[Viewpoint] Spring cleaning needed in GreeceThe simmering European credit crisis brought me back to the Continent for the first time in a decade, and I was surprised to find the region had barely changed from my last visit. Compared to Korea, which is in a constant state of flux, Europe stank of antiquity. The only change was in the faces of the people, who looked weary and beaten down. But the economic troubles they are facing may not be the only reason why.
It is said that people do not feel the danger swirling around them when they are standing in the eye of a storm. Despite the turmoil in the financial markets and the media frenzy surrounding European leaders’ every move, the region felt peaceful and antiquated, as usual. Even in hard times, it seems, people muddle along and get on with their everyday routines. But a dark shadow is looming on the horizon.
It is clear that Greece, which lies at the heart of the current crisis, should have gone bankrupt some time ago. The country is hanging on a cliff edge, yet public servants continue to protest pay cuts, while civilians demonstrate against plans to scale back their pensions. There is something rotten in the state of Greece, and it has the stench of rampant corruption. Now politicians there are fighting tenaciously to cling to their various interests, but the rest of the population is just trying to make ends meet as best they can.
Syntagma Square, in front of the parliament building in Athens, has become a focal point for mass strikes against austerity measures and welfare cuts, but even this area has become peaceful for a change. Citizens decided to wait instead for the summit between the two main political parties to form a coalition government after Greek Prime Minister George Papandreou was forced out of office. The governing Panhellenic Socialist Movement and opposition right-wing New Democracy Party will launch and run a centralist coalition government temporarily to approve the European Union’s rescue loan package and reform conditions in order to try to stabilize the country.
The gamble by the Greek prime minister and his plan to hold a referendum on the bailout left European leaders shocked and angry and triggered the unexpected marriage of warring political parties. Among grass-roots democracy activist groups, one insists that there are over 2,000 people in Greece acting as if they are nobility from the feudal age. Various family clans with connections to political parties enjoy many benefits. They fatten themselves by trading off jobs in government organizations and state-run enterprises and by feeding off the government budget. This activist group claims they must be eliminated in order to prevent another fiscal crisis and rebuild the country for the future. But one or two individuals, or civilian groups, cannot overhaul politics and society overnight. The eagerness and desperation of the populace must materialize as votes.
Many in Europe believe Greece will inevitably default on its debt and leave the euro zone. The question is whether the default is well managed or disorderly. The Greek economy takes up 2 percent of the broader European economy, which would not be greatly affected by a controlled and orderly default.
Sovereign defaults are not as unusual as people may think. A total of 257 took place from 1824 to 2004, for an average of 1.5 a year. The problem is the risk of contagion. European Union leaders agreed to write off 50 percent of Greek debt, inject 100 billion euros ($138 billion) into the economy and boost the European financial stabilization fund from 440 billion euros to 1 trillion euros to stave off a potential domino effect of bankruptcies. They hope to engineer an orderly default to prevent Greece’s woes spilling over to weaker countries like Italy.
A default by Italy, the third-largest economy in the euro zone, could be more disastrous to the global economy than the meltdown sparked by Lehman Brothers’ demise in 2008. It could be fatal for the euro and shake the global economy. Meanwhile, Italian Prime Minister Silvio Berlusconi is also under political pressure to step down to restore investor credibility.
The European crisis may be exaggerated, however, because too many people are crying wolf. It is hard to think clearly with alarm bells ringing in your ears all the time. This is one of the key problems Europe is facing.
*The writer is an editorial writer of the JoongAng Ilbo.
By Bae Myong-bok