Sunday, October 2, 2011

How will the Greek movie end?

Fortunately, there are still some people who believe that the Greek movie being filmed now could still have a good ending if only the directing would improve. Why this optimism? The majority of Greeks are industrious, decent, honest (perhaps even a bit naive), openhearted and they do not (and cannot) afford an unduly high standard of living. Greece has done virtually nothing in the last decade to utilize her potential. Instead, she lived on money from abroad (originally from the savings which guest workers sent back home and, since the Euro, from the cheap loans). Public administation is archaic. Politics are incompetent and corrupt. As a matter of fact, large parts of Greek public and business life remind us of a developing country.

No economy has more growth potential (at least for a number of years) than an economy which needs to do a lot of catching-up and which has the potential to do so.

This is the justification for optimism. However, one must be realistic enough to recognize that, by now, almost a miracle is needed in order to still direct a positive ending of the movie, and this miracle would need to happen in the next few months, possible even before year-end. Otherwise, the movie will find an ending like a Greek tragedy. What could such an ending look like?

One day, TV stations will report during the morning that masses of people are waiting in bank lines to withdraw their deposits. By afternoon, the situation will have turned into panic. By evening, the Central Bank will inform the government that there is not enough Euro cash in the system in order to meet the cash demands expected for the next day. The government will have to declare a Bank Holiday in order to have time to pass a new law freezing all deposits for at least one year (except for minimal withdrawals for personal needs).

At the same time, Greeks discover that, after all the cost cutting to date, heating oil has become 40-50% more expensive and that the electricity bill now includes a new property tax. If it is not paid, the electricity will be turned off.

By now, the social tension which has built up over the last year will most likely let off real steam. Remember that parallel to the Greeks described above, there are the other Greeks. Those Greeks who used the Euro-party to enrich themselves in unbelievable amounts; who continue to lead a very, very good life even today and who show that. In short: the "correct ones" have no choice but to recognize that they have been the fools and the "incorrect ones" are the smiling winners. Must I say more?

In all likelihood the government will be forced to resign. The plan for new elections will probably have to be discarded due to the break-down of social order. If this ends well, the President will succeed with the formation of an expert government which will govern Greece for the next 6-12 months without having to consult parliament. A good government of experts might be able to succeed - with active support from the EU - to put the country on new footings within 12 months, but those would have to be real good footings. For that, the expert government would have to be as good as de Gaulle was for France in 1959.

Should there not be a government of experts and should new elections not be possible, then Greece will sink into chaos. Whether or not Greek democracy can survive that remains to be seen.

The following, however, is certain in the pessimistic scenario: there will be substantial emigration from Greece only that this time around it will not be the workers who leave for work abroad but instead it will be the very well educated youth and other key performers of the economy.

Must I say more?

1 comment:

  1. Greece is unable to stir out of the mess it fell into, under its own exclusive responsibility and to some minor extent of its narrow minded lenders.

    The only possibility is a significant, external driven, investment activity. To be more precise, a Germany driven investment activity.

    Some thoughts on the matter I have published here

    If this does not happen arithmetics leave no doubt; A haircut above 50% is the least that can turn things around. Under a strong and constant supervision of the Greek political system who is just incompetent to stand alone up to the task