The Scary Greek Revolt Against Austerity

A blog about business and economics.
May 7 2012 8:58 AM

The Scary Greek Revolt Against Austerity

Greek newspapers on display at a newsstand in Athens  May 7, 2012
Greek newspapers on display at a newsstand in Athens May 7, 2012. Greece faced an uncertain future Monday after a stunning election shakeup by parties opposed to further vital austerity cuts, sending shockwaves through markets on fears of renewed eurozone turmoil

Photograph by Louisa Gouliamaki/AFP/Getty Images.

I suppose I should just be cheerleading for a continent-wide "revolt" against "austerity" but I feel compelled to note that as specifically applied to the nation of Greece, whose political system is totally melting down with far-left and far-right parties surging in the weekend's election, this is a totally nonsensical idea. It is true that the people of Greece are living through a very painful period of severe budget cuts, but what they're getting is much less severe than what they'd be putting up with without the euro framework.

This is different from the situations of Spain or Italy. Those countries did receive the temporary benefit of cheap borrowing costs from euro membership, but today they're gaining nothing from the eurozone other than inappropriate monetary policy. Greece, which lied to qualify for the euro and then kept on borrowing money by fudging the numbers, is receiving cold hard cash as part of a failed earlier effort to avoid "contagion" to other European countries. If Greece tried to exit the mechanism—or more likely was forced out by Spain or Italy cutting the cord—they'd be in for a dose of much more severe austerity. Think about Greek living standards converging with Serbia and Bulgaria. Many ills can be laid at the doorstep of the fundamental conceptual flaws in the euro and many others can be laid at the feet of the leaders of the European Central Bank. But Greece's basic problem really does come down to the fact that the Greek state doesn't have nearly as much money as it said it had, and there's absolutely no politically or socially appealing way to acknowledge those losses.

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The scary thing is that since the unpopular policies were implemented by a national unity government, there's now nobody left for the Greek voters to turn to but the extremists. I don't have any real answers for Greece, but Europe's other countries do have choices and it's crucial for them to not end up going down this same political cul-de-sac.

Matthew Yglesias is the executive editor of Vox and author of The Rent Is Too Damn High.

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