Cyprus-Forum.com

[Jerry]

I wonder to what extent the cost of hosting the Olympic games and the huge sums Greece spends to defend itself from Turkey have contributed to this crisis.

[Gasman]

Yes. I've read that the cost of them hosting the Olympic Games did contribute. However, it is not compulsory - it was done for the kudos and glory.

My pal who lives in Athens said it was HELL for them travelling to work while it was all going on. Athens roads and traffic being what they are at the best of times.

[Lit]

http://online.wsj.com/article/SB1000142 ... theadlines

Greek Tragedies

By VICTOR DAVIS HANSON

Draping the Acropolis with a hammer-and-sickle banner might seem a stupid public relations stunt—especially as a bankrupt Greece seeks to reassure foreign capitalist investors to save Hellenic socialism.

But then the news coming out of Greece these days gets a little more bizarre each day—fire-bombings, murders, riot, and mass shutdowns of all government services. All this chaos, of course, is streamed live to the world on the eve of the life-saving tourist season.

Indeed, no one can quite figure out the Greek enigma. Necessary austerity measures may well ensure recession. Yet any slowdown precludes enough economic growth to pay off exorbitant public debt. High interest is necessary to attract risk-prone investors, but will probably ensure that some $140 billion in loans—over $12,000 for every Greek in the country—can never be wholly serviced. Strikes and demonstrations come at just the time when workers need to be more productive on the job. Greek officials talk of reducing, not eliminating, annual deficits, at a time when budget surpluses, not further borrowing, are needed to restore financial sanity.


And the more the world learns about the peculiar financial culture of this tiny nation of 11 million—14 monthly pay periods, a retirement system that can be conned to draw pensions in one's 50s, endemic tax-cheating—the more it is baffled by the fiery rioting and protests of those in the streets who want others to ensure they keep getting their bonuses.

Greece, of course, is not quite unique. Britain and the United States are running historically unprecedented peacetime deficits and imploding their retirement and health care systems. In California, we see the same Greek phenomenon of extravagantly paid and pensioned public employees demanding higher taxes from a shrinking private sector that is fleeing an overtaxed state.

Elsewhere in Europe, sun and socialism are having a rough go of it as well in Portugal, Spain, and Italy. The late-night dinner, the double commute to ensure siestas, and a laid-back "tomorrow" joy of living seem to lead both to lower worker productivity and greater claims on entitlements.

All that said, the violent reaction to bad news in Greece is unique. But it is not so surprising given Greece's own turbulent past. Hundreds of insular valleys, 6,000 islands, and jagged coastlines, often cut off by mountains, help to explain the original emergence of 1,500 independent city-states rather than a unified nation—and a fierce tradition of agrarian independence as well as the birth of democracy. Given the mountainous Balkans and a prominent position in the southeastern Mediterranean, a European Greece itself was always especially vulnerable to the whims of the great, and usually hostile, eastern empires.

Greece inherited a tradition of top-heavy secular and religious bureaucracy as part of a millennium-long Byzantine Empire. But four centuries of Ottoman occupation gave to Greece an abiding disrespect for its government, a sense that the state was an adversary. Istanbul's western, Christian, and European colony kept its language, its sense of nationalism, and its religion largely through a strong sense of tribal solidarity—and often by moving up into the inaccessible mountain refuges to escape Muslim tax-collectors and recruiters.

Greece has always had an ambiguous relationship with Western Europe. The Franks, remember, sacked and nearly ruined Constantinople during the Fourth Crusade. Greek frontline opposition to Islam meant that a beleaguered and nearly extinguished Orthodox Christianity could not afford to experiment with a Reformation. And the vast distance from Gibraltar ensured that the Greeks, an adventurous sea-faring people, nevertheless missed out on the great age of maritime exploration, which was driven by the Europeans with accessible Atlantic ports.

History and geography were no kinder to Greece in the 20th century. The Great Powers that emerged victorious from World War I both encouraged and betrayed the ill-fated "Great Idea" of restoring Hellenism to Asia Minor, which ended in the savage slaughter at Smyrna in 1922.

Mussolini invaded Greece in October, 1940, and stalled in the face of fierce Greek resistance—only to be bailed out by Hitler, who looted and starved Greece during the ensuing brutal Axis occupation. And when the United States drew the line at Turkey and Greece to halt postwar Soviet expansion into southern Europe, communist infiltration from the north prompted a savage civil war that killed even more people than the famines of World War II. To NATO's American realpolitik planners, an unpopular, authoritarian, anti-communist government was preferable to a socialist, neutral, and democratic Greece.


Geography is fixed, and so even in the post-Soviet era of globalization, Greece is not quite free of foreign turmoil. The ongoing Islamization of a once secular Turkey threatens again to turn formerly somnolent territorial disputes out in the Aegean into a regional crisis—especially as the Greek population ages and shrinks and the demography of its neighbors to the east and south grows and becomes younger. A divided Cyprus is only temporarily dormant. Greece still struggles with the aftermath of Yugoslavia—both its own past unpopular sympathies with the brutal Milosevic regime in Orthodox Serbia and running disputes with the new Muslim and Slavic nationalist states on its northern borders.

