Grexit as sacrifice: Tragic conflict in the eurozone

Rational players understand it: a Greek exit from the eurozone is in nobody’s interest. Despite the belligerent rhetoric from Greek Prime Minister Mr. Tsipras, he fully well knows that a Grexit will be an economic catastrophe for Greece. Although he can only hope that it will be a short-lived one, nobody doubts that, as Syriza MP Costas Lapavitsashonestly remarked in a recent interview, there will be not only capital controls but, also,huge legal uncertainties, even food rationing! There is, similarly, little doubt that a Grexit will seriously jeopardize the main premise of a monetary union, namely that it is irrevocable. Once one is out, others may follow. Trust weakens, stability becomes precarious. What looks solid may start melting. If both players can predict the devastating consequences of a Grexit, is there a guarantee that the later will not happen? And if a last-minute deal is hammered out, as the Governor of the Bank of Greece has pleaded to, does it mean that, again, a Grexit is inconceivable? I fear not. Great undertakings, such as the euro, involve more than calculative behavior and game theoretical reasoning. The monetary union is not just a technical arrangement, but also the expression of a deeper desire for more integration in the continent. Great projectsare often existential in nature: they define what people care about and how they are oriented in the world. Rational calculations tend to obscure existential concerns. There are times, however, when calculations do not suffice and the game itself may be called into question. What is it for? What should its rules be? How should it be played? When such existential questions arise, they prompt players to significantly evolve their common undertaking. It is far from easy: since the stakes are high, players cling even more tenaciously to the views they already hold, which have brought them thus far. Stagnation is often the outcome. This is clearly visible in the collapse of talks between Greece and its creditors. The two sides cannot even to agree on what exactly they disagree! Whether they speak about pensions, VAT rates or debt relief, their communication is futile. Words do not carry the same meaning, expectations differ, priorities diverge. The Greek side insists on “political” negotiations, while the creditors’ side focuses on completing the “technical” staff-level fifth review. If Greeks are from Mars, the creditors are from Venus. At the root of the conflict is the paradox that both sides are right. ‘The rules must be respected and agreements honored’, arguesensibly the three bailout monitors (the European Commission, European Central Bank and the IMF, popularly called “troika”). ‘You must respect the people’s democratic will that brought us to power’, shouts reasonably the Greek anti-austerity government. They both have a point. Contrary to troika’spredictions, the consequences of theirbailout program for Greece have been devastating. No other developed country has been hit by such excruciating austerity during peace time! But to have a future as a modern country, Greece must change fundamentally: it cannot carry on pretending to be a modern country while keeping modernity at bay through the endemic practices of crony capitalism and a clientelistic,incompetent, and party-political dominated state. Tochooseany of the twosides means to neglectthe truth of the other side – this is a case of what philosopher Martha Nussbaum calls “tragic conflict”. Understanding it and asking the “tragic question” requires, notes Nussbaum, “assuming a possible burden of guilt and of reparative effort”. None of the two sides is prepared to do it.The troika reluctantly concedes that mistakes have been made in the Greek rescue program but does nothing radical to correct them by offering what is most needed –bold debt relief. The Greek side does what is historically used to doing: playing the victim of fiendish foreign powers, while resisting modernization of its anachronistic institutions that brought about its bankruptcy. Tragic conflict cannot be avoided. As soon as this is understood, the players are motivated to submit themselves to critical self-scrutiny and change their habits. But if we are to take advice from Greek tragedians this rarely happens: they knew all too well that human beings change their entrenched ways the hard way – through suffering, rather than reason. Suffering reveals what reason obscures. The Greek gift to the eurozone has been to expose the latter’s flaws – the folly of creating a monetary union without common political institutions to support it. But fixingthe flawsinvolves more than financial engineering: the underlying understandings would need to be boldly reconsidered and adopted policies appropriatelymodified. Mr. Schäuble certainly does not see it this way. Germany bears no responsibility for Greece’s problems, he keeps saying. On the other side, the consequences of harsh austerity and the embedded culture of victimhood have turned Greece inwards and made it more desperate, angry, even irrational. Defense Minister Kammenos threatens to make the country a suicide bomber: he proudly tells a popular, early-19^th-century story from the Greek independence struggle about how monk Samuel blew up the powder keg, killing himself and his captors, rather than surrender to the Ottoman enemy!Implied message: we will take you down with us. Existential projects involve high stakes. When stalled, sacrifices push them forward. A Grexit may be such a sacrifice for the eurozone; irrational but an existential necessity.The suffering it will cause will likely make each side see what itpresently refuses to seeand ask the hard questions to itself it avoids asking. As Sophocles puts it in Antigone, “big blows teach wisdom”. Regrettably, when this happens, it is usually too late.   Haridimos Tsoukas holds the Columbia Ship Management Chair in Strategic Management at the University of Cyprus and is a Distinguished Research Environment Professor of Organization Studies at the University of Warwick(www.htsoukas.com). He is a co-editor of From Stagnation to Forced Adjustment: Reforms in Greece, 1974-2010 (Columbia University Press, 2012).