Beyond the Beltway

Beyond the Beltway

This weekend’s Greek referendum: nobody wins, at least in Greece

No good choices left for Greeks. Alkis Konstantinidis/Reuters

So, after five years of interminable rounds of negotiating and posturing, Greece’s status in the eurozone appears to have reached the endgame. It may be premature to pronounce the matter in any way settled, but there seem few options left.

The referendum scheduled for this weekend appears to be disingenuous to some, and apparently inconsequential to others, notably IMF Director General Christine Lagarde in an interview published on Wednesday.

Two prongs to the Greek campaign

A resilient, often truculent left wing Greek government has tried to frame their country’s debt around two issues.

Their first offensive focused on the issue of identity: that the troika of the European Commission, the European Central Bank and the IMF have made it their mission to subjugate them because they are Greeks.

More pointedly, the problem to many Greeks is the Germans – who have been repeatedly portrayed by them as the power behind the throne in Europe. German notions of the “lazy Greeks” have been met with reminders of Nazi Germany’s persecution and plundering of Greece during their occupation during World War II.

Prime Minister Alexis Tsipras has belatedly attempted to calm the explicit hostility used in these mutual accusations. But the damage has been done and the atmosphere has remained tense. It often boils over into personal hostility on both sides, with German Finance Minister Wolfgang Schäuble being the current focus of Greek hostility. And if it isn’t the Germans, somewhat ironically, it is the Jews who are the source of their problems, as the results of a public opinion survey published this week makes clear.

Addressing the nation July 1. POOL New/Reuters

The second, belated offensive has been the attempt by the Greek government to expand the scope of debate to focus on the general issue of austerity in Europe.

As Greece’s governing left wing party, Syriza officials have portrayed austerity measures as self-defeating, a “Catch-22” from which no country can escape because they dramatically reduce the prospects for future growth.

Essentially, the Greeks have endured staggering cutbacks in public expenditures on things such as retirement pensions and government jobs in the last seven years. Unemployment is at over 25% and the resulting reduced consumption means that even optimistic forecasts suggest that Greece will never grow at a fast enough rate to repay its debts.

According to a new report, for example, “Greece would face an unsustainable level of debt by 2030 even if it signs up to the full package of tax and spending reforms demanded of it.”

The obsession with austerity policies in Europe

But Greece is only the extreme example of the obsession with austerity in Europe, what noted academic Mark Blyth called “a grand experiment that aims to find out if it is possible for an economically stagnant country to cut its way to prosperity.”

Even in countries like Britain, which has largely recovered from effects of the Great Recession and has an unemployment rate comparable to the United States, the recently elected conservative government continues to implement major cuts in public services. And all this despite the fact that many notable economists like Paul Krugman have suggested that government expenditures were not the source of the crisis, nor is austerity the appropriate solution.

A failed campaign

As things stand today, both parts of the Greek offensive have failed.

They have garnered little sympathy in Europe and have failed to shift the debate about a new path for Europe. Like the Irish and Cypriots before them, they are expected to bear the costs of these cuts and eventually reemerge with a more resilient economy, although when that will be is anyone’s guess.

The referendum therefore offers Greeks a tortured choice.

The first option is to abandon their defiant stance against the kind of global economic policies that have held supreme since Margaret Thatcher and Ronald Reagan in the 1980s. With that choice comes the loss of any sense of national independence and a lasting sense of humiliation.

Alternatively, they can choose to reject the demands placed upon them, be classified as an economic pariah, and endure years – if not decades – in the economic wilderness.

But with Greece’s banks currently shuttered, their prized tourist industry in disarray, and protests in the street, the smart money is that the referendum will support Greece’s acceptance of creditors’ demands.

One thing is for sure: whatever the result of the referendum, the outcome will be abject poverty in Greece for years to come.