No Silver Bullets for Greece

Endy Zemenides

Analyzing and opining on the Greek economic crisis (never mind advocating in Washington D.C. for Greece) has been one of the most frustrating endeavors one could be engaged in. The stunning lack of honesty at all levels has not only prevented a reasonable solution, but has sent us all hurdling to the possible demise of the great experiment of European integration and towards a failed state in Greece. The situation is getting worse because lies are being piled on top of lies. Greece cooked the books to enter the euro zone. Its European allies turned a blind eye. Europe tried to bolster the Karamanlis government by giving him a clean economic bill of health. Karamanlis claiming there was no debt problem. Papandreou claiming that there is money. The troika issuing economic forecasts that it knew would not come true in Greece. I could go on and on.

Now we have yet more falsehoods entering the debate. The first comes from those who are ready to cut Greece loose. They claim that both the EU and the euro can withstand a “Grexit”; this is far from certain. Some of the most bold pronouncements may remind one of the proud “we did the right think by letting Lehman fail” statements that came out of officials mouths in 2009 (in some cases, those statements were being made as the markets were collapsing and the economy disintegrating around them). Yes, the world economy may not be THAT exposed to Greece, and in any case, all the bailout money is going to the creditors anyway, so removing Greece as a middleman doesn’t necessarily have to spell financial disaster for Greece’s “partners”. But if recent experience should teach us anything, it is that we cannot be sure as to how investors are going to react, how depositors in European banks are going to react, on what the effect will be on the other crisis stricken countries.

The other falsehood emanating from this side of the debate is that austerity was working. No, it wasn’t – by any objective measure. The troika’s estimates on the ceiling for unemployment, the floor for GDP contraction, the end date for recession all came and went without as much as an “Ooops!” In the meantime, the humanitarian crisis has come to resemble the after effects of a war: Hunger, disease, social fabric being torn apart. The pro-austerity forces detest SYRIZA, but they created it.

Yet the disingenuity in the debate extends to anti-austerity side as well. A sense of desperation has set in, and the frustration with the lack of solidarity with Greece is understandable, but “responsible” would not be a way to characterize the rhetoric coming out of Athens today. More importantly, it is creating false expectations and intense emotions in the Greek populace. The bubble that is the myth of Russian salvation keeps getting burst, but the option of turning to Russia – or the BRICs – keeps surfacing to the top. Wishful thinking like the U.S. Federal Reserve Bank guaranteeing Greek debt, government to government partnerships with the U.S., and a natural gas bonanza (despite the fact that Greece is only in the infancy of exploration) have all taken their turn as the idea of the month. One MP took the floor and read the name of wealthy members of the Greek diaspora as a possible source of bailout funds. And of course, there is everyone’s favorite silver bullet: the return to the drachma. There is much comparison with the “Argentine” option without the accompanying analysis of the distinctions (Argentina already had its own currency, it just ceased linkage to the dollar; Argentina was poorer than Greece; Argentina’s debt was NOT wiped out, and it is an issue again as Argentina experienced  another economic crisis).

The sad reality is that no one has all the answers – perhaps no one has any answers. This crisis is unprecedented. The institutions handling it woefully inadequate. And Greek politics and society have become so divided that it may just not be possible for Athens to respond the way Brussels or Berlin wants it to. SYRIZA has a point when it says its European partners are not respecting Greek democracy; it is equally true that Greeks could care less about the democratic mandates or pressure the governments of Germany, Finland or Poland may be facing.

So here we are, at the precipice of something dreadful. Base elements on both sides of the debate appear too eager to jump over that cliff – in some cases, there seems to be cheerleading for it. They should recall that European populations actually cheered the outbreak of World War I – oblivious to the horrors that it would bring.

At this point, those who govern Europe and are responsible for furthering integration (yes Berlin, talking to you) have to show greater leadership. And politicians in Greece have to stop promising silver bullets or an end to the difficult road Greece is on. Austerity only policies must be reversed, debt relief must come.  While that will make Greece’s journey easier, it will not be EASY for a long time.