It seems that the international political and business elites strategy of scaring the Greeks into not voting for the leftist Syriza coalition could be working.
In my last blog on the Greek elections "Scaring the Greeks" I argued that while a Syriza win looked likely, it was still not beyond the realms of possibility that every effort would be made by the global and domestic elites to make ordinary Greeks feel fearful about voting for that party. According to unpublished opinion polls (as Greek law prohibits the publication of polls at least a fortnight before any election), New Democracy and Syriza have both gained traction during this campaign and appear to be in a tight race. This was not so much the case after the May elections as Syriza began leading in most of the major Greek opinion polls but in recent weeks the pressure has certainly gone on ordinary Greeks to turn away from the party led by the Hugo Chavez of Europe, Alexis Tsirpas.
It's no wonder. Day in, day out, ordinary Greeks (who are already largely anxious about their futures) have been fed apocalyptic visions of what a post-default Greece will look like. A world where both banks and the government run out of money due to massive capital flight (which is already occurring). A world where both inflation and unemployment skyrocket even more than they have been. Where ordinary Greeks engage in human flight towards airports and borders. Where civil conflict looms between forces of the extreme political left and right and their supporters within the police and security forces. You get the drift.
But the reality is that Greece is already at the point of no return now thanks to the neoliberal policy prescription handed down by the EU/European Central Bank/International Monetary Fund troika. Its prolonged internal economic depression (for that's what it is) has driven an even deeper hole into the country's public deficit. Mass unemployment and depressed domestic demand have seen the Greek economy collapse entirely. Hospitals and other essential social services have no money to pay even for the basics such as syringes and medicines or for much needed staff. Overall, many ordinary Greeks (apart from the very wealthy) have little or no money with many private firms having not paid their employees for months. Practically, the Greek economy has ceased to exist.
Therefore, irrespective of whether Syriza or New Democracy leads the next government, it is almost certain that Greece will default and leave the Eurozone. Until some weeks ago, I shared the view of Tsirpas that Greece could both stay in the euro and reject austerity but I think (after doing some further analysis and thinking) this even misses the point. I now feel the country, after undergoing what could best be described as the "Argentinian scenario" of crashing even further in the short term could enjoy (like that Latin American country) a spectacular recovery once it has its own currency back in the medium-to-longer term. Other highly indebted European states (such as Spain and Italy) could follow Greece out eventually and that will lead to the euro unravelling. And that's what the euro should do and will do - unravel - as the currency union has proven to be an unmitigated disaster.
But in the longer-term, Europe could be better off without the single currency. This is the case as the euro, after all, is backed by the comparative strength of the German economy. Therefore, if the German economy performs strongly (as it has done in recent years) then the euro currency remains strong hurting lower income, less resource rich countries like Greece whose exporters can't compete on the same level as their German counterparts. As external currency devaluation is not possible, the Troika has prescribed a series of internal devaluations (such as in Greece and Spain) where labour costs are reduced effecting a competitive advantage in that way. However, the underside of that is (as we have seen in both countries) is that internal economies become depressed leading to even higher levels of unemployment and underemployment. As Greece has shown, the cycle can become vicious and self-perpetuating thus entirely defeating any efforts to restore both fiscal and economic health. Hence, the only (eventual) way out of economic chaos will be a currency exit.
Therefore, I expect that if Syriza wins, the global financial markets will savagely punish Greece for voting for a socialist government almost immediately. If New Democracy wins, the global markets and the European Union will give Greece some respite but, inevitably, due to the intractable nature of Greece's public deficit (exacerbated by its depression), the country will undergo a more managed default and euro exit process.
In any case, the choice facing Greek voters on Sunday is an awful one. I personally would welcome a Syriza win but the cost of it may be severe in the very short-term. Even if New Democracy wins, the same scenario of a currency exit and default awaits with the only difference being it might be managed with the awful side effects coming some months down the track before recovery takes hold. This is unfair, obviously, as the financial markets have always traditionally been biased against the Left but that's the way it is. Eventually, Greece faces a non-euro future and while the majority of Greeks do want to stay in the currency, they will have to realise that their prospects might be brighter out of it than in. And once recovery takes hold, the Greeks will be scared no more.
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