The Greek Economy has been sick for many years now. In the past 18 months this illness became critical and now the Greek Economy is bankrupt.
The country owes to its creditors an amount of money that cannot be paid back under any stretch of the imagination.
However, the Greek Economy is hanging on, because there is a God out of the machine, who helps her stay afloat.
The problem here is that there is no end. In a Greek tragedy, when the God out of the machine shows up we are very near the end of the play. He does what he does and off we go, the problems are solved, or pushed away, the heroes escape, and the play ends.
In the drama of the Greek Economy, the God out of the Machine seems to intervene every now and then, and the play goes on.
The source of the problem is that the God has no clear and steady objective. The God is moving with the tide, and is a political God, if there ever was one.
The solution to the problem is unclear. And this is because the politicians in charge of the European Community cannot plan anything beyond the short term. The European Institutions are also very weak and cannot sustain the huge pressures of the required solution.
Therefore they all resign to the inevitable “muddle through” model of crisis resolution, or rather crisis maintenance. (I highly recommend to those with interest in the art and science of muddling through to read the classic article of Professor Lindblom.)
It appears that the show will go on like this until 2013, when the proper support mechanisms will be in place to avert the ripple effect of Greece’s inevitable default, and the Greeks will be allowed to go to hell without disturbing the rest of Europe.
The reason that Greece is not defaulting now is because the European politicians are afraid of the potential ripple effect this default will have on Portugal, Ireland, and potentially Spain and Italy.
What makes the play a tragedy is that all the requirements the Europeans and the IMF define for the continuation of the bail out, are almost totally ineffective for Greece. A simple example is the taxation system. In the 18 months since the first memorandum (to provide 110 billions of Euros to Greece) the taxation system in Greece is moving from worse to worse. Citizens who always paid their taxes now pay a lot more, while the citizens who were not paying their taxes continue no to pay. This results in the widening of the operational deficit of the Greek national budget almost every month in 2011.
Unfortunately there is more. Not only the so called measures are wrong for Greece, they are destroying whatever is left of the social cohesion in the Greek Society at large. Greek society today resembles a boiling pot without a safety valve.
The situation is rapidly getting out of control, as the credibility of the politicians is diminishing and people feel they are alone facing the looming disaster.
On the surface the so called technocrats of the European Union and the IMF seem to have a plan and know what they are doing. In essence, all they are doing is copying the recipes from their rather out of date recipe book. When things like that happen, it is the politicians’ job and duty to lead the course and find a way out. There is no such leadership in Greece today. The government went through a reshuffle a couple of days ago, only because there was nothing else to do. In addition, the EU/ECB/IMF troika have prepared the so called “medium-term” plan, which is basically another bunch of tax measures that will also fail.
We must brace ourselves for whatever comes next, and stop believing in any theory of “rational” behavior. Because the Greek problem is far too complicated even for the “instinctual” muddle through to work. And the God out of the machine is not a God, but a bunch of confused politicians cursing the moment they accepted Greece in the European and Monetary Union, and telling themselves that they only need to suffer until 2013 before they send the annoying Greeks and their problems to hell.
How would Pericles react should he be with us today? I cannot say. But this is a problem that we, the Greek citizens have to solve ourselves. We have to invent the modern day Pericles and give him the support to take us out of the perilous straights before it is too late.