Friday 10 February 2012

Greece and the West. A Failed Act of Union

The date is July, 5th 1439. The place is beautiful Florence. The issue is an Act of Union, but not any Union. It is the union of the Greek Orthodox Church (East Roman Empire) with the West (Papism). All the Orthodox representatives are there, from the Emperor John to Russian bishops. Pope Eugenius IV is leading the West’s delegation. On the table to be signed is the following “We decree that the Holy Apostolic Throne and Roman Pontiff possess a primacy over the whole earth, and that this Roman Pontiff is the Successor of the blessed Peter, Prince of the Apostles…..” you get the gist. 

The Orthodox delegation needs to sign it. The East Empire is crumpling under the forces of the Ottomans. Unless the West helps soon there would be no Constantinople and no East Christendom no East Roman Empire. All the Orthodox delegates sign the decree apart from one, St Mark of Ephesus. The Orthodox delegation then went back and changed its mind. They no longer wanted the West to help if it meant for the Orthodox Church to be under the Pope. They did not want to be humiliated to the West. They too, had pride and were representatives of God.  St Mark plays a pivotal role in the annulment of the decree through his passionate writings.
Thus the fate of the East is sealed. The Orthodox leaders decided that it was better lose the Empire and enslave its people rather than them losing their place and privileges. The rest is, as many say, history. In 1453 Constantinople and the Byzantine Empire fell and a great new empire was born. Intellectuals, philosophers, professionals, doctors, entrepreneurs left in panic for Venice and Florence. Many attribute the subsequent renaissance to the influx of ideas and learned intellectuals from the East. The Orthodox Church and the Patriarch in Constantinople retained most of the privileges, possessions, land and money. The Orthodox Church did not lose much. The people lost, well, everything. It took more than four hundred year for the Ottoman Empire to disintegrate (Sick man of Europe) and the various peoples to be emancipated and new countries like Greece, Bulgaria, and Romania etc. to be created or re-incarnated.
Greece Belongs to the West
Since 1439 the question of whether Greece is or belongs to the West has been a major political issue for Greek politicians. In the 19th century few years after the incorporation of the Modern Greek state by the great powers of the time (mainly Great Britain) the language spoken by the people was “cleaned” of most Turkish or Slavic elements in an effort to make it less Eastern. Later a civil war was fought between the communist (representing the East) and the Nationalist (representing Britain and the West). In the 70’s PM K.Karamanlis (uncle of the disgraced PM 2004-2009) famously exclaimed to A.Papandreou (father of the equally disgraced PM 2009-20011) that “Greece belongs to the West”. Papandreou was an admirer of the 3rd way to socialism professed by Col. Gadhafi.  It seems that the question was never really settled. Many Greeks live with a romantic ideal of a pure virgin independence and of a sovereign state that is self-sufficient yet powerful. It is only through the machinations and the conspiracies of foreigners that this God given right has not materialised.
The latest episode in this aeon long tragedy comes from the Leader of LA.O.S (the “O” in the LA.O.S stands for Orthodoxy). Mr Karatzaferis (leader of LA.O.S) first supported the bailout package and Mr Papandreou in May 2010. Moreover, he supported the decisions of the EU council in July 2011 and Mr Papademos as a PM. Now, in a complete U-turn, he is not going to vote for the new MOU that he apparently agreed only 2 days ago. According to him, signing would be giving up sovereignty. Greece he says has been humiliated. The pride of Greece is not negotiable and Greek political leaders are dealt with no respect. Furthermore, the IMF representative Mr Poul Thomsen (IMF) is a persona non-grata in Greece. He further lambasted the German boot and called Netherlands, Austria, Luxembourg German satellite states.
This is typical of the populist nationalistic arguments that aim to stir anti-European and anti-German feelings with the sole purpose to improve the poll standing. Mr Karatzaferis urged the Greeks to call Mrs Merkel’s bluff, claiming that Germany would never let Greece default as this would be disastrous for Europe. In fact only last week the leader of the left coalition Mr Tsipras said essentially the same. What if they are wrong? What if instead of throwing 130billion to the Greek black hole Europe choses instead to ring fence Portugal and Ireland? Merkel would look good in the eyes of the German voters and also look a good European by saving Portugal and Ireland. Greece on the other hand would do a Lehman Brothers and not a Bear Stearns.
