Tsipras’ dangerous gambit

June 27, 2015 could go down forever in the history of Greece. In the wee hours of Saturday morning, Prime Minister Alexis Tsipras suddenly appeared on national television. The country’s youngest prime minister, a tender 40 years of age and just five months in office, coolly told whichever Greeks were watching that they were up against “humiliating” loan terms for an international bailout. He announced a snap referendum on July 5 and advised his people to vote “no” to “respond to authoritarianism and harsh austerity with democracy, calmly and decisively.” By advising Greeks to reject the bailout terms, he said a “resounding democratic message” would be sent to the European Union and global community.

He lobbed a bombshell at leaders of the European Union and international lenders. He held nothing back and divulged the deal, which has been discreetly coordinated between the government and creditors in return for 7.2 billion euros or $8.1 billion due to the International Monetary Fund by midnight Tuesday to avoid a default on Greece’s debt. Pressured by creditors and his own people, who elected his radical party for its anti-austerity agenda, he put all his chips on the nationalistic sentiments of his people. It is now up to the Greek people to determine whether Tsipras’ dangerous gambit will bring honor or ruin to the country.

Tsipras was clever. He knew he had only one card - brinkmanship - to play against his European creditors. The handsome young leader of the leftist Syriza party quickly rose to power riding on populist discontent with the harsh austerity bailout conditions. Since the country received its first bailout in 2010, Greeks had to endure steep hikes in taxes and cuts in incomes and pensions. To them, the IMF, ECB and EU seemed like ruthless and evil Shylocks determined to get their pounds of flesh. Tsipras vowed not to kowtow to such merciless lenders.

The outrage and frustration of Greeks are understandable. But they are paying for their past profligacy. When the country joined the euro zone in 2001, the people became deluded about the value of their assets, capital and economy. They were suddenly on equal rank with the Germans and French. Low interest rates made it easy to issue bonds and raise loans. But their newfound riches were built entirely on debt.

Their pension system was generous beyond any comparison. Pension payouts were almost equal to what they made in their jobs. They were paid out from the age of 60. The payouts have now been cut and the age extended to 65. Before, even people who worked in so-called risky jobs were eligible for finance payouts before they turned 60. Hair designers and TV and radio show hosts fit into the so-called risky category. Hair designers “risked” their health by exposing themselves to perm chemicals and TV and radio hosts to various bacteria on microphones. It’s no wonder the national coffers were in such bad shape. The 2008 global financial crisis and fiscal woes in southern European countries descended on the country in a perfect storm.

Greece turned to their richer EU partners. But everything comes with a price. The Greeks were told to tighten their belts. Syriza politicians audaciously told them they should not. What voter could resist? Tsipras could not fail his supporters. If he accepted new austerity measures, that would be the end of his career and party. At the same time, he could not risk national default and being booted out of the euro zone. The economy would sink as soon as it returned to its old currency. Prices would shoot up with capital draining away. The economy is headed for an abyss and national credibility would hit rock bottom. He knew the stakes and he had but one choice. A referendum could save his political life for now. But it could also kill his country’s economy.

The ending to this Greek tragedy isn’t yet known. Whatever happens, the onus will be on the people. They may hate the creditors. But they were only doing their jobs. They had the right to ask for reforms so that their money isn’t wasted. Creditors were advised by some that they should go easier on Greece so that it can generate growth to repay debt. But the Greeks have cried wolf too many times.

The masses are often referred to as the sea. Their leader steers the ship of state. Water floats the boat and at the same time can sink it. The people chose. European leaders called the Greeks fools to believe in an insensible and irresponsible government. Greece’s perilous voyage should be a lesson to us. Politicians must be accountable. A country is at risk if voters are swept up in populist fervors. Candidates in the last presidential election competed against each other to make promises of more welfare. The country is paying the price for their recklessness. President Park Geun-hye cannot keep her promise of delivering welfare programs without a tax hike. Voters must learn from the Greek crisis that only deep waters can help the boat stay afloat.

JoongAng Ilbo, July 1, Page 28

*The author is the business and industrial news editor of the JoongAng Sunday.

by Kim Jong-yoon