Well, the Greeks voted on June 17th, but I am confused. What did the voters say?
Before the election, polls revealed that 80 percent of the people supported membership in the European Union and the continued use of the Euro. When they voted, those same people cast 52 percent of their votes for parties opposed to the adoption of the austerity program that Greeks feel is being imposed upon them by the more powerful members of the EU—which translates into Germany. Accepting the economic program is an essential agreement in order to remain in the Eurozone.
The New Democracy Party garnered the largest vote with nearly 30 percent. The leader of the conservative party, Antonis Samaras, pledged to keep Greece in the Eurozone and to negotiate modifications to the austerity package that Greece must accept in order to receive an additional 240 billion Euros.
Somehow, people find the promises of Antonis Samaras unreliable. When the New Democracy Party was in opposition against the socialist PASOK Party—which had accepted the program imposed upon Greece—he rejected it. His reversal leaves his position in doubt among Greeks and the politicians outside with whom he has to negotiate. In short, is he for the austerity package or against it?
At this moment, he seems to be supporting the packages and has formed a coalition with PASOK and the Democratic Left. Together, the three parties have 179 seats out of the 300.
It is enough of a majority to enable the coalition to move legislation through the parliament, but they cannot say that they are speaking for the people. They have a majority of seats, but they are far from having a majority of the public support.
Fifty of the parliamentary seats are a Greek constitutional gift to the party with the largest number of seats. It seems that the creators of the constitution understood the Greek propensity to fragment into squabbling hopeless factions and some means was needed to attempt to solve the tendency not to cooperate. Greek political parties are often built around an individual and reflect the views of the leader and the circle clustered around him. With egos and vanity deeply involved in political decisions, solutions can be difficult to achieve.
What about Alexis Tsipras, the leader of the leftist Syriza party? He collected 27 percent of the votes and the second largest number of seats. Evangelos Venizelos, leader of the center-left Socialists PASOK Party that won 12 percent of the popular vote has urged that Alexis Tsipras be brought into the government, but that is an idea without any hope. Even PASOK and the Democratic Party that have joined the New Democracy Coalition are refusing to have any of their members join the cabinet. It is their way of establishing a distance from any of the decisions that will be made and a recognition that the government will not survive for long.
The next largest party that is left outside of the government is Golden Dawn, a fascist movement that has adopted many of the characteristics of the Nazis who so many Greeks hate from the days of German occupation. Golden Dawn has grown from a scarcely noticed noise in the back streets to seven percent of the popular vote. They are noted for throwing foreigners out of the hospitals where there is too often a shortage of medical supplies. They also oppose what is seen as a German imposed austerity program and would create employment by planting land mines along the borders to keep out foreigners from “contaminating” Greek society.
The new coalition, with all of its conspicuous warts, will be accepted by the IMF, the ECB, and Brussels because there is simply no one else. The latter will not change its demands that Greece repay its debts, although it is likely that the time permitted to complete the payments will be extended and new bonds will be created to manage the debt load. Although some of the other government leaders would like to evict Greece and probably others from the EU, there is no provision in the EU constitution to expel a wayward member.
What the Eurozone must do is to keep the money flowing into the Greek banks that are going to continue bleeding liquidity into Germany and elsewhere. No one in Greece believes much has been achieved. Only the fuse on the time bomb has been lengthened slightly.
If the new government has the courage to implement the programs being promoted by the EU, the austerity will cost Greece more government jobs. That will reduce the spending in the economy and will increase the deficit. Without people working and spending, there will be no taxes to collect. With no taxes to collect, the Greeks are going to watch the bottomless pit into which their economy is sinking getting a little deeper.
Over the last five years, the Athens Stock Exchange declined by 93 percent. About a third of Greek businesses operate in the grey economy in order to escape regulations and taxation, but it means that they are also unable to function in the open financial markets where they can borrow from commercial banks and they have no chance of joining the export sector. Family-operated and focused upon local markets, the Greek economy has little chance of benefiting from the usual types of government financial stimulus programs or even from the return to a highly devalued drachma, except as a way to cast aside foreign debt.
Just as these businesses were invisible when they were functioning, they are invisible as they fail. It is a segment of the society that is dying unnoticed in the background and dragging down with them the families depending upon the business income.
The longer-term systemic effect upon the society is the brain drain that has some 70 percent of young professionals looking elsewhere for greener pastures. Once gone and established in another society, they are most likely lost forever to Greece.
But they cannot afford to wait for better times. Whatever the politicians and bureaucrats in the Eurozone propose will take many months or years to have any important impact. For now, the best that the Eurozone can do is to isolate the Greek economic disease before it spreads an epidemic of bank runs and failures across the continent. Only the most dedicated dreamers see any hope for a cure in the near future.
The extremists in the political movements are simply waiting for the probable failure of the current regime. When disappointment and despair degrades into rage among the masses, they will take their politics into the streets. After that, the future becomes a fog of tear gas and gun smoke.
Felix Imonti is the retired director of a private equity firm and currently lives in Japan. He has published a history book, Violent Justice, and articles in the fields of economics and international politics. He specializes in the Middle East. He can be contacted at: felmonti@ucla.edu
This article was originally published in the July/August edition of the Diplomatic Courier. This version reflects some slight changes to reflect updates since the article went to print.
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Where Did All the Spartans Go?
