Monday, July 13, 2015

Greeks fail to get their pony

 - by New Deal democrat

It appears that Germany and its creditor allies have crushed Greece.  An insightful article in this mornings's Washington Post helps to expalin what Greeks have been thinking:
An overwhelming majority of those who voted no– about 88 percent — believed that, as a result of an OXI vote, negotiations would continue, as you can see below. Only 5 percent believed that a no vote would mean Greece would exit the euro zone. 
By contrast, those who voted yes were much more worried about Grexit. In fact, 61 percent of them believed that would be the most likely outcome of a no vote.
In other words, the 61% of Greeks who voted "no" a week ago thought they were going to get an end to austerity and to keep the Euro too (and a pony!).  So, apparently, did Tsipras. Syriza never had any intention of actually exiting the Euro if they couldn't get an end to austerity.  Since a credible threat, carried through, to leave the Euro was their only leverage, they have been crushed by the creditors.
This entire episode, given Tsipras's apparent cluelessness, has been a failed turning point. Either there will be a move towards fiscal union on Germany's terms, or other southern European protest parties will understand that they must actually be prepared to leave the Euro.

Addendum:  I don't mean to be hard on the Greek people, who have suffered badly and will now suffer even more. But they tried to bluff, when other Europeans could read poll results too, and knew that the Greek people were not in favor or leaving the Euro. So the creditors called Greece's bluff, and Greece folded.

It is easy for Americans to be armchair strategists from 4000 miles away, and think that surely, the Greeks must have a contingency plan for leaving the Euro.  They didn't.

I don't mean to be too hard on the creditor nations either.  It wasn't just the German people who opposed a bailout.  Imagine your cousin Joe, to whom you made a loan last month, comes to you.  He says he can't pay it back, so he asks you for a writedown.  But he also asks for a new loan. How accomodating would you be? Probably, if you considered a new loan at all, you would demand a security - something you could sell if Joe defaults on the new loan too.

But again, the bottom line is, the Greek people had unrealistic expectations.  They have been crushed, and now the creditor nations, like Germany, will use Greece as an example to insist that Europe follow their fiscal terms.