Tuesday, February 3, 2015

Greece: The Tail Wagging the Dog

Human beings do not have tails but we do have animals that do. We are quite used to our pet wagging its tail especially right after we poured a large JD on the rocks and put it on the edge of the cocktail table. We are NOT used to the tail sitting motionless as it wags our dog. That would be weird and perhaps even dangerous.

All of this is relevant because in 2015 Greece has become the tail that wagged the dog.  The stories floating around this week about Greece and the Syriza Party prove it. Syriza is a left-wing radical political party in Greece. I tried to find a generic definition for Syriza but the word appears to mean nothing except for radical left-wing party in Greece. So I will make up my own definition and say it can be defined as a state of emotional chaos and intellectual vacuity.

This Syriza Party is amazing. Not even a majority of Greek voters it has done the impossible. Like David slaying Goliath, Syriza has brought the entire European Union to its knees. Syriza is threatening to not pay what it owes to the EU and has already suggested it might align itself with countries like Russia, China, and Cuba. Amazing. It is one thing for a country to use its veto in the United Nations – but for a European country to align itself with places like Russia and China is beyond imagination. As one of the smallest members of the 29 country EU, Greece is threatening to use it veto power to sway a huge economic union. If this isn’t the tail wagging the dog I don’t know what is.

If that isn’t bad enough for you, let’s say Syrzia is also evidence that a very long historical wave has peaked and is in decline. It’s like when your best friend and companion Bogie can no longer catch Frisbees in mid-air and instead retrieves the missile from the ground and limps back with catch in mouth and tail weakly wagging. You know the best is over. You fear for what is to come. You feel terrible and sad.

I am not exaggerating when I say that Greece shows that we have hit a sad turning point. The people of Greece spoke. They are tired of unfair austerity and want to move on with a new government that will restructure their debts. It seems unfair to Greek voters that they would have to pay their debts. Keep in mind that the Greeks entered into this mountain of debt willingly. Greeks were not deceived by Payday Lenders or by loan sharks in shiny suits.

Even before the crisis hit in 2007, Greece’s government deficit had reached around 10% of GDP. At that time the overall Euro area had a deficit of about 2.4%. During the crisis things got worse for all governments but in Greece the problem was catastrophic with debt to GDP reaching 19.1%.

No one made Greece join the EU. And no whips were involved when they gave up the drachma in favor of the euro. In joining this club they knowingly and willingly signed up to hundreds of agreements. Among them they agreed to keep their deficits no higher than 3% of GDP and debts no greater than 60% of GDP. The Greeks have done neither. One of the reasons for joining was to give Greece a more solid economic reputation. Being a successful member of the Eurozone gave them instant credibility and better interest rates for borrowing. But despite continued and repeated efforts to ask Greece to own up to its obligations, the Greeks made excuse after excuse and now find themselves in an impossible mess.

Austerity is too hard. Paying off honest debt is unfair. Restructuring the economy so it can compete and changing the government so taxes are normal and bribes are illegal is too much. Now the media says that other countries are watching the Greek case and will follow if they are successful in getting a huge portion of their debts written off. That anyone in the Eurozone would even listen to this nonsense is beyond credibility. 

When the Greeks threaten to not change and to not pay their debts, someone is harmed. Some of the money is owed to individual countries. If the Greeks don’t pay their taxes will have to increase in those countries. The Greeks also owe the EU government, the ECB, and the IMF. When Greece does not pay a loan,  other countries have to pay it. But the critics argue that it is still unfair. The IMF is rich. The EU is not popular among many Europeans who call themselves Eurosceptics. The ECB can print money.

But all this is nonsense.  The Greeks have to change. They have horrible habits that will devastate them in a global economy whether they are inside or outside of the EU. Sure they can get out of the EU and Eurozone. But they are still a member of the world economy. You can kick a drunk out of your club but he or she is still part of your community or town. The Greeks have to change their ways and this crisis just proves it. Okay so austerity is rough. But this is not just about austerity. It is about common-sense reforms that many European countries have already taken to make their economies more efficient and competitive.

So why don’t more people see it this way? I think it is because we have gone too far. Too many people hate markets. Too many people raise so called fairness above competitiveness. Too many people don’t see simple universal truths and instead see complex and complicated layers of excuses. We don’t care if Greece does the right thing. Our hearts ache for Greeks who will have to change their ways. Our hearts similarly pound when someone suggests we get tough on Russia in Ukraine or Bashar in Syria. 