July 20, 2012
Well, the Greeks voted on June 17th, but I am confused. What did the voters say?
Before the election, polls revealed that 80 percent of the people supported membership in the European Union and the continued use of the Euro. When they voted, those same people cast 52 percent of their votes for parties opposed to the adoption of the austerity program that Greeks feel is being imposed upon them by the more powerful members of the EU—which translates into Germany. Accepting the economic program is an essential agreement in order to remain in the Eurozone.
The New Democracy Party garnered the largest vote with nearly 30 percent. The leader of the conservative party, Antonis Samaras, pledged to keep Greece in the Eurozone and to negotiate modifications to the austerity package that Greece must accept in order to receive an additional 240 billion Euros.
Somehow, people find the promises of Antonis Samaras unreliable. When the New Democracy Party was in opposition against the socialist PASOK Party—which had accepted the program imposed upon Greece—he rejected it. His reversal leaves his position in doubt among Greeks and the politicians outside with whom he has to negotiate. In short, is he for the austerity package or against it?
At this moment, he seems to be supporting the packages and has formed a coalition with PASOK and the Democratic Left. Together, the three parties have 179 seats out of the 300.
It is enough of a majority to enable the coalition to move legislation through the parliament, but they cannot say that they are speaking for the people. They have a majority of seats, but they are far from having a majority of the public support.
Fifty of the parliamentary seats are a Greek constitutional gift to the party with the largest number of seats. It seems that the creators of the constitution understood the Greek propensity to fragment into squabbling hopeless factions and some means was needed to attempt to solve the tendency not to cooperate. Greek political parties are often built around an individual and reflect the views of the leader and the circle clustered around him. With egos and vanity deeply involved in political decisions, solutions can be difficult to achieve.
What about Alexis Tsipras, the leader of the leftist Syriza party? He collected 27 percent of the votes and the second largest number of seats. Evangelos Venizelos, leader of the center-left Socialists PASOK Party that won 12 percent of the popular vote has urged that Alexis Tsipras be brought into the government, but that is an idea without any hope. Even PASOK and the Democratic Party that have joined the New Democracy Coalition are refusing to have any of their members join the cabinet. It is their way of establishing a distance from any of the decisions that will be made and a recognition that the government will not survive for long.
The next largest party that is left outside of the government is Golden Dawn, a fascist movement that has adopted many of the characteristics of the Nazis who so many Greeks hate from the days of German occupation. Golden Dawn has grown from a scarcely noticed noise in the back streets to seven percent of the popular vote. They are noted for throwing foreigners out of the hospitals where there is too often a shortage of medical supplies. They also oppose what is seen as a German imposed austerity program and would create employment by planting land mines along the borders to keep out foreigners from “contaminating” Greek society.
The new coalition, with all of its conspicuous warts, will be accepted by the IMF, the ECB, and Brussels because there is simply no one else. The latter will not change its demands that Greece repay its debts, although it is likely that the time permitted to complete the payments will be extended and new bonds will be created to manage the debt load. Although some of the other government leaders would like to evict Greece and probably others from the EU, there is no provision in the EU constitution to expel a wayward member.
What the Eurozone must do is to keep the money flowing into the Greek banks that are going to continue bleeding liquidity into Germany and elsewhere. No one in Greece believes much has been achieved. Only the fuse on the time bomb has been lengthened slightly.
If the new government has the courage to implement the programs being promoted by the EU, the austerity will cost Greece more government jobs. That will reduce the spending in the economy and will increase the deficit. Without people working and spending, there will be no taxes to collect. With no taxes to collect, the Greeks are going to watch the bottomless pit into which their economy is sinking getting a little deeper.
Over the last five years, the Athens Stock Exchange declined by 93 percent. About a third of Greek businesses operate in the grey economy in order to escape regulations and taxation, but it means that they are also unable to function in the open financial markets where they can borrow from commercial banks and they have no chance of joining the export sector. Family-operated and focused upon local markets, the Greek economy has little chance of benefiting from the usual types of government financial stimulus programs or even from the return to a highly devalued drachma, except as a way to cast aside foreign debt.
Just as these businesses were invisible when they were functioning, they are invisible as they fail. It is a segment of the society that is dying unnoticed in the background and dragging down with them the families depending upon the business income.
The longer-term systemic effect upon the society is the brain drain that has some 70 percent of young professionals looking elsewhere for greener pastures. Once gone and established in another society, they are most likely lost forever to Greece.
But they cannot afford to wait for better times. Whatever the politicians and bureaucrats in the Eurozone propose will take many months or years to have any important impact. For now, the best that the Eurozone can do is to isolate the Greek economic disease before it spreads an epidemic of bank runs and failures across the continent. Only the most dedicated dreamers see any hope for a cure in the near future.
The extremists in the political movements are simply waiting for the probable failure of the current regime. When disappointment and despair degrades into rage among the masses, they will take their politics into the streets. After that, the future becomes a fog of tear gas and gun smoke.
Felix Imonti is the retired director of a private equity firm and currently lives in Japan. He has published a history book, Violent Justice, and articles in the fields of economics and international politics. He specializes in the Middle East. He can be contacted at: felmonti@ucla.edu
This article was originally published in the July/August edition of the Diplomatic Courier. This version reflects some slight changes to reflect updates since the article went to print.
