GREECE (10)

I have to say that I don't understand Greece; or, to be more precise, the Greek Government. Having negotiated about the country's debt for more than 5 months with its colleagues in the rest of the E.U., it rejected their final offer, just before the legal basis for that offer ran out on 30 June. It did put that offer to a referendum the following Sunday, though it also passionately urged the Greek electorate to reject it. Which they did, with a thumping 61% majority.

(As an aside, although it was very clear what the Greek electorate were saying no to, it was not at all clear what they were saying yes to. Normally in a referendum, it is quite clear what the results mean. The Scots were asked whether they wanted to be independent and they said no, meaning that they wanted to remain part of the United Kingdom. The forthcoming British referendum on the E.U. will ask whether the U.K. should remain part of the E.U. If the answer is no, then that will mean that the E.U. will leave. By contrast, the meaning of the Greek no, other than "we don't like that offer" was obscure.)

Anyway, armed with that domestic support for its line, the Greek Government made an offer to the rest of the E.U. that was worse than the one that they had just offered it, and which the referendum had just rejected. Even more bizarrely, it then accepted a counter-offer from the E.U. that was even worse than that one. Without doubt, the progressive tightening of the screws was due to other countries' exasperation with the Greek government; but I still don't understand the strategy. Besides which, the deal (which included a hike in VAT to 23%, close to Danish levels, and other unpalatable measures) still had to be approved by the Greek Parliament, and within three days. Nor surprisingly, a number of the Government's own supporters voted against it, though the measures did get through.

There is a case for arguing against German-induced austerity, and better economists than me have already made it. There is also a strong case for modernising and restructuring the Greek economy. Against that background, the new Government had in January a very good argument for a combination of relief and gradual reform, based in part on the true statement "look, the mess had nothing to do with us". Six months later, Greece has had to accept terms which most other countries would have rejected as an infringement of their sovereignty. For that, Greek voters have to thank their Government.  

Walter Blotscher