The intellectual background of Greece’s economics team hints at where negotiations with the country’s creditors will lead
By Y.Y. | LONDON
THE repayment schedule for the Greek government’s massive debt is entering an unforgiving phase. The IMF expects €750m ($840m) in cash on May 12th. This is only the start of a summer of Herculean labours: Greece will need to find an additional €2 billion for the IMF, and €6.7 billion for the European Central Bank, by the end of August. To do so, it will need those two, along with other euro-zone governments, to disburse the last slice of the bail-out they granted it in 2012 (and, in all probability, to agree a new, third bail-out programme). Yet Greece and its creditors cannot agree on conditions for the loan. A meeting of euro-zone finance ministers on May 11th in Brussels was not expected to make much headway.
The Greek government, led by Syriza, an anti-austerity party, has encouraged its creditors by sidelining the combative finance minister, Yanis Varoufakis. Instead, Euclid Tsakalotos, a deputy foreign minister, is now negotiating on Greece’s behalf. But while their bearing may be different, their economic outlook and intellectual roots are exactly the same.
Syriza’s economics ministers are not ex-bankers or technocrats, as in many European countries, but academics. Before joining the cabinet, several, including Messrs Tsakalotos and Varoufakis, were economics professors. Mr Varoufakis taught at the University of Athens, where he set up a doctoral programme "committed to portraying economics as an irresolvable contest of ideas”. It embraced the history of economic thought, emphasising Karl Marx and John Maynard Keynes. This is not the norm: most universities seek to convey one unified school of thought—“neoclassical” economics. Mr Tsakalotos grew up in London, and studied at Oxford University in the 1980s under left-leaning economists he cites as an inspiration. Rania Antonopoulos, the deputy labour minister, studied at the New School for Social Research, a hotbed of leftist thought in New York.
Mr Tsakalotos describes Syriza as “close to the Keynesian mainstream”, citing the British economist’s view that governments should spend to stimulate the economy during a recession. One such stimulus policy is a guarantee of a job for all citizens, which has earned Ms Antonopoulos the moniker “Ms 300,000 Jobs”. The problem is finding the money. Keynes’ solution—encouraging governments to run deficits in times of need—is not open to Syriza: its creditors insist on a surplus. Ms Antonopoulos believes Keynes would be on Syriza’s side: “The ECB wants us to decrease government spending in midst of a recession, which produces depression.” (He might be, though in the 1930s he noted that it was risky for countries in fixed-exchange-rate regimes, like the gold standard or the euro, to run reserve-draining deficits; better to skedaddle and devalue.)
But Mr Tsakalotos, at least, is ideologically committed to the euro too. He is adamant that monetary union is not only good for Greece, but necessary to prevent a revival in Europe of the narrow nationalism that prevailed before the second world war. Mr Tsakalotos believes the problem is that the euro zone is not a true union. In "Crucible of Resistance", a recent book, he proposes a pan-European mechanism to ensure no country gets in too much debt or credit to another.
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Such a proposal shows Syriza’s Keynesian roots: a similar balancing mechanism (but for the global economy) was proposed by Keynes in the 1940s. “The current system requires that we all become like Germany—that we rely on exports to grow,” Mr Tsakalotos explains. “But we cannot all be net exporters to each other—that’s logically impossible. We must create a new Europe that can handle economic differences.”
Keynes proposed a similar balancing mechanism for the world economy in the 1940s. To prevent tensions among countries all trying to maximise exports, Keynes proposed a global institution that would punish over-exporters as well as over-importers. Keynes’ proposal was rejected by the world’s biggest creditor and exporter at the time, the United States. No such ambitious systemic reforms are on the table at the moment, which is instead piled high with sticking plasters designed to keep Greece in the euro.
Germany, the giant creditor and exporter in this modern economic drama, may eventually wish it had taken such proposals more seriously. By the 1970s America's surpluses had turned to deficits, and the international monetary order fell apart once again.
