Stop, Start, Repeat: Greece and the European Debt Crisis

Greece: A Microcosm for the Troubles of Southern Europe

By Konstantinos Roccas, Staff Writer

On a cold December Night—while Athens was enveloped in a thick cloud of smoke and smog emanating from the homes of people burning wood and whatever else they could get their hands on in lieu of oil and electricity—Greek Prime Minister Antonis Samaras triumphantly ascended a podium and proclaimed that the notion of a “Grexit is dead.” The ‘Troika’ of lenders—as they are known in Greece—of the European Central Bank, International Monetary Fund and the European Commission, had finally reached terms with the Greek government that were acceptable to them and released the long-withheld disbursement of 52.5 billion euros.

Greece was saved and by extension the European Union was saved, as well. Markets rallied on the news. Confidence in Europe was reaffirmed and all was once again well in the EU. Media coverage slowly diverted towards more pressing matters and Greece could now focus on rebuilding its shattered economy. Hooray!

At this point you are likely wondering why this sounds familiar. The reason for that is that it isfamiliar. This cycle of ‘will they or won’t they’ with regards to the disbursement of bailout funds to the Greek government has happened many times since this crisis began and the basic narrative is always the same: Greece gets big bailout fund, which will be doled out in pieces. [pullquote]The cyclical process mentioned above further impoverishes the people of these distressed countries, while gutting many of the services needed for a modern country to run efficiently.[/pullquote]Greece needs to set austerity targets to receive cash. The Troika demands more measures and withholds the next tranche until Greece agrees to their terms. Greece claims it will run out of money by X date. Furious negotiations ensue and bailout tranche is released. Markets get bolstered on the news and things hum along until Greece is supposed to receive the next bailout tranche. Repeat as necessary; throw in a few riots for added flavour.

As ridiculous as this narrative sounds, it has become par for the course in the Troika’s dealings with Greece and the rest of the ‘sick men of Europe’. Instead of analyzing the problems that may have caused this debt crisis to compound and present meaningful solutions to restore Europe, they instead push a process that merely buys them time and serves nobody—with the notable exception of the extremely corrupt political elite that are still fattening themselves up at the expense of everyone else.

Greece itself is a microcosm for the troubles of the rest of the southern European states such as Italy, Spain and Portugal. The cyclical process mentioned above further impoverishes the people of these distressed countries, while gutting many of the services needed for a modern country to run efficiently. By employing such a cyclical process, the banks and lenders are able to temporarily stave off the total collapse of Greece, while buying them sufficient time to shield themselves from any sort of fallout in the off chance that Greece does default on its debts.

In the interim period between bailouts things slowly get worse for the people.  In Greece, for example, according to the Hellenic Statistical Authority, Greek unemployment has risen to a staggering 26% while youth unemployment in the 18-34 age bracket has risen to 58% as of January 2013. Hospitals are chronically undersupplied, with basic necessities such as latex gloves and needles at a premium and Greeks nationwide getting in touch with their inner lumberjack and heading into parks, forests and gardens to salvage wood that they can burn for heat due to a new levy placed upon heating oil, wreaking havoc on the Athenian atmosphere.  In addition, a starting mandatory wage of 450 euros has been implemented for young labourers.

Image Courtesy of: guardian.co.uk

On the flip-side, the politicians in Greece are doing extremely well for themselves. They’ve delayed and passed the Lagarde List—a list including prominent lawmakers, actors and their families who have Greek funds stored in Swiss accounts—among each other so many times that nobody really knows who was originally on that list in the first place. At the same time, 600 million euros earmarked for a Greek employment agency have vanished and no parliamentarian can explain exactly where that money went.  To add insult to injury, Greek Finance Ministry general secretary Giorgos Mergos went on record stating that the “minimum wage is too high.” All the while Greek lawmakers have 65-75% of their income declared tax-free. You couldn’t make this up if you tried.

The crown jewel of this insanity is ex-Prime Minister George Papandreou, scion of the Papandreou political dynasty which founded the Greek political party PASOK that dominated Greek Politics since 1981. As a ‘reward’ for being an integral part of the family that played a key role in running Greece into the ground, he now enjoys a cushy teaching job at Columbia University, while living in an upscale New York penthouse  with neighbours like Lady Gaga. He is also paid upwards of 55 thousand dollars for a single appearance on the speaking circuit. Oh, and his mother has also been linked to a 550 million euro account in Switzerland, though reports have yet to be fully verified.

While it all seems so very Greek, the conditions that precluded this crisis are all present in Spain, Italy and Portugal. Political corruption, nepotism and general inefficiency plague the governments of said countries, though they do have the ‘small’ advantage of having larger economies, which slows their inevitable collapse.[pullquote]Political corruption, nepotism and general inefficiency plague the governments of said countries, though they do have the ‘small’ advantage of having larger economies, which slows their inevitable collapse.[/pullquote]

Regardless of size, Greece is an example of what’s to come.  Though the governments of Spain, Italy and Portugal— along with the EU—will scream and shout that they are not like Greece, the result will be the same, as evidenced by the current situation in Greece: mass unemployment, grinding poverty and rampant embezzlement.

If Spain is any recent indication, this may be happening sooner rather than later. Spain has requested a 39 billion euro bailout for its troubled banks with the Prime Minister not ruling out a bailout for the state.

If such a state bailout were to occur, expect a situation similar to Greece’s, complete with the same ‘cyclical’ medicine that jumpstarted the insanity described above. The only difference will be that the EU, the banks and the lenders won’t be able to buy themselves time and the ‘great European experiment’ will go straight down the tubes, dragging the global economy along with it.

This cycle must stop and dialogue must start to better grasp the context of this crisis and to address it properly. If this vicious cycle continues to Spain in the same form as it is in Greece, expect investor confidence to quickly progress from ‘shook’ to ‘shattered’ with a mass exodus of investment from Europe. If this happens, the concept of an integrated Europe suffers; the people who live in these ailing countries suffer and things slowly get worse until the bubble finally goes bust.

Konstantine Roccas is an observer of international affairs and governance, both local and international, but also writes about anything else that piques his ire. He enjoys a half kilo of Greek yogurt daily.

More of his work can be found at myriadtruths.blogspot.ca and he can be followed on Twitter @KosteeRoccas.