I once wrote a diary on the The negotiation Process and even considered making it the topic of a putative Phd. research proposal before deciding that the gulf between academia and practice was too large to bridge: there simply wasn’t any good academic literature on the negotiating process that I could find, and no one could be found with the interest and expertise to supervise such a research topic. I raise the topic here because I am fascinated by the negotiating style adopted by Yanis Varoufakis and am still wondering whether he will ultimately be found to have been an effective negotiator on behalf of Greece.
Yanis Varoufakis interview: `Anything’s better than austerity’
When asked whether Greece could have achieved more had it adopted a more conciliatory approach at the euro group, as his counterpart Michael Noonan and other Irish Ministers have suggested, Varoufakis delivers an emphatic “absolutely not”.
While he declined to respond directly to Noonan’s recent comments likening him to a rock star and to academic economists and experts that were very good in theory but not good in practice, he said Greece’s previous experience in Brussels meant a robust approach to negotiations was essential.
“My predecessors in this job went along with the eurogroup’s policies to the full. They bent over backwards to accommodate the memorandum and the policies of internal devaluation and fiscal consolidation, and the so-called reforms that were imposed on Greece.”
And he points to where that has landed Greece. “It has been a complete and utter catastrophe. There’s humanitarian crisis is on the boil because they were so `good in practice’, this is quoting Michael Noonan. And I hope that I’m not so good in practice.”
Regarding Noonan’s other criticism that he was too theoretical, the Greek minister says he understands that “my colleagues in the eurogroup were disconcerted that one of their members insisted on talking macroeconomics”.
“One of the great ironies of the eurogroup is that there is no macroeconomic discussion. It’s all rules-based, as if the rules are God-given and as if the rules can go against the rules of macroeconomics.
“I insisted on talking macroeconomics.”
But Varoufakis said he welcomed Noonan’s comments, made at a conference in London on Wednesday, that he agreed in principle with the idea of swapping Greece’s official debt for growth-linked bonds.
“Michael Noonan is quite right. We need to restructure Greek debt. My proposal for GDP-linked bonds has one purpose: to increase the amount of money we give back to your partners by encouraging them to allow us to grow.”
I want to stress at the outset here that my interest is in the effectiveness of various negotiating styles in progressing a particular party’s interests and not in judging Varoufakis from an economic or ideological perspective. The comments from Irish ministers are apt, because the Greeks have adopted a negotiating style very much at odds with the Irish tradition of negotiation as exemplified in the Peace Process and various EU rounds of negotiation including the seven Irish Presidencies of the EU Council and the more recent post bank bail-out negotiations.
It also matters what your ultimately objectives are: An agreement which is objectively the best possible to further Greek national interests, or a process which shows that the new Syriza Government fought the good fight and did what it could for the Greek people. National morale matters, and had Yanis Varoufakis capitulated, or been seen to capitulate, the gloom, bordering on desperation in Greece would have been very deep indeed. What can you do when you elect a radically new government, on a radically different platform and nothing really changes? That sort of setback could have given the fascist right a very big boost indeed.
So it matters that Yanis Varoufakis is seen to have fought the good fight, and secured at least a partial victory or breathing space, regardless of what you might think of the content of the actual agreement. It probably matters a lot more than maintaining cordial relations with fellow Finance ministers, if the experiences of previous Greek finance ministers is any guide. But has Yanis Varoufakis made enemies unnecessarily, and could he have secured a better deal by adopting a quieter diplomatic behind-the-scenes approach as suggested by Irish Ministers?
First of all, it has to be conceded that the Irish Ministers have an interest in how the Greek negotiations are perceived: The Irish Government has adopted a relatively softly softly behind the scenes approach to its post-bail-out negotiations with what is generally perceived in Ireland as at best limited success. There is still much bitterness that Irish Taxpayers ended up bailing out bondholders in private banks even where those bondholders were not covered by the infamous bank guarantee proffered by their predecessor Government.