Russia has invaded the Ukraine. Period. Bashar used gas on his own people. Period. Greece is a mess. Period. Doing the right thing will be painful. So we excuse inaction by talking about time, and layers, and complications.  This is not a one-time change in attitude. It will be hard to undo. Democracy makes it too easy for the heart to rule the head – or for the tail to wag the dog. 


  1. Beware of Greeks bearing .... IOUs.
    I watched the Greek riots on TV. The place is in ruins.
    The problem with socialism is that, pretty soon, you run out of the other guy's money.
    Why criticize Greece. It is just a microcosm of the US in a few years.

  2. Dear LSD. It’s ground hog day/ déjà vu all over again. We’ve seen this play play out many times last century and will see it again this century . . . looks like starting with Greece.

    Developing or economically weak countries (haven’t verified but mostly are socialistic/communist-leaning) don’t manage their income and expenses, get relief from the IMF, World Bank, Federal Reserve, EU, etc., promise to behave then don’t, then ask forgiveness—specifically debt forgiveness—and/or devalue their currencies. Yep, taxpayers are left to pay the bill.

    The IMF, World Bank, Federal Reserve, EU, etc. are too eager to help out said countries—or else be held accountable for causing misery/deflation/social unrest, etc. if more aid and debt forgiveness isn’t given.

    It’s a never-ending death spiral circling the drain. And, not to be chintzy with criticism of poor fiscal management—as the Fuzz Meister says—the U.S. is nudging up against that condition.

    The world is a poor learner. History repeats itself but the world student class of late 20th century and the new class entering the 21st aren’t reading the lessons. So, who’s stepping up to be the bad ass Mr. Chips?

    1. This reply to my reply is from Charles....“Maybe . . . but, does she have the cojones?”

  3. SYRIZA stands for Coalition of the Radical Left.

    How have the austerity measures benefit the Greek people in the last 5 years? Unemployment is increasing, poverty is increasing, suicides in Greece have been increasing.

    I do believe that each person, entity, country, should be responsible for their actions. The same stands for Greece. But I get the feeling that the EU, the ECB and the IMF sometimes behave as a punishing body (or three). Should this be the case: "I will help you but you will make all reforms that I ask you to do". Is that why the EU was formed?

    As a citizen of the country that is under austerity measures right now, I really can't tell you what I feel about it. On the one hand, I see that corruption and inefficiency in Cyprus can only be tackled by external (i.e non-Cypriot) bodies who have no connections or relations with government officials and all they want is to get their money back. On the other hand, I see a society where the gap between classes has widened, I see my generation (people in their 30s) who cannot even think of having a second child because they can't afford it and I see people like me who are ready to pack their bags and leave the country, leaving their family behind.

    Where do we (or the EU in that case) draw the line?
    I am not an economist, but I am a pragmatist. In the case of Greece it is not black or white. Greece has asked for restructuring of the debt and they want to negotiate. EU should be a negotiator and not a dictator.

    And a sidenote:
    Radical Lefts in Greece represent a very small percentage of the population. The ~40% of SYRIZA in the recent elections came from people who are desperate, who have lost their jobs, who have seen their loved ones commit suicide, who have been encouraged by the words and speech and promises of Mr. Tsipras. If anything history has taught us, if that if this government fails, then I am afraid people will turn to the other extremes, call me Golden Dawn, the Greek neo nazi group.

    1. Mr Marangos,

      Thank-you for your reply -- it underscores the pain felt when a country takes on too much debt and ignores decades of requests for change. The EU does what it does because there are signed treaties that require it to do so. Future generations are being hurt not because of the EU. They are hurt because of the behaviors of their parents with regard to debt and to modernizing their economy. My post argued not so much for austerity but for sensible reform. I believe there should be some debt reorganization that follows real economic reforms. No excuses....real reforms.

    2. It is a tough and complicated problem. The country that birthed democracy, ruled the Mediterranean, conquered Turkey several times, was the breadbasket for civilized Europe faces the challenge of not being able to produce enough services and products to support is debt. As Alkis stated that whole eastern European area could fold with Greece and resort to radical action. If Europe was really united as is the US then Greece would be similar to Florida where the primary industries are oranges, tourist and phosphate. Its 19 M population has a high percentage or retired who do live off taxes. 60% of the employed people are just above or at the poverty level for wages. However, Florida has many government subsidies paid for indirectly by the people in the other states. The US will not let any state fold. The big difference is the Florida has to have a balanced budget

      Greece and many other European countries do not have to have a balanced budget and as we all know there is no such thing as a free lunch.