Dog days

As I watch a warm afternoon breeze rustle the leaves of the walnut trees and the cat dozes on the wall in the shade of the vine, it is hard to feel as if I am in the centre of a crisis. Yet the turmoil in the urban centres of Greece continues as the government reconfigures itself. In a country where even the dogs riot, there is a sense that the consensus has broken down.  This is hardly surprising when the sole answer to the failure of an austerity package is another austerity package.

In the absence of any recognition that this is partly a systemic crisis, threatening the entire European economy and requiring systemic reforms, it seems that the only possible response to Greece's sovereign debt lies in a choice between growth and default. The first is precluded by a policy of artificially imposed austerity, the second is of uncertain consequence though beginning to look increasingly likely. In a thoughtful piece, the historian Mark Mazower concludes,

Thus, whatever the cost-benefit analysis says about default, the pressing issue for Greece and for the EU as a whole is political. People will not accept further cuts if they think this is simply to bail out Europe’s overpaid bankers, and they will not support a government they believe is devoid of any positive strategy for recovery. If that support vanishes, as it is on the verge of doing, the country may head for bankruptcy anyway. That might well be the worse option not only for Greece but for Europe too. The onus is now on Europe’s leaders to rise above the short-termism and the wishful thinking that characterises their responses so far – the latest EU-IMF agreement is more evidence of this – and to frame further assistance as part of a plausible plan for growth. Given their track record, we should not hold our breath.

 I think that the last word should be left to Loukanikos.