Greek News

The New York Times reports:

Greek voters narrowly favored a pro-bailout party in parliamentary elections on Sunday, a result that is likely to calm world markets and ease fears that the country will leave the euro zone.

The Future of the EU and Greece

Jean Pisani-Ferry concludes:

A lesson from the Cold War is that ultimately, rational behaviour proved to be the best insurance against disaster. Today also, both partners have a common interest in behaving in cool blood. They have to set red lines credibly and unambiguously, as well as to indicate where there is room for discussion. This can only happen after June 17, when a new coalition emerges from the election and forms a government in Athens. In the meantime, we are bound to live dangerously.

This is of course assuming that (1) only rational decisions were made during the Cold War – rational decisions after an irrational decision are different than successive rational decisions – and (2) there is only one rational choice given that can be deduced given the information available.

A Quick Response to Jake on Democracy in Greece

Jake made a very good argument against populism in his post, and I tend to fall somewhere near his sentiments. I would, however, take his arguments one step further. A Greek referendum on the European bailout is not an example of democracy but of tyranny of the minority.

James Madison in Federalist 10 popularized the concept of tyranny of the majority, though he was not the first to acknowledge this risk of democracy. Tyranny of the minority, as it exists in this case, is evidence of a lack of democracy.

The reason I argue that is that one of the central tenets of democracy is consent of the governed. While there is no doubt that the Greeks are governed by the implications of the Eurozone’s proposal, there is a fair argument to be made that the rest of the Eurozone will be governed by it as well – they will certainly be responsible for making sure it is adequately carried out.

This may be the foreign policy neoliberal in me coming out (though Jake has carried the realist mantle well by examining the issue from a power perspective of sorts), but the fact is Greece is a part of the most closely integrated international governing apparatus in modern history. If democracy is the path they are choosing, they have to be willing to consent to the democratic will of the larger population of which they are a part.

No time for Athenian democracy

Markets around the world tumbled yesterday on the news that Greek Prime Minister George Papandreou would call for a referendum on the rescue agreement struck last week by the leaders of the EU countries. The plan would provide the Greeks with a lifeline to avoid default and remain in the monetary union. European banks would accept a 50% cut in the face value of Greek debt. In exchange, Athens would have to agree to deeper fiscal austerity measures. European leaders who ratified the plan did so at tremendous political costs to themselves — no taxpayer in a solvent European country wants to bail out the Greeks for decades of reckless spending. Now, the Greeks are looking ungrateful to boot.

There’s no doubt that Papandreou, a Socialist elected in 2009, has drawn a lousy hand. He inherited a fiscal catastrophe from his “conservative” predecessor. He has been at the mercy of his creditors, primarily the EU and IMF, whose largesse has thus far kept the Greek budget above water. Their bailouts have come on the condition that he dismantle the welfare state that his party helped create, cutting hundreds of thousands of government jobs, raising taxes, and sending the economy into deep and painful decline. His popularity has followed a similar downward path, and many Greeks have taken to the streets in protest.

Now, the politicians and bankers from Paris, Berlin, and London are demanding another pound of Hellenic flesh. Papandreou’s move, in terms of domestic politics, could be considered savvy, inevitable, or both. He has shouldered the entire political burden of the unpopular-but-necessary austerity measures, while his opposition — the party that is possibly most culpable for the current mess — has sat by and sniped. A successful referendum would provide a public mandate for his policies, thereby solidifying his standing and undercutting that of his opponents. If it were to fail, the opposition would be forced to accept responsibility for the default and its aftermath. But by most accounts, the true impetus for the referendum is that Papandreou has run out of political capital. He simply doesn’t have the ability to push another round of cuts through his razor-thin parliamentary majority. Viewed through the lens of Greek politics, the referendum is an entirely rational decision.

The problem is that these days, the consequences of Greek’s political decisions extend far beyond the water’s edge.