Home European Citizens Losing Control Case 1: Greece

European Citizens Losing Control Case 1: Greece

Democracy is at the heart of European values. Citizens can certainly oust governments in elections. But do they have real alternatives? And who is really calling the shots?  

Recent events have shown how citizens have lost control over their countries’ fates. This article discusses Greece. A look into events in Spain, Italy and perhaps other countries will follow. The picture is similar. Let’s start:

The Greek Bailout

The troubles of the Hellenic Republic are well known. They overspent and fiddled with their finances and public debt grew. There is a wide consensus that they shouldn’t have been allowed into the euro-zone.

So, markets lost confidence in Greece’s finances. This was followed by a bailout program to “help” Greece – a program led by the European Union, the European Central Bank and the IMF. But wait, what is inside the program?

The program consists of severe austerity measures: more taxes and less government spending. In return, Greece was granted money to refinance its debts. Who owns the debt? European banks.

Bottom line: Greeks are suffering and the large European countries  bailed out their banks. The promise was that Greece would re-balance and get out of the mess, and some gain would follow the pain.  Greece Leaves Euro Zone

That didn’t work out.

Greece sunk into deeper recession, deeper unemployment and far more debt. Some bondholders were bailed out, others are stuck with worthless paper. Greeks stayed with much less money in their pockets.

What did Greeks do? Go out to the streets, to protest. The opposition rejected these measures and said it could do better.

What would you expect to happen? Pressure from the street would send the government home, the country would go to elections, the opposition would win and the country would take a different course. Isn’t that democracy in action?

Twist in Events

Well, the Prime Minister was ousted. But the rest of the story is different. The opposition party (called New Democracy) suddenly sided with the ruling socialist party and supported the bailout program.

Both parties are afraid of losing their seats in parliaments and afraid of the markets. Instead of going to elections, they chose to form a unity government that its single role is to sail Greece towards a second bailout package. This means more austerity and probably the same success as the previous program.

And who will lead the new government of national unity? A former Vice President of the European Central Bank.  Lucas Papademos served 8 years under Jean-Claude Trichet, including the period of the launch of the first bailout program for Greece, in May 2010.

The Future

So, assuming that this unity government will pass more austerity measures and secure another bailout package, new elections will be held.

What choices will the Greek citizens have? Both major parties offer the same policy. Well, they don’t have to have a policy: the ECB and the commercial banks will eventually let them know what to do.

One of the options that few fortunate Greeks do have is to pull their money out of the country. Oh, that’s already happening:

What do you think? The economic situation in Spain and Italy may be better, but the citizens’ power is diminishing there as well. More on that soon.
Update December 7, 2011:  Greek Bank Run Intensifies – Exacerbates Greece’s Misery  – Greeks are acting through the banks

Yohay Elam

Yohay Elam

Yohay Elam: Founder, Writer and Editor I have been into forex trading for over 5 years, and I share the experience that I have and the knowledge that I've accumulated. After taking a short course about forex. Like many forex traders, I've earned a significant share of my knowledge the hard way. Macroeconomics, the impact of news on the ever-moving currency markets and trading psychology have always fascinated me. Before founding Forex Crunch, I've worked as a programmer in various hi-tech companies. I have a B. Sc. in Computer Science from Ben Gurion University. Given this background, forex software has a relatively bigger share in the posts.