Greece between the devil and the deep blue sea

There is no doubt about it that Greece is caught in a bad spot, at the wrong time and in bad company. To make matters worse the country entered the recent turmoil being already in bad shape and with an even worse sense of what needs to be done. The previous government  has been doing all the wrong things right and all the right things wrong:

  1. It let the IMF dictate the pace by sending intellectually mediocre, excel sheet operating, economic fundamentalists with no idea about how the real economy works. With tools of high school sophistication they destroyed whatever still worked in the real economy making naive assumptions about eventualities which would cost the job of every business consultant in any company anywhere in the world.
  2. It surrendered the country to its “friends” with no strategic options but to “stay friends”: the EU and the EMU are unacceptably considered to be the nation’s only option.
  3. It refused to be up front about the fact that the country’s finances and administration are in a mess, its people have been over-consuming and that it cannot possibly reform or fire its own voters.
  4. It administered poison which it called medicine to the real economy by allowing Northern Europe to reformulate the debate into pseudo-moral categories and tried to make it better by using infusions of rhetorical morphine about fairness and deep future expectations in effect signalling the country is in its death bed.

The options Greece now has are like “Scylla and Charybdis”. It is everybody’s guess to decide which is which but the country stands between staying in the EMU and bleeding for it and exiting the EMU and bleeding for it nonetheless. The bad spot the country is in is largely its own doing there is no way to deny that. Voters and political parties were caught into a bad spiral for years promoting each other along a catastrophic trend. No matter what happens the country will survive only if this is turned around.

The new Greek government,  the political parties in Greece or a new political force (if the first two do not) has to develop a national strategy which will hedge against the naive and unidirectional “stay in the EU at all cost” dogma. This national strategy should not only include a backup plan for what happens in case Greece is forced to leave the EMU but it has to actively develop an alternative plan for actually leaving the EMU on its own terms if it opts to do so. This is not inconsistent with being a good EU/EMU partner as we know.

The more the IMF amateurs get their way despite their intellectual mediocrity the more the bleeding from staying in the EMU will resemble the bleeding from leaving it. If the country needs to bleed for the next couple of decades then it needs to know how much bleeding staying costs and how much bleeding leaving costs.

The new Greek government should attempt to achieve the difficult goal of talking reality with the Greek people and inspire them at the same time. It is not easy but it needs to really do both. In the short term it should try to do just what it was formed to do namely make sure deals are kept and loans are renewed in order to buy time. Moreover Greece but also the other small countries in the EU and EMU should remember (and act on it) that the EU and the EMU is not a Franco/German club and that there are rules the two big bullies have to obey as well. The country however needs a long term plan. It needs to hedge against the dominance of the north European pseudo-morality:

  1. Explain to the Greek people that bleeding is not something the country can avoid at this point. The majority of the people in the country is faced with poverty EU or no EU, EMU or no EMU.
  2. Even your “friends” will try to take advantage of you if you have no options. This is just how life is. The worst friendships are those you keep because you have to. Greece is now trapped in the EU and the EMU. The government has to develop alternative plans in the open…
  3. Alternative plans could include entering talks with Turkey not on the silly small change of the past but on creating the core of a union much like France and Germany did after the war. This could be viable whether Greece stays in the EU/EMU or not. It is just an alternative strategy and Greece has been sawing the seeds the last years by playing nice with all its neighbors. Greece, Turkey the Balkans and the Mediterranean countries would not need the European North to create a Geopolitical and Economic Power House. This scenario could have a therapeutic effect even for the hubris of the European North.
  4. Seek and activate more “friends” like Russia, the USA etc and negotiate alternative deals with them.
  5. Greece should create and lead the club of the small countries against the Franco/German dominance. Greece, Spain, Portugal, Ireland and Italy together make up about 25% of the EU economy. They should discover how to counterbalance the Franco/ German dominance together. Things would then look much different than they do now.
  6. Finally the Greek government should seriously consider auditing the Greek debt for the case it can be shown to be odious or illegitimate and while auditing it get an injunction on payments.

The country needs to regain its dignity and its fighting spirit. The government should explain to the Greek people that they are in for a long painful fight but it has to pick up the fight itself. While trying to do the conventional things necessary to survive in the current scheme of things but also be a good partner in the EU/EMU it should work on alternatives. It could start by denying allegations of its own leaked alternative plans on leaving the EU/EMU and taking the Balkans, Turkey and the Mediterranean along. The specter of an empty EU/EMU will automatically devalue the Franco/German dominance. As Schäuble said, denying his own leaked alternative plan which dealt with a Greek departure from the EMU: anything less would be negligent.