Having just completed a four-year undergraduate degree in Economics I expected to be a bit more in the know when it comes to the current situation in Greece. Sadly, it looks like my degree didn’t actually teach me that much, and my understanding of the situation is solely dependent on the (not so great) media coverage.
What struck me the most is that we are not only uncertain about the future and about the implications of the introduction of capital controls and the referendum, but also about the past and how the Eurozone ended up in this mess in the first place. On one side one hears about fiscal profligacy in the years leading up to the crisis and the Greek’s government lack of flexbility in negotiations. On the other hand, there are stories about the creditors’ knowledge about Greece’s fiscal position in the years before the crisis and about their impossible demands.
Similarly, today in his 45 minute speech Jean-Claude Junker attacked the Greek government for leaving the negotiating table, when in reality the creditors have done that in the past, not so long ago. No one is a saint in this debate.
As of now both sides are engaged in a fight for the support of the Greek people.
Firstly, we have Syriza calling a referendum. Outsourcing the decision to the people absolves them of the responsibility for when things turn sour. Following the Hotelling- Downs model, parties mostly care about their election results rather than proclaimed ideologies, and this is the best they could do at this point. I am sure Tspiras and Varoufakis feel some weight lifted off their shoulders because the decision is no longer theirs. They do not want to end up on the wrong side of history, in case something goes wrong.
Secondly, we have the creditors turning to the Greek people, and hoping they will sway them to vote in favour of the creditors’ deal. Junker’s words during today’s conference speak for themselves: “I will never let the Greek people go down and I know that the Greek people don’t want to let down the European Union,” he said. “Greece is a member of the European family.”
We shall see what the Greeks decide on Sunday. It’s quite an exciting time; it’s not often that such large political decisions are up to the people, as opposed to the elites in power. At the same time, the referendum will be the beginning of a new, difficult chapter, regardless of the outcome.
I am still confused about what I actually think about this issue. All I know is that since both sides want the same thing, they should just get there instead of reaching the inefficient, uncooperative equilibrium. Nevertheless, what I found intriguing is Junker’s emotional attitude towards the debate.
“Juncker, perceived until now as the “honest broker” in the crisis – taking a softer approach than the Germans, who are viewed in Greece as the architects of austerity – has rarely been seen so irate, sources close to the EU in Garmisch-Partenkirchen said.” (June 7th)
“Juncker said he had been disappointed by a speech Tsipras had given to the Athens parliament on Friday. “He was presenting the offer of the three institutions as a leave-or-take offer. That was not the case. He knows perfectly well that is not the case.” (June 7th)
“Juncker, clearly agitated by events of the recent days, said Greek Prime Minister Alexis Tsipras’ decision to call a referendum ahead of a crucial round of talks planned for Saturday amounted to a “betrayal.” (June 29th)
“Juncker accused Tsipras of withholding key information about the creditor proposals and implied that the Greek leadership was protecting shipowners and other special interests by resisting pressure to raise their taxes. He challenged the government “to tell their people what is really at stake.” (June 29th)