By Paolo von Schirach
June 14, 2012
WASHINGTON – All the major US business channels, Bloomberg, CNBC and Fox are riveted on the upcoming Greek elections, giving American viewers the misleading impression that the outcome really matters and that the winner will determine somehow the future course not just of Greece, but of the entire monetary union based on the Euro.
Better if the conservatives win
Well, who wins matters a little bit. If the conservatives of New Democracy, led by Antonis Samaras, would come ahead, with a convincing lead, then we could expect more civilized and may be even constructive exchanges between Athens and its EU partners.
If the left wing Syriza party wins, then it is burlesque. Syriza would have the Greeks believe that –yes, my friends– there is a free lunch. In fact, an unlimited number of free meals. Greece, may be broke, but somehow it will continue its beloved spending habits, without paying its bills. No problem.
Overall, even a cursory look at Greek politics reveals that they are just as unbalanced as its public accounts. The Greeks –left and right– have yet to come to terms with the simple fact that their country lived way beyond its rather modest means for decades. All political parties indulge in conspiratorial theories whereby “someone did this to us“. Unless this state of mind changes –which is to say that people grow up and get serious– expect little progress.
In the end, whoever will come ahead in the new national elections most likely will not have enough votes to have a majority. So, it will have to be some kind of unstable coalition government. And, since the Greeks have yet to find religion, any new Prime Minister will have enormous difficulties in implementing austerity while trying to restart a terminally weak economy.
Awful economic data
Just a little data to put all this in perspective. Spain and Italy look with horror at the yield on their 10 year bonds approaching 7%. Well, Greek 10 year bonds will pay you 28%. How do you like that; some spread. (Germany’s 10 year, in case you are interested, is well under 2%). The unemployment rate in Greece is 22%. Europe is forcasting a Greek economic contraction of 4.7% this year. Try to run this “cradle of democracy”.
Whoever wins, no way to fix this mess
Whoever wins on Sunday, Greece will still be crushed under a mountain of debt, while its economy will still be non competitive and its citizens mostly in denial. The notion that this perennially challenged country may find the discipline to stay in the Euro, cut spending, pare down its bloated public sector, pay its debts and grow the economy looks totally fanciful.