Roger Cohen: The Great Greek Illusion

http://www.nytimes.com/2011/06/21/opinion/21iht-edcohen21.html?_r=1&nl=todaysheadlines&emc=tha212

 

The Great Greek Illusion

Roger Cohen

NY Times Op-Ed: June 21, 2011

 

LONDON — Greece has long held emotional sway over Europe. All the cradle-of-Western-civilization talk earned it leniency, even indulgence. The European Union was not ready to go mano-a-mano with the birthplace of democracy.

 

Past glory is a wonderful thing — and a lousy guide for present policy. That’s true in the Holy Land, in Kosovo and in Athens. Greece should not have been allowed into the euro. It failed to join in 1999 because it did not meet fiscal criteria. When it did meet them in 2001, the fix came through phony budget numbers.

But Europe’s bold monetary union required an Athenian imprimatur to be fully European. So everyone turned a blind eye.

In fact, recent history would have been a much better guide. Greece has had an awful past century. Let’s begin with the wars of 1912-13 that wrested northern Greece from Ottoman control. Then came the massive population exchange, or “ethnic cleansing,” negotiated at Lausanne in 1923 under which about 400,000 Muslims were forced to move from Greece to Turkey and at least 1.2 million Greek Orthodox Christians from Turkey to Greece.

That upheaval was followed by the 1930s dictatorship of General Metaxas; the brutal German occupation of 1941-44; and a devastating civil war in the late 1940s that bequeathed an ideological struggle between left and right whose visceral quality endures.

The rightist military dictatorship of 1967-74 that rounded up and exiled leftists fanned the embers of the civil war. The ongoing conflict with Turkey over Cyprus, involving its own “population exchanges,” ensures the memory of 1923 has not been entirely laid to rest.

So forget Socrates. Read Bruce Clark’s excellent “Twice a Stranger” on the effects of the Lausanne population exchange and the psyche of modern Greece. Clark writes of Greece as a society “where blood ties are far more important than loyalty to the state or to business partners.”

That’s not a state of mind conducive to tax-paying, collective effort or balanced public finances. It doesn’t rule them out but it doesn’t help. It’s no surprise that Greece took the euro as a means to live on the never-never — ending up with a debt load equivalent to 150 percent of gross domestic product and rising.

Yes, E.U. membership provided some balm to Greek wounds. That’s the great merit of the E.U.: It detoxifies history. But Greece remains a nation suspicious of outsiders — when you’ve been lorded over by the Ottomans you don’t want to be lorded over by central bankers — and a place where state structures command scant loyalty.

That does not bode well. It suggests the latest bailout, after the $158 billion last year, may just be good money chasing bad.

I’ve never seen Europe in such dire straits. Greece is full of the aganaktismenoi , or the outraged, who resent the sharp cuts and sales of state industries made necessary because there is no drachma to devalue in order to regain competitiveness.

Like protesters in Spain, they feel the poor and unemployed are paying for the errors of politicians, the evasions of the rich, and the whole globalized system that rewards the tech-savvy initiated while punishing those left behind.

Their anger is understandable.

In many ways the euro crisis, the European crisis, is an apt symbol of our times. A borderless order conceived by technocrats, sustained over a heady period by low interest rates, appreciated by the moneyed classes who made more money, is today facing popular revolt combined with the relentless pressure of its contradictions.

Strikes and violent protest are one measure of a Europe that now leaves many citizens unmoved by the great achievements of European integration. Open borders are beginning to close again. Turkey is turning its back on the Union. Germany has checked out from its postwar European idealism. America lambasts Europe for its military fecklessness. Many Greeks and Spaniards feel Europe is no more than a scam.

The bottom line is this: A monetary union among radically divergent economies without the buttress of fiscal or political union has no convincing historical precedent.

For a while, the easy-money boom allowed everyone to overlook the fact that peripheral economies like Greece’s or Portugal’s were not gaining competitiveness or “converging,” but amassing unsustainable deficits and debt. Now the hard facts are plain.

Given explosive Greek politics, German exasperation and the limits of what the Greek people will accept, I think the best imaginable outcome over time is probably an orderly Greek default rather than a disorderly one.

There’s simply no readiness to take the fundamental steps — like approving the issue of “E-bonds” underwritten by all the euro area’s taxpayers or the creation of a European Union finance ministry — that would convince markets the euro zone is ready to assume the logic of monetary union. As a result, the trends already evident — away from convergence — will continue over time.

Greece was not ready for the euro. Its classical past was of less relevance than its recent past. A lie is like a snowball: The longer it rolls, the bigger it gets. No salvage operation can hide that.

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