Greece: Mulligan Election, Mulligan Economy

By Austin Bay
Wednesday, May 23, 2012

Greece wants two mulligans -- like a golfer demanding second chance, a do-over tee shot, times two.

The immediate and obvious mulligan is a new national election. The teed-off Greek electorate teed up on May 6, but fractious voters produced a scattershot result. No single party achieved a parliamentary majority.

The leaders of Greece's three largest political parties subsequently failed to form a coalition government.

Their disagreements are fundamental. During the coalition discussions, the Syriza Party (Coalition of the Radical Left/Unitary Social Movement) announced it would not participate in any government that imposed austerity. Austerity is shorthand for economic reform, budget cuts and debt reduction, the policy regimen the eurozone's productive economies (led by Germany) and international lenders require in exchange for further loan guarantees and economic assistance.

Syriza's no-austerity leaders, however, argue that Germany and France will balk when they actually face a eurozone breakup. The Syriza-istas argue the election of French Socialist President Francois Hollande demonstrates a "shift to the left" in France that they contend (or pray) will weaken German demands for Greek debt reduction. While on the campaign trail, Hollande claimed he did not favor austerity measures, or at least he didn't favor harsh austerity measures.

Syriza's no-austerity pitch appeals to the Greek electorate's understandable anger at economic decline and frustration with complex reform measures. However, it also plays to and sadly encourages a far less justifiable sense of national resentment and victimization. No one likes to be told they must work hard, cut spending and do without. No-austerity politicians play to this human preference. Ultimately, Syriza counts on Santa Claus. Gifts will come down the chimney. Someone else, from the North Pole (or Northern Europe), will pay the bills.

In contrast, the New Democracy Party (center-right) and PASOK (Greek socialist party) think the Germans mean what they say about no more loans unless Greece lives within its means. The Germans demand honest money. New Democracy and PASOK are committed to keeping Greece in the eurozone. Greece, they argue, gains political clout and economic stability from being in the European Union and the eurozone. Remaining in the eurozone requires fiscal restraint and budget reform, which means accepting austerity.

Some PASOK supporters, however, condemn austerity. Conservative factions who see austerity as an affront to Greek nationalism have quit New Democracy.

Syriza's leaders see these fissures and wager that angry, resentful Greeks will reward them with a working majority in a new election. Another round of parliamentary elections will occur June 17. The electoral mulligan is a done deal.

The second mulligan, The Big Greek Mulligan, is another matter entirely. What Greece really wants is a complete eurozone do-over -- a restart, from scratch, with all debts forgiven. Syriza-ista fantasists may actually believe this dream mulligan is possible. New Democracy and PASOK political realists know it won't happen but miracles -- miracles do happen, don't they? Don't they!?!

Miracle enthusiasts will have to answer this question: Where is scratch? When the eurozone officially formed in 2001, Greece claimed it had a gross domestic product deficit of 1.5 percent. According to former Greek budget minister Peter Doukas (BBC News, Feb. 2, 2012) the correct figure was 8.3 percent of GDP. From euro-scratch the Greek government lied -- told a Big Lie and told it often -- about its deficits. The 1992 Maastricht Treaty (the treaty that created the EU) stipulated that member budget deficits must be 3 percent of GDP or less. Greece signed the treaty and claimed it met the 3 percent commitment. Today, skeptics doubt that claim.

A 1992 mulligan? Why, that might suggest the entire European Union project is a suspect venture.