Monday, 4 June 2012
Greek Elections and Deus ex Machina
Euripides
is one of the greatest of ancient Greek writers. The play in his tragedies was
so convoluted and complex that only God’s intervention right at the climax could
solve it and give it a happy ending. The
God was usually lowered by a crane (Machina) onto the stage. Greek
schoolchildren are taught Euripides and some argue that it forms part of the
cultural memes of the Greek society. The modern electoral and logical impasse in
Greece points to a play with similar climactic structure.
Greece is
walking to its second election in a month with 20% unemployment, a deep
recession/depression, a 5 billion primary deficit to pay salaries, a bankrupt
banking system, a deposit bankrun-marathon, no government, no money, no hope, and
no sympathy from the European spectators and with the threat of exiting the EMU.
Beat that Mr Euripides. However, this is real life and the probability of a Deus
ex Machina appearance like in Euripides plays is negligible. Still, many are
looking at the present Greek political parties for that Deus. Others
are hoping for an ECB divine intervention to save the whole of Europe.
Irrational Greek Polls
At the
risk of being totally wrong I will try to chart some of the possible scenarios
the day after the Greek poll date. So far the published polls have given a
conflicting and volatile picture. Many question the credibility of the Greek polls
and equate them to the credibility of the Greek statistics. The truth is that Greek
pollsters had it easy the past decades. They had to choose between two parties and
a very rigid bi-partisan electorate. Now the situation is more fluid. Many
Greeks do not feel bound by political parties or ideologies. The main driver is
fear, frustration, desperation, outrage and revenge. A major theme is “Every
man for himself”. Many bank on divine intervention for a better tomorrow.
Greeks are called to judge and to vote the lesser of possible catastrophes.
The
situation is a logical conundrum. Irrational populist policies capture the
imagination of the people who vote for irrational populist politicians who know
that they can only be reelected if they offer irrational populist policies.
You may
ask why do irrational populist policies captured the imagination of the people
in the first place. The answer is simple. For far too many years we allowed irrational
populist policies to succeed. Witness the housing bubble in the US. The irrationality
was there but was clouded by too much liquidity.
So here
are some thoughts on the scenarios for the morning after:
SYRIZA on top
SYRIZA finishes
first and gets the 50 seat bonus. Assuming that they have not reached the magic
37-40% they would not have an absolute parliamentary majority. Will they try to
form a government? Do they want to be in government at this particular moment
in Greek history? Chances are that they will get very little sympathy from the
communist party (KKE) but they could find friends in both the PASOK and the
DHMAR. So this is going to be a “leftish” government that would try to
renegotiate the MOU (Memorandum of Understanding) with the Troika. Here is the
tricky point. Troika may do some cosmetic changes to the program but SYRIZA
would have a Torvill & Dean moment on ice. A triple reverse somersault and
land on one foot. Can they pull it? I think they can. The left in Greece has
traditionally been much better at propaganda and media manipulation. The recipe
is well known. We say and promise the sky and the stars. When in government we
throw a bit of moon-dust and install our own people in key positions so they
are happy. The ideological fantasists are left with a future promise or leave
the party to form a splinter group (the left has more splinter groups than
stars in the sky). Would the ND object to this outcome? Yes they will, but have
limited way of influencing events. The ND is not an activist’s party and not
militant at all. The real threat to the stability of the system would come from
the far right which includes the fascists of GOLDEN DAWN. This however, is
still a manageable problem.
The main
issue is whether this left coalition could reverse the Greek economy’s free
fall and avert the exit from the monetary union. Here is the problem. Even if
Troika concedes on a 5Y absolute grace period on debt and interest payments,
the Greek government would still have to find 5billion a year (2.5% of GDP, a
number that is rising daily) to cover the primary deficit. It would be unthinkable
for TROIKA to give this amount of money with no strings attached unless they
want to buy the extra few months before they have completely immunized
themselves from the effects of Greece saying goodbye to Europe. Reforms are
painful and mean public sector shrinkage. How long before the coalition is
discredited and collapses? Stumbling and muddling through is an option but with
the Greek economy at a free fall any bets on are off. Still this may represent
the smooth option for Greece. It also perpetuates the myth of the left in
Greece. Namely, that the left possesses the ultimate truth but the bad
capitalists and faceless foreign interests, secretly conspire against it. If it
reminds you of religion, it is because it shares the same infallibility
qualities.
ND on top
Assuming
again that ND is the first party but with no absolute majority the choices are equally
daunting. ND can form a coalition government with PASOK and possibly with
DHMAR. They would need the coalition anyway as the quality of their executives
is debatable. Although this on paper is a more balanced coalition involving
parties from the traditional left-right-center it does not include the new kid
on the block, SYRIZA. This is a recipe for disorder and chaos. SYRIZA would most
probably oppose any coalition renegotiation agreement with the TROIKA actively
and militantly. Any new treaty would be branded treacherous and damaging to the
people’s interests. In this case, and given the disruption the government would
not survive for long. Let us not forget that both PASOK and ND have always preached
that the TROIKA program is evil and that they only signed up to it because they
needed the money and not because they truly believe in reforming the economy. New
elections would bring SYRIZA on top, possibly with absolute majority. At this
point whether Greece is in the monetary union or not is a secondary issue. The
main event is that SYRIZA would be the absolute masters. This may be the
optimum path for SYRIZA to gaining power.
Unity Government
This
scenario assumes that all parties, with the possible exception of the
Communists (KKE) and the fascists decide to join forces and form a government
similar to the Papademos government of two months ago. Of course this begs the
question of why have two elections and so much trouble only to go back to where
you were only few weeks ago, but that’s politics. A third election cannot be
ruled out but at least it may take few months. The pressure from Europe in this
case would probably be greater as there would be no opposition. The mandate of
the Unity government would be to save Greece from exiting the Euro. In doing
so, the parties would have to share the blame for the reforms. Clearly this is
a solution that goes against the instinct of each and every party.
This may
be the solution that buys more time for Greece but the ultimate problem is that
all the parties have consistently lied on the nature of the problem and the medicine
needed. The unity government would pass all the laws and reforms that Europe has
demanded. However, as every Greek knows,
passing a law and enforcing it or implementing it is a different thing
altogether.
Conclusion
Unless
there is a surprise and SYRIZA drops to a third position, for any coalition to
have any chance of success SYRIZA must play along, openly or tacitly. On the
other hand, the hard reality is that no matter who comes first in this election
may be irrelevant. The Greek economy is on a free-fall. The economic depression
is deep and there is no prospect of coming out in the next 2-3 years
irrespective of the currency in circulation. The best one can hope is to stabilize
the situation. Tax revenues are falling as more and more people refuse to
depart with their cash for fear of Drachmatization. They hoard their Euros and
have stopped any investment or unnecessary spending activity. Velocity of money
is virtually zero and the political uncertainty is not going to go away anytime
soon. Reversing this would mean new political parties capable of carrying out
the faith of the Greek people. This is a long way away. So far we have seen a
recycling of ideas, politics and politicians. Even the SYRIZA that self-brands
itself as something new is just a bad copy of the PASOK of the 80’s. The
similarities are too many to be a mere coincidence. Many of the voters, active
members, political advisers and consultants of the PASOK have switched to the new
SYRIZA vehicle. It’s their best survival option and they adapted accordingly. A
Deus ex Machina moment is a long way away but the climax is approaching.
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