Syriza, Tsipras, Playing with Fire
One of the main purposes of modern governments is to maintain social and economic stability. The degree of uncertainty and uproar that currently characterizes Greece from a social and market standpoint reflects Syriza’s despicable job of doing what it was elected to do. Unless Greece’s ruling officials are willing to take a step back and put the interests of their country ahead of their personal and partisan party objectives of getting a deal (or lack thereof) done, the worst is surely yet to come.
Tsipras has one last chance to shift the tide of the looming crisis that could hit the country before the proposed referendum on July 5th. The referendum, presented to the Greek people with “negative advice” according to Eurogroup president Jeroen Dijsselbloem, sets the stage for a disaster.
Direct democracy and referenda are a bad idea to begin with. The average citizen (Greek or otherwise) is simply not informed enough to make decisions about complex political and economic issues, especially ones that could decide the fate of a country for the foreseeable future. Even if people were informed and educated enough, how could they be trusted to choose the decision that is in the interest of the country and not their own? The issue at hand is complex and difficult to explain in layman terms, let alone vote on in one week.
Instances like this set the stage for the Dunning–Kruger effect: where unskilled individuals face illusory superiority, mistakenly assessing their ability to be much higher than is accurate. This is not only wrong, it is dangerous — not only are incompetent people unable to realize that they are incompetent, they are also not able to realize genuine competence in others, leading them to mistake populism and pseudo-nationalism for intelligence.
The main objective of democracy (a Greek idea, by the way) is that people have the power through representation. Greek citizens elected the current government assuming that it will act on their behalf and in their best interest. However, the repeated and dangerous mistakes Syriza has committed indicate that the Greek people have been duped to support a party that is based not only on cheap, but also harmful populism.
Should the result of the referendum be “no” to the current proposals, Syriza is likely to claim victory in defeat but the reality will prove otherwise. After the markets open, investors in Greek securities and government bonds will experience a sharp selloff in the stock market, according to Mohamed A. El-Erian, ex-CIO of PIMCO.
What is sure to happen is an opposite textbook scenario of Dalio’s “beautiful deliveraging.” Such a deleveraging consists of some austerity, some debt restructuring, and some printing of money. If done right, the result is optimal. If done wrong, as is the current scenario, the result could be complete chaos.
The pragmatic proposal that no one has yet put forward ought to be one that supports the nation’s difficult but necessary path to structural reform and economic growth fit of Eurozone standards. In order to truly put the interests of Greece in mind, the ruling party ought to sacrifice their (perceived) popularity and reach a deal with their creditors. Once they do that, Syriza might have a chance at saving Greece. Until then, the easy (and unfortunately more likely) path, is a crisis of mammoth proportions.