Greeks Vote "No", not "Nai"

July 5, 2015

     The Greeks have voted "No" rather than "Nai" ("Yes" in Greek), massively rejecting the terms of lenders.  Tomorrow, Angela Merkel and Francois Hollande will have a long day's working session, trying to navigate the news.

     The idea of Merkel, the right-leaning daughter of an East German clergyman; and Hollande, the left-leaning well-fed son of an attorney from Correze; trying to manage the politics of a renegade Greece, that gave the raspberry to the financial parameters of EU membership, beggars the imagination.

     However, both are forced by circumstances to find common ground on Greece.  Each of their countries are the biggest lenders to Greece, and if "Grexit" happens, it will be on their necks.

     Hollande's Socialist leanings mean that he must publicly demonstrate sympathy for the Greeks; Merkel, on the other hand, must bow to the rigor Germans expect in financial matters.  Both know that the Greek economy is now in no better shape than it was when the country joined the EU, and that the interest rates demanded will keep Greece  a sort of "banana republic" for the foreseeable future.

     No German banker (--and perhaps no German) would have agreed to the terms of Greece's entry into the EU.  However, German and French bankers saw money to be made from Greece and they lent the Greeks money on that supposition.  That the Greeks have turned out to be like the "lay-away" customers in ghettos --never arriving at the means to discharge their debt-- does not mean that the return on assets lent has been negligible.

     Alex Tsipras has shrewdly played on not just Greek nationalism, but that of nationalist parties in Europe.  Thus, a "No", is a way of saying "The contract you made us sign was a contract of adhesion to which we were not equal parties.  So we want the contract re-made."

     The dilemma is that Spain, Ireland and Portugal took the bargain and the pain when their economies were unable to deliver the benefits on which the loans were predicated.  The fear across Europe is that these countries will exit the Euro out of anger that the Greeks are handed special terms.

     What to do?  The European Union was supposed to evolve into a force that could compete with the U.S. economy, which for purposes of the argument, was supposed to be taken as a major player in the global economy.  Events of late are transforming the "European Project" into a squabble between the member countries as a group, outdistanced by countries with populations much more willing to sacrifice for the future of their children.

     Whatever the merits of the Greek case for relief, the resulting arrangement will leave Europe as a whole far behind the rest of the world, which is taking a page from the experience.