The Devil you Know or the Devil you Don’t

The main theme of the posts I’ve written about Greece so far has been my determined and conscious desire to remain somehow positive/optimistic, but the fear, uncertainty and confusion that I mentioned here are becoming only more pervasive. News of the most recent bailout has not been greeted with optimism, despite headlines about Greece ‘winning’ the next round of bailout funds and the late night negotiations ending in ‘success.’

In the last few months I have attempted to give myself a crash course in economics and European politics, with varying degrees of success. Even with my somewhat limited background, I was surprised when I read the Eurogroup’s report yesterday. The first thing that bothered me was this: ‘Greece must achieve the ambitious but realistic fiscal consolidation targets so as to return to a primary surplus as from 2013.’ I would normally assume that these people know what they’re talking about, but literally everyone I’ve spoken with (and I agree) believes this goal is not attainable. The Financial Times gives an interesting look at the impact of the austerity measures on Greece, compared to other European cutbacks, and the figure is dramatic. The Greek economy is rolling slowly to a halt, and I find it impossible to imagine this will be reversed by the end of next year, especially without an active plan for recovery.

The statement’s inclusion of  ‘an enhanced and permanent presence on the ground in Greece’ raises another series of questions for me. As a high school student in Model UN, I learned early on that any degree of ‘permanent’ involvement in a nation’s governance, financial or otherwise, is to be avoided. (This useful lesson came through a red-haired delegate from China, who stood up and said simply ‘National Sovereignty’ to every measure we proposed). In discussing the report yesterday, one of my colleagues said, ‘Well of course they agreed to permanent interference, our stupid politicians don’t represent us at all.’ I personally am torn – I understand indignation that Greek leaders would agree to such harsh terms, especially seeing what they will mean for Greeks, but I am also faced with the inevitable knowledge that the same leaders seem to have little alternative. By now, their careers are tied into the fate of the Euro, so their desperation to save it is understandable.

In times of uncertainty and crisis, it is natural for people to look around for someone to blame, so this has become a popular pastime both at work and throughout Greece. As I’ve mentioned before, conspiracy theories abound here. The latest explanation I’ve heard for why Europe is even bothering with a bailout, when so many seem to agree a default is inevitable, is that Europe needs stability during an election year. Blaming Greek politicians however, seems to be the favourite. (Obviously plenty of dislike is directed towards European leaders too – I was at a party on Saturday with someone dressed up as a devil with a Merkel mask.)

Elements of the Greek government and the public sector are undeniably corrupt, but I still haven’t understood how we got this way. By now though, favouritism and bribery seem to be so entrenched in everyday life that the cycle is vicious and repetitive. A colleague explained that when building their house, the official at the power company continued to find problems with her paperwork until she slipped something into the drawer he helpfully left open at his desk. Without something to placate him, she couldn’t get connected to the power grid. Stories like this are all too common, and frustrate me to no end. Perhaps this type of day-to-day corruption makes European advisers an essential piece of the bailout plan?

I am curious, and ask anyone I can, why people are so enraged with the politicians for accepting austerity measures full stop. Clearly, no one likes austerity – this much is obvious. But what is the alternative? Should we default sooner rather than later, as the general opinion seems to be that it’s inevitable? Have the last two years of cut backs been for nothing?

The Financial Times writes, ‘Attention is now turning to what happens next. The medium-term outlook is bleak. There is a growing consensus among pundits that the only real clarity is that there will be more uncertainty.’ By now, perhaps Greek should have become accustomed to this feeling of uncertainty. At the very least, they are getting creative in attributing responsibility, which I  think at this stage is understandable. As we carry on from day to day, with various experts from around the world recounting how unsustainable the situation is, the attempt to find some kind of vaguely reasonable explanation seems valid. Until this happens, I’m reading everything I can., and you’ve just read the resulting musings.

Coming soon… it’s not all doom and gloom! There have been some positives in the last few weeks, which I’m going to address soon.

