A funny thing happened on the way to Grexit

I kind of dropped the Greece bailout story a couple of weeks ago, because to be perfectly honest I think I can only deal with one major global agreement at a time around this place. But as we got right up to the brink of a Grexit, it turned out that, well, nobody, least of all the Greeks, really wants that. Greek PM Alexis Tsipras bucked his own party and the crowds of angry anti-austerity protesters filling the streets of Athens to accept more European austerity (for a bigger bailout) than he (and Greek voters) had previously rejected. Why? Well, who knows, but my guess is that Tsipras, as a politician, recognizes that you don’t get to continue being prime minister by doing something that, all those protesters aside, 78 freaking percent of your citizens don’t want you to do, which in this case would be leaving the Euro. It doesn’t matter if you can’t understand the logic behind that thinking, if there’s even any logic behind it at all; if you want to keep your job as PM (and notice that Syriza is doing pretty well in that poll), you pretty much have to listen to a majority that big.

And that doesn’t even factor in all the serious economic pain Greece had to endure during the week-plus that it was in default to the IMF, when banks were closed, withdrawals were restricted, and shit got real. Maybe Tsipras figured, rightly I’d be willing to bet, that even those Greeks who were most solidly against austerity, the ones protesting in the streets against Tsipras’s decision to accept Europe’s bailout terms, were only a couple of really bad months away from blaming Syriza and Tsipras for all of Greece’s economic woes. The better short-term play, even if it makes for bad long-term policy, was probably for Greece to stay in the Eurozone.

Greece’s parliament voted to accept the austerity/bailout package, then last week agreed to the economic “reforms” that are being demanded by Greece’s “Troika” creditors (the European Union, the European Central Bank, and the International Monetary Fund), which put the ball in the rest of Europe’s (i.e., Germany’s) court. And as it turns out, the rest of Europe, even Germany, didn’t really want to see Greece leave either:

It may be true that [German Finance Minister Wolfgang] Schaeuble would like Greece to leave the euro. But the hardline German finance minister is only one voice. His boss, Angela Merkel, doesn’t want it. Nor do the French or Italian leaders. Nor, crucially, does Mario Draghi, the European Central Bank’s president and arguably the most powerful person in the eurozone.

Better the devil you know, I guess. Despite the fact that the Eurozone believed that it was insulated from Grexit damage, that Greece wouldn’t be the first of a line of lower-performing economies to leave the Euro, maybe somebody in the corridors of European power (i.e., again, Germany) realized that what they were doing to Greece wasn’t exactly encouraging the six EU members who haven’t yet joined the currency union (that doesn’t include the three EU members who have already flatly refused to join) to make a mad dash for the Euro. Maybe they figured it was time to put on a happy face, let the healing begin, or something like that. So Germany’s parliament did its part and also voted to go ahead with the bailout. The ECB freed up lines of credit for Greek banks, who were finally able to open again, and Greece finally made its overdue payment to the IMF.

The IMF, probably channeling the thoughts of some interested third parties in Washington, surprised everybody by, kind of out of the blue, declaring that austerity alone can’t possibly solve Greece’s problems, and that its creditors are going to have to offer Greece some kind of substantial debt restructuring, one that either extends Greece’s time to pay and reduces its interest payments or that involves significant immediate debt forgiveness. They’ll probably choose the former, since the latter appears to be really unpopular among voters in Germany, France, etc., who would ultimately be asked to take that upfront haircut (because goodness knows we can’t ask banks to take a haircut on their own dumb investments, we’re not animals here).

So now everything is cool, yes? No. Greece and the Troika are already back to sniping at each other over Greece’s obligations for receiving its bailout money. Nothing is being or apparently will be done to tackle one of the major problems underlying this whole sorry affair, the fact that Greeks don’t like to pay taxes and their government doesn’t like to make them, and it’s not clear how there can be a long-term resolution to Greece’s financial woes unless this problem is fixed.

Last but not least, once again we (meaning us good capitalist human beings) have missed another opportunity to demonstrate to bankers that in fact it should be they, and not everybody else, who has to pick up the tab when they make shitty investments. That may seem like a petty, pitchforks and torches way of looking at things, but in fact this new (since 2008) policy where governments swoop in and alleviate big banks of the burden of their errors has seriously screwed up the bond market, by convincing those banks that they can use the previously conservative bond market to take all kinds of major gambles on whatever, because if those gambles crap out they’re sure to get a bailout. That’s kind of a big deal, so it would be nice if at some point somebody might take some steps to unscrew it. But here was another chance to do just that, and instead the governments of the Eurozone have paid to “bail out” Greece, by which we really mean that they’ve paid to bail out their own banks with the money taking a brief detour through Athens.

Hey, thanks for reading! If you come here often, and you like what I do, would you please consider contributing something (sorry, that page is a work in progress) to keeping this place running and me out of debtor’s prison? Thank you!

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