The Piper Will Always Be Paid
So it has happened. Greece has officially defaulted on its debt. On June 30th, the latest payment owed by the Greek government to the IMF went unpaid as Prime Minister Tsipras and his socialist Syriza party walked away from last minute negotiations on Greece’s bailout package declaring they would hold a referendum on whether to continue with the austerity agenda demanded by its creditors as a condition for continued financial support.
The fallout from this was almost immediate. The EU central bank announced it would no longer extend support for Greece’s struggling banking system. Capital controls were announced preventing the withdrawal of more than sixty euros a day from Greek bank accounts. The newspapers were flooded with pictures of long lines of desperate pensioners queuing up before Greek banks and stories of ATM machines running out of cash due to the sheer volume of withdrawals being demanded of them. Baring a last minute about face it looks very likely that next Sunday a “No” vote will be produced by Greek voters, and if that happens Grexit (the exit of Greece from the Euro and possibly the European Union as a whole) becomes a very real possibility.
And perhaps that is a good thing. If nothing else the sovereign debt crisis of recent years has shown the fallacy of the Euro. A currency union without a true political union simply does not work, as a growing number of people have admitted. Having one currency for a region as diverse as Europe with national economies that range from the German powerhouse on one hand to the sickly southern nations of Italy, Spain and long-suffering Greece leads to the inevitable issue that you have divergent economic priorities. In the normal course of things, a nation in the situation of Greece would simply devalue its currency to increase the competitiveness of its exports (a situation Canada benefitted from in the 1990s back when it was struggling to slay a deficit of its own), but while tied to the Euro that is simply not possible.
I certainly will not mourn should Greece ultimately exit from the EU. While its beginnings as a free trade zone were laudable, the nascent political union it has morphed into in recent decades is a Frankensteinian experiment that would best be aborted. The dream of so many Europhiles of a United States of Europe is a nightmare to a supporter of national sovereignty such as myself, and if the entire wretched edifice comes crashing down as other nations follow Greece’s lead and exit from the European project none will cheer louder than I.
But beyond the greater question of the European Union, what the ongoing crisis in Greece has demonstrated is the sheer delusional nature of humanity. Man’s capacity to deceive himself from the realities he faces is one of our greatest weaknesses as a species. The reality for Greece is that austerity, either imposed by the European Union or manually brought about from within, is unavoidable. As a nation it simply has no more money. Even advocates of Keynesian economics must recognize that fiscal stimulus must be paid for by someone, and Greece has unfortunately emptied its own coffers and racked up such a debt that no one else is willing to lend it any more money.
And yet the Greeks continue to be in denial of this simple fact. Margaret Thatcher once observed that the problem with socialism is that eventually you run out of other people’s money. While I do not agree with the Iron Lady on everything (there is in fact such a thing as society for one), on this point she was spot on. For years and years Greece spent with no regard to the future, incurring a massive bill in the process and that bill has finally come due. Only the Greeks refuse to realize this. Like a whiskey priest they simply keep drinking and drinking out of fear of the hangover, refusing to recognize that eventually they must sober up and the longer it is delayed the worse the aftereffects will be.
Witnessing the gradual unravelling of Greece through its own sheer obstinate refusal to see the writing on the wall has brought me no pleasure. To see the birthplace of Western civilization brought so low instead fills me with a profound feeling of sorrow. The nation that once ruled over an Empire that stretched from the Balkans to India has been reduced to an enfeebled rump barely capable of governing what little it retains. It is also very likely that things will get a great deal worse before they get any better.
Civilization, stability and order are truly fragile things. They depend largely on the expectation of continuity, the belief people have that what is true today will also be true tomorrow. When the pensions and government paycheques stop, when a lifetime’s savings disappear because a bank goes out of business, or when the ability to pay for even the basics of survival slips out of one’s grasp things have a tendency to become very ugly, very, very quickly. Police and soldiers also have an annoying habit of losing interest in doing their jobs when their paycheques stop coming in. Take away continuity and chaos reigns supreme, and when chaos reigns people tend to drift towards those promising order, any kind of order, simply due to the promise of some kind of guaranteed continuity being restored.
The truly sad fact of this scenario is I cannot see any path forward for Greece that does not involve great pain and hardship. Without financial support from the EU, which the Greeks have shown they are no longer willing to pay the price for, there is no pain free way to grapple with the massive economic and fiscal realities that exist. Returning to the drachma would certainly be economically beneficial to Greece in the long term, but in the short term it would have the devastating effect of greatly increasing the cost of imports, which include necessities like food and medicine. So the case of Greece should ultimately be taken as a warning. The piper will always be paid, eventually, and putting it off merely guarantees that when that day comes the price will be steep.