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Greek Financial Crisis - It's About More Than Money

Mal Fletcher
Posted 30 June 2015
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'We sail within a vast sphere,' wrote Blaise Pascal, 'ever drifting in uncertainty.' That just about sums up the Greek financial crisis.

Greece appears completely adrift within the vast sphere of European and global economics.

Neither Greece nor its European partners show any sign of emerging from a state of shared uncertainty any time soon.

In the face of the Greek crisis, much has been made of anti-austerity demonstrations.

Within Greece and beyond, would-be reformers have taken up megaphones and banners to denounce the very idea of penalties for defaulting on debts, or inducements for their repayment.

For all the noise and bluster, I don't hear any of these people presenting a serious, viable alternative model to those already on the table.

If you tone down their populist rhetoric, anti-austerity campaigners, none seem to be offering a realistic plan which might address the concerns of Greece's creditors. Nor do they proffer a practical plan to move Greece forward in terms of its fiscal management.

It is always easier to argue from an ideological  perspective than it is to do so from a pragmatic or strategic one.

That's especially true when the argument is about something which, in the first instance, sounds distasteful. Nobody likes the sound of austerity - the very word itself has the ring of doom about it.

That aside, the problems Greece will face from here on, whether it remains inside the EU or opts to move out, are more than financial in nature.

It is hard to see the Syriza regime lasting much longer, given its obvious economic cackhandedness and its devotion to party above country.

Yet whichever government takes the nation forward, the two biggest challenges it will face revolve around trust and culture.

For all the good will people feel toward Greece, given that it provided the seedbed for European democracy, there is no doubt that reestablishing trust with private and governmental investors will be a tall order.

Whatever the result of next week's referendum, doubts will linger as to how seriously the nation is willing to take its need of fiscal reform.

Furthermore, the question will remain that if Greece could so easily remove one seemingly fiscally responsible administration - pre-Syriza - and replace it with a band of populist ideologues, might it not do so again when tough calls need to be made?

The core currency in international finance is not the American dollar, or the gold standard - it is trust. Without investor confidence, no economy can thrive.

What's more, unless a population has confidence in its own government's fiscal ability, its level of innovation will inevitably slide.

Economies grow only when workers feel that they have a certain level of security when they take the risks necessary to create new products and services.

Just as real as the trust challenge will be Greece's problems with its own culture, especially as it relates to such things as taxation, entitlements and work.

The Euro crisis is partly the result of a clash between Greek aspirations, values and culture and the expectations of its European partners.

This is best demonstrated in the very different approaches to fiscal responsibility favoured by a majority of Germans - as reflected in a number of polls - compared to those of many Greeks.

The original architects of the Euro project should have foreseen the potential for difficulty given the enormous gulf that exists between the social and economic values of some northern and southern European states.

Yes, it is always easier to say such things with the benefit of hindsight, but it doesn't take a rocket scientist to identify relatively long-standing differences in culture.

The fact is that, at the time the EU was formulated, European leaders desperately wanted to unleash a constructive alternative to the divisiveness of the Cold War. They wanted to present a positive face to a world that had come to associate Europe with warfare and devastation.

A common European market then quite naturally gave rise to the notion of a common currency.

The only problem was - and is - that Europe doesn't share cohesive economic values across its member states.

The architects' zeal was understandable, yet it left them with a bad case of myopia. In rushing to set up a single currency zone, they simply papered over a number of deep and persistent cracks in the basic fabric of a multifaceted Europe.

Now, whatever the outcome  of the current Greek crisis, Europe as a whole will pay the piper. Whatever happens tomorrow, it will likely be a long time before Greece inspires fiscal trust both within and without its borders.

It might also be a while before Greece finds peace within itself, in terms of the right way forward for its cultural ethics.

Moreover, Europeans may lack the confidence to take any huge steps toward further integration.

That, in my view, will not be a bad thing, as Europe still all too often acts like a head that has become detached from its essential soul.

It makes plenty of policy, mountains of it, but it reflects little about the narrative at the core of its identity, its big picture historical destiny and where its values really came from.

From here, European leaders will need to tread wisely when it comes to dealing with other member states facing debt problems. And Europe will need to think much more keenly and seriously on what 'ever closer union' really means.

Going forward, the Greek situation will bring new disagreements to the fore, driven by historic cultural expectations.

Arguments about whether austerity works will doubtless rage on.

Yet one thing will remain axiomatic: if you don't manage what you have, nobody will trust you with more.




What’s your view?

Is the Euro a viable currency going forward?

Yes

No

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