The Longest Existential Crisis Ever

by Adam English, Outsiders Club A little, “it would be funny if it wasn’t so depressing” feeling has been languishing for years, and how it is being covered has only elevated it to farcical levels. Alternating bouts of platitudes, threats, and a journalistic requirement to speak with authority and certainty when neither exist, have made the Greece problem a red herring. Greece does have a problem. A very serious national one. However, the real problem is in the EU, and there are no answers to how to “solve it” because the root of the problem is not being addressed. It Doesn’t End Here First off, let’s just assume that a deal is struck. It really shouldn’t be hard to imagine, since in reality Greece and the IMF have been sparring over relatively small numbers. Unemployment is over 26%. Plus, new data shows that, in 2014, the number of the unemployed who could not find work in over a year jumped to 73.5%, up from 67.1% in 2013. Greece also has one of the highest percentages of elderly people at around 19.5%, along with a shrinking population as more people emigrate than immigrate, and more people die than are born. If a deal were to be struck, what would change in that equation? Absolutely nothing. For some reason, perhaps a perception issue or a bias towards easier to digest metrics, we forget that economies are first and foremost a creation of the mass behavior of people. The simple reality is that fewer and fewer Greeks must shoulder the costs of an aging population that is not working, a pension system that eats up 75% of all spending other than interest payments on debt. This will trend will continue unabated for decades. If Greece doesn’t find a deal even more favorable to it than what is being rejected by the EU and IMF, then it would essentially be taking a usurious loan from a mob-connected boss. The cost will always be greater than the benefit, and there is no climbing out for at least an entire generation. The interest rates might not seem terribly high, nor are they in comparison, but when combined with the sheer amount due and previous cuts, it becomes more than Greece — specifically the current government — can afford. Political Survival As much as the EU and IMF would rather work with more compliant negotiators when they control the coin purse and Greece has its hat in hand, Europe needs to ponder who will visit Brussels next if the current Greek government doesn’t succeed. The current Greek government is a compromise between the far left Syriza and populist right Anel parties, united by the anti-austerity cause. Pension cuts are a third rail for both parties, and defiance of pension cuts demand is a linchpin of the coalition. The parties in power will suffer a grievous blow if they return with a deal that includes these cuts, or if they return with nothing. The survival of the coalition is dependent on this issue, and for the parties to retain power they may be forced to choose a Pyrrhic political victory over a Pyrrhic economic victory that leaves the country better off, but puts bureaucrats in the riot-torn streets. History is filled with such decisions, and they rarely end with an altruistic swan song by politicians. The Poison If a deal is forced through at the cost of Greek politics, or if no accommodation is made by the EU and IMF, it will only embolden other radical parties across the continent. It would create a “damned if you do, damned if you don’t” policy by ascending radical parties. Euroscepticism — as it is increasingly called — is on the rise, especially in the periphery nations and even in some core nations like England and Austria. Yet the EU is torn between camps, and it can either attempt to force the hand of Greece or powerful nations like Germany. Either it emboldens nations to leave the EU and defy the promise of a centralized Europe they were sold, or it allows a small nation, both in population and economic clout, to control the terms of a deal. In this sense, the whole EU dilemma is akin to a darker version of a scene in The Princess Bride. Both sides are in a stand-off, about to drink from two cups, one of which contains a deadly dose of iocane powder. The thing is, both cups have poison in them, and you don’t know which one has built up enough of a tolerance survive. In fact, the odds are pretty good that neither side is prepared, economically or politically. Why Greece Really Matters The economic realities of high unemployment, aging people, and crippling debt don’t belong to Greece alone. Nor are the politics that create new governments that are completely intolerant of the status quo or continued austerity demanded in Brussels by other nations. Greece is facing a nightmare, but the markets aren’t worried about missed payments, a couple billion in Euros or a 1% GDP cut. This is ultimately all about the fate of the EU experiment itself. The EU has made it this far mostly because everything went in its favor for nearly 15 years of bull markets, massive inflows, and strong economic growth. Those days are gone, along with the stable support people in EU member nations have for the union. What happens in Greece, even if it is solved and everyone walks home happy somehow, will not be the last time we see fissures in the EU. In fact, it is only one of the first in a long line that will become an ever-present, long-term existential crisis. Take Care, Adam English

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