Greece and the European Union reached a preliminary agreement last month that fell substantially short of Athens’ grandiose aspirations. What’s more, due to the vague nature of the agreement and the lack of trust between the involved parties, the ensuing negotiations have broken down again in the past few weeks. The Greek economy has now reached a critical point with significant deposit withdrawals, very limited market activity and a sizeable standstill in tax payments painting a rather bleak picture.
Throughout the negotiation process, the Greek Government, particularly the Prime Minister, Alexis Tsipras, and the Minister of Finance, Yannis Varoufakis, made a number of mistakes that made it more difficult to reach a positive outcome. It is important to reflect on these mistakes when Greece returns to the negotiating table once more.
Know your allies and understand their motives:
Incumbent governments in Portugal, Ireland and Spain paid a significant political cost to implement tough austerity and unpopular reforms. Therefore, it will not be in their favor for Greece to get “special treatment” because this will indicate to their electorate that they did not negotiate hard enough.
For Spain, in particular, where the rising leftist party, Podemos, threatens the current government, a concession towards Greece would shift the political balance towards Podemos. Thus, the motivation for these countries is different from 2012 when all Southern European countries had similar goals and motives vis-à-vis Germany. During the negotiation process the Greek government overestimated the support they would get from other embattled Southern European governments.
Pick your battles:
Aside from tackling tax evasion, there is little common ground between what the Greek government wants and what its counterparts want of it, or even to what both sides consider to be “reforms”. Greece gave the impression that it wants many concessions immediately, with no sense of prioritization. Inter alia, it demanded a debt haircut, limiting austerity, a halt in privatizations, stopping the humanitarian crisis, raising the minimum wage and rehiring public employees that were laid off.
Tsipras described many of the demands as non-negotiable “red lines” during his campaign. He also talked about a clear, democratic mandate from the Greek electorate. But red lines and democratic mandates and are not exclusively Greek, and the Europeans, particularly Germany and other Nordic countries, also drew red lines on some of these issues and also have electorates to answer to. Given the seemingly intractable position between the parties the Greek government should have prioritized its issues to its counter parties. It is clear that some of the goals, such as halting the humanitarian crisis and the reduction of this year’s target for primary surplus are much more time-sensitive than others such as reducing the debt to more sustainable levels. Thankfully, the government has lately shifted towards this direction though this has been more of a reaction than its own initiative.
Negotiations are two-way affairs:
Negotiations often require concessions from both sides in order to reach a workable compromise. Given the vast distance between Greece and the EU, and the relative bargaining power between them, the Greek government should have postured less going into the negotiations. Clear prioritization would have allowed Greece to concede more upfront and less overall. It would have also improved trust and cooperation between the two sides. Certain actions of good faith would go a long way to cultivate a climate of good faith. The Greek government opted instead engaging in aggressive rhetoric and raising the sensitive issue of WW2 war claims.
Focus on substance and not the pretexts:
An unfortunate amount of time and political capital was spent debating the name of the committee that will monitor the program, or the name of the program itself. None of this matters. All that should matter is whether any new agreement will improve the lives of Greece’s people. It is a shame to spend political capital when the clock is ticking. Focusing on these side issues without solving the underlying issues that plague Greece and the European economy led to a worse outcome for all involved. What is needed is a more pragmatic approach focusing on interests and facts and avoids posturing and unpredictable behavior.
Hopefully, the first round of negotiations was only a reflection of growing pains for a party unaccustomed to negotiating and more comfortable in the opposition. Indeed, it is a hard balance to strike between the realities of the Greek economy and the pre-election promises given. The next round should reflect their newfound experience in battle that will allow them to walk away with a better deal for Greece and the rest of Europe.