Summer games (not quite Olympic)

If anything, the recent spat in the Labour Party demonstrates once again its genuine altruism. As the great British public are getting ready to be bored by endless traffic jams and scorching summer heat on the beaches of Kent, the Labour Party provides us all with an entertaining spectacle worthy of Shakespeare. On one side, behold the modernisers, ready to pounce on anyone who dares to mention past ghosts still haunting the party (who are now jet-setting and sporting deep tans), on the other side, see the undead of the stalinist union sympathisers who smell a chance to hijack the party machinery for the ultimate battle to bring socialist nirvana to the (uninformed) masses. 

To any bystander however this spectacle resembles more shadow boxing than an actual debate about the future of the party. In the very centre of any party husting is the glaring black hole of ideas, right or left wing, or at least the stubborn unwillingness of either side to articulate any policies. That suits the incarnation of the stalinist undead from Islington who is trying to pass himself off as the older version of the Greek PM Tsipras, with some modest success. Corbyn, like any ideologue, revels in bland 'statements of principle' which offer instant appeal but have little to do with politics, the art of the compromise. 

The centre ground does not look much more attractive with a former PPS and Cambridge graduate trotting out the line that he is 'from Liverpool' which, he believes, gives him the 'common touch'. Then there is Yvette Cooper, who is mainly driven by an unfathomable ambition to be leader without ever quite revealing why she would want the top job. My best guess is that she does this as a kind of ego-trip to revenge the defeat of her husband. But that's only a hunch taken from the only comment of hers that made headlines so far, which was that she cried when Ed Balls lost his seat. Lucky those with supreme motives like her. 

And then there is Liz Kendall, which strikes everyone as a pale version of Tony Blair (pun very much intended). Her main characteristic appears to be that she lacks Blair's charisma and his way of connecting with people, or formulating any simple sentence that hits home, for that matter. Something she will undoubtedly learn in the next five years, even if not at the dispatch box opposite David Cameron. 

So, there we are, the sorry spectacle of the Labour Party selection process. I propose that we should talk about the really important things in life again. How about a national debate on whether we should put the clocks back for summer TWO hours instead of one? We always talk about this. Let's not be diverted by the small matter of the Labour Party making itself comfortable in eternal opposition. 

Bailouts won't change a thing...

Whilst most people are increasingly likely to greet news about Greece with a sense of fatigue, the main battle lines appear to criss-cross political camps. The arguments have been rehearsed endlessly so I spare you another repeat. However, there is one aspect that receives less attention. It's the ability of the Greek government to reform as opposed to its willingness to do so.

Much of the discussion hinges on whether Greece can get the breathing space through another bailout (or a long term debt relief) to reform its economy and become competitive in the world markets again. This assumes however that the Greek government has the wherewithal to actually carry out reforms at this stage. It seems to me that this is a huge assumption to make given the parlous state of its tax system and the traditionally low levels of administrative governance in the country. So, despite all talk about the pros and cons of bailouts, even if Greece would be afforded some space and time, it is unlikely to emerge any time soon as the all new and shiny South European twin sister of Germany.

This aspect shifts the perspective from what the Greek government is willing to do (triggering nasty discussions about blame) to what it can and can not do, prompting a realistic calculations of the chances to reform. It is that realism that should guide politicians on Monday what to do about Greece, rather than indulging in fantasy scenarios.

The blackmailers

Greece's financial situation is becoming more precarious by the day. Paradoxically, it is not its debt that is weighing Greece down nor the greed of its lenders, but it is the lack of trust by its own population that is making life harder by the day. Greeks are still withdrawing millions of Euros every day from their bank accounts, clearly anticipating that this will all end in tears, i.e. the Greek exit from the Euro.

The sad aspect of this Greek saga is that it was entirely preventable. Greece's debt burden was heavy yet entirely manageable at the time of the election, and the budget ran a first initial surplus. The economy showed some signs of recovery and investments picked up. All that has now stalled due to the insecurity created by the zig zag course of the new government.

So what's the case for the strategy pursued by the Greek government? Let's look back at the last six weeks. Starting with the election, the Greek government had a very strong lever at their disposal. Germany as well as all other main players signalled that they would make sure that Greece remained within the Euro. This was a solid foundation from which to build within the Euro zone a coalition around change for growth and investment. At about the same time, the recently appointed Commission President Juncker announced that he was working on something similar which chimed with the intentions of the Greek government to move from austerity to investment for growth, a (now approved) 350 billion Euro programme.

Yet, within two weeks after the elections, the Greek government managed to antagonise not just its main lender (Germany and the IMF) but also its smaller European partners, such as Slovenia and Slovakia, who notably contributed millions of Euros to the Greek bailout programme despite being much poorer than Greece. Talk by the Prime Minister Tsipras and his thin-skinned Finance Minister Varoufakis about Greece's entitlement to other countries taxes ensured that they lost all good will by their European counterparts. Eventually, the Greek government had to climb down and accept a four month extension of the existing bailout programme to the old conditions. This can only be called a phenomenal failure of policy on the part of the Greek government given that they actually had a strong negotiating position at the start.

Why did this go so horribly wrong for the Greek government? The main reason appears to lie in their inability to differentiate between electoral campaigning and negotiating with European partners. Both Tsipras and Varoufakis appeared to believe that their electoral campaign rhetoric would bear just as much weight in negotiations with their European partners as it had with the Greek electorate. Their maximalist demand (access to taxpayer's money of other countries without any budgetary control) may have made sense within the domestic national debate, but its logic fell apart quickly when articulated within European institutions. Confronted with this failure to get their way, Tsipras and Varoufakis resorted to blackmail, indicating that they would violate ECB rules if their European partners would not meet their demands.

In a way, this strategy ensured that Euro zone members are now seriously thinking whether a Greek exit from the Euro would indeed weaken the Euro, or whether in fact it may strengthen the currency. Which is exactly where the Greek government does not want to be in the larger scheme of things. Once their main negotiating asset, the unwillingness of their partners to allow a Grexit is gone, they will have no levers for negotiating further debt relief. The Greek negotiating tactic resembled a high wire act which they embarked on with several heavy suitcases stuffed with maximalist demands instead of travelling the rope as light as possible. This whole episode may soon feature in university handbooks on policy making as a prime example of poor strategy. Once safely back in his university post, Professor Varoufakis may be able to read up on it.