THE BLOG

The Athens Tram

The modern Athens tram was inaugurated in July 2004, a few weeks before the Athens Summer Olympics. It was a controversial project, because it took away parking spaces that were already sorely needed, split various neighborhoods in half, and did not improve the commuters' prospects in Athens and its suburbs. It is a very slow mode of transportation that is used by people with no time constraints. In short, it has been a failure.

At the same time, the Athens tram offers an excellent parallel to the current status of Greece's negotiations with its creditors, given the fruitless Eurogroup meeting of May 9, which resulted in yet another postponement of substantive decisions, due to the government's delaying tactics. Analysts and politicians have used various methods to explain and propagate their views--the latter certainly to promote their interests, the former sometimes honestly and sometimes to achieve expedient objectives. Yet the Athens tram offers an interesting metaphor to describe the Greek economy, explain why negotiations break down frequently, and distinguish between the feasible and the implausible.

Like the tram, the Greek economy was placed on pre-defined rails exactly 6 years ago, in May 2010, with a goal of reaching the end of the line in the shortest possible time. After that, perhaps operating as a trolley bus for a couple of years, and then as an urban bus for a few more, the Greek economy was expected to metamorphose to a car with ever-increasing speed and capabilities. But that hopeful trajectory never materialized, because most of the successive tram operators (i.e., the Greek governments) naively believed, to various degrees, that they had alternatives to the prescribed route. As a result, more often than not, they tried to change the route in the hope of reaching the end of the line sooner, which in fact further delayed progress significantly.

The vision of a tram zooming efficiently through Athens like a silver bullet turned out to be an impossible dream. Every time the tram operators attempted to change the prescribed route, the tram would derail, get stuck at the point of derailment, and eventually have to start all over again on the same route from where it had left off. The net outcome? A waste of time and effort, compounded with frustration by the passengers (i.e., the Greek citizens) and the engineers (i.e., those who had constructed the route, originally called the Troika and more recently called the Institutions).

The frustration of the passengers was fully understandable, because after 40 years of a wild ride with fast cars and borrowed money, no tram operator ever explained that the days of fun parties were over and that the passengers would all have to squeeze in this slow mode of transportation for several years. In other words, the communication policies of the Greek governments from 2010 to 2014 were a colossal failure. As most observers of the Greek economy know by now, the government that was elected in January 2015 and re-elected in September 2015 has lost valuable time because, on its own initiative, it has halted the tram several times to renegotiate the route with the engineers, only to find out that the rails were impossible to move or readjust and that the tram would have to follow the originally established route. The passengers had been fooled several times into believing that a new tram operator would have been able to improve their deteriorating conditions. No one was able to explain that the color of the shirt of the operator (i.e. the political party in power) could not have made a difference, because after 40 years of living beyond its means, the Greek economy had to be put on a rail system to survive within the broader network of European railways, namely the Eurozone.

Why hasn't anybody with authority been able to explain what was the point reached by the Greek economy in 2009, why Greece reached that point, where does it want to go in the future, and what path does it have to follow to reach the new goals? After 6 years of following the Greek crisis closely, of which four in an official capacity, I have concluded that the true reason is not ideological. Regrettably, it is technocratic. Very few people within Greece understand the rigidities and distortions of the Greek economy, the nearly primitive state of its public administration, and the sorry state of its judicial system. And of those who understand, instinctively or by comparison to other European countries, even fewer (a handful, really) know how to achieve macroeconomic stabilization, which is a prerequisite for growth. Only a very small number of Greek economists, most of whom live abroad, are trained in applied macroeconomic policy and are familiar with the financial programming model, which is the basis of stabilization programs. The financial programming model is constructed on economic identities, which, unlike economic equations, are inviolable, because they constitute Economic Laws, like the Law of Gravity. Any attempt, deliberate or accidental, to violate economic identities leads to a brick wall. Advocates of "solutions" that violate economic identities have so far revealed only one truth: that such "pundits" are uneducated sciolists.

Which brings us back to the tram metaphor. The tram operator need not be a career macro-economist. But (s)he needs to be surrounded by credible advisors, preferably individuals that have been educated and trained abroad and have experience in deliberations with international organizations. Even though the tram operator will have very little, if any, leeway in changing the route of the tram, the international engineers are more likely to show some flexibility if they face a serious team instead of the clueless tacticians that comprise the current negotiating team.