The nation of Greece has, for centuries, conjured up a plethora of images and thoughts: the birthplace of democracy, philosophical land of Aristotle and Socrates, the Parthenon, and the natural beauty of Corfu, Mykonos and other Greek resort islands.
Sadly, over the last half decade, for many around the world the word ‘Greece’ has a very different connotation: a bankrupt nation, whose economic and political uncertainty threatens not only the future of its people, but of the entire Eurozone.
In much the same way that—as the old saying goes–Rome wasn’t ‘built in a day’, so too is it true that this modern Greek tragedy evolved over a longer period of time. What’s transpiring now in Greece can be traced back to decades of mistakes, miscalculations, and an unwillingness by many to confront an evolving, and long threatening, economic reality.
There are those who, perhaps with some validity, have argued for years that while the European Economic Union (EU)—and its singular currency, the Euro—made fiscal sense, it ignored a long, convoluted and often confrontational history among the European nations. For while it’s true that yesterday’s enemies can evolve into today’s economic allies—the examples are countless, including America’s close ties with former ‘enemies’ such as Germany and Japan—European history is long, often violent and replete with the nationalism of many nations.
So it came as no surprise to many that, when the recent referendum question was asked of the Greek electorate “do you wish to accept the terms offered by the EU in exchange for another economic bailout”, more than 60 percent of voters said ‘no’.
On a practical level, it may be difficult for some to understand why Greeks—who have repeatedly said en masse that they wish to remain in the EU—would endanger that likelihood by such a vote, it is completely understandable on an emotional level.
The fact that the ‘No’ supporters used the stern countenance of Germany’s finance minister Wolfgang Schaeuble on their referendum poster was not by happenstance; those Greeks opposing the EU bailout knew that their best chance for success would be an emotional appeal, and so relied on a poster that none-too-subtly recalled memories of 1941, a time when German forces invaded and occupied Greece.
And what does the economic and political drama unfolding in Greece mean for Americans, and American business?
That all depends on the terms of reference one chooses to use. Economically, a Greek bankruptcy would have little direct impact on either American business or consumers. The Greek economy is but a fraction of the size of the U.S. economy: the Greek Gross Domestic Product (GDP) was $242 billion (US) in 2013, while the American GDP for the same year was $16.77 trillion (US).
However, the fear among some economists and politicians is of a ‘Greek contagion’, which translates into a possible domino effect of a Greek bankruptcy, wherein other EU countries with weaker economies and higher debt levels—such as Spain and Portugal—could follow Greece’s exit from the EU.
Were that to occur, the impact on America would be far greater than simply a Greek exit from the EU. According to the European Commission, the U.S. and EU economies combined account for about half of the entire world’s GDP.
So the unanswered issue, especially for an American audience, is would a Greek exit from the EU be the end–or just the beginning of a much larger story?
And the overriding question still remains: how did it come to this?
As noted earlier, a combination of several factors are at play in the evolution of this Greek tragedy. Profligate government spending, overly generous pensions (with Greek ‘retirement’ often starting up to 15 years before traditional American retirement), compounded by a worldwide recession, finally brought to the forefront long-simmering questions about the sustainability of Greece’s social spending.
The real tragedy at play here is not so much a philosophical one regarding the policies of the Greek government, or the terms of a European bailout of Greece, as much as it is a human one. As of this week, Greek banks are restricting individual withdrawals to no more than $60 per day, as they fear running out of hard currency; meanwhile, everyone–from the poor and the elderly, to the hardworking businesspeople and merchants in Greece–face an uncertain economic future that, at best, will likely mean difficult times for several years to come.
There are many economic lessons to be learned from what is currently unfolding in Greece.
These would include: a confirmation that ever-increasing debt levels are ultimately unsustainable, and carry with them very real, and very human consequences; that politicians who choose to sugar-coat the economic reality of their country for short-term political expedience should be avoided at all costs; and a recognition that, as I noted in another recent column, those who choose not to learn from history are doomed to relive it.
From the time of Aristotle and Socrates, Greece has taught the world many Life Lessons.
The modern Greek tragedy, and the resulting painful human drama, unfolding in the summer of 2015 is a political and economic lesson the world would do well to learn.