The Kapali Carsi

The deal that may make or break the eurozone

It is no secret that the top priority of the new Greek government will be to negotiate a reduction in the country’s debt – as well as to broker softer terms on the austerity conditions forced by its creditors. Until as recently as the wee hours of Thursday, I thought that this would be unethical.

Here is the intro. to my latest Hurriyet Daily News (HDN) column, where I explain why I thought a Greek debt/austerity relief was unethical and how I changed my mind before tackling the trillion-dollar (or rather euro) question: What is the deal that could make or break the eurozone? You can read the whole thing at the HDN website. I have a few additional comments to make:

First of all, I should say that “debt/austerity relief for reform” is not such an original idea. Not only have other commentators like the FT’s Martin Wolf have brought it up, it was also part of the original bailout deal Greece struck with the troika of lenders (IMF, ECB and EU). But I honestly find the new government much more serious and sincere on reform. It is true that the halt to privatisations and their commitment not to cut public jobs do not make my argument convincing, but on other matters like corruption, crony capitalism, tax evasion and the like, they seem determined to go all the way. BTW, I agree with the FT’s Alan Beattie that “reform” is too general a term and should be used wisely. Some supposed reforms like deregulation, which the troika has been insisting for Greece, has nothing to with the mess the country is in.

Moving on, I may have sounded pro-Greece (and Tsipras) in my column, and I definitely am- even though the Greeks have a habit of repackaging traditional Turkish dishes, even ones with with Turkish language names such as caciki, peynirli and imam bayildi, as their own:) But one thing I don’t like about the new government (one I could not mention in the column  is that they seem to be using their status in the EU as a leverage mechanism. While they have denied such allegations, and they have not been in power long enough for us to form a judgment, their early actions are indeed worrying– see Leonid Bershidsky’s Bloomberg View columns for more on this. So the responsibility falls on Syriza and PM Tsipras as much as the Germans and Chancellor Merkel.. In fact, FT columnist Philip Stephens summarises the mistakes of both parties and argues that a stand-off may sink the euro. I more or less think along the same lines..

Last but not the least: What will happen? My blog post Nouriel Roubini and colleagues have a great piece over at Roubini Global Economics that goes over the important upcoming dates as well as the likely outcome of the negotiations. Even though he is usually known as Dr. Doom (I recently leaned that the new Greek FinMin’s nickname as well), I found him quite optimistic. Despite their public and official hardline stance, he believes that the Germans are eager to strike a deal. I wish I could share the whole note, but they are a paid service, so it wouldn’t be proper:(…

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