After the last minute negotiations, public referendum and currency crisis, things are slowly getting back to normal for Greece. Of course, normal is a relative term. Let’s take a look at what was lost and what was gained.
First, let’s consider the Greek market, now that we can, since the Greek stock market finally reopened in Athens today after a five week shutdown. The investment mood was bearish, with their stock market down more than 20%, furthering hampering efforts to draw sorely needed capital into the beleaguered country.
The market is a reflection of investors’ feelings about the economy, but it isn’t the economy itself; so, is the Greek economy doing better after the austerity temper-tantrum? No. The capital controls imposed by Syriza clobbered real manufacturing activity, international shipping, and tourism: the three most important aspects of the Greek economy. The Greek economy was actually growing after several years of decline. Greece had suffered a great deal with the austerity measures, but they had actually been able to pay their bills after shedding government spending and improving their tax collection efforts.
So, the economics are bad, but was there a political upside? Maybe, but only if you’re a Euro-skeptic. Ex-Finance Minister Yanis Varoufakis now discloses that they had a set contingency plan for the, previously unspeakable, Euro-exit. The Financial Times reported on the necessity for raiding bank deposits of ordinary citizens to take such a move. Creditor nations are much more bearish on the Euro experiment, and they have begun drawing up plans for currency union dissolution as necessary.
It’s important to remember that this harrowing experience could all have been avoided. If you’re for the European currency union, then this experience is simply damaging. Even if you’re against the Euro, surely a planned, negotiated exit was preferable to the drama of the past few months.