Millennium Post

Greek tragedy unfolds

The Ancient Greek philosophical tradition broke away from a mythological approach to explaining the world, and it initiated an approach based on reason and evidence. At a time when Greece finds itself in <g data-gr-id="45">trouble</g> it would do well to think about how Socrates gave up his life for the common good. Socrates’ death is described at the end of Plato’s dialogue titled Phaedo. Socrates turned down various pleas to attempt an escape from prison. After drinking the poison, he was instructed to walk around until his legs felt numb. The numbness slowly crept up his body until it reached his heart. Shortly before his death, Socrates speaks his last words to Crito: “Crito, we owe a rooster to Asclepius. Please, don’t forget to pay the debt”. Several thousand years after Socrates swallowed a cup of hemlock, Greece finds itself unable to pay the debt. Except that this time the debt is not a mere <g data-gr-id="55">rooster</g> but a clear and present danger which threatens a meltdown of an epic scale. Greece owes a lot of money to a lot of people. How this came to be is a story in itself. When Greece joined the Euro currency and became the twelfth country to do so there was a lot of <g data-gr-id="41">euphoria</g>. 

The then Greek Finance Minister, Ioannis Papandoniou, described it as <g data-gr-id="40">an historic</g> day that would place Greece firmly at the heart of Europe. In a way joining the European Union did place Greece at the heart of Europe, but in unexpected ways as the current crisis shows. A lot of political and economic commentators have blamed the previous Greek governments for burning through a ton of cash. This is not entirely accurate. 

The Greek government had a manageable amount of debt to begin with. Then it was coerced to bail out its private banks who were engaged in the same reckless fiscal behaviour that all other banks in the world were indulging in 2008. In doing so, the private debt of the banks became the sovereign debt of the Greek government. The European Central Bank which is the central bank for the Euro and administers <g data-gr-id="52">monetary</g> policy of the Eurozone sternly refused to back the Greek economy in its hour of need. So blaming this on the reckless extravagance of the Greeks is perhaps callous. A lot of Greece’s current ills can be explained with its decision to join the Euro in 2001. If Greece wasn’t a member of the Eurozone, it could have boosted its sagging economy by printing more of its native currency i.e. the drachma. 

This would have substantially lowered the value of the drachma in international markets, making Greek exports more competitive. It would have also lowered domestic interest rates, encouraging domestic investment and making it easier for Greek debtors to service their debts. According to noted economist Joseph Stiglitz, the economics behind the program that the “troika” (the European Commission, the European Central Bank, and the International Monetary Fund) foisted on Greece five years ago has been abysmal, resulting in a 25% decline in the country’s Gross Domestic Product. 

Almost none of the huge amount of money loaned to Greece has actually gone there. It has instead gone to pay out private-sector creditors – including German and French banks. Greece has gotten but a pittance, but it has paid a high price to preserve these countries’ banking systems. The IMF and the other “official” creditors do not urgently need the money that is being demanded either. It’s clear that Brussels and Frankfurt will not lend a sympathetic shoulder to the Greek economy. As far as they are concerned Euro-zone is not a place for Greece to hide anymore.  A Grexit is perhaps imminent from the European Union. Greece will drink the cup of hemlock.
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