Articles:
Greek Negotiators Should Learn a Little from Britain

The
proposal for “debt-swapping” floated by Greece’s new finance
minister, Yanis Varoufakis, is both ingenious and constructive. But
whatever its merits – and as always in financial transactions, the
devil will be in the details – by putting it forward in this way
Greece is making what can be termed The British Mistake. Just as for
Britain’s prime minister, David Cameron, there is still time for
Greece’s triumphant new leader Alexis Tsipras to remedy this error.

The
error arises from the natural instincts of national politics. These
incline both Mr Tsipras and Mr Cameron to fight alone as proud and
plucky countries, battling in Greece’s case for a better deal from
the European Union as special victims of German “subjection”
or in Britain’s of the throttling red tape of Brussels busybodies,
or somesuch grievance. Trouble is, isolation and victimhood may sound
noble, but such nobility is for losers.

To
stand as little Greece against the other 18 eurozone members, or as
little Britain against 27, is a potentially fatal mistake. Neither is
in a strong enough position to bully or blackmail the others. And
such unilateral brinkmanship is likely to make it harder for Germany
and others to make the deals that Greece and Britain need.

Clearly,
given the promises he made during Greece’s election campaign about
debt relief, Mr Tsipras needs to achieve results, which is the same
feeling Mr Cameron has had on the topic of EU immigration, given that
the hounds of UKIP and the Eurosceptic rats in his own Conservative
Party are all thirsty for his blood. But for both men, and their
countries, placing a single large bet on a bilateral negotiation
would be tantamount to planning for defeat and life outside the EU.

In
order actually to achieve their goals, Mr Tsipras and Mr Cameron need
to take a smarter approach. That means framing their demands so that
reforms stand to benefit more countries than just Greece and Britain
– ideally, even Germany itself. And framing them in a way that fits
German policy-making principles: as new rules that can persist and
help Europe prosper.

In
Greece’s immediate case, that means making its debt-swapping
proposal applicable more widely than just to itself. Neither Germany,
Finland nor the Netherlands will be able to accept a debt-relief
policy simply based on the notion that Greeks are mad as hell and
can’t take it any more. Mr Tsipras’s friends in Spain’s
left-wing insurgent party, Podemos, might like such a stance, but the
current Spanish government too is likely to reject it.

This
won’t be easy, but Mr Varoufakis sounds quite an ingenious
economist. He could even find an ally in devising such a plan in
Germany’s finance minister, Wolfgang Schauble, if he can
convincingly draft a principle under which sovereign debt above some
high percentage of GDP could be swapped into bonds tied to nominal
economic growth, only on condition of making an agreed programme of
radical liberalising reforms.

Would
that be saleable? Neither Ireland nor Spain, which have already made
such reforms, would want to take part. But Italy and Portugal might,
and such a principle could provide the eurozone with a strong tool to
ensure future crises are dealt with in the right way. And in Greece
itself? Well, liberalising reforms are a tough sell there, but if Mr
Tsipras means what he says about tackling Greece’s “oligarchs”,
the rich quasi-monopolists who dominate the Greek economy while
avoiding paying their taxes, this would be the best way to do it.

It
would be best, both politically and for the future health of Europe,
if this were made part of a wider package, one that boosts economic
growth and creates jobs while binding the EU closer together. In
addition to the debt swap, that could involve a beefed up programme
of publicly financed investment, across the whole EU, made possible
by altering the fiscal pact to separate capital investment from
current spending; and a new single-market drive, deepening market
integration for goods and extending it to services and the digital
economy.

Funnily
enough, much of this ought also to appeal to Mr Cameron. What he
needs if he is to be able as prime minister to recommend a “yes”
vote in an EU referendum in 2017 is three things: to show that the EU
can solve problems and revive its economy; to show that a single
market in services is at last being created; and to show that
countries that choose to stay out of the euro cannot be discriminated
against. This package could give him two of those three.

So
here’s an idea: given that Mr Varoufakis flattered Britain by
floating his debt-swap idea on a visit to London, why doesn’t Mr
Cameron now propose this wider package, both for his own good and to
show that he can, after all, be a constructive European?