A Greek tragedy is a play that deals with pain, suffering, hate and love. It moves from one crisis to the next and ends in a disaster that was obvious from the beginning.
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This is exactly what is happening to the Greek economy.
Most Greeks think otherwise. They say the European Union countries humiliated them with forced austerity, hurting their standard of living, when all they wanted was to live as if they lived in Germany and to work as if they worked in Greece.
Alexis Tsipras, who heads the radical-left Syriza party, translated this dream into a stunning victory at the polls this past week.
Tsipras, 40, is a charismatic populist, the most dangerous combination. Just before the election, he told the Greeks exactly what they wanted to hear:
- He’ll raise the minimum wage by 30% (!).
- He’ll solve hardcore unemployment - currently 26% - by increasing government-sector employment.
- He’ll give every worker, including retirees, a bonus of an additional monthly salary every year.
- He’ll provide free health care and distribute vouchers for discounts on food and electricity to 300,000 households.
- And if someone falls behind on mortgage payments, the bank will be unable to kick him out of his house. That’s the bank’s problem.
These are just a few of the promises that led Tsipras to victory at the polls.
The promises remind us of those of Shelly Yacimovich before the elections in 2013. She promised 138 billion shekels ($34.5 billion) of additions to the budget to anything that moved.
But the Israeli public proved its maturity and simply refused to believe her. The Greeks believe Tsipras.
The beginning of this Greek tragedy starts in the early 2000s, when Greek governments ran an irresponsible budget policy that specialized in increasing spending and giving gifts.
The retirement age was lowered to 55, government employees received a bonus of a month’s pay (and even two months’), the public sector grew to monstrous proportions, the big unions controlled the economy and made it inefficient, and when the unemployment rate grew, the government increased unemployment compensation, a made-in-Greece solution.
Alongside the enormous spending increase, the government passed out far-reaching tax breaks and allowed mass tax evasion. The result was a huge budget deficit, 14% of GDP, and an enormous public-sector debt.
What does this look like? A family that earns 10,000 shekels a month and spends 12,000 shekels. How long can that last?
So goes Greece. It took out hundreds of billions of euros in loans from European banks - until in 2010 the banks closed the spigot and the Greeks got mad.
“What do they want from us? To pay back the loans? To stop the partying? What are you talking about? What happened?”
After long negotiations Greece reached an agreement in which the banks wrote off some debt and restructured payments for the rest over many years.
As part of the accord, Germany and the EU did not demand that Greece enter a period of austerity. (The Greeks claim, with great resentment, that they did.)
Germany and the EU merely asked Greece to start acting prudently: living within its means, reducing budget deficits, raising the retirement age, cutting tax breaks, carrying out important reforms and increasing productivity.
But the Greeks don’t want to work hard. They believe in free lunches. They want to continue to party in their tavernas, dance the Sirtaki and drink ouzo - and let the Germans pay for the celebration.
But as in every Greek tragedy, the end is known in advance. Tsipras, that dangerous mix of radical-left economics and limitless populism, is now leading Greece into the last act: the great disaster. It is unavoidable.