Greece in the Crosshairs of Crisis

A Chinese blessing says, "may you live in interesting times". 

Buying a villa in Greece during an economic crisis certainly is interesting. Now the country has made it's way into the unchartered waters of being forced out of the Euro zone, a move for which there is no formula nor precedent.

The debate over the pending referendum to be held in two days is hot. Early polls suggested the No vote- or the vote to tell the EU to stick it,  was going to win easily. 

But now that people have had a taste of what expulsion or leaving will look like, the vote appears to be swinging the other way. But even a Yes note is fraught with uncertainty and is far from a solution. 

One lady I spoke with yesterday in Chania said "even if she has to go back to her village and live off her garden and 20 olive trees, it will be better than what she experiences now. There is not much ambiguity here. People are clear in their choice. They are scared. 

If Greece chooses to stop using the Euro and goes back to its historical currency called the drachma there is even greater cause for concern. Greece has nothing to base a new currency on at this time. So what is suggested is a "haircut".

This kind of haircut will see the Government take a substantial portion of everyone's bank account and savings to be used to establish a base for the new currency. This seizure could be as much as half or more of all bank accounts. That alone is a major cause for concern.



Many businesses only take cash. One taverna we ate at last evening said they needed cash in order to buy the next days' supplies as suppliers are not offering credit -even very short term credit, at this time. The local gas station manager only buys each morning, the gas she can sell that day and thus often runs out. 











The media- especially the foreign medias, are using fear to sell papers thus the worst fears are highlighted. Tourists are here on vast numbers, but they are spending far less than they used to. One person we spoke to said the Greeks "need the love from others" to help get past this. By love she meant coming here and spending.

We, my wife and I, have been gleaning the media, consulting with other ex-pats on Crete and drawing from any other well that may offer wisdom at this time.

To say we live in interesting times in Crete only begins to describe our reaction. Yet, at the end of the day, we remain observers in the Greek political arena and are simply along for the ride. It is not for us to voice an opinion too loudly as we need to live here and the fractures from this vote and crisis may be long lived. 










So these blog entries will focus on the view from where I sit.

To begin - a briefing on the current history to this crisis. The current Greek economic crisis has many tentacles and roots that often exceed my skill in macroeconomics to comprehend. Never the less I try. 

The current crisis is the result of poor choices by everyone involved. The sheer number of official voices and deeply vested competing interests complicates it. 

It begins with the Greeks, their culture, way of life and outlook on the world, their history and of course their roller coaster political life that has characterized them all through modern times. 

Tax avoidance is a matter of some honour for the Greeks. The Greeks do not seem to share a social contract such as many Canadians do who, as we pay our substantial taxes reluctantly, also see that we are supporting all that makes Canada work. It appears the Greeks have a different focus. Their major spheres of interest are family, village and church. The greater whole, well, it is an ambiguous relationship.

Social responsibility is different here. To say it is lacking is, of course, nonsense but to say it is other appears to be true. The Greek norms are quite foreign to us. We experience these wonderfully in such things as Greek graciousness and hospitality yet we can be perplexed at the general acceptance of such things as corruption and the all pervasive underground economy as the natural way of doing things.

On the other side is a myriad of groups and institutions beginning with the three major players.  The EUC [European Union Commission, the ECB [European Central Bank and the IMF [International Monetary Fund] together are called the Troika and it appears they have trouble talking to one another thus agreements are made by one body, altered by another or rejected by the third. It all makes for ongoing uncertainty from that front.

Certain leaders such a Germany’s Merkle also muddy the waters inserting their own vetoes and demands.

In short there are simply too many voices at the table for a meaningful negotiation.

Last year things were looking like the worst might be over. Unemployment was improving and Greece was beginning to move towards balancing the books.

But all that suddenly changed when a snap election was called and a coalition of the left – the Syriza party, ran on a platform of renegotiating austerity believing that the Troika would have to comply with Greek demands and grant a better deal.

The gamble has failed spectacularly

What has happened, simply put, is that everyone has boxed themselves into a corner. Syriza said no way to the Troika and now the EUC and the Troika say no way to the Greeks.

For some unfathomable reason PM Tsiparas [above], has called a snap referendum vote without a clear question. There is little time to debate or think and little meaningful information to go on. The strategy seems to be that a knee-jerk reaction by the Greeks voters will influence the Troika in ways favourable to Greece.

The Greeks are an emotional people and it looked like there was clearly going to be a 60% “No” vote to staying in the EU and complying with the bailout formula.

With the banks closed and with withdrawals severely limited the Greeks got a taste of what No will mean it now appears that number is reversing and about 60% will vote Yes. Yet if that happens it will mean the Greeks have rejected Syriza who they just elected and there may need to be a new election and everything begins all over again. But another serious question is whether or not the EU patience with Greece is nearing its end.

To say it is a mess is too simple. It is a tragedy. People are suffering and it appears the pain is growing and may begin to avalanche soon.

One analysis I find helpful to understand the Troika’s position is that Greece is not alone with an economy in crisis. Italy, Spain, Portugal and Ireland are struggling with extreme debt. It may be the Troika is making an example of Greece to scare these other countries into compliance with the Troika.

As I recall Napoleon encouraged his officers to shoot some soldiers from time to time to “encourage the others”.  Has the Troika come to a similar conclusion?

So Sunday's vote looms on the immediate horizon and there is little chance that whatever happens will mean relief for the Greek people. This will go on and on no matter the choices. 

For those in Canada this should not be seen as simply an EU problem. New Brunswick it flirting with similar excessive debt and the story from here could become the story there. 

The banks are a powerful reality in our lives and they do not have a human face such that they can easily be compassionate. The bankers are accountable to investors who have come to expect a healthy annual return on their investment. Taken together all these forces point to how unsustainable the structures that have served us so well in the past have become. 

As Ghandi observed many years ago, "there is enough in this world for everyone but there is not enough for everyone's greed".