Greek Vote: Insanity or Insight?
It is now official: On Sunday, in a resounding demonstration of faith in Prime Minister Alexis Tsipras and his Syriza Party, Greek voters overwhelmingly [rejected](http://wsj.com/articles/polls-close-in-greek-referendum-1436113280) austerity measures demanded by the “troika” comprised of the European Commission (EC), European Central Bank (ECB) and International Monetary Fund (IMF). Sixty-one percent of the Greek electorate voted “no.” As a result, the nation that has become the poster child for socialist-inspired profligacy sails into uncharted territory. Perhaps the spookiest aspect of this affair is the level of enduring unreality that attends it. “I’m fully aware that the mandate that I was given is not for a rupture with Europe, but a mandate boosting our negotiating strength for reaching a sustainable deal,” Tsipras said in a televised message late on Sunday. In other words, Tsipras and his fellow travelers believe that kicking troika demands to the curb actually strengthens their bargaining position. Apparently for some unfathomable reason they choose to ignore, or completely dismiss, the idea that any concessions granted by the nation’s creditors would make it virtually certain that the EU’s other economic basket cases, all of which are currently biting the austerity bullet, would demand similarly favorable deals. In relative terms, Greece is an economic pipsqueak. Italy, Spain and Ireland? Not so much.
It is now official: On Sunday, in a resounding demonstration of faith in Prime Minister Alexis Tsipras and his Syriza Party, Greek voters overwhelmingly rejected austerity measures demanded by the “troika” comprised of the European Commission (EC), European Central Bank (ECB) and International Monetary Fund (IMF). Sixty-one percent of the Greek electorate voted “no.” As a result, the nation that has become the poster child for socialist-inspired profligacy sails into uncharted territory.
Perhaps the spookiest aspect of this affair is the level of enduring unreality that attends it. “I’m fully aware that the mandate that I was given is not for a rupture with Europe, but a mandate boosting our negotiating strength for reaching a sustainable deal,” Tsipras said in a televised message late on Sunday. In other words, Tsipras and his fellow travelers believe that kicking troika demands to the curb actually strengthens their bargaining position. Apparently for some unfathomable reason they choose to ignore, or completely dismiss, the idea that any concessions granted by the nation’s creditors would make it virtually certain that the EU’s other economic basket cases, all of which are currently biting the austerity bullet, would demand similarly favorable deals. In relative terms, Greece is an economic pipsqueak. Italy, Spain and Ireland? Not so much.
It is hard to feel sorry for the Greeks. They have long been a society addicted to spending money they don’t have, even as tax avoidance has become a national pastime. And despite the handwringing about “austerity,” government spending still accounts for a whopping 47% of Gross Domestic Product (GDP). And while certain aspects of government spending have been cut to the bone, government worker pensions and wages that account for about 75% of primary spending and 16% of GDP remain virtually sacrosanct. It was the promise to keep them that way that vaulted Tsipras and Syriza to power.
In Greece’s defense, what little austerity that has been imposed beginning in 2010 has produced catastrophic effects. The nation’s unemployment rate tripled to more than 25% overall (the youth unemployment rate is 49.8%) and remained there. GDP has cratered by nearly 30%, meaning nearly a third of the nation’s economic output has simply disappeared. The top tax rate is 42% and applies to annual incomes as low as 42,000 euros ($46,429) and a Value Added Tax (VAT) runs as high as 23%.
All of this has produced the mindset that led to Sunday’s vote. A majority of Greeks believe they have suffered enough and they refuse to be bullied by their creditors any longer. Again they have a point, albeit a twisted one. The nation’s debt accumulation of more than 342 billion euros ($376 billion) represents an almost unbelievable 180% of GDP, and the odds it will be repaid in full are zero. For many Greeks that impossibility in and of itself has become the ultimate rationale for seeking more favorable terms.
After Sunday’s vote, Finance Minister Yanis Varoufakis, famous for his clashes with the nation’s creditors, announced his resignation. That resignation was one “that the Prime Minister judged to be potentially helpful to him in reaching an agreement,” Varoufakis explained. “For this reason I am leaving the Ministry of Finance today.” Yet he remained true to the Greek majority’s mindset. “I shall wear the creditors’ loathing with pride,” he added.
