Many articles on Greece often link the Hellenic Republic’s economy to a “Greek Tragedy.” And much like a chorus, the pundits and journalists explain how worse the current situation is getting every step of the way. But if we are going to use this analogy for a nice headline, we must consider some other ramifications as well. If Greece’s economy were a tragedy, the end would mean the death of Europe’s monetary union; the tragic flaw that led to this outcome: hubris.
The Greeks sweltered this past summer as debt negotiations hit their lowest point since the crisis began over five years ago. With stringent capital controls, meaningless referendums, and major political turmoil, Greeks resorted to waiting hours on ATM lines and bartering with neighbors when all their money vanished. Unemployment records have remained well over 20 percent since 2012, and citizens all over the country desperately put their lives on hold while politicians in the European Commission debated the future of the continent, where the citizens of Greece had no choice but to put their fate in the hands of two men: Finance Minister Yanis Varoufakis, and Prime Minister Alexis Tsipras.
Sometime in the late 1960s to early 1970s, a young Yanis Varoufakis decided to spell his name with only one “n,” despite the traditional spelling that uses two. It was a choice made for no other reason than pure aesthetics, but after receiving a low mark on an assessment for misspelling his name, the future MP reacted not apologetically for “breaking the rules” but instead angrily declared that he would use only one “n” for the rest of his life.
But this story should not surprise you.
This account comes from the man who once stated, “I shall wear the creditors’ loathing with pride” upon resignation from the finance ministry. And if this story teaches us anything about the way Varoufakis thinks, it’s that the relationship between Athens and Troika (Greece’s three international lenders) could go no other way than one based on pride, revenge, and the rejection of tradition.
Although Varoufakis has since resigned due to the EU partners’ preference that he remain absent from meetings, the ex-finance minister’s mindset about the current paradigm in Germany, Greece, and the European Union is aligned with most citizens in his country. While most Greeks favor staying in the Euro, a majority opposes the harsh austerity measures imposed by its international creditors. Additionally, Prime Minister Alexis Tsipras has implied that the newly agreed deal is a national humiliation. For Greeks, the concept of a Eurozone that promotes mutual wealth is already dead, and it is only a matter of time before Athens realizes that it has exhausted all of its economic and political options.
It is easy to criticize the actions of the Greeks and their government in recent months, and the solution to their crisis seems simple to some, including Latvian finance minister, Janis Reirs. In response to the referendum results against austerity conditions set by creditors last July, Janis Reirs, stated, “Latvian people do not understand the Greek people.” After all, Latvia successfully recovered after implementing harsh austerity. For the Latvians, the question became, why can’t those insufferable Greeks understand what is needed to recover?
But what Mr. Reirs and many other EU leaders refuse to acknowledge is that the referendum wasn’t solely about austerity, and effective diplomacy surely couldn’t be the aim. Rather, it was about the wounded pride of 11 million Greeks who wanted to send a blunt message to those that they feel have stripped their right to sovereignty. And as long as Greece continues to govern to the whim of German checks, this sentiment will only worsen.
But this is already happening.
The leftist ruling party, Syriza, splintered amid the acceptance of a third bailout, setting off a rebellion that caused the prime minister to resign and the ex-Syriza MP’s to form a new party called Popular Unity. Popular Unity runs on opposing the bailout, rejecting the euro, and returning to the drachma, Greece’s old currency. Tsipras initiated snap elections on Sept. 20 in order to seek a stronger mandate. Even though Syriza came out of the election with a narrow victory, Tsipras still holds the task of forming a government with Independent Greece, and the current sentiment of politics in the country is that of disillusionment and apathy. The Nazi-inspired far right party, Golden Dawn, has emerged as the third biggest party in parliament, running on an anti-immigration and anti-austerity platform. Not only has Greece shown no signs of even being close to an economic recovery, but its political schema is turning more volatile as well.
As it turns out, voting oxi (no) in the referendum did very little to change the trajectory of negotiations in Greece’s favor, as many claim Athens received an even worse deal from a spiteful Germany in the wake of Greek insubordination.
Since the Great Recession of 2008, Germany has established itself as the hegemon of the European Union. It boasts one of the lowest unemployment rates in Europe and possesses a robust private sector with strong investor confidence. Perhaps this good fortune in the midst of failure from surrounding states has created a feeling of egotism for Berlin and its Northern European partners. And maybe the Germans have arrogantly forgotten their own history of amassing an overwhelming amount of debt. After World War II, Germany accumulated debt that amounted to over 200 percent of its GDP. Their debt crisis was not solved through harsh austerity, but rather through debt relief with the London Debt Agreement of 1953.
The third bailout is so harsh that even the IMF does not fully support it, stating that it “is by no means a comprehensive, detailed agreement.” And Nobel Prize winning economist Paul Krugman writes that “this Eurogroup list of demands is madness…[t]his goes beyond harsh into pure vindictiveness… [and] it’s a grotesque betrayal of of everything the European project was supposed to stand for.”
For the Germans the situation was simple: If Greece commits to austerity, we can save Europe. What they refused to take into account, however, is that their standing as the economic monarch in the union — and imposing their might on the sovereignty of Southern Europe — would not only be looked down upon but would also not be tolerated.
Greeks may oppose austerity, not just out of fear of losing their pensions, but also as the last option available in sticking it to a country that they feel sought to own them rather than bail them out. And that is a fact that seems to be lost on the hubristic German machine.
Many claim that Grexit would be a disaster. And they are right.
Returning to the Drachma would be devastating, as it would plunge the economy into a free fall, devalue its currency, and cause high rates of inflation. But many economists also claim that it would still be a better option than deteriorating as a perpetual debtor state in a failed European system.
Many look to the example of Iceland when favoring the return to Greece’s old currency. In 2008, Iceland’s economy plunged worse than any of the other recession-plagued countries, as its banks became so big that they far surpassed the GDP of the country, making them “too-big-not-to-fail.” Iceland was unable to bailout its banks, and its leaders did what other politicians only have nightmares over: they defaulted. But just as they entered one of the worst financial crises in global history, they too recovered in one of the most successful upturns seen yet. How was this possible?
Iceland was able to take advantage of not being part of the euro. Letting its currency devalue, the country effectively boosted exports and diminished imports, helping offset the blow of defaulting. Having the krona instead of the euro proved useful yet again: Iceland was able to cut the value of wages, rather than the wages themselves, which economists have attributed to the country’s rapid recovery.
Though tragic the state of their nation may be, it is not the Greeks that this story deems as heroes, and Angela Merkel resembles nothing of a Homeric figure. Rather, it’s the optimism and unprecedented collaboration defined by the euro project, in a continent filled with a rich history of war, that is the real hero, and like all heroes from Greek plays, Europe’s Monetary union must die a most tragic death with the inevitability of Grexit that looms like a self-fulfilling prophecy.