In all these crises, as those in the past, conspiracies abound. A nefarious, but nebulous foreign "they" seems in the Greek mind always to lurking in the shadows. And in such a Manichean national landscape of villains and heroes, either the government, the Church, or the "rich"—or, alternatively, the "communists" and the "agitators"—hoodwinked the noble people into doing what they in retrospect should not have.

The sum of all that tragedy is sometimes greater even than its parts, and explains in part why today Greeks are both dependent on and suspicious of foreign "help"; why they both complain about, and yet demand, a cumbersome bureaucracy; why they rage at northern Europe and the United States, even as they seek to become integrated within the West; and why such a creative, rational, and capable people so often turn feisty and full of misdirected rage at its own self-inflicted miseries.

Will Greece survive as a modern, prosperous European state? In one sense, it is hard to see how—given the overwhelming debt, the structural flaws now apparent in the European Union monetary system, and the violent rather than rational popular responses to the crisis. And yet, given its tragic past, the current financial meltdown of 2010 pales in comparison to the Ottoman occupation. It certainly is minor when seen against the slaughter of a million Greeks in Asia Minor, the endemic starvation during the German occupation, the savagery of the civil war, and its frontline vulnerability during the Soviet-American standoff.

Greece survived all that, as it will the present crisis, because in the end Greeks in extremis so often prove an heroic people. That is hard to remember in our present exasperation with the ongoing depressing spectacle in Athens, but it is nevertheless a historical truth.

[Gasman]

I hope he is right about them surviving this one. He is right about

no one can quite figure out the Greek enigma

as far as I am concerned.

Perhaps he could have gone further and given his explanation of what, exactly, it is they DO want or realistically expect to get? That's what puzzles me.

[Gasman]

http://daviddfriedman.blogspot.com/2010/05/do-greek-protesters-want-default-should.html

Do Greek Protesters Want a Default? Should They?

Lots of people in Greece have been demonstrating, sometimes violently, against the government's "austerity" program, adopted as the price of getting loans to cover Greece's very large national debt. It is not clear from the stories I have seen what alternative they propose.

One possibility is that they believe the Greek government could continue its current policies if it wanted to, that the austerity program is merely a plot by wicked people to make the protesters, and people like them, worse off. It is hard to see how a government can continue to spend much more than it takes in if nobody is willing to lend it money, but that may not be how they are looking at the question.

An alternative possibility is that they realize that rejection of the program will result in their government being unable to either borrow more money or turn over its present debts, leading to a sovereign default, and are in favor of it. That raises two questions. The first is whether that is what the protesters, or many of them, want. Readers who have followed the situation more closely than I have are invited to offer any relevant evidence.

The second is whether, in terms of their own self-interest, it is what they ought to want. At first glance, one would think not. The program being proposed is not austere enough to put the Greek budget into surplus; under it the government would still be spending more money than it takes in, although not as much more. If defaulting on its present debt makes the Greek government unable to borrow, that would force a balanced budget and presumably lower, not higher, expenditures than currently proposed—the opposite of what the protesters want.

But the answer is not that clear. For one thing, current budget calculations include interest payment on the current debt; defaulting on that debt would eliminate those payments. I don not know the details of the proposed budget, but it is at least possible that a balanced budget with current income and without interest payments would result in an increase in (non-interest) expenditure.

Furthermore, default will not make borrowing impossible. My friend Jeff Hummel quotes me as saying—when and where I don't know—that sovereign default is the one balanced budget amendment with teeth. I do not know if I really said it, but if so I was exaggerating. Defaulting once is bad for one's credit rating, but defaulting twice is worse, so after a sovereign default a government still has some incentive not to do it again, hence some reason to pay off on any further borrowing. And the first default reduces the incentive for the second, since there is no wless debt to default on—the benefit of eliminating a billion dollar debt is much less than the benefit of eliminating a hundred billion dollar debt. So after default, a government should still have some ability to borrow.

Which raises the question of whether a Greek government that had defaulted would be willing and able to spend more money, some of it taxed and some of it borrowed, than currently proposed. If so, perhaps the protesters are correct in believing that rejecting of proposed program would lead to a better result, from their standpoint, than accepting it.

This is not only a post about Greece. The argument in favor of sovereign default applies to a lot of other governments as well, including the U.S. I find the rarity of such defaults—and the willingness of people to lend large amounts of money to borrowers who face no legal penalties if they fail to pay it back—at least mildly puzzling. Presumably the explanation lies in indirect costs to default, reputational and otherwise.

One further point is worth making, emphasized by the Greek situation—the existence of positive feedback. The greater the perceived risk of default, the higher the risk premium that lenders will require on their loans. The higher the risk premium, the more costly the debt, hence the greater the incentive to default. So if a sovereign default does happen, it could be surprisingly sudden.