The eurocrisis is dead. Long live the eurocrisis!
20/06/2012 § 1 Comment
They had the election, and the scary party didn’t win. Yay! Now we can all go back to…to what?
Greece’s conservatives and socialists are edging towards a deal on a new government….
Who are these conservatives and socialists who saved Greece, Europe, and the world from Syriza, the radicals who would have torn up the existing bailout agreements and pushed for a better deal? Why, they are
arch rival parties which alternated in office from the fall of military rule in 1974 until last year, when Greece’s economic crisis forced them to share power in a short-lived national unity government.
Let’s say you’re the kind of person who thinks that the Greeks brought this all on themselves, that this is a sort of Greek tragedy in which moral laxity in Act I sets off a chain of events leading to punishment in Act III. They overspent, they didn’t pay their taxes, and now they can’t pay their debts. Who, exactly, was in charge in Act I? Actually, it seems that the same people who were in charge then just won the election. If the actors are still on stage, the play isn’t over. There’s still plenty of time for the gods to punish the mortals’ hubris.
Let’s say, alternatively, that you’re the kind of person who thinks this is structural. The euro is a monetary union without a fiscal union, so it has insufficient automatic stabilisers to contend with the regional economic heterogeneity in Europe. Money flowed into Greece when investors thought it was a safe as Germany. In fact, it wasn’t, and now those debts cannot be paid. Who, exactly, is going to negotiate the lower debt payments and/or higher inflation that might allow Greece to trade through? The same political parties who have been playing catch-up for the last couple of years?
There are now reports that the election may have shaken things loose a little. Creditors are signalling that they may be willing to renegotiate. Maybe the threat of competition — the success of Syriza — was enough to push the political duopoly towards a better equilibrium.
With that exception, the Greek election has merely moved us back to the status quo ante. As I recall, it wasn’t all that flash.