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Greece’s “Small” Problem is Bigger Than You Think

In a recent interview, Greek political scientist Dimitri Sotiropoulos reflected upon the year of events since his countrymen rejected austerity. Citing terrorism, migration, and Brexit, he characterized Greece’s economic straits as “a small problem” in comparison. While there’s little question that those other momentous events have bumped Greece’s economic collapse from the front pages, Greek Prime Minister Alexis Tsipras and Syriza are on the verge of allowing that small problem to bloom into a full-fledged big problem by continually fertilizing it with sizable heaps of failed leftist ideology and pandering populism. By playing to Greece’s hoi polloi, Tsipras is in serious danger of letting the theater fall down around him.

Tsipras is furiously attempting to push through electoral legislation to enhance his chances at reelection while simultaneously endangering Greece’s long-term political stability (such as it is for a government already constantly teetering on the brink of snap elections). The legislation, which scraps the fifty-seat stability bonus given to the party that receives the most votes in favor of a system of pure proportional system, doesn’t have enough support to make it law before the next election.

However, it may help keep Syriza in the driver’s seat as the opposition group, New Democracy, is projected to make significant gains at the country’s next polling.

The proposition is certain to lead to instability if Greek and European history is any guide, and that’s hardly good news for a country whose government bonds are literally the worst in the world, and whose stock exchange has experienced the kind of losses that compare to those of markets in the Third World.

In addition, Tsipras has been waxing nationalist recently. On the one-year anniversary of the Greek electorate’s definitive rejection of austerity, he took to Twitter to declare the move no less than a “sublime act of resistance.” Although he was forced to sign a new bailout and accept greater austerity measures only a week later, he is again on the anti-austerity bandwagon, having been joined by German Vice Chancellor and Economy Minister Sigmar Gabriel last week. Tsipras, buoyed by the “wake-up call” of the late Brexit vote, railed against austerity measures and called for further incentives meant to boost economic growth and employment.

The current government is pumping the brakes on privatization as well. Syriza was dragged kicking and screaming to privatize several public assets in order to repay creditors when they first came to power in January 2015. However, in the face of crippling strikes by the Panhellenic Railway Employees Association (POS), port workers, and civil aviation workers union OSYPA over privatization of their respective industries, going forward with such plans, which have always been unpopular, has now become potentially politically fatal. Tsipras’s defense minister is in the process of reversing the privatization of Greece’s shipyards by bringing them under the control of a single body and expropriating its current owners. In addition, Russian Railways has dropped its offer to buy TrainOSE S.A., likely scared off by the current government’s wishy-washy approach to the matter.

All of this is occurring as increasingly impatient creditors are fuming on the sidelines. In order for creditors to sign off on the next €2.8 billion installment in rescue funding, Greece must secure the approval of the plan to privatize the state-run power grid operator ADMIE, appoint staff to a supervisory board for the country’s new privatization fund, and add a second set of public utilities to the fund. This, which was slated to have been completed by the end of last month, has yet to be accomplished. Also on the agenda is for the Greek government to take on the supremely politically unpopular task of reforming labor laws to give employers more flexibility in the hiring and firing of their employees. Few are holding any illusions that any of this will be done on time, if it is even done at all.

Greece’s one realistic alternative to austerity is an immediate and substantial overture to the rest of the continent for forming a fiscal union. As the United States learned early on with its first abortive effort under the Articles of Confederation, one has to give a little to get a little. In Europe’s case, in order to get economic stability, member states must become comfortable with the notion of a unified economic policy, which will necessarily require giving over to Brussels a certain amount of policymaking authority. With a unified economic policy comes tangible benefits, like direct transfers of capital to member states that are in trouble. Additionally, a continent-wide economic policy is better able to rise above petty local politics – as it stands now, politicians in Greece can vote to bind the Union to tremendous losses in order to accomplish some short-term, local gain. Like keeping himself and his party in power, for instance.

It’s clear to anyone who cares to look that the idealistic (and patently unrealistic) approaches to Greece’s problems that have heretofore been suggested by Syriza and the rest of Europe’s left are not worth the ones and zeroes used to convey them. Greece (and the rest of EU’s member states, for that matter) must realize that Victorian-era notions of national sovereignty and the EU’s austerity agenda are as compatible as oil and water. Although Greece is soon to become a big problem again, the problem is bigger than Greece’s failure to implement austerity – it is Europe’s failure to let go of a little bit of local control in order to reap the greater benefits of stable, sound economic policy.