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3 thoughts on “The Devil you Know or the Devil you Don’t

  1. Lee says:

    Thank you so much for penning and posting this; it is so well done and I so enjoy reading your posts. Please keep them coming!
    What can be done? My perspective, simplistic as it may be, is this: The European banks need to take responsibility for either their lack of due diligence or predatory lending practices(take your pick) and write down their loans (they already should have an Allowance for Bad Loans Reserves account on their Balance Sheets to cover non-performing loans) to the level that Greece can meet the interest+principal payments and still have money left over for reinvestment in its economy. If this is not acceptable, the country should default; it’s not as terrible as people might think and is, in fact, at times necessary as many companies and countries have already found out. I am certain that there are Asian lenders more than willing to provide new funding once Greece clears the slate.

  2. Laurie Poseidon says:

    Most people believe that the corruption practices and distrust for authority go back to the Ottoman Empire. Greeks had to trick/be smarter than the Turkish authority figures and thus learned to work in their own economies below the surface. It certainly does explain to some degree complete willingness to act outside law or the powers that be in terms of taxes, etc. No modern Greek would cheat and not pay at a taverna, but it’s different if you are cheating the government by not paying your tax because many people believe that the government is just “authority” and you cannot rely on it to act in your best interest.

    Sorry you chose an electric company bribe example. I’m not saying it doesn’t happen, but I know people in the electric company who resisted huge bribes and were politically hurt by their resistance. Indeed it would be better for things (like electricity) to cost slightly more and not have bribes, but how can you make everyone understand and act on that? How can you ask teachers not to do private lessons without receipts (i.e. taxes) when they earn about 1,000 euros a month and are expected to provide for their families with that money? it is almost assumed that they should be paid little because they will make extra money on the black market. How do we change these attitudes of at least 50 years if not of centuries?

    As for the issue of banks writing off the loans. . . haven’t they agreed to cutting 53% already? Do you think they should agree to deeper cuts? You say, politicians’ “careers are tied into the fate of the Euro, so their desperation to save it is understandable”, but I don’t believe they want to keep the Euro only to save themselves. I am inclined to believe their “rhetoric” that falling out of the Euro will doom our pension, health and other plans. It scares me beyond belief. We did “default” or at least serious devaluation when we had the drachma, but the psychology of leaving the Euro is more than I can imagine. Always, when the economy is bad, it is the poor, needy people who get hurt worst. They don’t have funds stashed abroad to feed, house and heal their children. What happens to crime in a broken state? Will I have to leave my adopted home if things collapse? What if I were someone who couldn’t leave? What does it feel like to know you have years of doom and uncertainty ahead? Even with all the money (in China–pardon the pun!), that mindset would not allow me to invest in this country until some of the uncertainty is gone. . .and how do you get rid of the uncertainty?

    None of us wants to be negative, but I believe we need a leader of vision to follow out of this morass. Unfortunately, political leadership is considered an oxymoron these days. It’s easier to give up and wring your hands about how terrible everyone else is than to try to find a compromise, reasonable solution and work hard for it. Who are we going to vote for when we get the chance?

    • Lots of really interesting thoughts. I came across this paper (that I haven’t finished reading through) about historical roots of the crisis: http://www.cato.org/pub_display.php?pub_id=13569 Kind of illuminating I thought, and the historical context of surviving under the Ottoman Empire does make sense. The government doesn’t have a traditional alliance with the people, so why should we believe they have anyone’s best interests at heart aside from their own?

      That example was only because someone told me about it – I know there are civil servants in all sectors that hold themselves to the highest standards, but it’s such a shame to be in a position where political damage can be done because someone chooses not to take part in under the table stuff.

      You said everything very well – Michael and I were speculating about leadership, and wishing someone will show up soon to turn things around. It feels like that’s just wishful thinking though..

      Next blog is in draft form with the title ‘Not All Doom and Gloom!’

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