I find it stupefying that Greece is causing so much existential angst in Europe. Mind you, I used to accept the prevailing view that, like JPMorgan Chase, Greece is just too big to fail; moreover, that if it failed others would surely follow.
I am now convinced, however, that this transformative logic simply does not hold. Not least because the more appropriate analogy is not the risk of a big bank failing, but the fear of a little tumor growing. And in this context, cutting Greece out of the Eurozone is the best way to forestall the self-fulfilling prophecy of its failure triggering a contagion/domino effect; you know, the way one might excise a metastasizing (malignant) tumor out of the body. (Unfortunately, just the prophesying is having a withering effect on markets around the world.)
Yet here is the foreboding, self-fulfilling way no less an authority than the Financial Times framed this debt crisis just yesterday:
The idea of a Greek exit from the Eurozone is no longer fanciful. After 70 percent of voters in elections on May 6 supported parties that rejected the terms under which €174bn of international bailout loans were offered to Athens, many investors now see a fissure in the 17-member Eurozone as increasingly likely. European governments are furiously thinking through the various scenarios, while still urging Athens to stick to its agreements on austerity and reform. If those hopes are dashed and Greece goes, what happens next?
In other words, Greece is refusing to take the only medicine that stands any chance of putting the cancer it represents into remission. Frankly, this refusal alone demonstrates why it needs to be excised out of the Eurozone. And, by the way, the ongoing, farcical failure of its political parties to form a governing coalition should be the least of Europe’s problems. Greece should be left to its own devices to become the terminally debt-ridden, dysfunctional and ungovernable mess in Europe that Haiti has been in the Caribbean for centuries.
But here is the prescient way I framed this untenable state of affairs years ago:
Greece may be the cradle of civilization but it’s being regarded throughout Northern Europe these days as little more than a beggars’ colony. This is because Greece is now looking to richer member states of the European Union, like Germany and France, to bail it out of an existential financial mess…
It is hardly surprising that most Europeans are developing as much contempt for the Greeks as most Americans now have for bankers. Not least because rich member states in the North believe that their poor relations in the South have nothing to blame for their financial woes but their own ‘Club Med’ approach to fiscal discipline…
You’d think that having to go to their betters in the North – hat in hand – would humble the Greeks. Instead, public sector workers have gone on strike in a self-indulgent effort to pressure their government against imposing any austerity measures as a condition for receiving a bailout package from the EU (and IMF).
(“Greece Just Another Panhandling PIG in Europe,” The iPINIONS Journal, April 29, 2010)
Again, that was over two years ago. Since then, despite the writing on the wall, European leaders have been implementing extraordinary measures to keep Greece on financial support, fearing that, if Greece fails and exits, other Eurozone countries like Portugal and Spain would follow. Whereas they should have been implementing measures to make Greece’s inexorable path towards failure and exit so painful for Greeks that other countries would want to avoid going down that primrose path like the plague.
This is why the only thing I find newsworthy about this Eurozone debt crisis today is the extent to which countries like Germany and France have allowed the financial contagion Greece represents to metastasize. The situation is clearly critical now.
So instead of begging Greece to take the medicine to save both itself and the “euro project,” European leaders should be scrubbing for the surgery that is necessary to cut out Greece to save the Eurozone. Greece is not too big to fail.
NOTE: I’m not saying I told you so, but European leaders would have been well-advised to heed the counsel I provided in such commentaries as A Dead EU Constitution Resurrected as a New Treaty Is Still a Dead EU Constitution (November 13, 2007), A Europe Divided by Debt Cannot Stand (March 25, 2010), If Rescuing Greece is Necessary to Save Europe, Europe’s in Big Trouble (October 15, 2011), and Forget the Euro, Europe Itself is Falling Apart (December 15, 2011).
Related commentaries:
Greece … PIG…
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