Diary of a Financier

Qualify & Quantify the “Social Costs” of Greece’s Options

In Economics on Sun 12 Feb 2012 at 14:57

Greece has reached yet another arbitrary deadline, which means she has yet another deadline to defer. Parliament has finally started discussing the existential consequences of their coming action. Back in October, I suggested the existential questions would be the final, tallest hurdles in this process:

There’s much to discuss about the matter. Do the politicians have the best interests of the people in their hearts? Do the people know what’s best for them? Does government have the right to dictate what’s best for the people? What is best for the people, the greatest good for the greatest number? This is not about my own philosophy or my own intellectual curiosity though. This has evolved into more than politics, economics, et al. This has become existential. Given the status quo, I ask (as I have many times before): what good has this Monetary Union yielded for politics, economics or the peace?

…The Greeks in the streets won’t fade away. Eurocratic shuffling of the deckchairs will not send the demos home. They will demand their say. So when they’re ignored by finmins in fine suits, when they’re cast deeper into indentured servitude, when they’re slipped arsenic offered as ambrosia… what’s their next move?

Now, a major antagonist of a quick bailout settlement, Finance Minister Evangelos Venizelos has taken note of the resurgent protestors. He remarks:

“We must show that Greeks, when they are called on to choose between the bad and the worst, choose the bad to avoid the worst.”

Lucas Papademos, the technocrat who supplanted the former Greek Prime Minister, has finally been asked to defend his penchant for the bailout/austerity avenue. To wit, he argues:

“We are looking the Greek people straight in the eye with full knowledge of our historical responsibility… The social costs that come with these measures are contained in comparison to the economic and social catastrophe that will follow if we don’t adopt them.

Mr. Papedemos doesn’t go far enough in this (or any other) defense, particularly considering the gravity of the situation. 20120212-145016.jpgIt’s time to qualify and quantify the all-in “social costs” of a bailout/austerity, then weigh them on a balance scale against the “social catastrophe costs.” No more baseless speculation.

The scale will come to the same conclusion I have:

…[C]urrency dissolution is the smart route for Europe. (It’s a nutty game of prisoners’ dilemma in arriving at the first dissenter.) Greece’s politicians would serve their countrymen well to revert unto the drachma. Devalue the currency and pay debt back in full–albeit toilet paper FX. That way, domestic Greek pensioners at least have income to depend on. They won’t be able afford international travel or most discretionary imports, but they’ll have income to finance living expenses. Via any other option–hard-default or bond restructuring–Greek pensioners will take a haircut to their own incomes. They’re synecdoche for the broader populace, few of whom would be able to afford living expenses–not even the essentials, not domestic nor foreign–were Greece to agree to any sufficient option but the drachma’s return.

–Romeo

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  1. […] both name and reputation) to a modern figure.  In fact, I mentioned another Mr. Venizelos in an entry this weekend: Now, a major antagonist of a quick bailout settlement, [Greek] Finance Minister […]

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