Posted 15 June 2012 - 09:40 PM
The situation: On Sunday Greece will have its second national election after the first one collapsed for some reason. Currenty the seven major Greek parties have formed oppositional coalitions which will decide whether or not Greece maintains its "austerity," stays in the EU, and stays with the Euro.
The two sides:
A. New Democracy (19% of vote) - the "conservative party" by Greek standards, and hardcore progressives by any other standard
B. Pasok (13%) - moderate socialists
2. Anti Bailout
1. Syriza (17%) - hardcore socialists, nationalization of the entire financial system
2. Independent Greeks (11%) - populist nationalists
3. Democratic Left (6%) - moderate socialists
4. KKE (9%) - communists, only party which explicitly wants to abandon the Euro
5. Golden Dawn (7%) - fascists
So if the pro-bailout side wins Greece will limp on for a few more years before bankruptcy inevitably occurs and they drop the Euro. If the anti-bailout side wins, even if the new government doesn't explictly opt out of the EU, they will probably be de facto or even litterally thrown out for not accepting the bailout terms laid out by Germany. Given the situation, I am rooting for the socialist/communist/fascist coalition since it will crash the economy more quickly and allow something closer to a recovery to occur sooner.
Posted 16 June 2012 - 06:21 AM
The third possibility is that Greece stays in the Euro. From a German political viewpoint, a Euro with everything unchanged except one less small country is not a great benefit. They would get the advantage of making an example of one country, in the hope that it will be a lesson to others. However, it comes with the risk that people will see it as a sign that a large country -- like Spain -- might also leave, with a break-up of the EU. On balance, the Germans would be willing to underwrite the Greeks if the Greeks show a willingness to do some so-called "austerity".
In addition, in the funny world of politics, a left-leaning coalition may actually find it easier to enact so-called "austerity" and even to start de-regulation, which is what Greece really needs. This is pretty common in politics: the anti-bailout guys could end up being the one who ensure a more robust bail-out. Anti-bailout voters trust them to negotiate a bailout on the best terms possible, and the pro-bailout voters will breathe a sigh of relief and not complain too much.
Technically, I think Europe "has" the wealth and ability to take more money from some rich people and give it to some poor people, and also to monetize some debt. If both these things are done, the crisis can be "solved" in the traditional way: by re-distributing wealth and by inflating. Whether they will adopt this, and to what extent, is a political decision. If they were a single country, the traditional route would almost certainly be the case. If enough of them still aspire to long-term political union as a United States of Europe, they could opt for this traditional approach. Historian Niall Ferguson argues that there's a pretty good chance Europe blinks and the EU stays in place. On the other hand, how do you convince a German voter that a Greek citizen should get social-security at a younger age than a German?
Of course, it is somewhat of a 'cross-roads' decision, and the decision-making here is primarily ideological/political, making it extremely hard to predict which road they'll go down.
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