Monday, March 07, 2011

Reform Fatigue and the Vision Deficit in Greece

Readers of this blog know that I am generally an optimist about Greece. Not necessarily of the country's odds to avoid default, but of the reform agenda more broadly. I have been heartened, for example, that fewer subjects seem to be taboo these days; that there is finally an effort to account for how the state spends money; and that the government has refused to back down in the face of protests.

Yet my optimism is weakening. The problem is that the government cannot seem to move beyond crisis management towards offering a compelling vision for the country. The inability to do so hinders the prospects for change. The government is obsessed with avoiding default; it should be obsessed, instead, with creating a better Greece.

The way to think about Greece right now is of a country at three overlapping crossroads. First is the European crossroads, where Greece wants (a) to secure an extension to the maturity of its loan from the troika, preferably with a lower interest rate and an ability to buy back debt, and (b) to obtain some promise that come 2013, EU help will not be contingent on a partial default. This front, however, is more pan-European than Greek, and so Greece's fate rests on a broader European consensus.

The second crossroads is one of political unity. The "troika press conference" was a turning point in that regard. It made public a set of divisions within the cabinet that have since grown. The splits are too numerous to mention, but the very public dispute between Interior Minister Yannis Ragoussis and Defense Minister Evangelos Venizelos over the handling of the hunger-striking refugees at Villa Ipatia is only the latest manifestation of the breakdown of whatever unity existed before.

The third crossroads is one of political will. There are two issues here. The first and most obvious is an unwillingness to fight powerful unions - GENOP-DEI (power sector union) comes vividly to mind. But second, and perhaps more worrisome, is a watering down of laws and/or a deferral of hard decisions. Laws are passed, but regulations on how the laws will be implemented are set to come later. Often, the implementation is nowhere to be seen months after a law passed.

There are several paths through these crossroads. In Europe, the terms of access to European help post 2013 are far from clear. Some extension to the loan makes sense, otherwise the aid package might as well cease tomorrow (see here). But what kind of deal will be struck remains to be seen. At home, a cabinet reshuffle looks likely, although there is also always talk of early elections (which the prime minister downplays, even though he was the one to raise the question seriously to begin with). Yet even here, the direction of the reshuffle is not clear.

These are battles, however, not the war itself. The government's problem is that it lacks a broad, compelling vision for the country. Political change can happen in two ways: politicians can either tap into a growing pie to extract concessions, or they rely on sufficient political weight on one side to overwhelm their opposition. In other words, politicians can either buy off opposing forces or squash them.

The political economy of Greece is such that the government cannot hope to use either of these two levers: it cannot promise patronage, and in fact, it promises a shrinking economy and a shrinking public sector; and it also has no political counterweight on which to rely in its battles against vested interests because it battling all vested interests at once.

Against such odds, the government needs a broader narrative to create a new coalition for change. It needs to articulate a direction for the country and to convince Greeks that at the end of this difficult decade awaits a better life. Avoiding default cannot be the sole or even the principal preoccupation of the Greek government.

The kind of vision I am talking about will call on people to take on responsibilities that they have eschewed in the past. It will ask them to be risk takers rather than seek shelter in government jobs. It will value the risk taker and the entrepreneur, the expert over the politically connected charlatan. It will expect more from the public than collective mediocrity. In other words, it will be very un-Greek. It will seek to create a Greece that has not existed for a very long time. But it will be a Greece that will be worth living in and worth waiting for.

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