Making Sense of a #Greek Tragedy #Grexit

Greece is struggling with a large scale economic crisis, which may soon surpass The Great Depression of the US in the 1920s. Of course, Greece being part of the EU makes its situation more complex, and more communal. Every other country seems to have its two cents to contribute in what could be the largest bailout in financial history. And, of course, since I have started working in a bank, my daily newsfeed is peppered with these references.

So I tried to make sense of it all in the only way I know how, by combing through one of the greatest Greek tragedies ever, that of Oedipus Rex. If you have not read it, I highly recommend you do. But before that, here’s a handy blurb

“A prophecy said that the protagonist Oedipus would kill his father and marry his mother. He meets a man at a crossroads accompanied by servants; the protagonist and the man fought, and he killed the man. (This man was his father, Laius). He becomes the ruler of Thebes after solving the riddle of the sphinx and in the process, marries the widowed Queen, his mother Jocasta. When the truth comes out, following from another true but confusing prophecy from Delphi, Jocasta commits suicide, Oedipus blinds himself and leaves Thebes.” Courtesy: Quizlet

Nothing much of what follows is original. The study has been taken from a handy website, which also links into a detailed PDF (Briefing Paper, Number 7114, 6 July 2015. Greek debt crisis: background and developments in 2015). The text of the play has been taken from a free source and then another.

So, this is what has happened so far.

Background to crisis
Greece’s economy has undergone a severe recession since the debt crisis began in 2010, with the economy over a quarter smaller now than it was then. Two international bailout programmes in 2010 and 2012 have provided a total of around €240 billion (£171 billion) in financial aid to Greece. Attached to these loans have been stringent conditions designed to reduce the budget deficit and improve economic competitiveness.

Against this backdrop of continued severe economic and social pain, the radical left-wing Syriza party, who promised to reject the austerity measures, won the January 2015 election beating the incumbent centre-right New Democracy party. Syriza’s leader, Alexis Tsipras, became Prime Minster.

Of course, the High priest of Thebes always looks up to his King for counsel. He calls upon his King to save Thebes from a fell curse that might befall them. He also tries to boost morale by calling on the King’s great personality and wit.

PRIEST
For, as thou seest thyself, our ship of State,
Sore buffeted, can no more lift her head,
Foundered beneath a weltering surge of blood.
A blight is on our harvest in the ear,
A blight upon the grazing flocks and herds,
A blight on wives in travail; and withal
Armed with his blazing torch the God of Plague
Hath swooped upon our city emptying
The house of Cadmus, and the murky realm
Of Pluto is full fed with groans and tears.

And now, O Oedipus, our peerless king,
All we thy votaries beseech thee, find
Some succor, whether by a voice from heaven
Whispered, or haply known by human wit.

O never may we thus record thy reign:–
“He raised us up only to cast us down.”
Uplift us, build our city on a rock.
Thy happy star ascendant brought us luck,
O let it not decline!

So, after our ‘King’ came to power,

Syriza campaigned against the conditions attached to the bailout agreements and pledged to reverse many of the austerity measures introduced in recent years, such as the 22% reduction in the minimum wage. It believes, along with a number of economists, that the cutting of public spending and tax increases introduced in order to attempt to reduce Greece’s large budget deficit had been counterproductive. It argues that this led the economy into a vicious negative spiral of weaker demand causing weaker public finances, in turn resulting in the imposition of even tougher austerity conditions.

Oedipus, too, wants best for his state. He is fully committed to its welfare and success.

OEDIPUS
I have sent Menoeceus’ son,
Creon, my consort’s brother, to inquire
Of Pythian Phoebus at his Delphic shrine,
How I might save the State by act or word.

CREON
In this land, said the god; “who seeks shall find;
Who sits with folded hands or sleeps is blind.”

Greek bank balance sheets are plagued with very high levels of non-performing loans (where the borrower is not making repayments to the bank); the IMF estimated in June 2014 that 40% of all loans provided by Greek banks at the end of 2013 were non-performing.13 Greek banks also hold a large quantity of Greek government bonds.

