphatically Greek voters rejected.He has imprisoned himself into a paradoxical situation.

All along, both players (Greece and its creditors) have refused to see the big picture – the protection of the eurozone. Like in a prisoner’s dilemma game, nobody wants Grexit but, sadly, this is what their actions will most likely bring about. Brace for impact.


Haridimos Tsoukas holds the Columbia Ship Management Chair in Strategic Management at the University of Cyprus and is a Distinguished Research Environment Professor of Organization Studies at the University of Warwick (  He is a co-editor of From Stagnation to Forced Adjustment: Reforms in Greece, 1974-2010 (Columbia University Press, 2012).

Categories → Οικονομία

  1. avatar
    Anonymous2 on July 10, 2015 - (permalink)

    Isn’t this rather premature? Tsipras is a politician. Good politicians can always find a way out. How about Mr Tsoukas?

    • avatar
      Anonynous on July 13, 2015 - (permalink)

      There is always a solution, but can’t you see the damage already done? Would you consider Tripras to be a good politician whatever the outcome???

      • avatar
        Anonymous2 on July 13, 2015 - (permalink)

        I was only referring to Mr Tsoukas’ premature conclusions regarding Grexit and what he saw as the failure of players to see the big picture (the protection of the eurozone). The protracted negotiations were certainly damaging to Greece in the short term but whether the agreement reached this morning outweighs those in the longer term, is an open question.

  2. avatar
    MM on July 14, 2015 - (permalink)

    I agree with the conclusions of this article.

    The conditions for this 3rd bailout program are far too onerous, and the lenders will have full control over everything in Greece.

    Political instability will befall upon Greece that will inevitably lead to Grexit (either on a temporary or a permanent basis).

    I hope I am wrong.

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