There has been a lot written about Greece’s elections. The outcome, a narrow victory for the New Democracy party, was the most widely expected result. Paradoxically, this result will lead to even more uncertainty. It is simply, to adopt a common American phrase of the moment, ‘kicking the can down the road.’
To most commentators, the Greek electorate had a simple choice. Do you want to stay in the Euro, or not? In reality, Syriza, the left wing radicals, had always maintained that they wanted to stay within the single currency. They simply wanted to renegotiate the terms of the bailout. It was rather like a madman holding a gun to his head and threatening to blow his brains out in your house, if you don’t give him £1000. His gamble is that paying him off is a lot less inconvenient than clearing up the ghastly mess in your living room.
Germany would probably have renegotiated anyway, regardless of who won in Athens. People have always underestimated how consistently the European elites have pursued their dream of a single currency. In 1969 there was the ‘snake’ — a narrow band in which the diverse currencies would trade. This was replaced in 1979 by the European Monetary System, another forerunner to full monetary union. The euro itself was born in 1999, and was available for day to day transactions in 2002. This marked the end of a process which had lasted 30 years.
It is unlikely that Greece would have been allowed to leave the Euro. Yet Germany had to frighten the Greeks to vote against Syriza. If Greece had called Germany’s bluff, Berlin would probably have blinked.
The present situation however will no doubt enable the Germans to relax a little bit. This is dangerous, since the lack of urgency in dealing with this crisis has already caused so much damage.
There have been no new facts in this case since Papandreou got into power in Athens in October 2009. The crisis has been allowed to drag on for nearly three years without any firm resolution. The rather weak victory of New Democracy does not inspire much hope for any quick and definite outcome in the near future.
The euro will simply limp on. Markets will remain jittery. European politicians will continue to make ineffectual speeches and hollow claims of solidarity.
Given Greece’s predicament, a classical analogy may be appropriate.
Procrustes was an ancient Greek bandit who famously abducted and forced travellers onto an iron bed. If the victim was too tall, he would simply cut the poor man’s legs to make him fit exactly. Shorter victims were forcibly stretched until their size matched the proportions of the bed. The real fear remains that no amount of stretching or cutting will make Greece fit the iron bed of the single currency.