Dangerous mythmaking

Athens and Europe should rethink their Greek myths

Both debtor and creditors are telling tales which leave out key facts. The incomplete and incompatible narratives make agreement on the next bailout harder.

Start with the story spun by the Syriza-led coalition's left-wing Greek government. In its version of history, the European demand for fiscal rigour is the sole cause of the country's woes. That is doubly unfair.

First, no one forced the Greek government to run huge deficits for many years, and everyone, even the Greek government, now wants to keep deficits under control. Second, the creditors have never simply called for fiscal austerity. They always tried to use their power to push the government to change the nation's inflexible economy, which discourages investment, promotes inefficiency and favours insiders.

Platon Tinios, an economist at the University of Piraeus, argues that Greece's crisis and bailout were caused by successive governments' reluctance to tackle overgenerous and inefficient pension and labour inequalities. Syriza sometimes claims it wants change, but it is trying to reverse previous pension reforms, even though the government is in line to pay out a massive 15 per cent of gross domestic product to retired people by 2050.

The creditors' version of the past glosses over the refusals to be realistic about the Greek ability to repay: no writedown in 2010 nor 2012. Instead, there were fudges and the imposition of immediate brutal spending cuts. A clearer, more decisive and kinder debt deal would have helped Greeks, and given less ammunition to Syriza. Of course, as in any good story, the lenders had a plausible motive for their obstinacy: to encourage reform. But it hasn't worked well, in large part because the Greeks were telling a quite different tale.

The conflicting narratives increase the risk of a chaotic rupture. Syriza, though, is in the weaker position. Greek voters do not want to leave the Eurozone, and exit would only increase the fiscal pressure. Still, the European Commission, the European Central Bank and the International Monetary Fund could help Greece by promising that the next chapter of this Greek epic includes substantial and permanent debt relief.