For Greeks and many other Europeans, it is a loathing well earned. There may be no better example of progressive hubris than the notion that a group of nations with vastly different cultures and economic habits could be shoehorned into the single entity known as the European Union. It represents the essence of transnationalist-inspired elitism that demonstrates an ample contempt for democracy and national sovereignty, and it was put together under the audacious auspices that a “united” Europe would never again suffer from the disharmony that led to two World Wars in the 20th century. Thus the 28 member states operating via a system of supranational institutions and intergovernmental-negotiated decisions was doomed from the start. Or to put it in simple terms, industrious Germans who retire at 63 aren’t exactly thrilled with underwriting Greek profligates whose statutory retirement age for men ranges from 45 to 65 years, with 75% retiring before age 61.
Thus, barring a rather large change in the negotiating stance of Greek’s EU paymasters, it would seem a “Grexit” is the most likely possibility. In preparation for that eventuality, Greek banks, which may no longer have access to EU bailout funds, are preparing for a Cyprus-like “bail in” of as much as 30% on per cent on deposits above 8000 euros ($8800). Greeks themselves are hoarding cash in a nation where banks are closed and one can only get 60 euros ($67) per day from ATMs, many of which have already run dry. Greeks are also stocking up on essentials such as food and medicine, stripping supermarket shelves bare in the process.
In the meantime, the pro-EU crowd is offering a variety of exotic solutions to the crisis. They will undoubtedly be brought up in emergency negotiations that begin today in Brussels following a series of conference calls between the players yesterday. Options range from facilitating an “orderly exit” from the EU, a temporary suspension of Greek membership, or a messy departure replete with the collapse of Greek banks, a return to a highly-devalued drachma, and possible contagion for the rest of the EU — or, a renegotiation of debt that will once again kick the can down the economic road.
There are also the pro-EU types indignant at the thought of Greece receiving any preferential treatment at all. “Greece has voted overwhelmingly against a compromise that would have allowed Europe to continue financing it," writes Bloomberg News columnist Leonid Bershidsky. "Now it must be forced out of the euro area and perhaps from the European Union — otherwise everybody will demand the same no-strings deals, and aspirants from Eastern Europe will want to join the bloc for all the wrong reasons.”
No doubt, but this is also an inadvertent argument for disbanding the EU altogether, an idea firmly supported by UK Independence Party (UKIP) leader Nigel Farage, who calls the Greek referendum “a crushing defeat for those Eurocrats who believe that you can simply bulldoze public opinion.” “The result is a tired, stumbling European Union that is dying on its feet before our very eyes,” Farage declares. “Credibility for the project is fading fast as citizens right across Europe awaken to the reality of its authoritarian instincts that seek to run roughshod over public opinion.”
He further notes a generational shift, with younger Europeans realizing the notion of a prosperous and peaceful European Union sold to their parents has done great harm to a generation “now realising that we do not need a single currency or a political union to be friends, neighbours and trading partners.”
It’s not just about a single currency. It’s about nations trading away their character, their dignity and their sovereignty in exchange for the siren song of socialist security and tranquility that has produced neither. Are Greeks being unrealistic? You couldn’t get a country filled with more unrealistic people who haven’t quite figured out they’ve run out of other peoples’ money to spend. On the other hand, what’s so great about a group of transnational elites who wish to continue a game that essentially amounts to lending Greeks money so they can turn around and give back to the people who lent it to them? People with utter contempt for anything that undercuts power to shape the destinies of the “little people” as they see fit.
Make no mistake: While a Greek failure frightens them, a Greek success story that might eventually emerge following their exit from the EU scares them even more. Greeks themselves aren’t quite up to speed on reality yet, but at some point it may begin to occur to them that the threat of catastrophe bandied about by EU enablers rings exceedingly hollow when they ask themselves a simple question: compared to what? Five years of economic hell they’ve already endured, with no hope of genuine improvement on the horizon?
Sure a return to the drachma would be cataclysmic, with massive currency devaluation, but it would certainly force Greeks to come to terms with their unsustainable impulses. And long-term, once again putting it in simple terms, would a three-bedroom apartment overlooking the Aegean Sea and selling for the equivalent of $75,000 be unsellable? Would ultra cheap vacations in comparison to the rest of the continent be equally so?
For many years now, the entire world has been engaged in a badly articulated struggle between the socialist one-worlders determined to convince billions of people that individual liberty and capitalism are to blame for their problems, and those who know these arrogant elites’ ultimate ambition is unassailable power in exchange for the illusion of economic well-being. Well-being that can only be realized by allowing these would-be masters to control the world’s destiny “for its own good.” Not only has it been an economic disaster, it has robbed people of their industriousness, ambition and ultimately their integrity in exchange for a “free lunch.” As the Greeks have made amply clear, the center of this contemptible construct isn’t holding. The era of security in exchange for de facto, spirit-crushing indentured servitude may in fact be coming to an end.
It can’t happen fast enough.
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