In Greece Syriza Is Still, After Three Months, Insisting On The Same Red Lines

MAY 4, 2015 @ 1:12 PM

By Tim Worstall

CONTRIBUTOR

Forbes

We were all rather hoping that the intensive negotiations over the weekend would produce something of a breakthrough in the Greek debt deadlock. But if today’s reports are to be believed that’s not quite what has happened. Syriza, negotiating for Greece, is still insisting upon the same red lines that must not be crossed they were insisting upon three months ago. And those are the very red lines that the Eurogroup, negotiating on behalf of the creditors, insists must be crossed. Specifically, they are insisting that the welfare state must be made more generous, something entirely unacceptable to the creditor side.

Here’s that news:

Talks between Greece and its creditors have stalled after the two sides failed to reach an accord on reforms needed to unlock vital financial aid and secure the country’s future in the eurozone.

Following days of intensive negotiations, government spokesman Gabriel Sakellaridis told reporters that he was still confident a deal would be struck, even though the International Monetary Fund remains at loggerheads with the leftist government over labour market reforms.

Well, this is the thing you see. The Eurogroup and the IMF see the straightened circumstances of Greece as an opportunity to enforce some needed microeconomic reforms on the country. It’s not just a matter of running a large enough primary surplus to pay off the debt. They’re also thinking that certain basic reforms to how the labour market works are desirable. Desirable to the extent that they’re willing to use the need for cash to avoid default to insist on their taking place. Maybe that’s fair and reasonable and maybe it’s not. But the problem it runs up against is that some of those reforms are things that Syriza has specifically stated that it doesn’t want to do.

However, Syriza has said that demands by creditors to reverse an increase in the minimum wage and cut pensions remain “red lines” that the leftist leadership is unwilling to cross.

There’s a lot of shouting by the European left about “democracy” over this. Syriza was elected by the Greek polity and they stated that this was what they were going to do. So, democracy means that they must be allowed to do this. Which is just fine of course. But democracy doesn’t mean that Greece gets to do this with other peoples’ money. Which is what would be happening.

As a result the Eurogroup and the IMF are insisting on that reversal and Syriza is insisting that it won’t. It’s a red line either way for both groups. And the result of this is what I’ve always feared will be the result. Usually, in a negotiation, you’re at least aware of what the other people will really insist upon and where they will compromise. The art is in making sure that you do at least. So that you can make sure that you do indeed offer them what they insist upon having but use that retreat to gain what they don’t mind giving up elsewhere. And the one thing you don’t want to end up doing is insisting upon having a red line in direct opposition to the other guys’ red line. Which is exactly what appears to be happening here. If they’re both serious about this then there’s not going to be an agreement, is there?

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