CHORUS (antistrophe 1)
First on Athene I call; O Zeus-born goddess, defend!
Goddess and sister, befriend,
Artemis, Lady of Thebes, high-throned in the midst of our mart!
Lord of the death-winged dart!
Your threefold aid I crave
From death and ruin our city to save.

Given Greek banks’ large holdings of its government’s debt, their solvency is closely linked to that of the state. A failure to either extend or replace the current bailout programme would probably result in Greece defaulting on at least some of its debt (as it would not have the funds to service it).

If this were to happen the ECB may decide to either reduce or end ELA (Emergency Liquidity Assistance), resulting in Greek banks probably becoming insolvent. As a result, the ECB is keeping a close eye on negotiations surrounding the future of the bailout programme.

OEDIPUS
Teiresias, seer who comprehendest all,
Lore of the wise and hidden mysteries,
High things of heaven and low things of the earth,
Thou knowest, though thy blinded eyes see naught,
What plague infects our city; and we turn
To thee, O seer, our one defense and shield.

This provisional agreement was viewed by most observers as a “defeat” for the Greek government given that most of its original demands that helped it get elected were not included. For instance, The Economist concludes that “Greece drop[ped] nearly all its demands”. The Open Europe think tank believed that “Greece seems to have failed to achieve many of its goals” with Greece “basically agree[ing] to conclude the current bailout”. Meanwhile, German Finance Minister Wolfgang Schäuble appeared content, commenting that “the Greeks certainly will have a difficult time to explain the deal to their voters”.

The chorus feels about this much in the same way as I do.

CHORUS
To us it seems that both the seer and thou,
O Oedipus, have spoken angry words.
This is no time to wrangle but consult
How best we may fulfill the oracle.

Many disagreements have spawned.

Talks between the Greek government and its creditors (other Eurozone members (usually through the European Commission), the ECB and IMF) have continued in the following months, without an agreement being reached. The Greek government has presented proposals for reforms that its creditors have rejected as being insufficient.

The main areas of disagreement are in the following areas:

  • Labour market
  • Pensions
  • Budget targets
  • Value-added tax (VAT)
  • Debt reorganisation

The Greek government feels that if it caves in it will end up perpetuating what it sees as the mistakes of the austerity programme. Meanwhile, the other Eurozone members are reluctant to lend billions of euros of additional loans to Greece if it does not commit to reforming its economy and improving its public finances.

What is it, then that is keeping the rest of the EU from helping Greece out? The King is annoyed by their behaviour, surely.

OEDIPUS
What then, thou knowest, and yet willst not speak!
Wouldst thou betray us and destroy the State?

TEIRESIAS
I will not vex myself nor thee. Why ask
Thus idly what from me thou shalt not learn?

OEDIPUS
Monster! thy silence would incense a flint.
Will nothing loose thy tongue? Can nothing melt thee,
Or shake thy dogged taciturnity?

TEIRESIAS
Thou blam’st my mood and seest not thine own
Wherewith thou art mated; no, thou taxest me.

OEDIPUS
And who could stay his choler when he heard
How insolently thou dost flout the State?

TEIRESIAS
Well, it will come what will, though I be mute.

OEDIPUS
Since come it must, thy duty is to tell me.

TEIRESIAS
I have no more to say; storm as thou willst,
And give the rein to all thy pent-up rage.

The long-running debt crisis took a surprising turn when the Greek Prime Minister announced on 26 June that Greece would hold a referendum on 5 July on whether to accept or reject the last proposal from the creditor institutions. Greek voters decisively backed ‘No’, with 61% of the electorate backing the government’s position.

CREON
First, I bid thee think,
Would any mortal choose a troubled reign
Of terrors rather than secure repose,
If the same power were given him? As for me,
I have no natural craving for the name
Of king, preferring to do kingly deeds,
And so thinks every sober-minded man.
Now all my needs are satisfied through thee,
And I have naught to fear; but were I king,
My acts would oft run counter to my will.
How could a title then have charms for me
Above the sweets of boundless influence?

What happens next?

