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For years, I’ve heard a common refrain from those who seek positions of leadership: “I’m not going to tell you what you want to hear, but what you need to hear.”
We should expect no less from our leaders – especially our political leaders. We all live in representative democracies because we don’t have time to govern countries as large as we live in and economies as complex as the ones we participate in. We go to the polls to elect leaders, not proxies.
As the European Union, the greatest experiment in capitalist democracy of our lifetime, faces its moment of truth, a dearth of leaders from Berlin to Athens, Paris to Rome and Brussels to Washington, D.C. make it impossible to have any confidence in how the Western world can emerge from this crisis.
Let’s focus on what got the most attention in the last week: the results of Greece’s May 6th elections. The Greek electorate repudiated the two parties that almost exclusively governed Greece for four decades and that negotiated its bailout. Voters surprisingly elevated SYRIZA (the party of the Radical Left) to second position in the Parliament. Multiple attempts to form a coalition government have failed because of SYRIZA’s insistence on “tearing up” the memorandum with the Troika (EU, European Central Bank, and IMF) that laid out the austerity measures Greece is suffering through. Polls show that in new elections, SYRIZA would place first, making the party even less likely to agree to a coalition.
The problem is that SYRIZA has not advanced a governing platform and instead is promoting talking points that poll well: Call off austerity, repeal wage cuts, stay in the euro, nationalize banks, and tax the rich. Never mind that no serious analysis has been offered to demonstrate how all of that would happen. Instead, SYRIZA has decided that this is Greece’s moment of maximum leverage and they are going to call Europe’s bluff. “They will be begging us to take the money,” SYRIZA deputy Dimitris Stratoulis said of the bailout, arguing that European leaders would not dare risk a Greek exit from the euro since it would wreck the single currency project. What if they don’t, Mr. Stratoulis?
At a minimum, SYRIZA leader Alexis Tsipra owes the Greek people an honest conversation. The Greek people must be told that there is no magic bullet which drastically alleviates austerity and allows Greece’s participation in the euro to remain unchanged. They must be told that there is an inherent and irreconcilable conflict between the existing pension system and investing in future generations. A return to the drachma cannot be ruled out, but leaders must acknowledge that while it may restore competitiveness, short term chaos – in the form of hyperinflation, wiped out savings, bankrupt businesses (because they have debts in euros), and additional internal devaluation – is a certainty. They have to come to terms with the fact that Greece’s return to competitiveness is as dependent on structural reforms (of the entitlement system, the public sector, and the labor market) as it is on wiping out Greece’s debt.
The leaders of New Democracy and PASOK have to issue mea culpas as well. They must come to terms with the price of the corruption tax during their respective reigns and the effect of not liberalizing the economy. Once all the “leaders” have admitted that there is no policy option that turns Greece around in a single election cycle, then they should lay out their vision for building a new Greece.
The Greeks cannot be alone in speaking truth. Germany must give up its stubborn insistence that austerity in indebted countries will lead to prosperity and solve the euro zone’s problems. This policy has not worked anywhere in Europe. True German leadership would acknowledge that adherence to a fiscal compact requires a robust growth compact – one that commits the Germans to living with higher inflation and consumption, allows for more aggressive European Central Bank measures to ensure liquidity in weaker economies, and promotes a real “Union” by providing for a transfer of wealth between wealthier and poorer countries.
The euro is just a decade old. The EU’s latest constitutional changes are less than three years old. While the European experiment is more than 50 years old, the EU as we know it still finds itself in the hands of its founders. In the first few years of American history, our founding fathers faced an economic crisis that threatened the very young United States. Leaders emerged, a great debate was had (we still read it in the form of the Federalist Papers), and the result was the U.S. Constitution that still governs this country more than two centuries later. Europe’s leaders face a similar crisis and opportunity. They have to start by telling their peoples some hard truths.Back to top