LA.O.S commands around 16 MP’s in the Greek parliament. The other two main coalition partners (ND+PASOK) have 236 seats out of the total of 300. Thus the MOU can be passed if there are no significant defections from the other two. Despite a majority of 86 it still an open question.
Calling Merkel’s Bluff
Greece could in principle default on its obligations. This according to Mr Karatzaferis would cause a problem to Europe that Europe cannot afford. It does not however say what would happen to Greece if Merkel and Europe decide not to support Greece through the default. Let me itemise few consequences:
·         Greece still runs a 2.5% or 5billion primary deficit. In lay terms this means that it would not be able to pay pensions and salaries. Thus the government may cut or impose a limit to all salaries and pensions with the rest either owed or in the form of stamps (were done during German occupation).
·         Greek banks are bust. This means bank runs. The government would probably need to impose limits on transactions over a certain amount. It should further stop any transfers of money abroad. Imposing capital controls goes against the Maastricht treaty but an emergency law could be passed.
·         As Greece is not self-sufficient (current account balance is -18billion). Greece would also need to perhaps lock some of the retail deposits to pay for essential goods. Oil-energy is one example were Greece needs hard cash.
·         Ultimately, if there is no compliance by the people, Greece might ask to exit the Eurozone and to regain its monetary policy. Namely, print New Greek Drachmas.
·         As there is no provision in the Lisbon treaty for Eurozone exit but only for a Union exit (article 50), Greece would have to leave Europe altogether and then re-enter to Europe (assuming the let us) under the special provisions that govern UK etc.
·         In sort Greece would become a truly failed state. I do not dare to think of geopolitical consequences for Greece.
The list of possible outcomes is longer and it does not get better. Committing suicide is an act of superior stupidity not a superior trading strategy.
Europe would have problems too if Greece defaults disorderly. However, Europe can absorb the consequences. Europe would be wounded but not killed. Most European leaders would breathe a sigh of relief if the next European Council meeting does not have Greece in the agenda. European banks would suffer a loss but it represents a very small amount of their assets. It can be absorbed. The first bailout money (73bln so far) is under English law and this means that Greece cannot change them. This would act as a lever for Greece to comply with European will if Greece ever wants to re-enter the capital markets. Even if Greece prints new Drachmas the 73bln would remain in Euro.
Then there is the fear of contagion into other countries. Portugal in particular is a great fear. However, the 130billion that Merkel saved from Greece could be given to Portugal who complied (mostly) with the Troika demands. It would completely seal Portugal from any contagion as their total debt is around 170billion. Thus we see that Europe can find ways of continuing without Greece but Greece does not have meaningful ways of continuing without Europe. Greece does belong to Europe.
The real question is what the Greek electorate thinks? Many Greek politicians started playing the nationalist-isolationist card. And they play well. Are their ideas catching on like the ideas of St Mark’s in 1439? Because if they do then Greece’s fate would be sealed once more for many-many years to come in an unpleasant way.
Going back to 1439, it is chilling how that the Greek Orthodox Church propaganda distilled in the minds of the faithful that it was right to break the links with the West. It was right because even though they lost everything they had their own Church. They would find redemption in the afterlife, with their true God and church. Those that did not buy the propaganda immigrated. St Mark became a saint of the Orthodox Church shortly after he died. He is not a saint in the Catholic Church.
Have no doubts that the same propaganda would be part of the package of “an honourable death”. Mainly deaths of the others, as the main advocates of this action are fully hedged. They own or have on their side most of the mass media in Greece and can easily manipulate the truth and misrepresent the facts just as the Greek Church did for many centuries.