An Exit From Europe Would Be Our Own Greek TragedyPanagis Vourloumis
May 24 (Bloomberg) -- Greece is going through one of its periodic self-mutilations. After trying for decades to become a full member of the European Union, and succeeding, it’s doing its best to get thrown out.
With new elections due in June, the country’s two-party system has been shattered. A mosaic of smaller parties that are either openly anti-European or pledging themselves to policies that would drive Greece from the euro did well on May 6.
The last time there was such a major swing in the Greek vote was in 1981. Pasok, the socialist party led by Andreas Papandreou, swept to power on a slogan of “change” and exit from the North Atlantic Treaty Organization and the European Economic Community, as the EU was called back then. Nothing of the sort happened. Instead, Pasok went on to create a huge state sector and then to pack it with its own political supporters.
Orgy of Entitlements
Thereafter, Pasok and the center-right New Democracy -- the labels are deceptive, both parties are basically similar -- alternated in power. Their combined share of the electorate never fell below 75 percent, and often exceeded 85 percent. For 30 years, these two parties competed in an orgy of jobs and entitlements for votes. In the span of a generation, the composition and ethos of Greek society were transformed. Where there had been a mostly self-reliant and hard-working body of citizens, we got an army of state-supported employees with guaranteed job security and early pensions.
In the latest election, Pasok and New Democracy together received less than 32 percent of the vote, and it’s easy to see why. These two parties campaigned on promises to stick with the austerity program imposed on Greece by the so-called troika -- the European Commission, the International Monetary Fund and the European Central Bank -- in exchange for help to stave off a disorderly bankruptcy and exit from the euro. The troika insists on structural reforms, such as less job protection, limiting trade union privileges, and opening monopolies and closed professions in the service sector.
In short, Greece’s creditors are asking the country to dismantle what was built during the last few decades and led Greece to bankruptcy. The intent is to make the economy competitive, but those affected don’t see it that way, and they are many. Close to one in four of the working population depends on the state for his or her salary. Add to them the unemployed at 23 percent, double among the young, plus all those whose salaries and pensions were reduced by the troika’s austerity measures, and you get a large pool of very unhappy and insecure people. It is an ideal fishing ground for all kinds of political adventurers, and this is what is happening.
The parties that increased their strength on May 6 are mostly led by unscrupulous ignoramuses. None of them has any coherent program, but they all agree on one thing: Greece should renege on the agreements it signed with the EU and the IMF. Three of these parties -- Syriza (a neo-Marxist conglomerate that received 16.8 percent of the vote), Independent Greeks (a last minute nondescript grouping that scored 10.6 percent) and the more moderate Democratic Left (with 6 percent) -- claim they want Greece to stay in the euro. Either they are totally out of it or, more likely, they are deliberately misleading the electorate.
A Winning Oxymoron
Most Greeks keep their savings and receive their salaries or pensions in euros. However bitter they are with the old parties, however much they want to believe that by some miracle austerity would disappear with a different government, leaving the euro is scary. Nevertheless, the lie, the oxymoron that it’s possible to renege on the bailout agreements and also keep the euro, seems to work for the moment, especially in favor of Syriza. The communists with 8.5 percent of the vote and the neo-Nazis with 7 percent also made it over the threshold to enter Parliament. They at least don’t pretend they want the euro or to be in Europe.
According to the government, there is enough money to run the country until June. A possible scenario is that the catalyst for future political developments will come in the form of an energy crisis: Greece depends entirely on imports for power and transportation, and suppliers of crude oil and natural gas now accept only cash. If the agreements with the EU and IMF become inoperative, there will be no money for energy, or anything else for that matter. Before that, of course, Greece may get a run on the banks.
The situation is critical, but that doesn’t seem to faze the politicians who emerged from the last election. Drunk with victory, they are anxious to benefit from the momentum. Their pitch is that with Francois Hollande now president in France, and German Chancellor Angela Merkel’s Christian Democrats defeated in state elections, the political climate in Europe is changing to favor a more-or-less unconditional bailout of Greece. They think the IMF and the Germans are bluffing when they say they will cut Greece off unless it sticks with the austerity program.
As the June 17 new election approaches, the electorate is becoming polarized. Voters are moving away from some of the smaller protest parties to Syriza, and others to New Democracy. Under Greek law, the winner gets an extra 50 seats out of the 300 in Parliament, so whether Syriza or New Democracy emerges with a few more votes than the other becomes crucial. Recent polls suggest it will be very close. Whatever the result, the government that emerges will have a thin majority and the real danger is that the country remains leaderless and adrift. The longer this lasts, the bigger the risk of exiting the euro and jeopardizing the position of Greece in a united Europe.
Such a development would be tragic. The worst would not be the severe and lasting economic consequences. The broader political reasons for joining the family of European nations were to take the country out of isolation, give it better governance and strengthen its democratic institutions. All the efforts Greece made in this direction over the past four decades would be thrown to the winds. The next election is really a vote for or against Europe.
(Panagis Vourloumis is an investment banker and independent consultant, and was chief executive of the Greek telecommunications company OTE, from 2004 to 2010. The opinions expressed are his own.)
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