Will Greece Remain On A 'Life-Support' System?

A great deal of ink and broadcast time has been spent over the last few months on the fate of Greece. Mind you, this is a discussion that self-obsessed Greeks have been having at least since Homer, but it seems to have gained traction recently. As a very smart, very well plugged-in Greek friend explained at dinner last night, “A lot of people in Greece love nothing better than the fact that Greece is on the front pages of the world’s newspapers. While the content of this news may escape them they consider such coverage proof that Greece is where it should be – at the centre of the universe.”

            My friend, who would describe himself as a ‘realist’ rather than a ‘cynic’, says the current stand-off between Greece and the rest of the Eurozone is ‘pure theatre – nothing more.’ Both sides, he says, are playing to domestic audiences. The Greek side uses its bizarre, confrontational negotiating style to please the home audience. Given the high approval ratings of this strategy seems to be working. The optics of the  ‘little guy’ standing up to the power of the ‘big bullies’ effectively obscures the reality that the country is broke and can barely meet its pension obligations. The heavyweights of the European Union, for their part, need to show their own domestic audiences that they are not giving in to the ‘profligate and corrupt’ Greeks. They are well aware of the rising chorus of resistance to further financial assistance. “Hans will not give one penny more to those shiftless bums. If Portugal and Ireland worked their way out of the recession why can’t Greece?” So goes the rhetoric.

            The reality is a bit more complex. My friend anticipates a messy continuation of the current situation. “The creditors and the Eurozone are well aware that there is no way the current Greek government, or indeed any foreseeable Greek government, will make the necessary structural reforms to generate growth and help the country stand on its own feet. Rigid, antiquated ideology combined with deeply entrenched vested interests make such reforms virtually impossible. It’s not just Syriza, the former New Democracy government was never serious about implementing reforms. It is far more likely that the creditors will keep Greece on a life-support system by drip feeding it just enough cash to keep it within the Euro zone. Then they can forget about Greece and move on to more pressing issues. No one wants to risk a complete break- up of the Euro over a possible Greek exit from the single currency.”

            The only flaw in this argument is that the so-called ‘Hard Left’ faction in Syriza doesn’t want to play this game. They would like to drop the constraints of the Euro and return to the national currency, the drachma. The language they use while spinning around in their own little galaxy is full of such stirring phrases as ‘national sovereignty, dignity, national honour, and freedom from oppression.’ When reminded that even fellow ‘austerity’ sufferers like Portugal, the Baltic states and Ireland, urge Greece to follow through on reforms this faction in Greece says this is merely proof that Europe is not ‘ready’ for a real left-wing government. You have to remember that Greece is about the only country left where political terms like ‘Left’  and ‘Right’ are actually used in serious conversation. Most other countries have moved on to more current challenges rather than re-fight old, stale political doctrine.

            Behind the ringing calls for ‘national sovereignty’ with a return to the drachma lies a far more mundane reality. Returning to the drachma means essentially a return to the rotten old system that broke Greece in the first place. The government could simply print as much money as it wanted, regardless of its value, and reward its friends with jobs, higher state hand-outs, even more restrictive labour practices, and protective barriers for favoured industries – those that are left in Greece that is. The economic hardships faced by ordinary people would be glossed over as ‘sacrifices necessary for the common good.’ In other words, ‘Stop whinging about the lack of food on the shelves and glory in the return of Greek pride.’

            Remaining in the Euro, with all its financial constraints and empty Greek treasury, makes this type of political spending more difficult. But not impossible. “Remember all those €70 billion in non-performing loans held by Greek banks.  Do you think it is a straightforward process determining whose loans will be forgiven and whose repayment will be demanded,” my friend asked rhetorically. “I dare say there will be some interesting discussions between the banks and the government on this issue.”

            He may be right in his ‘life support’ analysis, but there is always the risk that an accident between inexperienced Greek negotiators and tired, frustrated Eurozone finance officials could push the country into the cold, hard world outside the Euro.