It’s not a pretty picture. The vote raises the stakes to a point where even the insular, financial bureaucracy-addled Euro-crats have to pay attention for once in their worthless lives. At a time when just about all experts have been saying for years that Greece has no hope of ever repaying its debts, the question of whether the EU will even acknowledge its own mistakes is critical.
The austerity measures were bean-counting exercises, in which resolving the debt and finding an economic solution which would actually solve the problem were never even under discussion. A Yes vote would have put Greece back in to the no-win position, with no options but more hardship. It was never a realistic choice.
Quite the opposite, the Greek economy was progressively, and thoughtlessly, shut down. The ridiculous notion of starving the pensioners simply meant that welfare payments didn’t go in to the economy. Businesses closed, and unemployment went up, starving the Greek VAT system of more revenue. The entire process was stupid beyond belief and failed exactly as it was always predicted to fail.
Welfare isn’t “welfare.” It’s an economic tool. Few welfare recipients hang on to their welfare money. It goes straight back into the Main Street economy, where it generates revenue. It’s used to pay bills. It’s a way of ensuring cashflow in economies. That was the basis of the New Deal during the Depression, in which broke Americans had some money to spend to prop up local businesses. To this day, many conservatives don’t even understand that.
The Greek austerity measures basically crashed the domestic economy. They made things a lot worse, very quickly. You can’t pay debts with no money. You certainly can’t pay them when even your ways of making money dry up. Revenues dried up, business slowed, and the chances of making money to repay debt disappeared with each new EU edict.
The whole principle of Greek austerity was wrong. This was “lending more to fund repayments of a debt.” This is a case in which the borrowers simply get more deeply in to debt with each bailout. No debt collector would advocate that as a solution, but some of the biggest financial players in the world did. It was never going to work, and it didn’t.
The Greek vote has also put the ball back in the EU’s self-cluttered court, giving Prime Minister Tspiras a mandate to negotiate from a much stronger position in an otherwise hopeless situation. Some may say the Greeks had nothing to lose with a No vote, but the bottom line here is that they’ve called a spade a spade.
EU austerity vs reality
The EU itself is in less than pristine shape, with several countries, notably Italy and France, not in default, but with very heavy debts. Other countries are staggering along. Only Spain has managed to work itself in to a better economic position, and its problems were its own economy, not external debt like Greece. A serious recession or local economic problems could tip these countries into a difficult debt position.
A few questions:
1. If the EU can’t handle or properly manage a small economy in trouble, how would it handle big economies or multiple economies?
2. If it can’t even understand the perspectives of debtors, how does it propose to find solutions?
3. If it won’t recognize its austerity programs don’t work, what chance does anyone else in debt have? Default may become the default response.
4. If the Greek fiasco simply led to default, will the EU continue to impose the same formula that led to default?
5. If the EU ideal is a prosperous Europe, and the result of EU economic management is an impoverished Europe, how good is EU management?
6. If the EU penalises and starves Greece of essentials like pharmaceuticals as a result of default, does the EU expect admiration for its economic brilliance?
7. If the EU writes down the debt to some sane level, what are the effects? Does the world end, or do a few very rich people wind up with a little less money?
8. If the EU’s position and the Greek response lead to massive turmoil on markets, will anyone really be surprised? Or just disgusted?
The first rule of negotiation is never to put the other party in to an impossible position where they can no longer negotiate.
The second is to find workable solutions, not create more insoluble problems.
The Greeks have made a choice. They’ve accepted the risks of their choice. The rest of the world may want to consider giving them a hand, now their “friends” in Brussels have let them drift into their current state.
Greece is a warning to the EU. Too many mistakes have led to total failure of the European ideal. It’s appropriate that the home of democracy is the first to vote against failure, as much as against austerity.
