Tuesday, February 15, 2011

Greece's decent into Hell

The concrete facts of today's post and the reasons for this post title are related to today's deliberations on excessive deficits in the euro zone.

The EU's Council of Economics and Finance Ministers (ECOFIN) is still meeting in Brussels, but the outlines of its deliberations on the euro zone's members are becoming clearer. Discussions have been had over the excessive budget deficits of Malta, Lithuania and Romania. The Council has granted each of these countries an additional year to sort out their finances making 'recommendations' on how to proceed. Greece, however, has been slapped with a
'decision giving notice to Greece to correct its excessive deficit by 2012, according to a specific timetable, including deadlines for reporting on measures taken'.
This reflects its budget deficit at more than four times the legal limit of 3% of GDP, and a total debt burden of almost twice the legal limit of 60%.

Everything is on the table. Everything that an elected government holds dear:
The Council therefore calls on Greece to design and implement as soon as possible, starting in 2010, a bold and comprehensive structural reform package. It sets out specific measures, covering wages, pension reform, healthcare reforms, public administrations, the product market, the business environment, productivity and employment growth.
And the initial reaction of the Greek government is anything but understanding. Beyond these measures, the Greek government will probably have to sell public land to raise cash, an issue that raised political hackles this week. This isn't speculation, but something that the EU and the IMF have told Greece they will have to do to qualify for financial aid.

Greece is going to Hell, and it will not return until it changes. There will be much (legitimate) debate about whether the timing and force of the demands made on Greece are just and wise, but the die is cast. Greece will become the scapegoat for all that is wrong with the 'weak links' of the euro zone. The others in the room have already put this in print. The others, above all Portugal, are being put on notice that they are next if they do not learn their lessons the 'easy' way. For Greece, however, it is too late.

Ironically, it is from Greek mythology that the most appropriate archetypal narrative of Greece's fate comes. Persephone, the Queen of the Underworld, started her existence as the Kore, the young maiden goddess born to Zeus and Demeter. She attains her true place in Greek mythology after Hades, the Greek god of the underworld, and of money, abducts her and forces her to become his Queen. After a time below, she is allowed up to the surface, for a part of the year, only to return below for the rest of it for all eternity. There is nothing consensual or pretty about these events. The initial trauma is total and encompassing, but in most versions of the Greek myth, Persephone is transformed sufficiently that she returns acceptantly to Hell each year, to wear her crown on Hades' side.

But for now, there will be a lot of screaming and tears.  

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