This week Jeroen Dijsselbloem was reelected as leader of the Eurogroup (the name for the ministers of finance that are in the Euro zone). I suppose I should be proud about it. We are fellow Dutch people after all, but I think it's essentially a tragedy.
Dijsselbloem was a rising star in the Dutch labor party not so long ago. End 2012 he became minister of Finance and was catapulted almost straight into becoming leader of the Eurogroup. That eurogroup was in trouble after Jean-Claude Juncker had left. Juncker had no clear successor. Germany did not want, southern countries were not acceptable, Finland had Jutta Urpilainen. Jutta Urpilainen was clearly not acceptable. Not because she was a woman, but because the first thing she did as a minister was going to Greece to seek collaterals for the loans Finland would give. The Greeks send away. Greece was a proud nation. They could not give an island as collateral, but here was some money. Back home it started to dawn. Money? Which money? German money? Dutch money? Finnish money? A cigar from your own box we call that. After that it was clear that Finland would not lead the Eurogroup. In this vacuum the Dutch government saw an opportunity to good to waste.
When Dijsselbloem was set to become leader of the Eurogroup he made himself acceptable for everyone by saying that his socialist background would assure that he would keep an eye out for the common man. Dijsselbloem made his first mistake in the Cyprus crisis (March 2013, he was 4 months in office as minister) when he said “that the Cyprus bail-in was a template for resolution of a bankruptcy”. He had to retract those words pretty quickly and the people who had been nice to him weeks before were suddenly not nice any more. It wasn't much later that talk started that Germany would back a Spanish minister for the next term. It was obvious a stick to beat him with. Be good, or else. Back home Dijsselbloem had unruly bankers to deal with. The type that raise their bonuses while their bank is under state control. Dijsselbloem probably would have liked to shoot them, but he couldn't. One day he could be one of them. If so, they made it clear, he better keep their bonuses around.
In the negotiations I have seen Dijsselbloem turning more sour and sour. Stress, exhaustion, sheer frustration, and maybe some sense that his heart is not at the right place anymore is eating at him. Success is dearly bought. Both Shakespeare and Goethe could write a tragedy out of it.
The second tragedy is that of the Greeks, although it has turned several times to a comedy of errors, a drama, even a farce. The Tsipas government started as protest movement demanding an end to austerity. Even before the elections that brought it power the investors got scared. Markets paralyzed, interest went up. In months that followed were hectic. With every attempt to escape the austerity Greece put an even tighter rope around her neck. They pleaded with the Eurogroup, but they were unimpressed because they had seen such moves before. They turned to Russia, but without success. In better times Russia might have bought Greece, but this was not one of those times. Then threats to EU (we flood you with refugees), demands of war reparations from Germany, a call for a Marshall plan. There ain't anything that the Greeks have not tried to lessen the burden that they carry. And yet, they also have failed to organize themselves in a good way that it would be effective. The constant drain of cash from the Greek banks made them on one hand dependent on the ECB, on the other hand it ensured that none of that money would go to the tax office.
The tragedy is that behind the big numbers of the Greek debt is real poverty. The austerity measures that Dijsselbloem is imposing on Greece hit hard. They don't hit the rich, they hit the common man who has pay for the problems at every turn. A Grexit would lower his purchasing power with 30%! A bail out, eats the pensions and the income in untold ways. The way out is as usual not based on money, it is reorganizing yourself in such way that you can cope with the problems that lie ahead of you. This Greece so far failed to do. I hope they find a way.
The third tragedy that occurred last week was the shock that went through the Chinese stock markets. In a matter of hours many small investors lost their savings. The total amount was about 15 times the debt of Greece. Eventually the Chinese government was able to put an end the fall, but the damage was already done. I have no idea how this going to affect the lives of people over there. That's the trouble with big numbers. When they become too big you have no empathy to share.
Scylla and Charybdis
Let me first that I like Greece. I always loved Greece since I read the stories of Greek mythology when I was young. Greek hospitality is for me is the standard of civilized behavior. In short, I am quite a fan of Greece.
However Greek had always a weak economy. In earlier times when we only had an European Community the debt was already sky-high. Greece somehow got by but was always on shaky ground. The criteria for being in the Eurozone were strict. From beginning it was clear that Greece would have a big problem with that. However no alarms were ringing. That was strange to me. With a debt so big you would expect closer monitoring. Especially when the olympic games came to Greece (2004). It cost a huge amount of money and I was wondering how that was being paid for. But again no alarm bells went off. It was in the end George Papaconstantinou (october 2009) who had to confess about the true size of his country's debt.
Ever since Europe has tried to keep Greece afloat. We have given the banks that owned Greek bonds a haircut (a nice word for you don't get all your money back) and took the debt to ourselves. We have given them easy terms. The majority of the loans don't need to be paid back yet. In fact most will not be paid back in my lifetime (assuming that everything goes well). The interest rates are super low because we are borrowing it to them and not the investors on the financial markets. I approve of all that even if it means cutting in budgets at home.
So much aid!! And still it is not enough. For months the eurogroup and the Greek government have been haggling over the terms. The Greeks want an end to austerity and we, yes we would like a prospect of getting our money back. Not at the end of century. Sometime sooner would be nice. Do we trust the Greeks to make good on their promises? The answer is sadly no. All Greek governments have tried since 2010 to wriggle themselves out of their obligations. The last government has tried it even more violently then others. It got them nowhere. When the debt is that big your room for independent decision making is rather limited.
What we want is that the Greeks put there house in order. No more corruption, no cheating with numbers, no tax exemptions for the rich. In fact when you actually bother to the read 10 pages of proposals that were on the table when the negotiations broke down, you get the impression that most of these proposals were sensible. Aimed at improving the efficiency of government, removing corruption and slack. In short at putting the house in order. The main problem seems to me the pension reform. That's where it really hurts, but if the talks had continued such problems could have been solved. From reading the document I get the impression that those who said that a deal was close were right. It is very disappointing, reading all this, when talks break down. It is the failure of politics.
We need to able to trust the Greeks. That trust has vanished and it will not return until Greeks have a government that is reliable and accountable for its deeds. When the trust is rebuild we can begin to think about forgiving part of the debt (again). Until that time the debt is a stick that Greece will be beaten with until someone with a sense of responsibility takes charge.
The Greeks will vote next Sunday on a package that has expired by Tuesday. It is a weird referendum. It's a choice between Scylla and Charybdis. If I were a Greek I would stay home.