Mario Draghi famously stated that the European Central Bank would do “whatever it takes” to save the euro. The assumption inherent in that statement is that the euro is worth saving. Today, the Greek people will decide whether they agree.
Syriza is effectively washing its hands of the dilemma facing the country. The best analogy I have seen is that Greek Finance Minister Yanis Varoufakis has driven the bus off the cliff – and is now tossing the keys to the screaming passengers at the back.
Austerity has been witness to soaring unemployment and an economy shrinking by 25 per cent. Worse than that, it all appears to have been in vain. Furthermore, the troika doctors seem to think that what is needed is an added dose. A psychopath is defined as “someone who has no feeling for other people, does not think about the future, and does not feel bad about anything they have done in the past”.
Judged purely by their effect on Greek society, and the manner in which they have conducted themselves, the troika members can only be described as psychopaths. They have impoverished a nation, stripped its people of their dignity, and taken away all hope.
For their part, Greek politicians are also guilty of a catalogue of crimes against their own nation. Firstly, they failed to construct the necessary apparatus to have a functioning and effective State. Secondly, they adopted the euro. This was done for political reasons, by fiddling the figures to present a comically overstated economic case. The much needed reforms – and the troika is correct to insist on reforms – were never enacted, with the result that the economy remains horrendously inefficient. The chickens have now come home to roost.
The europhiles have been kind enough to supply us with countless arguments of the merits of a Yes vote, so we need not go over them again. They readily convince euro zealots, and equally fail to impress the unconverted philistines. Suffice to say that the most compelling argument is that a Yes will force politicians to finally enact reforms. However, to do so exclusively for the purpose of unsustainable debt repayments is unrealistic.
In the absence of goodwill on both sides, and brinkmanship – not logic – dictating proceedings, Greece now stares intothe abyss
Many of the arguments are disingenuous, driven by lofty European ideology. The starving man in Athens has more pressing needs, and he will be excused the pursuit of self interest. Germany and France had no qualms in pursuing their own narrow self interest when breaking the Stability and Growth Pact and saving their own banks via the ‘Greek’ bailout. It ought to be recalled that the Greek bailout money did not go to Greece, but to its creditors.
A plausible case for a No vote does exist. The IMF itself now argues that Greece needs €50 billion and a 20-year moratorium on debt repayment. A logical extension is that the (lapsed) creditors’ proposal that is the subject of the referendum is hopelessly out of touch with reality and should be voted against. It is a pity that this development came at such a late stage, and that Syriza did not manage to exploit the cracks within the troika.
Capital Economics estimates that if GDP had grown at just over two per cent since Greece adopted the euro (this was the pre-entry rate), current GDP would be 14 per cent higher. It is a simple statement of fact: the euro has destroyed wealth in Greece.
In the absence of goodwill on both sides, and brinkmanship – not logic – dictating proceedings, Greece now stares into the abyss. First the europhiles preached that membership of the euro was irrevocable, while the Greeks threatened to leave and blow up the eurozone en passant. In a comic twist of position, the europhiles now say the vote today is a vote on whether Greece wishes to remain in the eurozone – while Varoufakis argues that Greece’s membership of the euro, and the EU, is ‘non-negotiable’.
With so many possible permutations, and so many unknowns, one cannot be definitive as to what is the better outcome for Greece today. Those who have no hope left may be perfectly willing to clutch at drachmas. They might well ‘do a Draghi’ – whatever it takes. Perhaps they might conclude that an uncertain future (represented by the No) is preferable to certain death (represented by the Yes).
The sword of Damocles hangs over the population whichever way it votes. But it also hangs over the eurozone and the very concept of ‘ever closer union’.
This article is the objective and independent opinion of the author. Any opinions that may be expressed in it should not be interpreted as investment advice, nor should they be considered as an offer to sell or buy an investment.
Martin Webster is head of equity research at Curmi & Partners Ltd.