Wednesday, January 28, 2015

Northern Europe vs. Greece

As a result of punitive measures on the part of the so-called troika—European Commission (EC), the International Monetary Fund (IMF), and the European Central Bank (ECB)—a socialist party, Syriza, has come to power in Greece. Syriza is limited in its ability to act against the troika; it can persuade, but has little leverage.

To the Northern European bankers and public it's a morality play; the Greeks must be made to do their duty, and punishment will change the ways of the irresponsible, childish, not-Protestant Greeks. It is no play to the Greeks, whose health care system has collapsed under the harsh measures already pressed on Greece.

I believe that Greece is, in fact, developing a more disciplined attitude towards finance and spending. The troika wants to rush the matter, and they probably have the power to do it. It would be a shame. The misery would be intense and go on for years, and the Greeks would probably end up hating northern Europeans. The easygoing Greek culture would be hardened. Much would be lost, and the northerners would come to regret that, as well as the loss of their relief valve and one of their favorite vacation spots.

The best compromise would be something like: the troika makes concessions, the Greek debt is reduced, some sort of stimulus measures are offered to the Greeks, and the Syriza government commits to and implements long-term measures to reduce the real corruption of the Greek system. If, instead, there is no deal, there is the risk that the fascist Golden Dawn party will come to power in Greece. They probably will not last more than a generation, but those years would be hard indeed.

I am left wondering whether a unified currency is appropriate for a multi-national, multi-cultural federation. It seems to me that it tends to grind all cultures into uniform economic forms, and this is a shame.

Paul Krugman on the matter.


Anonymous said...

Some of the United States are chronically corrupt and dependent on federal handouts. There is no thought of their exiting the dollar zone; the one time they really tried they were stopped by Generals Grant and Sherman. And the central bank is not trying to impose austerity on them; quite the opposite: They are forced to provide at a minimal social safety net over their strenuous objections. I wasn't thinking this was a good situation, but compared to Greece's plight, I guess it is.

The Blog Fodder said...

Putin now has a declared foot in the door of the EU with the Greek Left/Right coalition. Sanctions against Russia require consensus. Greece may use this as a tool to leverage concessions from the troika or they may really mean it and create the kind of disunity in the EU that Putin craves.
If it were possible for Greece to leave the Eurozone they should do so as they can more easily reduce the impact of the horrendous austerity program. I do not blame the Greek people for the mess their economy is in. As usual, the top of the food chain skimmed all the money and leave the people to pay for it.
If Greece does not see some improvement in their lot, the next government will be Golden Dawn.

Raven Onthill said...

voidampersand, as you say, the US response to the depression is not very good, but at least on the monetary side the Fed is keeping interest rates low. In the USA, the fiscal response from Congress has been limited since 2010, and the states could really use some help. Greece's problem is not interest but principal; barring the discovery of vast oilfields in Greece, there is no way the Greeks can repay their debts.

Blog Fodder, I've read reports of Greek support for Russia with some discouragement. However I am unable to tell which are accurate, and perhaps even the Greek public does not know. (Do you read Greek?) To leave the Euro Greece would have to set up its own honest banking system and I don't think they've the people to do it.

Hey, maybe they can use Bitcoins! :-P

reason said...

Isn't there a bigger issue here.

To what extent can democratic governments make commitments and expect them to bind their successors?

Shouldn't all international agreements come automatically with expiry dates, so they need to be renewed.

The Blog Fodder said...

Vast oilfields in Greece? They will be shutting down all the mining shortly and anything else deemed not "green"