Reasons to Again Pay Increased Attention to Greece
Over the past two years, intense media coverage has demanded at several moments a great deal of attention to Athens, usually for some vote everyone was sure would pass, but if it didn’t, we imagined it would supposedly mark a turn for the worst in the crisis, but only if the European Union stuck to their threat of pulling funding to Greece. There was plenty of theatrics to it all. Dramatic statements to the press but private and anonymous statements walking those public declarations back. This latest and upcoming round may not be much different, but with an increasing number of actors involved and having difficulty coordinating, it may set in motion some unscripted events.
- The funding situation in Greece just got worse: “Greece’s international debt inspectors have discovered that the debt-ridden country still needs an extra euro15 billion ($20 billion) in help—on top of a promised euro130 billion bailout and a euro100 billion debt relief from private investors”.
- There are ongoing negotiations between Greece and its private sector creditors over debt “haircuts”. Even if a deal between negotiators is struck, some of those private creditors, particularly hedge funds, may hold out, forcing Greece to implement those debt haircuts through legislation. This would kill an allegedly voluntary debt deal and certainly put Greece in default and trigger billions of dollars in insurance contracts, leaving the financial sector to hope the payment of those contracts doesn’t sink a major financial firm or bank.
- Meanwhile, the negotiations I just mentioned are occurring alongside negotiations between Greece and the Troika (IMF, European Union, and European Central Bank). These two negotiations are linked and can negatively impact the other. The Troika has demanded additional and painful austerity measures, conditions that are politically difficult to meet. One government official confessed their frustration to the Guardian: “No political party is willing to move either, saying wage cuts are a red line they are simply not going to cross. You tell me how this is going to be resolved. We have no idea and we’re very worried.”
- Elections in Greece are fast approaching and may take place as early as April. This makes negotiations over new austerity measures all the more difficult as three different parties in the coalition government face backlash for going along with widespread austerity, austerity including a reduction of the minimum wage.
- The risk is increasing that actors outside financial institutions and political offices might start affecting events and take them off their orchestrated course. The head of the Greek Church spoke of this risk: “Greeks’ unprecedented patience is running out, fear is giving way to rage and the danger of a social explosion cannot be ignored any more”.
- Finally, we have great certainty that this Greek drama will have a spinoff series. Portugal’s cuts are being outpaced by spiking unemployment and a contracting economy under increased strain from financing debt and a number of austerity measures.
Even if none of these factors provoke a disorderly default in Greece, the best case presented to us is one of perpetual economic depression in Greece, a NATO and eurozone member, a nation fully integrated into the military and economic system of the West, yet enduring a painful and dangerous meltdown. This in and of itself is of enough significance for us, regardless of whether the prospect of the whole of Europe sharing in this meltdown is realized.