On Thursday 30 April 2015 the breakfast discussion ‘Greece and the Eurozone – Is Reform Possible?’ was held at the Forum of the Hertie School of Governance. It was organised by LSE Enterprise Germany in cooperation with the Jacques Delors Institut – Berlin.
LSE’s Prof Kevin Featherstone and Hertie School’s Prof Henrik Enderlein discussed outlooks and potential scenarios of Greek reform with moderator Mark Schieritz, LSE alumnus and Finance & Political Economy Correspondent for German weekly Die Zeit.
At a time when emotions are running high whenever the Greek debt crisis is discussed in public, the breakfast discussion stood out in its factuality and constructive tone.
Prof Featherstone made the point that targets created purely for budgetary reasons, rather than being based on analysis and data, and too little time to realise those targets, created a hostile environment for any reform endeavour in Greece. But the failure to reform was not just about the lack of political will: low quality governance due to institutional weaknesses is to blame. Reforms of the administrative apparatus are key for the situation to change in the future. This is a lesson that Italy and the Balkans should take away from this crisis, as they face similar administrative and governmental deficiencies. Austerity alone has not worked, and current measures have been mostly short-sighted and discouraging rather than empowering local reform-minded politicians.
Prof Enderlein stressed that there is a lack of understanding not only of Greece itself but also of the factors contributing to the current situation. The Greek difficulties reveal the structural problems of the European monetary union, one of them being how to tackle widespread financial problems. He also pointed out that political goodwill was squandered on all sides: in September 2014, when things were looking up and there was hope of surplus and growth, a recovery programme should have been implemented. The other member states should have been adamant in enforcing such a support programme rather than letting the Greek reject such a helping hand at that moment.
Furthermore, after the elections there was initially hope for reasonable and moderate decisions by the new government. But instead Syriza antagonised the entire Eurogroup within 48 hours and ended all reasonable discussions as well as any remaining goodwill.
Both experts agreed that this crisis is most likely to end in a showdown in June. The idea of a Grexit was unequivocally considered a scenario to be avoided at all costs as it would come with a high price tag and eventually destroy the EMU. Profs Featherstone and Enderlein agreed that the current Greek narrative of getting the best possible deal was a dangerous path, but said that they have seen the first signs of policy makers being more sensible and adopting a more long-term oriented and pragmatic strategy, forging the path towards a compromise in June.
Left to right: Prof Featherstone, Mark Schieritz, Prof Enderlein, Christian Thiel
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