An unhappy marriage

 

Tolstoy famously began a novel by saying that all happy families resemble one another, but each unhappy family is unhappy in its own way. In the bad old days, people just endured marriages that were plain bad. Now people are not legally locked in. They are free to separate and divorce. By and large, they and those around them are better off as a result if they choose that option. This is, I suppose, a part of what we call progress.

It looks like we are about to see a similar act of mercy take place between Europe and Greece, at least for the monetary union under the Euro. It is I think widely accepted that the currency union was a mistake – at least in extending to nations in the south that were not capable of living up to such a union. That we know now was plainly the case with Greece. They told some awful lies to get in and people up north just chose to look the other way for their own political reasons. A union so flawed from the beginning was always going to be fraught. I gather that both sides are now coming to the sensible conclusion that the proper thing to do is what other people do with a bad marriage – just call it off and stop the pain. There might be some immediate distress, but ultimately both sides will be better off.

The other day, I spoke to a Liberal MP. I asked her what distinguished the Liberal Party from the Labor Party. She identified her concern for small business. I think that many in small business might hope to do better under the Liberals than Labor. If you translate that, it means that ultimately the Liberals will put the interests of capital over those of labour more often than Labor – say on the issue of penalty rates or termination. But neither political party here will admit to any such distinction, much less proclaim it.

Something like that must underlie the huge difference in the economic performance of northern Europe over that of the south. In the south, the tendency is for labour to be favoured over capital, and one result is that business is not as successful in those countries. We saw this recently with Air France. It is being squeezed between gulf carriers and cheap carriers. The directors therefore planned to start a new cheap airline of their own. That did not suit the French pilots. They like the deal they have, and bugger anyone else. They went on strike and forced management to shelve the idea. Local protectionism had won. The French are famous for this. The pilots are OK, but the company and the nation are worse off. Labour had prevailed over capital.

When people speak of the need for Mediterranean countries to undertake structural reforms, they mean revising labour laws to stop protectionist rackets like this. Too much of industry in the south is run like medieval gilds or sheltered workshops. That is why industry is being drained out of countries like France and Italy that have not been strong enough to break up the protection.

Greece has incurred a chilling level of pain and personal misery in trying to keep up with the north and to keep up payments on their loans. But they have also made, as I understand it, next to no progress on the reforms required to halt their ingrained corruption, tax evasion, and protectionism that comes under the term ‘clientelism’.

The new government says that it will clean all this up. That, like the Arab Spring, may take more than one generation. In the meantime the Greeks are left to bemoan their pain, which they may have incurred for nothing, because they have not been able to change how they live. It is hardly an adequate response to put a bad label on what they are being asked to do by confirming obligations solemnly entered into in their name, demonising their lenders and economic betters, and personally insulting the leader of the most successful of them. Then they vote into government a party that says it will renegotiate a deal with parties who have no interest in renegotiating anything, and when elected the new government tells the other parties that it wants time to formulate a proposal.

It is ironic that a disaster that began by the Greeks making promises that they knew that they could not fulfil looks like being brought to an end by a government that won office in precisely that manner. It is also ironic that those who champion elected governments over technocrats are witnessing the coup de grace delivered by an unelected technocrat.

You could never imagine a man better suited to antagonise to the point of madness the partners and lenders of Greece than Yanis Varoufakis. He is an Australian Greek Marxist academic blogger who has never been involved in running a business or government. Despite all those disqualifications, he has a sublime confidence in his own rectitude which he imparts with manic, nervy jests to the faithful at his side. If you have not caught his act yet – in SS leather great coat and Burberry scarf – do so. He makes Jack Palance look like a neutered weasel, but when he gets on to the word that starts with ‘a’ and ends with ‘y’, he sounds like Hitler on Versailles – although some, like Keynes, may have thought that Hitler had a better case of grievance.

Mr Varoufakis’ speciality is game theory, but when Bloomberg called his bluff, he smiled at his own joke, which he does all the time, and said that there is no plan B – there is only Plan A; therefore he was not playing games. He is altogether terrifying. Imagine the Finance minister of Finland telling his government that Mr Varoufakis would like them to pass a law depriving Finns of their property to accommodate the wishes of this man to avoid an obligation binding on his nation.

For good measure, Mr Varoufakis accused Europe of holding a gun to the head of Greece. That remark must satisfy most criteria of madness. Mr Varoufakis is the ultimate political time bomb – a passionate zealot with no idea of his own huge limitations.

My sense is that the north has had enough, and that they are preparing to do the humane and sensible thing, and dissolve an unhappy marriage, either now or sometime in the next year or so. There is no reasonable ground for believing that Greece will be able to lift its game to the extent needed up north, and unless the right thing is done, they will be just setting the stage for the next showdown along the road. Surely the governments up north have enough to do looking after their own.

But this time I can at least say that it looks like being none of my business. The markets look bored, and unlike four years ago, when I really lost sleep, no one is holding a gun at my head. And Mr Varoufakis might find the politics of the Chinese and Russians more congenial. Certainly, borrowing from them might complete his financial, and that of Greece, in a manner that might fairly come to be called terminal.

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