The new government in Athens has some moral force on its side. But so far, its tactics look more like a chaotic stream of threats than game theoryby Bronwen Maddox / February 13, 2015 / Leave a comment
This article is taken from the new issue of Prospect Magazine, out Thursday 19th February. Subscribe here
Two planks of Varoufakis’s position are well-founded—in arguing that Greece cannot pay its debts as they stand, and in challenging the rigid interpretation of austerity that Germany has prescribed for the eurozone. One is clever, in proposing a restructuring of the debt. One is right but the new government is unlikely to deliver it—proposals for 10 reforms including taxing the shipping families and others of the wealthy elite that have avoided such impositions throughout modern Greece’s history. One is plain wrong—reversing many of the reforms that the previous government had so painfully made.
His tactics, too, may prove counterproductive, for all the excited tribute paid to his academic background as a game theorist; he appears to have shifted demands repeatedly even in the first few weeks in power, and presented them with immense aggression even to those most disposed to agree.
Overall, his proposals do still mount an important challenge to the narrow and damaging doctrine which Angela Merkel, Germany’s Chancellor, has imposed on the eurozone. But for all their radical sounding nature, his challenge to Germany is not matched by one to Greece itself—to embark on a transformation that would actually make it a modern European country.
What has he proposed? Greece at the moment has €317bn of debt, equivalent to 175 per cent of GDP; almost two thirds of that total is composed of loans from the European Central Bank and the eurozone. Details of demands are not all public; the protagonists are keeping them close to their chests. But the first blunt demand of the new Greek government was for at least some debt to be written off. This won short shrift from Berlin; Germany, invoking its history, has chosen to take it as an article of faith that the face value of debt must be repaid, at some point; if you have borrowed money, you must pay it back.
Greece then shifted to a proposal to change the terms of some of the debt. Under these plans,…