Greece’s self-inflicted tragedy and the catharsis to come

July 2, 2015
The word 'No' in Greek is seen on a banner hanging from Athens' University building

The word ‘no’ in Greek is seen on a banner hanging from Athens’ University building in Greece, July 2, 2015. REUTERS/Marko Djurica

It’s only fitting for Greece to be the focus of a tragedy — after all, they created the form.

The protagonist in a classical Greek tragedy sometimes undergoes a personal revelation through a tragic experience. Aristotle, in The Poetics, defines this as “a change from ignorance to awareness of a bond of love or hate.”

Alexis Tsipras, the Greek prime minister, has had a partial revelation as his nation’s tragedy has unfolded. The bonds he feels toward the European Union are more hateful than loving.

With this view, he has called for the Greeks to vote ‘No’ on Sunday to the last offer by the EU. That offer has been withdrawn, anyway. Tsipras said a ‘No’ would allow the country to “return to the European Union with principles.”

It’s worth figuring out what ‘No’ would mean for Greece, for Europe and for the world. It would be a world event, though not mainly because Greece is the birthplace of democracy, drama and philosophy. Those sentimental considerations may have helped persuade EU politicians and bureaucrats to let the country accede to the union in 1981, when it was neither economically nor politically ready. This time the world would be watching because of the probable and possible effects.

First, a ‘No’ would probably mean the opposite of a “return to the EU,” with or without principles. Logically, it would mean leaving the euro, which would mean leaving the EU itself because there are no separate treaties. The country is coming to the end of its stock of euros. The next step would be for Greece to print its own money, probably the pre-1981 currency, the drachma, which has claims as one of the oldest currencies in the world. Coinage of that name circulated in Greek city-states from 1100 BC.

Second, the Greek experience shows the rest of the eurozone that the European Central Bank — assuming it remains firm on giving no more money — will not function like a national central bank. It will not issue currency, come what may. Central banks have issued currency denominated in the millions in countries where inflation was beyond control and payments for everyday items cost hundreds of millions. It happened in Germany, in1923, when price increases were in the billions; Bolivia in the mid-1980s, when inflation reached 50,000 percent, and more recently in Zimbabwe, where price rises reached the quadrillions.

These meant terrible times, but there was a currency, ultimately under government control. All three countries eventually took action to bring inflation down. The ECB, like the euro itself, is under no effective government or democratic control, a fact well known but dramatized by the Greeks. Moves to create a closer fiscal/governance regime in the eurozone are likely to be skeptically received, another effect of the Greek standoff.

Third, Tsipras has made several overtures to Russia, which is unlikely to bail him out (it has its own problems, with Western sanctions and a still-low oil price). But Russia could take Greece under its wing; it could encourage it to take “revenge” on the West by refusing to agree to actions by the North Atlantic Treaty Organization — especially against Russia — and could raise problems over use of its NATO bases.

Greece could revert to a more aggressive policy against Turkey, a fellow NATO member but a traditional enemy. An angry Greece would be weak but could cause trouble for the West, of which it has been a part. Were it to do so, the European Project would have failed to gain a member – Ukraine – but instead effectively lost one – Greece.

A ‘No’ vote would show that, for all the tragic effects since Syriza was elected and took power in January,  Tsipras retains enough credibility to have his strategy “?” followed. That question mark is there because if there is a strategy, it’s deeply mysterious. On Tuesday, he sent a letter to the EU saying he would accept most of the demands in the last offer. On Wednesday evening, he went on TV and called for a rejection of the offer.

Is it all the fault of a far-left government? Not all. Greece borrowed like a drug addict for many years, but banks, especially in Germany and France, lent as giddily as Greece received. And Germany and France, strict upholders of Greece’s obligation to pay back the debts it owes top foreign banks, were, as the economist Thomas Piketty recently observed,  serial defaulters on their debts after World War Two.

No question that the Greeks have been exasperating, hauling finance ministers and prime ministers into fractious, late or all-night sessions in which nothing is agreed. But that’s the job. These leaders, all of whose countries accepted Greece, failed to heed warnings about Athens’ crooked finances and  acquiesced in huge loans; they can’t afford to cast it out in a fit of pique if they want to safeguard the eurozone. Greece will never be able to repay the debt it has assumed. Shouldn’t that be recognized, and at least a partial forgiveness regime be discussed?

But it may not be a ‘No.’ A Pro Rata poll on Wednesday showed ‘No’ still ahead but ‘Yes’ catching up. A ‘Yes’ vote should open the space for new negotiations – and should also mean that the Syriza government, whose strategy will have been rejected, will resign, which should mean a more accommodating partner for the EU. In a finely balanced column earlier this week, the Financial Times’ Martin Wolf wrote that a resumed relationship with the EU “would offer an unpleasant and uncertain, but at least imaginable future.” That is, more austerity, perhaps even tougher conditions and no growth for some time.

And the politics would be toxic, too. Syriza, essentially a Marxist party of protest, would return to what it does best: opposition. A government of technocrats, the most likely outcome following a resignation, would find it hard to keep order.

Chaos with a ‘No,’ chaos with a ‘Yes.’  The hole in which Greece has found itself, and which its government has greatly deepened with some aid from the EU, will not be resolved on Sunday. But at least the Greeks, and the world, will know which route the chaos will follow.

5 comments

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A couple of observations:
1. There’s no separate treaty, but there’s no provision to kick out Greece from both EU and Eurozone either, the Greeks can only willingly leave the EU on the basis of the Treaty of Lisbon’s provisions, that’s something everyone conveniently keeps forgetting. Worse comes to worst Greece will nominally keep the Euro while effectively printing its own money.

2. The dracma was both the pre and post 1981 currency, the Euro was established only in 1992 with the Maastricht Treaty, exchange rates were established in 1998, but the Greek one was established only in 2000. That’s a 19 years difference, Mr. Loyd.

Posted by hs7 | Report as abusive

If the Germans have some ideas how the Greeks can pay off their debts by further austerity, which will contract their economy even more, increase unemployment and business bankruptcies, they should surely let the Greeks know. The Euro union was deeply flawed from the beginning and the Germans should admits this obvious fact and work to change the Euro union, not make the problems worse. Krugman, Stiglitz and European economists all agree that leaving the Euro, no matter how temporarily painful, is a solutions if the Troika will not yield on debt restructuring, a sensible solution.

Posted by jimb3242 | Report as abusive

Anti EU mood in the region is at the highest level ever our support to Greece

Posted by Macedonian | Report as abusive

“The next step would be for Greece to print its own money, probably the pre-1981 currency, the drachma..”
You are 20 years off the mark there. In 1981 Greece just entered the EU. Euro adoption came 20 years later, in 2001.

Posted by Korios | Report as abusive

Perhaps a Trojan Horse will arrive filled with bitcoins.

Posted by Skipper50 | Report as abusive