George Mesthos How large was Lehman's to the US? The world? It does not take a large percentage of failure to cause a great deal of financial damage. The issue at hand is not Greece's economic weight, but Europe's ability to manage crisis and produce prosperity. Greece's revelations in November 2009 set off this spiral because -- as you pointed out in your first comment -- for the first time markets really considered that the currency bloc does not move as a unit, leading to country-by-country contagion. So why take that risk? As for Germany, its exports are starting to feel the pinch of EU austerity. The responsibility now falls on German leaders to stop scapegoating and make clear that German prosperity is predicated on European (and Greek) stability
George Mesthos This echoes what was going on prior to allowing Lehman Brothers to fold in 2008. We have seen over the last 4 years how that plan worked. Much larger bailouts were required, the financial system missed collapse but the rest of the world has been dealing with the after-effects including recession and debt. PIIGS Fatigue is understandable but misguided. Portugal and Ireland have 'gotten their acts together' and their economies are sputtering. Italians are making concessions thought impossible a year ago to avoid full-blown austerity, partly because no one may be able to bail Italy out. That leaves Greece. IF Tsipras wins, his hardline will either lead to a modification or disastrous default. Unlike Lehmans, Greece can't just go away.
George Mesthos Valid point. This is a mea culpa on my part. The whiplash on the Spanish bailout was so fast I missed it since I didn't check back on the markets at closing. As the WSJ put it..."The unwinding was remarkable for its speed". http://online.wsj.com/article/SB10001424052702303768104577460442153217320.html It's that speed that led us to put in the 4th scenario caveat that the crisis develops so fast, uncertainty has become an end unto itself.
George Mesthos Arguments citing ‘civilization’ and ‘orientalism’ misappropriate history and ignore the more relevant recent past. The purpose of the European Union is not merely a glorified free trade zone. It was designed to integrate all of Europe into a market-based, democratic, and, lest we forget, peaceful continent. The European Community enlarged to Greece in 1981 to consolidate its fledgling democracy following a brutal military junta and to benefit from comparative advantages in tourism, agriculture, shipping, etc. Those longterm benefits should outweigh the current bitterness. Also, Greece was not the only country to flout the Eurozone rules. France has missed the deficit mark 7 out of 12 years, albeit by much smaller percentages than Greece.
George Mesthos We had to modify the article a bit when the Spanish bailout came together so quickly. First, governments feel more comfortable bailing out banks (see TARP) than other governments and societies. Thus, the lack of conditionality for Spain. Second, the markets punished Europe for self-described draconian austerity. They rewarded Europe for bailing out Spain. Finally, the Europeans realize they have to supply more than the bare minimum. The first Greek bailout failed because Europe (in greek-like fashion) chose to use optimistic revenue projections. Hopefully, in this second chapter, policymakers have realized ravaging an economy (no matter the sins) is ultimately counterproductive. Look for a modification of Greece’s second bailout.
George Mesthos The cycle described here is erroneous. 1) public benefits in Greece are weak when it comes to public sector wages, unemployment and pensions. See OECD statistics. Greeks depend on the family for social support, now decimated by austerity. 2) Lying did happen. But the conservatives (ND 2004-2009) did it most recently and the socialists (PASOK 2009-2011) had to implement austerity. 3) Greece suffers a crisis of governance – not so much spending but the inability to enforce the rule of law (including taxation) equally. The communist party (KKE) has fallen from about 10 percent support to around 5 since the crisis began.
George Mesthos Roman, Greece’s issue at the moment is not so much polarization as fragmentation. Usually, Greek society is caught in a dichotomy; east-west, demotiki-katharevousa, monarch-democratic, liberal-conservative, capitalist-communist, etc. The problem right now is that the poles have split into so many pieces. For that reason, we concluded that scenarios proposing a new unity government are wishful. In our scenarios there is likely a new consolidation -- old-new or right-left – even if it takes multiple parties.
