Thursday, June 16, 2011

Greece Shakeup

The irony is that Greece really did not need a bailout to begin with.

European leaders insisted on the bailout as a way to shore up Greece’s finances, calm markets, and strengthen the euro.

It has had something of the opposite effect. And now that Greece really does need a bailout, the same European leaders are balking.

Today the prime minister is picking a new cabinet, one more narrowly focused on the austerity budget that must somehow save the country from further financial decline. He plans to ask parliament for a vote of confidence. It is perhaps all he can do to shake things up, which is what you need to do when people are complacent and no one has an answer to the problems.

Out in the street things turned ugly yesterday. It was perhaps the largest protest in a year of protests and by the end of the evening, police were attacking protesters with a ferocity not seen before. Protesters are mostly repeating the same sentiments as before, yet it is also true that the solutions and suggestions they represent cannot be ignored forever.

In cities elsewhere in Europe, financial and political officials are trying to slog through the inherent difficulties of the situation and work out a new plan for Greece. Complacency is a problem there too. Traders, bankers, and ideologues are seeking to attach their various pet conditions to a Greece plan that has no guarantee of success even without any such extra burdens. Financial traders have been watching this process and fidgeting for weeks, and yesterday started to reach the conclusion that it is probably already too late for a deal to prevent a Greek default.

This story of complacency, dithering, and half-hearted compromises that arrive too late to matter has been repeated throughout history. Shaking things up is a way to try to break that pattern. It is fair to ask how a political shakeup in Greece will really make any difference, yet no one can say that it won’t help. It is, at least, the biggest move that anyone has made in the last three weeks.