It’s a mad, mad, mad, mad world

Illustration by Manos Symeonakis

It’s been a long time since the military doctrine of mutually assured destruction, or MAD, has been relevant to international affairs and even longer since US Secretary of State John Foster Dulles coined the term. Greek and European politicians, however, have proved that the principle is alive and kicking and once again poised to destroy the lives of millions.

Observing the machinations of Greece’s parties over the last few days as we wavered between prime-ministerial appointments — from former European Central Bank Vice President Lucas Papademos to Parliament Speaker Filippos Petsalnikos — has been like watching the trashiest of reality shows. People who you had suspected of being pretty shallow have now been exposed as empty pools of self-interest. Facing the most bitter of paybacks for all its past sins, the political system chose not to stare straight ahead and tackle the issue but to turn its back on the outside world.

Relieved of the admittedly draining pressure of governing this country, George Papandreou appeared to abdicate himself of the responsibility of handing power over to a prime minister who had a chance of doing a better job than him and a government that would have the necessary cohesiveness to carry out the specific mission of providing several months of stability on which Greece’s hopes of recovery could be built.

The media, meanwhile, linked Finance Minister Evangelos Venizelos to attempts to scupper Papademos’s candidacy. Venizelos denied press reports that he vetoed the Harvard professor because he feared losing his position as finance minister and influence within the government. However, it seems there was an effort by some elements of the political status quo to prevent Papademos from assuming the role. While there are issues about Papademos’s potential appointment — such as the possibility that being a former banker, his priorities might not be political and that he is not a democratically elected official — these could be overcome. If Papademos is deemed good enough for the job of re-establishing Greece’s trust and credibility in Europe and tackling challenging economic issues, then the political system could easily find ways to accommodate him and compensate for any of his weaknesses.

The apparent attempt to sabotage Papademos’s candidacy can only be attributed to hardened politicos’ fear that a candidate who actually might know what he’s doing when tackling complex economic issues would deal the fatal blow to a dying political system. There was a palpable sense from all sides of the political spectrum over the last few days that a new prime minister surrounded by candidates of his choice who were not plucked from the party system would be a threat. Were these technocrats to have even a modicum of success and coherence to present to the Greek public when the snap elections came around early next year, the politicians would be left standing stark naked in front of an enlightened and angry electorate.

At New Democracy, meanwhile, Antonis Samaras appeared cornered by his own party’s refuseniks. Some saw Samaras’s agreement to form an interim administration as a betrayal of the staunch anti-austerity stance that the party maintained over the last couple of years. It didn’t win ND any extra voters but it ensured that its support base was not decimated like PASOK’s. Signing up to the coalition undid ND’s carefully constructed public image of being on the people’s side. With the right wing of ND breathing down his neck, Samaras took a stand designed to show he and his party had some spine. He said no conservative MPs would take part in the new government.

Greece, therefore, is poised to create an interim government that will negotiate the world’s biggest ever bailout while being nothing more than a political afterthought. The leader of the nationalist Popular Orthodox Rally (LAOS), Giorgos Karatzaferis, underlined the disunity in the so-called unity government by storming out of yesterday’s talks between the party leaders, claiming that Papandreou and Samaras were playing “tactical political games.” Playing a game of his own, Karatzaferis had cheered for the creation of a coalition government but then remained on the sidelines, scrambling around to find any reason to reject the chance to join the interim administration. In what must be a world first, Greece is attempting to form a three-party government in which only one party is prepared to take part.

Testing Europeans’ patience even further, Samaras played the “national dignity” card to defend his right to give only verbal commitments to their demands that he sign up to austerity measures that have already been agreed with the troika and to the outline of the October 26 bailout deal. The ND leader would have had every right to reject putting his name to terms that have yet to be agreed, but this wasn’t what European Economic and Monetary Affairs Commissioner Olli Rehn suggested. He called for a commitment to existing measures and to move forward with the Brussels deal, which includes a further 130 billion euros in loans for Greece and a 50 percent haircut for private holders of Greek bonds.

Perhaps the key to the demands being made by the Europeans was that Samaras should commit to negotiations that would flesh out the October 26 agreement. Clearly, these talks would also focus on the measures and targets Greece would be set in the years to come. In other words, Samaras was being invited to negotiate. But the leader who since 2010 has been talking about “renegotiating” the terms of the first, 110-billion-euro loan agreement balked at having to replace his easy rhetoric with tough decisions. He let his inaction speak louder than his words.

However, inaction has not just been a Greek characteristic during this crisis. We should not forget the months of foot-dragging in late 2009 and early 2010 — attributed chiefly to Chancellor Angela Merkel being wracked by domestic concerns — that led to Greece’s debt crisis getting out of hand. It was clear then and it’s much clearer now that a quick and decisive intervention — possibly through a much smaller bond haircut than the one being proposed now and a recapitalization of European banks — could have nipped the problem in the bud.

In fact, as an excellent New York Times article by Landon Thomas and Stephen Castle indicated a few days ago, eurozone leaders ignored warnings about Greece from the International Monetary Fund as early as mid-2009. Instead of approaching Greece’s problem as part of a systemic problem, which the euro — with its structural flaws and inadequate institutions fostered — they allowed it to turn into a debate about whether the hardworking north should come to the rescue of the slothful south.

Thomas and Castle paint an alarming picture of how the then European Central Bank President Jean-Claude Trichet insisted that a severe bout of austerity was the only answer to Greece’s problem. His insistence meant that the eurozone was in denial about the fact that Athens had become insolvent. When the possibility of a Greek bankruptcy began to hit home, the bailout fund that was created ended up being a half-hearted attempt that relied more on wishful thinking than financial logic. Nothing was done to strengthen the European banks that held Greek bonds to protect them against a restructuring that would provide Athens with some relief, despite Greece needing respite from the biting austerity measures more as each day passed.

Even this July, the eurozone continued to ignore the experts who said a major restructuring of Greek debt would be needed to prevent a disorderly default. The leaders proposed a modest 21 percent haircut. Three months later, this was jacked up to 50 percent — still not enough according to many economists and market analysts. Now, as Greece rocks from political tremors and Italy shakes thanks to its own Silvio Berlusconi-inspired instability, the eurozone is poised to pay for adopting a blinkered view for so long. Italy’s 10-year bond yields shooting above 7 percent yesterday may be the last warning it gets to recover the situation.

In Greece and the eurozone, our decision-makers have had their fingers poised above the big red button for some time. We can only hope they realize the damage they are about to wreak, otherwise mutually assured destruction is guaranteed.

Nick Malkoutzis

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