Greece Euro Exit: Free Will Or Fate, The European Way?

Includes: GREK
by: Paolo Gorgo

In Greek mythology the Moirai were the goddesses of fate, who personified the inescapable destiny awaiting each human being.

Zeus, however, was the only god obeyed by the Moirai, as he had the power to change everyone's fortune. In other words, in the world of ancient Greece fate did not just happen, as the chief sky-deity could interfere and engineer a different destiny. For the better or for the worse…

Fast forward to our times, modern Greece is responsible for most of its fate, having fudged its books to get into the EU and passed laws that virtually immunized corruption, leading to a few years of growth, but in a way that is nicely resumed by Antonis Kamaras in this Foreign Affairs article:

Unconditional European Union funding in the 1980s and early 1990s, and easy international borrowing in the 2000s helped both the left and right finance unsustainable patronage politics. According to Eurostat, the EU's statistical agency, public payroll expenses (salaries and pensions of civil servants) rose in Greece from 38 percent of state revenue in 2000 to 55 percent in 2009. Compounding this trend, local elites became hostile to any coherent national reform effort, precisely to preserve the system that now privileged them. For example, in the mid-2000s a local alliance in Salonica successfully resisted the granting of a concession to a major international port operator, in order to retain management of it themselves.

As long as the Greek central government was solvent, or could borrow massively, the system worked.

As we write this article, and after a first round of inconclusive elections, Greek politicians are trying to find a way to avoid a return to vote in a few weeks, which might "increase the likelihood of a further, disorderly Greek default and ultimately of Greece's departure from the euro area,", as Moody's analyst Nondas Nicolaides recently wrote in his report.

While most Greeks still declare that they want to remain in the European Union, truth is that their votes seem to be going in the opposite direction:

Polls published last week show Syriza winning a likely new election, although far from gaining an overall majority in Parliament.

In the same poll, though, 78.1 percent of respondents say the new government must do "whatever's necessary" to keep Greece in the euro, something that would be nearly impossible if Greece were to denounce the bailout agreements, as Syriza, and other parties, want. It looks as if the Greek electoral wants to stay in the euro but without the commitments contained in the international bailout agreement, which has given the country billions in rescue loans.

Withdrawal from the European Union is a right of each member: however, there is no way to push a state out of the EU - unless, of course, existing members put in place such actions that make the decision to exit the most likely outcome for a member, like a modern Zeus interfering with someone's fate or free will.

Top EU policymakers have gone from saying that "a Greek exit from the EU is not a possibility" to declaring that "the risks of contagion for other countries of the eurozone have been reduced" in case it happens, as in German finmin Schauble's latest public outcome.

For what it may be worth, even the popular German newspaper "Der Spiegel" has summarized German feelings about a Greek euro-exit with the following headline, on its latest cover: "Acropolis adieu! Why Greece must leave the euro now."

With Greek state funds expected to have fallen below € 1,5 billion, and the latest €5.2 million euro bailout payment from the troika reduced to €4 billion only, and just to repay BCE debt, it looks like the European gods have decided at least not to lend a much needed helping hand, putting further pressure on Greek politicians to come up with a quick solution that endorses the Troika tough economic conditions.

Unfortunately, playing poker at this stage of frustration for the population may lead to tragedy, as Evi Pappa, professor of economics at the European University Institute in Florence, presumes in her Al Jazeera interview:

SB: What would your advice to Greece be?

EP: The million-dollar question. What I would say is that it looks like Greece is facing a real tragedy. It is like we are condemned to die - like Antigone, in the tragedy of Sophocles. Antigone was condemned to be buried alive in a cave by Creon, and when the Chorus finally convinced Creon to save her life, a messenger arrives announcing that Antigone has hanged herself.

Modern Greece, like Antigone, is condemned to the austerity measures of the European Commission, burying it alive, and it looks like, when the Europeans come to her mercy, it might be too late - and Greece might commit suicide by deciding to leave the eurozone. I don't have a lot of hope for Greece.

If (or when) it happens, it will be hard to say to say that the outcome was unpredictable.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

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