Justice will not come to Athens until those who are not injured are as indignant as those who are injured.–Thucydides
The shadow of classical Greece has always loomed large over Western civilization–whether in literature, philosophy, art, mathematics, history or politics, it has been, in so many ways, the fons et origo of us all. Modern Greece suddenly seems poised to play that same outsized role, but by no means in the same civilizing way. Athens’s fiscal crisis could very well ignite the next global financial crisis–just as the world hoped it might be starting a slow exit from the last one.
After meeting with fellow European leaders in Brussels in early February, where he argued the case for help in solving the hefty budget deficit he’d inherited on taking office last fall, Prime Minister George Papandreou flew home to Athens to tell his countrymen that he’d returned with a half-full cup of promises–and no assurance of the serious backing Greece needs to weather its woes. Global markets, which had been fibrillating nervously for three months about Greece’s (and the euro’s) financial health, skipped several beats after Papandreou’s speech, after already suffering a long sell-off that wiped out much of Wall Street’s shaky recovery. All eyes are anxiously casting about for Delphic signs of what Europe’s finance ministers will do when they meet to hear Greece make its case again, this time in hard numbers.
The situation has the makings of an Aeschylean tragedy. If help isn’t forthcoming, little Greece–whose economy is just 3 percent of Europe’s GDP–could, against its will, set off a chain reaction that pulls down Portugal, Ireland, Spain, perhaps even Italy, and thereby throws Europe’s, and then America’s and the rest of the world’s, fragile recoveries into reverse.
The crisis is, in classic Greek fashion, ripe with ironies. Papandreou came to office in October determined to clean up his country’s longstanding fiscal recklessness and widespread corruption. It was he who first exposed the scope of the dilemma immediately after discovering that this year’s deficit would be double what his conservative predecessors had promised. Moreover, Papandreou has consistently insisted that his government will keep the promises it has made to Greek voters and to EU auditors to bring the deficit, now almost 13 percent of GDP, down to less than 9 percent this coming year and to the EU-mandated ceiling of just 3 percent within two more. But traders and speculators, sensing the size of the task the government faces, have forced interest rates on Greek bonds to record highs, betting that the country is close to default. (The traders’ role is itself ripe with ironies because Goldman Sachs and other top Wall Street firms had earlier in the decade helped Greek governments move liabilities off state budgets by constructing the same sort of offshore entities and complex derivative swaps that were at the heart of the US banking system’s collapse a year and a half ago. Revelations of the deals by the New York Times generated new attacks on the Papandreou government, despite the fact that it was his government that had exposed the dealings.)