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Tuesday, September 22, 2015

Greece re-elects Tsirpas, who is now obliged to implement the exact austerity reforms that he swore to oppose in his first successful presidential election.

Link: Tsirpas wins with almost the same exact plurality.

Do you remember the days, when to discuss Greece meant to recall a fantastic cruise in the Mediterranean, or a month of sun-soaked relaxation on a Mykonos beach?  In the 19th century, the English upper class believed that for a young person to have a fully rounded education, then a trip to study the classics and ruins in both Greece and Italy was a requirement.  Personally, I enjoy reading about Greece's more modern history, including the 1821-1832 war for independence against the Ottoman Empire, or the valiant guerilla war against the Nazis in World War II.  Today's younger generations no longer have to be instructed about Greece in a classroom, because Greece is frequently the subject of an international news story.  Unfortunately, the news stories are not  documentaries about Plato or Ancient Sparta.  For roughly the past decade, the newsworthy events generated in Hellas have been dominated by economic news.  In particular, the rest of Europe has become very interested in the state of the Greek economy.  Greek is a member of the EU, which appears to be validating the old cliché that a chain is only as strong as its weakest link (somewhere deep in Les Invalides, Napoleon just rolled over).  The brilliant minds that constitute the European Commission's Economic and Financial Affairs Office (Directorate-General for Economic and Financial Affairs) keep a close eye on the economies of all the member states.  The Greek economy was not very strong when the EU offered Athens membership, but the belief was the Greek system would be reformed, modernized and improved by its association with its fellow EU states.  But the last ten years, played out in the European Press almost like a soap opera, has been one Greek economic crisis after another.  The evolution of the original crisis, which was addressed with a fat loan from the EU, should have been an indication to the Economic and Financial Affairs folks that Greece was going to be a problem that would refuse to go away.  The timeline will include an additional loan, mass demonstrations by the Greek people, protesting both their government and the EU who provided the loans, and the possibility that Greece may become the first country to join and depart the EU.

The actual issue isn't complicated.  The Greece government, which is the nation's largest employer, continues to grow in all directions.  Greeks are living longer, and each decade another generation enters the rolls of pension-collectors.  The Greek government only takes in so much in taxes (income tax, tariffs, transaction fees, tourist taxes, etc.).  With the growing number of pensioners, and the continual growth of social programs, migrants, etc., the Greek government runs a huge deficit.  Every year, the government spends more money than it takes in.  To make matters worse, the Greek economy is in dire need of reform.  The Unions are all-powerful, and they fight tooth-and-nail any attempt to modernize equipment or processes, for fear that it will result in a smaller workforce (which is probably true, but the profit made should be put into enlarging the business, which creates jobs as well).  The cycle is repetitive.  The Greek government is under-water and can't pay its pensioners, so it asks for help from the EU.  The EU responds with a loan offer, tied to a requirement for reform.  The Greek people go ape-shit, calling the German members of the negotiating team "Nazis", and pressure their government to initially refuse the offer.  Cooler heads eventually prevail, and the reform package is accepted.  The bailout cash arrives, but the Greeks do not effectively implement the reforms as required, which sets us up for the second-running of the cycle.  The unreformed Greek economy (again) is unable to meet its obligations, so again a request for assistance arrives at the EU.  Another loan package is put together, along with another requirement for austerity and reforms to the Greek economic system.  More demonstrations, cars burned, governments toppled, but in the end, a deal is reached.  The money is delivered, but the austerity and reforms and other requirements related to the repayment of the loan are put aside.  Believe it or not, there was a round three of this absurd game.  It would have saved everyone so much money and time, if the EU would have just written a check to the Greeks each time they needed money.  The reforms, which are the only way the Greek economy will evolve and grow to function successfully alongside its EU neighbors, seem impossible for the Greek people to accept.

Current Greek President Alexis Tsirpas, was elected last year on a platform of intransigence and opposition to the EU.  But once he took office, he got a lesson in reality.  Greece had two options: either agree to the conditions set by the EU and receive ANOTHER loan, or leave the EU.  If Greece leaves the EU, then access is lost to a number of other programs and initiatives that have been very helpful. Also, Greece would lose access to the financial support that has actually kept Greece from complete economic collapse over the past decade.  Regarding membership in the EU, some of the wealthier countries like France and Germany, probably end up losing money at the end of the every year, but the idea of a European Federation means so much, that they are willing to give a little.  On the other side, countries like Greece (and Italy, sad to say), have really become dependent on the EU to keep them from total economic collapse.  What is most interesting is that the countries who truly embrace socialist-style economics (Italy, Greece, Serbia) are a complete economic mess, while free-market economies like Germany, Poland, Czech Republic, and France, never have to ask for a hand-out.

After taking office and realizing that he had no choice, Tsirpas accepted the deal offered by the EU.  He faced an almost immediate rebellion in his own party, and his popularity numbers went into free-fall.  But Tsirpas is one smooth operator (he reminds me of a young George Papandreou), and he decided to call new elections to answer calls for his resignation.  If Tsirpas had agreed to immediate presidential elections, or at least stuck to a reasonable timetable, he would probably have still lost.  But he scheduled the election after the people had digested the issue of reforms, and gave his astute political machine time to rebuild his image, as the young Greek warrior who stood up to the German Harridan Angela Merkel.  One thing no one can deny: the Greek people love their drama!

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