Greece and Eurogroup: No deal, no Grexit

The bottom line is that if Greece is left to go bankrupt, the consequences for the small Mediterranean country will be catastrophic, but may well prove catastrophic for the Eurozone as well.

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After Sparta defeated the Athenian Democracy in 404 BC, the gradual decay of the winners begun. The decay was culminated in 371 BC with the battle of Lefktra (Boeotia) where Spartans were defeated and humiliated by the Thebeans under Epaminondas.

A couple of decades later, the hegemony of Macedonia extended over Greece and King Philippos II of Macedonia arrived in Peloponnese and advised the Spartans, “If I invade Lacedaemon (the kingdom of Sparta), I will extinguish the city of Sparta.”

Spartans replied with one word, “if.”

Indeed, there was no doubt that if they were invaded by Philippos II, Sparta would be completely destroyed, but losses for the invaders would not be worth the attempt. Therefore, Philippos II opted not to extinguish Sparta.

Under the circumstances, both the Greeks and the Eurozone are well aware of what catastrophic results for each party a Greek bankruptcy would imply. Thus, Grexit should rather be ruled out.

In the backstage of the confrontation are a technocratic Germany and a new inexperienced but very political Greek government. The Germans display a solid thinking based on Cartesian logic but they lack of any imagination. On the contrary, the Greeks have only imagination and sometimes even hallucinations.

Each party lives in its own world and each one feels confident that the other side would not take the confrontation to the end.

The good thing is that all interested parties are talking of a ‘problem.’ This means that there is a solution, yet it seems that the interested parties did not agree on the demarcation of the problem, which is the prerequisite for its solution.

Both parties agree on the generic term, structural reforms. Europeans are speaking of tools to collect money in order to repay debts. The Greek government envisages structural reforms under the restrictions of the fresh popular mandate. The difference in understanding is chaotic.

As it seems to be still premature, no party speaks of structural reforms that will give the lasting solution to the Greek problem. They are simple but painful.

Reduction of the public sector: In this way a budget surplus will be obtained without strangling the private sector and corruption will be automatically minimized.

De-cartelization of the market: For most consumer good and services prices will be reduced to half thus offsetting salary and pensions reductions. De-cartelization will bring in Greece the balance between prices and salaries achieved in all other European countries decades ago.

Deregulation: Only in this way to re-ignite growth and convince people, starting from the Greeks, to invest in Greece. Over-regulation and ever-changing rules are the reasons no one invest in Greece.

Think on the fact that today, in order to build a sheep shelter, yes a sheep shelter, 18 permits are required. Furthermore to install in your house an emergency power generator of a few KWA (in Greece we have an average of one short, local blackout, once per week), you need 52 permits, all from different authorities.

These are the kind of structural reforms needed and the Greek government, though conscious cannot proceed as yet. Time is needed for the Greeks to understand and digest that need and certainly only with a grand coalition government, after a wake-up shock of non-fatal impact, such reforms may be attempted.

The other day, the Greeks went to IMF and asked for a light rescheduling of upcoming debt repayments. The Greeks explained that with the popular mandate they got, they couldn’t service the foreign debt, as they have to pay salaries and pensions first. And they well explained that all other payments from the public and private sector have been practically stopped. IMF refused any such facility without even discussing it.

In response, the Greek Prime Minister announced four ‘red lines’ on non-negotiable issues, labor relation, pensions, VAT and state properties.

This is the situation the relations between Greece and the Eurogroup, clear and plain. Yet before coming to the hard-core problem, structural reforms, both sides must realize that Greece, besides the economic crisis has two other equally serious problems to address. Uncontrolled immigration and institutionalized anarchy which both impede the secure and democratic functioning of the society.

Uncontrolled immigration in a Member State is not a national problem but a European problem and must be globally addressed by the European Union.Institutionalized anarchy is a political situation of national concern but the

Institutionalized anarchy is a political situation of national concern but the potential spillover and domino effects of such national concern subject to the rest of Europe may prove an element of potential destabilization.

Therefore the three Greek problems as a whole must be addressed in the Greece-Eurogroup negotiations and not only the cash-flow shortage of Greece and the loans repayments.

Under the circumstances it is obvious that Greece and the Eurogroup are far from an agreement.

By Basil A. Coronakis

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