The Greek Tragedy is a Case Study in Class Warfare

Greece is in a financial bind, and if Greece's problems can't be solved, it could mean the beginning of the end of the eurozone experiment.  European leaders are confident that they can close a deal with Greece on Monday and stave off disaster, but Greece isn't the only eurozone country facing financial Armageddon.  Spain and Portugal, to name just two others, are waiting in the wings to see what transpires.  The deal that's struck between Greece and European finance ministers will become the precedent for other countries that are sure to follow.

No matter what happens, there is bound to be discontent that has the potential to explode.  European countries have built intricate webs of unsustainable social programs that affect every member of society, and they must be unraveled if the eurozone hopes to survive.  Real and imagined winners and losers in the process will be at each others' throats, and more violence similar to what we have witnessed in Greece over the past week is probably inevitable. 

An article in Saturday's Washington Post by Michael Birnbaum titled "Greek leaders' priorities questioned" points to the difficulty that European finance ministers will have in Greece as they attempt to find a balanced solution:

"Greek citizens have never believed that the deep spending cuts their country has made to avoid bankruptcy were distributed fairly. But top European officials are starting to worry about that, too.

Misgivings remain about whether Greek leaders are committed to instituting the tough policies they have promised in return for the money, not least because of a lingering sense that cuts will continue to hurt the poor far more than the powerful.

[...]

Last week, the Greek Parliament approved measures that cut the minimum wage by 22 percent, effective immediately, but trimmed the salaries of the best-paid civil servants 10 percent, effective months from now. Angry rioters torched dozens of buildings in central Athens in reaction to the cuts.

But officials fought until the last moment to spare the largest public pensions from being touched, finally capitulating on Wednesday after European leaders threatened to scotch the bailout altogether.

The rollbacks in social spending, and policies passed last year that increase the tax burden on the poor, have prompted many Greeks to say their leaders are not always fighting for them.

[...]

'I really feel for the people of Greece,' he [German finance minister Wolfgang Schaeuble] told the daily newspaper Der Tagesspiegel. 'The vast majority now hard-hit by the reform and austerity measures . . . can do nothing about the backup in reforms, the loss of competitiveness and the unproductive use of funds in the past.'"

The Greek tragedy is a case study in class warfare that is unfolding before our eyes.  Leaders in Western nations including the United States should pay close attention because eventually it will become blatantly obvious that they, too, have made promises that they can't fulfill.  They will have no choice but to break those promises, and when they do, it will engender ill will between rich and poor, young and old, black and white, and other segments of society.  Finding solutions that mitigate the damage is key, but rest assured that there will be consequences as affected groups vent their feelings, sometimes violently.

The moral to this story is that unavoidable and unpleasant outcomes are associated with breaking promises even if those promises were irrational at the outset.  We are just beginning to appreciate some of the mistakes that we have made.  Unfortunately, it takes time to reach consensus, and until consensus is reached, there will be enmity on all sides.  As we search for workable solutions, this should be one of our guiding principles: never make a promise that you can't fulfill because the cost of breaking promises is very high.

 

Neil Snyder is a chaired professor emeritus at the University of Virginia.  His blog, SnyderTalk.com, is posted daily.




Greece is in a financial bind, and if Greece's problems can't be solved, it could mean the beginning of the end of the eurozone experiment.  European leaders are confident that they can close a deal with Greece on Monday and stave off disaster, but Greece isn't the only eurozone country facing financial Armageddon.  Spain and Portugal, to name just two others, are waiting in the wings to see what transpires.  The deal that's struck between Greece and European finance ministers will become the precedent for other countries that are sure to follow.

No matter what happens, there is bound to be discontent that has the potential to explode.  European countries have built intricate webs of unsustainable social programs that affect every member of society, and they must be unraveled if the eurozone hopes to survive.  Real and imagined winners and losers in the process will be at each others' throats, and more violence similar to what we have witnessed in Greece over the past week is probably inevitable. 

An article in Saturday's Washington Post by Michael Birnbaum titled "Greek leaders' priorities questioned" points to the difficulty that European finance ministers will have in Greece as they attempt to find a balanced solution:

"Greek citizens have never believed that the deep spending cuts their country has made to avoid bankruptcy were distributed fairly. But top European officials are starting to worry about that, too.

Misgivings remain about whether Greek leaders are committed to instituting the tough policies they have promised in return for the money, not least because of a lingering sense that cuts will continue to hurt the poor far more than the powerful.

[...]

Last week, the Greek Parliament approved measures that cut the minimum wage by 22 percent, effective immediately, but trimmed the salaries of the best-paid civil servants 10 percent, effective months from now. Angry rioters torched dozens of buildings in central Athens in reaction to the cuts.

But officials fought until the last moment to spare the largest public pensions from being touched, finally capitulating on Wednesday after European leaders threatened to scotch the bailout altogether.

The rollbacks in social spending, and policies passed last year that increase the tax burden on the poor, have prompted many Greeks to say their leaders are not always fighting for them.

[...]

'I really feel for the people of Greece,' he [German finance minister Wolfgang Schaeuble] told the daily newspaper Der Tagesspiegel. 'The vast majority now hard-hit by the reform and austerity measures . . . can do nothing about the backup in reforms, the loss of competitiveness and the unproductive use of funds in the past.'"

The Greek tragedy is a case study in class warfare that is unfolding before our eyes.  Leaders in Western nations including the United States should pay close attention because eventually it will become blatantly obvious that they, too, have made promises that they can't fulfill.  They will have no choice but to break those promises, and when they do, it will engender ill will between rich and poor, young and old, black and white, and other segments of society.  Finding solutions that mitigate the damage is key, but rest assured that there will be consequences as affected groups vent their feelings, sometimes violently.

The moral to this story is that unavoidable and unpleasant outcomes are associated with breaking promises even if those promises were irrational at the outset.  We are just beginning to appreciate some of the mistakes that we have made.  Unfortunately, it takes time to reach consensus, and until consensus is reached, there will be enmity on all sides.  As we search for workable solutions, this should be one of our guiding principles: never make a promise that you can't fulfill because the cost of breaking promises is very high.

 

Neil Snyder is a chaired professor emeritus at the University of Virginia.  His blog, SnyderTalk.com, is posted daily.




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