If the current standoff ( pre-referendum) was not so serious, it would be funny. It reminds me of a Marx Brothers film from the 1930s, in which Groucho said “he did not care to belong to any club that allowed him to be a member.”
It has been entertaining watching the Euro elite grappling with the profligacy of their Mediterranean club member, and last week, we saw Jean Claude Junkers, the EU President, reduced to tears pleading with the motorbike riding leather clad Greek Finance Minister Mr Varoufakis.
Even better, Mr Veroufakis told the EU a few months ago that trying to elucidate repayment from Greece was “like trying to extract more milk from a cow by whipping it”
Aside from this marvellous comedy, how have we reached this point?
Back in 1999, the EU wanted Greece, and any other EU country vaguely interested, to become members of their new currency project. The convergence criteria that all member were supposed to have met (low inflation, government borrowing of less than 3% of GDP, etc.), proved malleable, and a former governor of Greece’s Central Bank has admitted that his country fudged its exam paper, allegedly with the help of international external consultants!
The Greeks were wildly enthusiastic , and its easy to understand why. The Greek people and government saw gold, the opportunity to benefit from someone else’s better currency, borrow internationally on that currency with more credibility, at better interest rates, and simultaneously receive wheelbarrows of EU structural funding, all because they had agreed to be members of this big club. Interest rates duly fell from 5% to 2%, money poured in, there was the usual property boom (which no one spotted or could understand), and the Greek people, using its government, rewarded themselves with early public sector retirements at 50, with all of the financial foresight and responsibility of Groucho Marx.
And then came 2008. The financial crash exposed both Greece and the Euro for what they both were - fake constructions – and the edifice began to crumble
If the EU and Greece get out of this alive, what will they do next? The debt piled up by Greece is not capable of being repaid in the near or medium term. Greek Euro denominated debt is technically the same as Germany’s Euro denominated debt, but it is clearly not the same. The dilemma for the Eurozone is to determine if the Euro represents a single sovereign entity and from that, to pool this debt and make it jointly and severally guaranteed. However, how can you achieve that if each member county has independent and different fiscal deficits, policies, and costs, and their own electorate?
Greece has done us one favour. It has illustrated that we should always, either as a country or as individuals, keep our feet firmly grounded, and live within our means. It’s the same for our businesses. Grand plans and lavish projected expenditures should be enjoyed as a dinner party discussion, but in the morning, remember to get back to basics. And stay independent.
