My thoughts on the Greek situation
Disclaimer: This was written for my sister who asked for my perspective on the topic on Facebook. I’m only publishing it here because it was getting too long for a Facebook comment. Economics, politics and history are not my fields, and a solid understanding of all three is really necessary to understand what’s happening — I don’t have that. This is just my own perspective and opinion based on my read of the often conflicting, contradictory and subjective articles I’ve seen and read over the past several months.
This is far too lengthy a topic to do it justice in a single comment, but a quick summary is that I’m fairly disgusted with both sides of this issue.
On the Greek side:
- Syriza sold the Greek people a promise that wasn’t actually within their power to deliver (an end to austerity and an immediate rollback of many of the reforms while remaining in the Eurozone).
- Syriza has repeatedly insulted and alienated the European partners whose help they need if they were ever to deliver even partially on the promises they made to the Greek people.
- While Syriza has given lots of concrete plans and taken action on programs that cost money (pensions, minimum wage, re-opening the public television, etc.) I have yet to see any concrete action or credible programs that will grow revenue, build a sustainable economy or foster Greek entrepreneurship.
- I have not seen a single Greek politician (or, frankly, any Greek person for that matter) offer any kind of contrite, solemn admission that the corrupt, clientelistic political class, bloated public sector, unsustainable pension system and fiscal mismanagement before 2010 that got them into this situation were entirely the result of their own entirely homegrown democratic political choices. I’ve only seen blaming others for their current problems, which simply isn’t wise if you’re trying to persuade people to give you money.
At the same time, I’m even more disgusted by the European leadership, ECB and IMF:
- They have imposed a program of brutal austerity on Greece since 2010 that any credible economist will tell you was recessionary, and this predictably plunged Greece into Depression.
- They promised but never delivered on meaningful debt relief to get Greece on a path to growth and sustainability.
- They have never explicitly acknowledged that austerity was a disaster or that Greece is fundamentally insolvent.
- They appear to have utterly failed to learn the most important lesson of Europe in the early 20th Century on what happens when a country is saddled with austerity and an unsustainable debt burden.
- Instead of trying to present this as a shared European problem, they’ve attempted to turn this into a morality play and stoked the fires of tribal nationalism by blaming the Greek people instead of acknowledging their own culpability for letting Greece into the Euro and reminding their voters that the buildup of excessive debt by Greece required irresponsible lenders (private banks in the central European countries) as well as irresponsible borrowing by Greece. While I don’t agree with everything in this piece, a good summary of the creditor side of moral hazard is here: http://www.interfluidity.com/v2/5965.html
I also think that there is a bigger geo-political security aspect to this: Greece is part of the Balkans (where we’ve seen war in our lifetimes), refugees from war-torn countries in the Middle East are arriving in Greece in significant numbers, and the situation in the Ukraine and relations with Russia are particularly tense. Aside from the economic and humanitarian case for the Europeans to offer more help to Greece, given this backdrop it seems foolish in the extreme for the European leadership to risk letting Greece descend into chaos.
So: where to from here? The effect of capital controls and the banks nearly running out of money is certainly making it clear just how dire the situation really is. At the same time, the overwhelming “No” vote makes it clear to the European Leadership that the Greeks really are crazy enough to pull the trigger on Grexit if they must. And the IMF’s own report last week makes it absolutely clear to everyone that Greece’s debt is unsustainable. (This should provide some political cover for the creditors to help them give some ground on this).
The “resignation” / sacrifice of Varoufakis and today’s statement from Tsipras is, in my view, remarkably reasonable and conciliatory:
My hope is that this translates into a reasonable proposal from Greece that isn’t far off the last proposal but adds a significant amount of debt relief. My secondary hope is that, in spite of all the mistrust and acrimony that has developed and the immediate personal political risks to European politicians in doing so, they will have the good sense to accept the Greek proposal.
