Germany's Economic Mannschaft Prevails
AP Photo/Martin Meissner
Germany's Economic Mannschaft Prevails
AP Photo/Martin Meissner
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The German soccer team, the Mannschaft, four times a World Cup winner, has built its reputation not so much on theatrics, but on two less flamboyant qualities: team spirit (Mannschaftsgeist), and endurance. It so happens that these selfsame qualities helped the German government prevail in the standoff with the government of Greece, led by hard-left Prime Minister Alexis Tsipras, over the bailout program under which Greece is committed to implement austerity measures and structural reforms in return for a €240 billion ($273 billion) bailout. Germany has contributed €80 billion itself to the bailout.
Showing true team spirit, German leaderships assigned roles to Chancellor Angela Merkel and Finance Minister Wolfgang Schaeuble. While the latter adopted a tough line, Merkel's conciliatory tone countered accusations that Germany was being a spoilsport.
The German government also took took pains to play collectively. Berlin worked with other eurozone partners to stress the importance that each of them attached to Greece's compliance with the provisions of the rescue program. The team comprised a wide array of eurozone members, ranging from financially healthy Finland and the Netherlands, to debt-burdened countries such as Portugal, Spain, and Ireland, to tiny Lithuania and Slovakia.
By acting in concert with these partners, Germany thwarted the Greek government's attempts to scapegoat and isolate Berlin. As a matter of fact, it was Greece, rather than Germany, that found itself short on allies.
The Greek government carries a share of the responsibility for that. Had it narrowed its requests to a loosening of restrictions on government spending, Athens would likely have rallied the support of debt-stricken countries - and more important, of France - that have warned against the anti-growth effects of fiscal austerity.
Yet instead of narrowing Greece's demands, Tsipras launched an all-out war against the bailout agreement and expected the equivalent of an unconditional surrender from Greece's official creditors.
Indeed, in line with electoral promises, Tsipras demanded his country's official creditors write down a chunk of Greece's sovereign debt and give back the yields derived from their holdings of Greek government bonds. He further decided unilaterally to reverse public spending cuts and to roll back the structural, pro-market reforms (privatizations, labor-market liberalization and wage restraint) stipulated in the rescue package.
He went even further, declaring the bailout program dead and refusing to deal with the so-called troika, namely the three institutions that supervise the implementation of the program (the European Commission, the European Central Bank and the International Monetary Fund).
To make Greece's official creditors abide by its terms, the Greek government took to theatrical posturing, promising Greece's own version of Cold War-era mutually assured destruction. Tsipras and his finance minister, Yanis Varoufakis, sent a message to Greece's creditors: If you don't accept our conditions, Greece might go bankrupt, which would provoke a Continent-wide financial crisis and put in jeopardy the very existence of the euro.
In other words: Play on our terms, or we will all sink together.
The problem is, the Greek government had no way to intimidate its official creditors. The worst-case scenario, namely a Greek default followed by Greece's departure from the euro, has ceased to be perceived by Greece's partners as a catastrophe - the eurozone has put in place institutional firewalls to cope with that eventuality.
A recent note prepared by Standard & Poor's indicates that Grexit would have little impact on the sovereign ratings of other debt-ridden eurozone countries.
As a matter of fact, Greece's partners worry more about the political contagion of an eventual Tsipras success against creditors than they do about the financial repercussions of a Greek default or of a Grexit. Indeed, to yield to Tsipras' demands would bolster the electoral chances of Syriza-like populist political parties across Europe - this is something that eurozone members are keen to prevent.
Endurance was the other key feature of Merkel's strategy.
Every day that elapsed without an agreement between Greece and its partners entailed an outflow of several hundreds of millions of euros from Greek banks - €20 billion have left the country since December.
Add to this the fact that tax collection has fallen dramatically (20 percent below official projections in January after a fall of 14 percent in December), with arrears rising by €1.1 billion per month, and it becomes clear that the Greek government was in a desperate need of a deal with its official creditors so it could obtain fresh funding. Germany and its allies only had to wait for the Greek government to wave the white flag.
Capitulation finally took place on Feb. 20, when Tsipras and his finance minister backtracked on practically all the contentious points.
The debt write-down was shelved. The Greek government conceded to requesting a four-month extension of the rescue package. The troika will continue to exercise its functions, but under a different name. It will henceforth be called "the three institutions." And the policy reforms the Greek government intends to introduce or change will have to be agreed to by these institutions.
Adding insult to injury, the eurozone bailout fund will take back €10.9 billion that had been earmarked for the funding of Greek banks facing financial difficulties. The bailout fund will now directly administer that money.
The Greek government would be well advised to do some intensive training in negotiating techniques, and most of all in political lucidity, in preparation for the next match. That contest is scheduled for April, at which time a detailed list of austerity measures, including budget cuts, will be examined by the institutions before these decide whether to grant Greece access to the €7.2 billion of the rescue package that remain to be disbursed.

(AP Photo)