Maturities have been extended, interest rates have reduced, but there has been very little write-down, and no default. The bottom line is that the bank bail-outs have added greatly to the explosion in Irish sovereign indebtedness from 25% of GDP in 2008 to 123% in 2014. The current Government is under a great deal of domestic fire from critics – not only from the left – for not having done a better job of getting the “institutions” to do a greater deal of burden sharing. If there is one reason why the current government may not be re-elected – apart from the lack of a credible alternative – it is this failure to do a better job of getting the “taxpayer” off the hook of a debt that was never theirs in the first place.
So if the Greeks get a better deal by shouting louder; by threatening Grexit or default, or simply by being more able and robust in the negotiation process, it will reflect very badly on the Irish Government indeed. And the same probably applies in Portugal and Spain as well – looking nervously over their shoulders at the advance of Podemos et al. So Germany’s apparent hardline stance was not lacking in potential allies, even if no one else was particularly keen to take the lead in beating the Greeks down.
Yanis Varoufakis also makes a fair point when he notes that the supine approach of previous Greek governments has yielded nothing but humiliation and poverty for Greece: a dramatic break or paradigm shift was needed to overcome the widespread belief in EU capitals and markets that after a lot of huffing and puffing the new Syriza Government would back down and break their electoral promises. Business as usual, in other words, had to be shown to be not an option. A great deal of anger, rupture, and attempted shaming is to be expected when you are trying to change the rules of the game. Yanis Varoufakis may have had no option but to break a few eggs and watch a few heads explode.
It helped that Yanis Varoufakis is actually a distinguished economist who could speak a language few Finance Ministers can actually understand – or rebut – and one which their economic advisers knew to be grounded in a lot of mainstream economics: Hence the anguished cries that the Greeks were speaking economic theory rather than just applying legal rules: oh the horror! Michael Noonan is an able, if aging politician, but his background is as a primary school teacher. He knows all about enforcing class room rules, but economic theory wouldn’t exactly be his forte. So we had a clash of paradigms -EU norms and rules versus Macro-economic reality as supported by many independent economic authorities. Yanis Varoufakis got a deal he could live with not because he could shout and pound the table, but because he could explain the economic realities better than anyone else.
It also helped that there was much common ground between the parties – clamping down on tax evasion by the wealthy, and improving administrative efficiencies. The IMF predilection for neo-liberal labour market “reforms” – i.e mass sackings and race to the bottom wages – was somewhat sidelined by refusing to deal with the Troika as such, and negotiating primarily with the Eurogroup – a good piece of advance planning and strategising by the Greek side. Insofar as you can, a successful negotiator has to map out the pitch s/he is prepared to play on, and the people s/he is prepared to play with. That “the institutions” aka the Troika allowed themselves to be divided and conquered in this way suggest a considerable degree of amateurism on their side.
So was the Greek negotiating style successful, and can we expect them to make further headway in the future in getting out from under the yoke of austerity? A lot will depend on how the process is reflected in the media and amongst the Greek populace: will the Greek economy gradually improve, and will corruption, tax dodging and administrative inefficiencies be seen to decrease? The major problem here is that the new Greek Government have a great deal to achieve and very little time to achieve it. Social change is possible if you have time and the resources required to grease the wheels of change. I can foresee a huge fightback by the Greek economic elite – threatening an investment strike, a removal of all liquid assets to Switzerland and a withdrawal of services to the Greek Government and people unless concessions are made.
It will be a bitter internal class struggle in Greece. Even the Troika couldn’t ensure meaningful reform of the upper civil service, legal and medical professions in Ireland – still the bastions of entrenched privilege, restrictive practices and extremely high earnings by almost any world standards. But at least there are some signs that Syriza has succeeded in reversing the class struggle, from austerity being an attack on the relatively poor to an attempt at reform of elite structures in Greece. In this “the institutions” will be uneasy bedfellows, but the dynamics of EZ politics may have changed. That, more than the immediate outcome of direct negotiations may be the real legacy that Syriza may bestow on Greece and the Eurozone. It is a gift we should all be grateful for. May EZ elites beware.