Further Thoughts on the Lack of Greek Panic

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In my previous entry, I wondered about why there wasn't a banking panic going on in Greek.  However, my conclusion is rather unsatisfactory - essentially that there isn't a panic because your average Greek isn't panicking, yet.

Upon further reflection, I believe I know why the average Greek isn't panicking - and interestingly enough, it's the exactly same reason he should be panicking.

We got where we are today because the average Greek voted out the two parties that were cutting government spending in an attempt to keep Greece in the Euro.  Much like the average American voter (who wants to cut spending, increase services, cut taxes and balance the budget) the average Greek wants things that are mutually incompatible:  To increase government spending, balance the budget, and remain in the Euro.  He probably also wants to cut taxes, too, but I haven't read that, specifically.

Consequently, it's expected that a majority of Greeks will vote for SYRIZA, "The Coalition of the Radical Left", which is saying, "we can spend more money and stay in the Euro".  I believe the plan for this is to loudly point out to the rest of Europe that, if the rest of Europe stops giving Greece money, Greece will simply default on all the previous loans they've gotten, and anyway, it'll hurt the rest of Europe if the Euro is seen as unstable, so the Euro needs Greece more than Greece needs the Euro.  All of which may be true, but is unlikely to make the rest of Europe sympathetic with Greece. Helping out your brother-in-law who lost his job is one thing; it's quite another when he starts making threats to break your china if you tell him he has to start looking for a job.

The reason the average Greek is going to vote for SYRIZA is because he thinks it means Greece won't leave the Euro.  If Greece won't leave the Euro, why should he be worried about his money deposited in Greek banks in Euros?  If he thought SYRIZA's election put Greece at risk of leaving the Euro - he'd vote for another party. If he did that...there would be much less need to panic about Euros in Greek banks.

This seems to suggest that panic won't happen in Greece until well after the elections. The question is, to what extent is a SYRIZA election going to finally give the rest of Europe the backbone to say "Enough is enough"? In the past, they've been remarkably good about kicking the can down the road - it's possible to imagine them saying "well, we'll let you slide on your targets for six months out of respect for democracy", and just keep allowing this thing to not reach a resolution. It seems Greece isn't going to voluntarily leave the Euro - they're going to have to be kicked out, and we're still some time from that happening.


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This page contains a single entry by Brett Thomas published on May 22, 2012 8:33 AM.

What's Going on in Greece? was the previous entry in this blog.

Making Predictions, Especially about The Future is the next entry in this blog.

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