Beware of Greeks Returning Gifts


by Avi Davis

On Monday morning, the Greek people awoke to find themselves confronted by a new reality.

 

 

In a landslide, the anti -austerity party, Syriza, won a decisive victory in national elections, positioning its tough-talking leader, Alex Tsipras, to become the next prime minister.

Appearing before a throng of supporters outside Athens University late Sunday, Mr. Tsipras, 40, declared  the era of austerity over and promised to revive the economy.

He also said his government would not allow Greece’s creditors to strangle the country.

Such a victory was hardly unexpected.  Since  Germany and other northern European countries had forced Greece to swallow the bitter pill of austerity in 2011,

the country has groaned under the dramatic cuts in government spending, the loss of public sector jobs ( at one time the public sector made up nearly 45% of the workforce)

and the evaporation of the once booming housing market.  The Greeks could not become accustomed to a situation in which  their future was controlled by other countries

and  there has been increasingly loud rallies calling for an end to the Euro mandated austerity regime.

But Tsipras’ plans to end austerity and grow the economy quickly will immediately encounter some insurmountable hurdles to which  the economists

in his party have not given sufficient attention.

For lets be clear about one thing:  Greeks economic pain is not due to the austerity measures forced upon it by the Eurozone.  It came about because of years of profligate

spending, irresponsible budgets, a debt to GDP ratio that was the highest in Europe and a country that failed to produce anything much at all that the rest of the world wanted.

Greece joined the Eurozone in 1999  flush with the expectation that the high valued Euro would bring with it a rush of international investment

which would power the economy into the 21st Century and contribute to widespread prosperity.

But in those giddy years, the people of Greece neglected to affirm the one value that they would need to enshrine in order to grasp their new golden egg:

they still needed to work and work hard.

That was not to be.  Given to years of lassitude, the Greeks, and most Europeans have no stomach for the kind of effort it takes to sustain a modern economy.

Profligacy, social welfare, neoptism, corruption and a vibrant, fairly open black market, has produced a country where people don’t work much, retire young

and take long vacations. Add to this severe institutional problems – such as the fact that a third of the country doesn’t pay tax and a quarter of the economy operates

under the table and you have a recipe for economic catastrophe.

Corruption, venality of office, an over loaded and under-worked bureaucracy and the fact that there is no history of accommodation between the political classes

and labor unions at all, have all added to the sense of hopelessness.

 

The Greek model actually describes the bulk of Europe, where the work ethic has given way to the pleasure ethic and the

lambent idea that government can always be counted on to bail out failed enterprises.  But what happens when the government has no money to bail out anybody

and the source that it must rely on – namely foreign investment, remains skittish and uncertain about the country’s future?  What happens when no one – not the European Union,

not the United States and not China – is prepared to say we believe in your future and we will continue to fund your debt?

That is exactly what  the new prime minister will face in the coming days and weeks when  the EU stands its ground and tells the Greeks that if they

welsh on their commitments then their debt will be called – leading to a pain unlike the people of Greece have ever known before.

 

For the EU, Greece and the austerity regime imposed upon it has represented the plug that has prevented them from hearing that flushing sound as the wealth of Europe

gurgles down the drain and empties into the Aegean Sea.

Would detaching Greece from the Euro and letting it drift back into the drachma bring great pain to the heart of Europe?  Almost certainly, but it is not fatal.

Will the Greek revolt  against austerity encourage other countries under the same austerity regime – Portugal, Ireland, Spain and Italy – to follow their example and

buck their benefactors?  Almost certainly not.  The difference is that these countries have mature statesmen who have been able to convince

their populations that a  temporary belt tightening and fiscal discipline could lead to a far more prosperous future.

Unfortunately in Greece that kind of leadership has been absent and that absence is now even more pronounced with the ascension of  anew leader who eschews

the kinds of sacrifices the Greeks have needed to make for years

 

In 2011 The European Union – and most particularly its wealthier countries in Germany and France – handed Greece a gift.   Now the Greeks wish to

return that gift with contempt, thinking that the EU has more to lose than they do.  They could not be more mistaken. The Northern European countries

will let Greece sink into the Aegean rather than open the floodgates to other fragile economies demanding the same accommodation.

 

A titanic  tussle is about to take place.  But lets set in perspective:   In this Olympian wrestle for dominance,

it is the Europeans who hold the Greeks by their vulnerable parts and not the other way around.

 

Avi Davis is the President of the American Freedom Alliance and the editor of The Intermediate Zone

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