Goldman Sachs has much to answer for in enabling Greece to join a club for which it was not eligible. But the blame must be shared by those whose wish to include as many members as possible (in the euro) led them to gloss over the obvious deficiencies in Greece’s fudged application.
Now that Greece is teetering on the edge of an ejection from the eurozone, it is time to stand back from the sound and fury to evaluate the likely consequences. They are mostly desirable and long overdue – no junior member should get its way by threatening the fabric of the club.
Since World War II, Greece has toyed with communism, an ill-fated monarchy, fascism under military rule, and finally a form of democracy that was no more inherited from Pericles than it was self-financing through honest governance and fair taxation.
Modern Greeks prefer an internal economy based on sophisticated barter, allowing only space for agricultural exports, rather than investing in manufacturing or any other productive industry. They disdain strong government and won’t pay taxes to support one, and they are quick to complain about victimisation. Fortunately, they have a healthy Mediterranean diet. This will be needed if they continue to retire at 50.
Those are the facts of life today in Syriza’s Wonderland.
The reality is that it is a waste of time to table the scale and terms of Greece’s debts and the programmes promised for their repayment. They have all been ignored. Every one of them serves to illustrate the weakness of the hand that Syriza boss Alexis Tsipras is trying to play with Europe’s grown-ups.
He has only one ace: Angela Merkel’s desperation, after 60 years of German efforts to create a political union that will guarantee peace within Europe, to keep the euro intact. Her fear is that other countries will try to play the same card, and that Greece might even choose to leave the EU too (with many thousands of refugees from Syria, it won’t).
Small chance: one ace doesn’t make a pair, let alone match a German full house. Greeks play a mean game of backgammon, in which bluff and luck are decisive – but in poker, bluff is quickly exposed. Will they fold? And what will be the consequences for the eurozone if they don’t?
Grexit would probably be good for Greece
The likely answer is EU bond and stockmarket mayhem for about ten days, and then a huge sigh of relief. Despite help from the European Central Bank (ECB), some Greek banks will collapse. But in three months’ time, no one will be talking about Greece, even if it turns to Putin’s Russia for financial support. In any case, the EU will try to ease the passage of Greece’s going to spare its blushes.
The immediate consequences for Greece will be severe, but a restored drachma – devalued against the euro by 50% – will allow tourism and better terms of trade to quickly put the country back in the black.
Suitably chastened, and with its flirtation with anarchy behind it, the government (the present one or, more likely, the next) will learn to run and tax the economy sensibly. There will be considerable debt forgiveness from creditors, and a gradual acceptance from an exhausted but hardly surprised public.
This would not be a bad outcome for Greece, half-way between hubris and nemesis (the “Golden Mean” as described by Aristotle), and it would be a blessing for the rest of the world, not just Europe. The ECB has had plenty of time to ward-off contagion, and Greece represents less than 2% of the eurozone economy.
The pound will strengthen unhelpfully against the euro, but not for long. Otherwise, the only important consequence for Britain is that Angela Merkel will redouble her efforts to oblige David Cameron in his mission to keep Britain in the EU. If Grexit were to be followed by Brexit, it might easily lead to Italy going – and the Spanish might fly too.
Real crises come out of the blue. As with other political upheavals that were feared too much before they happened, a departure of Greece from the eurozone is nothing to worry about overmuch.
Tsipras may yet buckle – if he doesn’t, bring it on.