Greece: It’s Not About the Numbers

The Wall Street Journal

http://blogs.wsj.com/eurocrisis/2012/11/16/greece-its-not-about-the-numbers/

The spreadsheets spell it out clearly. Billions of euros of austerity measures on top of an already fast shrinking economy have made the country’s growing debt pile unsustainable.

As this leaves euro-zone countries to squabble with the IMF over how to reduce Greek debt, self-professed international experts continue to play the same old tune: the country’s only path to economic salvation is to leave the single currency zone.

They argue a devaluation of the national currency will boost competitiveness, exports would rise and foreign investors will snap up dirt cheap assets, contributing to job growth and economic expansion. These arguments are economically sound but overly simplistic, others argue.

Many analysts, both here in Greece — but also abroad — argue that Greece’s place in the euro zone is also crucial to ensuring Greece’s continued political stability, as well as its geopolitical influence in the volatile region of Southeast Europe and the eastern Mediterranean.

Exiting the euro could send the country into an uncontrolled tailspin for decades, they say, and warn that such a free fall that could prompt internal strife, that might even spill over into neighboring countries.

One prominent scholar, Theodore Couloumbis, professor emeritus of international relations at the University of Athens, argues that the single currency — and the period leading up to euro-zone membership — contributed to more than a decade of prosperity in Greece.

That matters a great deal in a country that went through a military dictatorship some 40 years ago and a civil war not too long before that.

He’s not alone. Some German government officials have also quietly argued in recent months that a ‘GREXIT’ could also diminish Europe’s influence in the region.

As it is, Greece’s three-year long debt crisis is already helping to re-shape the political fabric of the country, driving the electorate to extremes. After two successive elections earlier this year, members of a ultra nationalist party, as well as extreme left and right wing groups are now represented in Greece’s fractious parliament.

Greece’s two mainstream socialist and conservative parties can no longer independently form a government, forcing them to form a shaky coalition along with a small left wing peer.

Hate crimes against illegal immigrants are on the rise, violent street protests have become common practice, and political leaders regularly warn of the threats to democracy as Greeks become fed up with austerity.

Saturday’s anniversary of a bloody student rebellion in 1973 that contributed to the collapse of Greece’s military junta several months later is a reminder of how fresh and fragile democracy in the country is.

Greeks are fully aware of this. That’s why the vast majority of them oppose leaving the euro and still remain deeply committed to the European project.

“It would be the biggest political disaster for Greece since the Asia Minor disaster,” said Aris Hatzis, an associate professor of law, economic and legal theory at the University of Athens. Mr. Hatzis was referring to Greece’s defeat to Turkish military powers in 1922 in what is seen here as one of the country’s darkest chapters in modern history.

“For Greece to recover it would take at least two decades, if it was to do so. It would be a failed state.”

All of this at a time where trouble in the broader region is on the boil again, with Syria’s civil war edging perilously close to Turkish soil and another looming conflict between Israel and its Palestinian neighbors in the offing.

Macroeconomic indices are important and provide something for economists to do. But they do not adequately sum up what is happening in Greece right now and the risks the country faces, many Greek analysts say. More than debt sums are needed to do this.