Thomas Miller is the previous Ambassador to Greece, Bosnia and Herzegovina, and the Special Coordinator for Cyprus. He is also the current President/CEO of International Executive Service Corps, a non-profit that furnishes expertise to the developing world to train in best business practices. You can read more about his impressive career here.
The Greek Elections and the Future of Greece
Author: Ambassador Thomas Miller
As of now it looks virtually certain that Greeks will return to the polls on either June 10 or 17—just a few weeks after the last inconclusive election. On May 6, Greeks resoundingly turned out the two parties that had alternated power for nearly the last four decades when 70% of them voted for parties that rejected the austerity plan these two mainstream parties had signed with the European Union, IMF, and the European Central Bank (ECB).
Why such a massive turn of events? The May 6 vote is a repudiation of the four decades of alleged corruption, inept economic policies, and most importantly a rejection of the austerity measures Greece’s European colleagues had insisted upon as the price for getting 174 billion Euros to bail Greece out of its difficulties. The message of the anti-austerity parties was fairly simple: paraphrasing the movie, Network, “I’m mad as hell and I’m not going to take it anymore”.
Unfortunately the anti-austerity parties (mostly from the left) have no real solution. While most (and most Greeks) want to stay in the euro, they don’t want to abide by the terms their predecessors already agreed to as the price for remaining in the eurozone. They somehow think that if they scream loud enough, the Germans and others who have been underwriting this bailout will knuckle under to Greek indignation and soften their terms. Given what we have heard recently out of both Berlin and Brussels, it seems they will be sorely disappointed. While there may be a prospect for some softening of the terms around the edges, it is highly doubtful that there will be a wholesale repudiation by Greece’s lenders of the austerity package.
So, not unlike earlier crises in Greece, but with the stakes much higher this time, the question is who will blink first? Greece is not playing a strong hand, and there is a point beyond which its lenders will be unwilling to act. The consequence of pushing too far and too hard could be that Greece will lose the funding that has been promised and any future funds. That in turn would lead to Greece’s inevitable withdrawal from the euro and reversion back to the drachma with tremendously negative consequences: significant devaluation, the collapse of its banking system, massive spikes in unemployment above the already high levels, and the collapse of the Greek economy. Greece would be hard put to even pay its civil servants and the reduced pensions for its aging population. Ironically, the rejectionist parties are insisting on more civil service hiring and returning pensions to their earlier levels.
Let’s hope that some sanity returns to this situation and that Greece and its lenders are not put on a “who blinks first” path because while the consequences of a withdrawal from the euro for Greece would be catastrophic, the spillover effect to the rest of the Eurozone could be very serious.
P.S. With events moving so quickly and unpredictably, the only thing that is certain is that this note will be overtaken by events by the time it hits the wires.