George Mesthos Let's start with a question. Is immigration a burden? If a country can absorb immigrants they are a benefit. As outlined in Germany's case, Greek engineers would actually help their economy be more productive. In certain cases, Australia subsidizes people willing to work in rural areas. Pretty much all of the West could use young, employed people (and their families) to offset the demographic woes at the heart of its fiscal crises. Will migrants be welcomed? Paradoxically, Western publics scorn low-wage workers filling gaps in the labor force but they praise or don't notice successful migrants. Greece ironically has an immigration problem because it doesn't have low-wage work available for thousands of refugees who the EU won't let out.
George Mesthos What makes the Greek case interesting, but I didn't develop in the article, is that we would not be talking about a diaspora forming, but rather getting larger. After all, this reporter considers himself a member of that diaspora as a 3rd gen G-A. There are some 7 million people outside of Greece who identify themselves as ethnically Greek. Of that number a relatively small, but significant number grew up in Greece or Cyprus and either migrated as EU citizens within Europe to posts usually in academia, banking or industry or abroad to Canada, the US, Australia, even South Africa and the Middle East. The question I would ask you is can we still consider it Brain Drain when a country is undergoing severe brain waste?
George Mesthos Angela, good points. The public/private education tension is a long, fraught issue. One thing we often miss looking from the outside in is the legitimate concern Greeks and education officials have about 'Degree factories'; in other words, private programs that do not meet standards but either allow people to purchase qualifications or fool people into thinking they are getting an education when they are really not. Nonetheless, private education is thriving in Greece, with Greeks going to colleges, frontistiria (cram schools) or language centers to supplement their public education. The skills they learn from these programs tend to be more in line with the 21st century and will help those going abroad.
George Mesthos My fellow George, could you elaborate more on your position that regional escalation could be avoided? My kneejerk thought after reading this article was that an attempt to put "boots-on the ground" (which I agree, would probably be necessary) or even just a no-fly zone would be geographically perilous. Iraq is about to get a shot on its own two feet. Iran probably doesn't want to see its partner knee-capped. Lebanon is always something of a wildcard and what will Israel do? (Although an Israeli airstrike a few years ago got a decidedly muted reaction.) North Africa's neighborhood, including the Mediterranean and the Sahara, was a lot more tranquil. Economic and other sanctions may be less gratifying, but more viable med. and long term
George Mesthos John Giokaris raised an interesting point that I wasn't able to tackle in my original article. Greek political calculus might seem like rocket science to outside analysts but it's pretty straightforward once you learn the characters and how to read between the lines. PASOK and ND have long been about the same party in reality, with vastly different individual personalities. A lot of that has to do with Brussels but more of it has to do with the malaise of Greek government. Both parties have gone against their own ideologies to oppose the other in power in everything. The key number in Greece is 150, or half of the parliament. The closer the ruling party is to 150, the more likely elections are, ergo Papandreou's aborted referendum.
George Mesthos All great questions, Gianni. Keep in mind there's a difference between leaving the EU and leaving the Eurozone. Exiting either one would be unappealing. If restoring the drachma could also restore some lost economic sovereignty but maintain the basic benefits of EU membership, Greeks would do it. Taxes are harder to dodge than they used to be and the anecdotal complaint is that it used to be salaried workers who got slammed with all the taxes. Now the small scale merchants can't evade any more but the wealthy dodgers largely still get away on the cheap. Plus legal 'understandings' are gone such as kiosk owners' flat tax. Employers are much more afraid to go under-the-table than they used to so if you have papers, you pay taxes.
George Mesthos Geia sou Yanni! Thank you for your thoughtful question. The anarchists and the folks who get rowdy at demonstrations are an incredibly heterogeneous bunch. They are more of a network than an organized movement, with little or no hierarchy and many groups drawing from the same personnel. It's important to differentiate between the koukoulouforoi (the Gas Masketeers) and the terrorists who carry out bombings and automatic weapon assaults on police stations. They're not (necessarily) the same animal. Each and every one of them from the priveleged teenage hero wannabe, to the middle-aged weekend warrior, to the hardened revolutionary has their own cocktail of reasons from utter frustration to violent overthrow of the government. Each generation of Greeks has had its revolutionaries. But almost all of them were trying to achieve democracy. Now what? As for destruction. It's really symbolic