The Referendum: Two Terrible Choices

After much back and forth these last few days, it appears that the Greek people will, in fact, be going to the polls on Sunday in a historic referendum. As the reality of the situation has sunk in, I have found that if I were voting, I really don’t know which way I would go because both of the choices are terrible. The options are:

  1. Vote “Yes,” in favor of an almost spitefully bad deal offered by the Eurozone leadership, one that continues the austerity policies that have crushed the Greek economy these last several years and essentially guarantees that Greece will be unable to revive its economy anytime in the foreseeable future.
  2. Vote “No,” taking a leap of faith into an unknown future, a vote which the Eurozone leadership has stated will be interpreted as a vote to leave the Euro, and take the serious risk of massive short- to medium-term pain in Greek society, in the hopes of coming out to a brighter future in the long-term.

A number of people have asked my opinion of Paul Krugman’s piece in the NYT the other day, in which he makes a compelling argument for why Greeks would be better off voting No. As usual, I agree with 95% of what Krugman says, but I wholeheartedly disagree with a crucial 5%. He argues that:

much and perhaps most of the feared chaos from Grexit has already happened. With banks closed and capital controls imposed, there’s not that much more damage to be done.”

In other words, things in Greece are terrible and can’t get much worse. I am no economist and I am not confident about much of anything in this debate, but one thing I am confident of is that things could get worse. A whole lot worse.

At this moment, capital controls—limits on access to bank deposits—are just beginning to have an impact on the Greek economy. Commerce is essentially frozen, as nervous consumers put off non-essential purchases, businesses hoard what cash they have, and foreign suppliers refuse to provide product without up-front payment that Greek businesses are now unable to make. And the one bright spot in the Greek economy in recent years—tourism—is only beginning to suffer from the uncertain situation. The Association of Greek tourism reports a catastrophic drop in bookings recently, a fact I can personally attest to based on last week’s trip to the island of Paros, where the number of foreign tourists was down dramatically compared to recent years.

The snowball effect of cash shortages, nervous consumers not spending on anything non-essential, businesses unable to import or export products, and tourism taking a massive dive is likely, in the short run, to drive the Greek economy into a far greater tailspin than it is already experiencing.  More businesses would likely close, more people would find themselves out of a job, and the country’s great many self-employed contractors would find that what little work was out there before has dried up.

So, while there is nothing I would enjoy more than to see the Greek people stand up and proudly give the finger to Merkel, Scheuble, Junker, et al, I couldn’t easily expect my Greek friends to do so. My wise friend Peter N. made one of the most cogent observations on the position of US progressives in this debate that I have heard:

“It seems to me it’s always easier to join in a revolution, protest, riot, hunger strike, etc. from the comfort of our faraway couches in between bites of pancake.”

Exactly.

So, the Greek people are left with two miserable choices. I pity them and, more than anything, I am angry at the Eurozone leadership for putting a proud people into this position. I believe that what Krugman and others have said is right—this isn’t about really trying to find a reasonable deal to help Greece get out of its years’ long depression. It’s about punishing a left-wing government that dared to get out of line and sending a warning shot to similar forces in Spain, Italy, and elsewhere.

A sad reflection on the Eurozone.

FYI, an excellent short interview on Australian radio with Greek Finance Minister Yiannis Varoufakis provides a very compelling explanation of why the Greek government opted for the citizen referendum on the proposed deal.

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