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On Point

The Debt Monster Still Stalks Greece


by Austin Bay
June 21, 2012

Cerberus, the Greek mythological monster charged with guarding Hades' gates, is traditionally depicted as a huge dog with three carnivorous heads. This dire hellhound has a dreadful job. He (or is it a "they"?) sinks his teeth into Hades' new arrivals, making certain the recently deceased don't accidentally lug their bodies into the Underworld. Yucky, huh? Well, Cerberus is, fortunately, an imaginary monster.

Greece's latest mulligan national election, held June 17, appears to have left the country with a three-headed dog of a potential government. Three "pro-Europe" Greek political parties clawed out enough votes to try to form a coalition. As I write this column, the center-right New Democracy Party (ND), the old guard conservative party that took 30 percent of the votes cast in the electoral do-over, is attempting to reach a power agreement with its "old left" (but fellow old guard) antagonist, the Greek Socialist Party (PASOK) and the small, "moderate left" Democratic Left Party (DL). This triad coalition would nominally control 179 out of 300 parliamentary seats.

While several eurozone officials call an allegedly "pro-bailout" coalition in Athens very good news (which they add may lead to better news), no one underestimates Greece’s economic and political difficulties. Exactly how "pro-bailout" an ND-PASOK-DL coalition would be is not certain. ND and PASOK are demanding new bailout terms from lenders. They maintain the election demonstrates that a majority of Greeks want to remain in the eurozone. This demonstration has created political conditions justifying less-stringent loan conditions. Creditors, they argue, can trust the Greek people to work to repay Greece's debt.

Greece's debt, however, is a genuine monster. Creditors have good reasons to question a rosy interpretation of the election. The ND's 30 percent was the largest single party vote total in the election. Deep and unresolved political fractures divide Greece.

OK, the Greek people want to remain in the eurozone; they prefer hard currency euros to devalued drachmas. However, they haven't decided what to do, not decisively, about their structural debt.

In fact, a strident Greek plurality, supporters of SYRIZA, the Party of the Radical Left, still believes the debt monster is hype. If they cast blame enough, shout and scream persistently, just wish hard enough, the debt monster will go poof — or someone else will pay it off.

Fantasy economics and blaming foreigners has political sizzle. SYRIZA ran second behind ND, taking 27 percent of the vote. SYRIZA refuses to participate in any government that, to paraphrase SYRIZA polemicists, kowtows to foreigners who would dominate and impoverish Greece.

SYRIZA's young and charismatic leader, Alexis Tsipras, a former college Communist, contends ND and PASOK are corrupt and spent political forces. A recent Tsipras interview with Reuters included this fist-pounding assertion: "Greece needs courageous and decisive leaders who can use the rage of our people ... as a weapon to negotiate for the benefit of the country." He sees himself as that decisive leader, of course.

He has decisive rhetoric. But is he decisive economically? If SYRIZA led the government, what would it actually do? SYRIZA touts a conveniently vague "national recovery plan" promising efficient government and punishment for wealthy tax cheats. Truly efficient government would ultimately require fewer public-sector workers. Is SYRIZA efficiency stealth austerity? A prior PASOK-led government advocated tax reform.

Attacking foreign lenders stirs nationalist passion. It also undermines lender confidence. Tsipras and SYRIZA don't offer real solutions, they simply channel populist rage.

In the face of the debt monster, populist rage is a spent force. Even if lenders offer Greece new bridge loan terms, and EU officials suggest they will, defeating the debt monster ultimately requires forceful cuts in spending. Which is why this 21st century Greek tragedy will likely end with Greece departing the eurozone. Defeating the debt monster demands a political will Greece has yet to muster.

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