Friday, 20 April 2012

Αμαρτίες γονέων τέκνα παιδεύουσι: passing on debt overhang

For a pdf version of the paper, containing the relevant figures, please click here.

What follows is an outline of the Greek sovereign debt crisis from a perspective that is certainly not mainstream - at least not in the sense of what every major political, economic, and media outlet loves to hate nowadays. For my interpretation as to how the crisis came about will be neither structural nor cultural. Of course, national economies do grow or decline because of social and economic substructures, political institutions, and cultural traits. Yet, these refer to long-term processes whereas serious sovereign debt crises usually evolve over relatively short (often too short) periods of time. Sovereign bankruptcies, much like those of large private companies, occur because three unfortunately too human factors are allowed to carry the day in the highest echelons of strategic decision-making. These are irresponsible greed, incompetence, and irrationality (a term which many a time is meant more as an euphemism for stupidity).

A Greek tragedy in three acts: A dilemma, an oxymoron and a leap of faith

There are times when academic witticisms really hit the nail on the head. When the organisers of the latest instalment of the Greek Public Policy Forum decided on headlining the Nottingham meeting “No Country for Old Systems”, they surely could not have predicted the tragic irony that their intended pun now encapsulates. On 3rd April a 77 year old retired pharmacist puts a gun to his head and commits suicide in the middle of Syntagma square. In a dramatically lucid suicide note he explained that the only act of resistance left to him before ending up looking for food in the trash, was a dignified end of his own choosing. While the jury is still out on what will happen to countries with “old systems” that fail to meet the standards of the global free market, Greece appears to be rapidly becoming “no country for old men”. If soaring youth unemployment, gender inequality indices and the growing waves of emigration are added to the equation, it is doubtful whether younger men and women will fare any better for the foreseeable future.

A ‘crisis’ of legitimacy – the role of citizens and democratic control

Much of the discussion of the current crisis in Greece and Europe in general has understandably focused on its economic characteristics. But it is also possible to talk about a crisis of legitimacy from which the European Union suffers – a crisis which predates the current eurozone crisis and even the existence of the euro as a whole. A range of factors have been identified as symptoms of this legitimacy crisis: fluctuating levels of support for, and trust in EU institutions as reported in Eurobarometer surveys; low and falling turnout for European Parliament elections; problems with the ratification of EU treaties, both in referendums and using parliamentary methods; increasing amounts of protest and contestation directed at the EU institutions; and non-, or variable compliance with EU law on the part of member states, to mention just a few.