While I agree that on paper these deals look fine and make sense, there is one key thing that the authors, the people quoted in the story, and European financiers in general seem to be overlooking: This deal doesn't happen just on paper. This affects real people with real lives and is effectively destroying them.
I don’t know why people would expect anything different from a Prime Minster and a Government that was elected on the promise that they would roll back the imposed reforms and fight new ones being put in place. Since the financial collapse started in 2008, Greece as seen its unemployment rate go from around 8.00% to a high of 28.00% in late 2013 to current rate of 25.70%. Imagine that: a 2.3% drop in unemployment and you’re STILL sitting over 25%. Youth unemployment is currently sitting over 50%, down from a peak of 60%. Compare that to the US rate of 12.3%. No country or population would stand for it, especially over 5 years of it.
Greece made some poor decisions throughout the 90s and 2000s, when money was cheap and it was easy to spend. Their joining into the Euro though didn't do them any favors. Greece’s economy was never as strong as Germany’s or France’s and the idea that they would be tied to those countries without the ability to independently float their currency one way or the other always seemed odd to me.
The fact that Greece is roughly in rebellion against the EU right now really shouldn't surprise anybody. No group of people, especially one with as long and proud history as the Greeks have, wants to be told how they should live their lives. And while asking for reparations is rather dumb, Germany’s occupation of Greece in the 1940s still has to hold some cultural sway over people that will immediately cause distrust.
The easiest comparison, though probably somewhat simplified, that I can think of is the way that the US Government hands out money to the States. While there are some restrictions (e.g. seat belt and drunk driving laws on highway funding) on the money, for the most part the States can spend however they want. Could you imagine the uproar if state like Minnesota or Delaware, states that send more money to the Federal Government than they get back, were able to dictate exactly how states like Louisiana and Alabama would be able to spend money? It would never work. Forget the legal framework that prevents that here, the people themselves would never stand for it.
When looking at Greece, you have to picture it in that context. Yes their leaders spent beyond what they could, but everybody did that. It was pretty much encouraged. No, their economy wasn't based on something as strong as Germany’s or France’s and the collapse in 2008 cut them deeper. That doesn't mean you can come flying in and tell them you must fundamentally change the way you do everything overnight and not expect them to stand up and say “No!” I’m honestly surprised they put up with it as long as they did.
Greece needs to make changes in order to survive but the need to be done in a manner that makes sense and doesn't drive the country further in to a debt and poverty cycle from which they can never recover.
Germany needs to realize that they don’t hold all the cards here. While they are in the better situation economically, you have to imagine that Greece would be willing to do something drastic. At this point Germany has backed them into a corner and I can’t imagine that the Greek government is just going to say “Ok! It was all a bluff, we’ll do everything you say!” I have to imagine that they will fight. Whether that is to go into default, drop themselves from EU, or some other approach to wind themselves out of the Eurozone, I don’t know. What I do know is that a people that have been beaten down by a dysfunctional economy this long are going to want to fight back against something and right now the EU and Germany look like the easiest targets.
It would make more sense to allow Greece to gain some ground. Let them save face. And the concessions that Germany, the EU, and the IMF have to be willing to make can’t be small. They have to be significant enough that the Greek government can go back to the people and show them that they are able to get something other than slapped across the face. Otherwise Greece has nothing to lose and her politicians will continue to fight in that same mindset.
