Saturday, June 27, 2015

Reflections on the Greek Referendum

The Supreme Court's decision in favor of Obamacare was a disaster averted.  As such, posting on it can wait until I have the chance to read the decision over.

Taking down Confederate flags and the Supreme Court approval of same sex marriage are culturally significant and deserve some comment, but there is no crisis or urgency to them.

And I continue to make progress with Thucydides and hope to be back to Classical Greece when things quiet down.

Greece is experiencing bank runs
But all of these can wait.  In the meantime, the crisis in modern Greece is coming to a head very fast. Apparently negotiations have (predictably) broken down, the the IMF-European Central Bank (ECB), European Commission (EC) troika insisting on continued, stringent austerity and the Syriza government unwilling to accept it after promising a relaxation of terms.  The Troika has announce an ultimatum and told the Greeks to take it or leave it.  Prime Minister Alexis Tsipras has instead called for a referendum on whether to accept the terms.  Parliament has approved the referendum, with the far-left and far-right parties voting yes and the centrist parties voting no.*

My initial reaction was to applaud.  There is no escaping the fact that Greece has no good options here.  In effect, it has two.  One is to stay the course, continue the ruinous austerity that has been crushing the economy for the past five year and hope for a different result.  The other is to default on its debts and leave the euro.  This will be extremely traumatic in the short run and may be ruinous in the long run, or may be followed by rapid recovery.  No one knows.  Unsurprisingly, the Greeks do not much like either option.  Thus far they have grudgingly followed the first option, with the hope that it would lead to improvement.  When the improvement failed to show up, their patience started wearing thin.  They elected Syriza when it promised a third option -- a reduction in austerity leading to recovery.  It has now become apparent, as it was to many even before, that that option was an illusion.  So now it is time to bite the bullet and make the hard choice -- an indefinite commitment to grinding austerity and long-term suffering, or an immediate, much worse suffering with the hope but by no means the certainty of rapid recovery.

So my first thought was good.  My own advice if forced into the Grexit was to demagogue.  Get the people all riled up against the EU, proclaim a reassertion of national sovereignty, and hope that the hardship would be brief, and the anger would be enough to get people through it.  But a referendum is better than a demagogue.  It has several advantages.  It confronts the people, painfully and honestly, with what the options are and forces them to make the choice.  It legitimizes the decision because it has been made by the people in referendum.  And it causes the people who made it to be to some degree invested in the outcome, more willing to accept the associated hardships, and more determined to make it work.  Besides, my mother will assure you that whenever you are a public forum trying to plan something, whoever, is the most obnoxious and critical is the one it is most important to assign responsibility in making policy.  Doing so has several advantage.  It confronts your trouble maker with reality and forces him (or her) to deal with it.  It forces your trouble maker to shut up or put up -- if you don't like our plan, don't just grumble, come up with something better.  And a lot of what your trouble maker is typically complaining about is the sense of powerlessness, that other people are doing something to him (or her) and that he/she has no say so in it.  Being brought into the process relieves this complaint.  Obviously you can't do that with the entire national public, but forcing them to make a painful choice and be invested in seeing it through is the best you can hope for.

But now I am having second thoughts.  The problem is that the default deadline is June 30.  The date for the referendum is July 5.  And the Troika is making clear that it has no intention of granting an extension until after the referendum.  Which means that by the time the referendum is held, Greece may be facing a fait accompli.  The default will already have taken place.  Bank runs are taking place all over the country.  The ECB has been loaning money to keep the Greek banks running but might cut it off any time.  In that case, the government will have no choice but to freeze everyone's bank account.  And while it is hard to say, it is entirely possible that Greece may already have been forced to leave the euro during those five days.  In which case the referendum would be meaningless and simply a way of forcing the crisis without admitting to it.

*Reminds me of some of our own votes, especially on government surveillance powers.

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