Tag Archives: SYRIZA

Our Brand Is Crisis: Greek Economy ‘Experiencing New Normal’!

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Athens, Greece: Coming to a Developed World Metropolis Near You?

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The latest developments in the eurozone financial crisis have seen Greece go to the polls to decide upon the acceptability of yet another loans agreement – messy small-print duly included – and much of the analysis on this topic has focused on familiar tropes: the implications of the referendum result for Greece’s continued participation in the euro; the value of that same currency; and even the possibility of the European Union losing a relatively minor but deeply symbolic member country.

But it is the mundane reality of events on the ground which have got we at Mediolana in a contemplative mood. With capital controls in place to avoid the Greek economy haemorrhaging cash, international bank transfers have been suspended and imports of some basic items – including sugar, flour and pharmaceuticals – are starting to become scarce. Developments like these are introducing a whole new round of uncertainty into everyday existence.

This dysfunctional world of bank runs, shortages and epic political instability may seem distant to onlookers in Northern Europe or the costal cities of the United States. But the question still needs to be asked: is Greece really as sui generis as we would like to believe? It is certainly true that it has a long history of fiscal imprudence, embedded institutional corruption and – perhaps most damningly of all – a taxation system that barely impinges on the privileged oligarchical class. It is also true that with a population of ten million people and a limited industrial or natural resources base, Greece was always going to have to punch above its weight in precisely the areas in which it has fallen short to avoid long-term decline.

But there are plenty of countries (and indeed entire regions) with basic economic problems: budget deficits, political corruption and tax systems that virtually or literally subsidise the already fabulously wealthy are hardly Greek inventions. Greece may not even be the worst nation in the eurozone according to these metrics; in the world beyond the eurozone, places with all kinds of deep flaws which are anathema to high economic performance are not being forced to wrestle with austerity owing to flagging stakeholder confidence.

Ten years ago this weekend, the Greek national football team won the 2004 European Nations Cup. Today, the country seems to be pioneering the ‘paupers with smartphones’ economic model, and its very viability is openly being questioned. That such a transition can happen overnight in historical terms should give those in supposedly superior polities pause for thought.

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Greece: Winning the Battle, Losing the Currency War?

As the UEFA Euro 2012 finals edge closer into view, it seems almost fantastical that as little as eight years ago, Greece – the winners of Euro 2004 in a victory so improbable that we still have trouble believing it happened – was something of a poster-child for economic development. Its glittering – nay, chic – Athens Metro, constantly expanding GDP and membership of the elysian eurozone all pointed to a nation-state which had attained End of History status.

Today, Greece has more of a fin de siècle vibe about it, with social, political and economic norms being upended. The legislative elections of 6th May 2012 saw a collapse in the vote for the two traditional powerhouses of Greek politics – the rightist New Democracy and its Panhellenic Socialist Movement counterpart – and a surge in support for the hitherto unknown Synaspismós Rhizospastikís Aristerás or SYRIZA, a radical leftist coalition which was, somewhat ironically, founded in 2004. With the post-election horsetrading having failed to produce a government, another election has been called for 17th June 2012 – and SYRIZA, presently the second largest entity in parliament, could end up as the biggest single representative bloc in a few weeks’ time.

This is potentially a development of great significance on a number of levels, but we at Mediolana believe that it could be particularly interesting because of SYRIZA’s stance on seeking bailout money from the European Union: it rejects such a policy, with its European policy spokesperson Yiannis Bournos claiming that there is ‘no way’ that Greece will be ejected  from the eurozone; even if the EU were to cut off funding, Bournos affirms that Greece will be able to rely on a combination of its own tax revenues and alternative financing arrangements courtesy of China, Russia and the Middle East.

But for all the novelty of this perspective, is Bournos actually correct? We foresee at least three serious problems with SYRIZA’s position:

1. Risk. The assumption that the Greece would ultimately never be compelled to exit the eurozone amounts to calling the bluff of Germany, a country where bailouts of indebted southern European nations is broadly unpopular: nearly two-thirds of survey respondents were opposed to a fresh Greek bailout package in February 2012, and it seems unlikely that any German leader – even the bailout-happy Angela Merkel – would wish to risk too much political capital on this issue indefinitely.

2. Drachma ≠ Panacea! In the event of a Greek withdrawal from the eurozone, SYRIZA would be forced to rely on the good name of a new currency, presumably a variant on the former national currency of Greece, the drachma. However, with the country’s reputation for relative fiscal rectitude in tatters, the value of any new currency would be subject to severe downward pressures: Greece’s proclivity for deficit spending and current reliance on foreign capital to meet even basic expenditures is now common knowledge, and currency markets are likely to reflect this.

3. Eastern Promise? Leaning heavily on emerging markets and petromonarchies with current account surpluses is not necessarily a viable long-term strategy, either. China’s European financing strategy involves nothing less than the giving by the recipient country of rock-solid collateral, while Russia and many Middle Eastern states are likely to need their largesse to assuage domestic dissent. Root-and-branch tax reform, transparent governance and the construction of an export-defined economy is surely of greater utility – but is an avowedly anti-capitalist collective best placed to deliver these initiatives?

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