  • The referendum result provides a political boost to the Greek government and Prime Minister Alexis Tsipras. He was optimistic that a deal with the other Eurozone countries would be possible.
  • Early reaction from Eurozone governments outside Greece has been mixed about the possibility of a deal following the referendum.
  • French finance minister Michel Sapin said the basis for dialogue between the two sides still exist.
  • German Vice-Chancellor and economy minister Sigmar Gabriel said “negotiations about a programme worth billions are barely conceivable”. A number of Eastern European leaders have also had sceptical reactions. The Estonian Prime Minister Taavi Rõivas tweeted: “Does not look good for the future of Greek people…”.

CREON
But O condemn me not, without appeal,
On bare suspicion. ‘Tis not right to adjudge
Bad men at random good, or good men bad.
I would as lief a man should cast away
The thing he counts most precious, his own life,
As spurn a true friend. Thou wilt learn in time
The truth, for time alone reveals the just;
A villain is detected in a day.

  • Many believe the ‘No’ vote has diminished the prospect of Greece staying in the Eurozone. The key question concerns how likely the creditors will come back and offer better terms to the Greek government, which is now calling on debt relief to be included in any agreement.

CHORUS
Brand not a friend whom babbling tongues assail;
Let not suspicion ‘gainst his oath prevail.

  •  A new (third) bailout agreement will be necessary, complicating negotiations.
  • The immediate concern for Greece is the banking system. Capital controls have staved off its collapse for the time being, but, despite this, money is running out. The Greek economy is also suffering given the capital controls.
  • The European Central Bank’s response to the referendum result and its aftermath will be crucial. If it significantly reduces the money it offers to the Greek banking system, or even completely withdraws this emergency funding, this would likely lead to Greece having to create its own currency to keep the banking system functioning.
  • Even if the ECB maintains the €89 billion in emergency funds it is providing Greek banks, this may not be enough and even tighter capital controls may be needed.

JOCASTA
Since then my counsels naught avail, I turn
To thee, our present help in time of trouble,
Apollo, Lord Lycean, and to thee
My prayers and supplications here I bring.
Lighten us, lord, and cleanse us from this curse!
For now we all are cowed like mariners
Who see their helmsman dumbstruck in the storm.

CHORUS
Here was a man who fired his arrows well—
his skill was matchless—and he won
the highest happiness in everything.
For, Zeus, he slaughtered the hook-taloned Sphinx
and stilled her cryptic song. For our state,
he stood there like a tower against death,
and from that moment, Oedipus,
we have called you our king
and honoured you above all other men,
the one who rules in mighty Thebes.

But now who is there whose story
is more terrible to hear? Whose life
has been so changed by trouble,
by such ferocious agonies?

Of course, all of this rambling is purely my own opinion. I understand very little about macroeconomics and the nuances of politics. But I do believe that the rest of the world owes a huge cultural debt to Greece. It is one of the oldest and most flourishing civilizations of this world and has given us the likes of Plato, Hippocrates, Socrates, and Archimedes. Have we, collectively, put a price of €323bn (£172bn) on their heads? Who do we think we are?

CHORUS
You residents of Thebes, our native land,
look on this man, this Oedipus, the one
who understood that celebrated riddle.
He was the most powerful of men.
All citizens who witnessed this man’s wealth
were envious. Now what a surging tide
of terrible disaster sweeps around him.
So while we wait to see that final day,
we cannot call a mortal being happy
before he’s passed beyond life free from pain.

Today, banks have reopened after weeks. I have no point to make but I hope the Greek government defies the tragedy of Oedipus. Not everything is about the money.

If you wish to read further about all the points mentioned above, read this PDF. But more importantly, read the play.

2 thoughts on “Making Sense of a #Greek Tragedy #Grexit

  1. This was a marvellous article regarding the Grexit, one that I really enjoyed. I especially loved the concise way in which it conveyed all the information required. Allow me a brief introduction: I’m a 15 year old with an interest in finance and economics who wants to share my views with the world at shreysfinanceblog.com. If you could read and reblog one of my articles, it would be very much appreciated! Thanks again for writing this brilliant article.

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