Monday, October 31, 2011

Greece’s Rhetorical Referendum

The Greek PM has just announced a “rhetorical referendum,” by which I mean that it is asking a question whose answer does not matter. Whatever the Greek people vote for, no big question will have been settled, no divisive issue will have been resolved, and we will have no more information about the public’s mood than we do today. In other words, it is a meaningless referendum. 

The problem, of course, is that there is no real “choice.” Greece has defaulted, even though the default will be more orderly and might not be called a “default.” So when the PM says that the Greek people have to approve the haircut deal to help the country “stave off default,” his claim is Orwellianly ludicrous. There is no choice because the referendum does not offer alternatives as referenda are supposed to do. For lack of a better metaphor it is like letting a vegetarian choose between beef and chicken – you are past the point where the question makes sense. 

All this referendum tells us that this PM is too little for Greece, that he has no backbone and no courage. After having walked you to the cliff, and as the water zeroes in on you both, he will turn and say “should we jump?” as if “yes” means that we somehow all made the decision to jump together, and if we drown it was our joint decision to drown. This referendum is no more than a petty attempt to offload responsibility and culpability by sharing it with the “people” – and in doing so he reminds us how unfortunate we are to have him as our leader in this great hour of need. And we don’t need a referendum to know that.

Thursday, October 27, 2011

Greece After the Haircut: Numbers and Politics

A haircut, as any woman will tell you, can be rejuvenating or it can be a disaster. As Greece parades its new haircut, which one will it be? To answer this question, I want to look first at the numbers and then at the politics.

Let’s start by looking at some numbers. Greece’s finance minister said this deal alleviates the country’s debt burden by €100 bn and reduces annual debt service by €4.5 bn. But Greece’s gross debt was €353 bn on June 30. A 50% haircut would be much greater than €100 bn. So what is going on?

The Greek finance minister said the deal covered the country’s tradable debt held by the private sector, which he put at €206 bn – hence, the 50% haircut would lower debt by €100 bn. But even that number seems low: in its latest Public Debt Bulletin (here), the Ministry of Finance put the country’s tradable debt at 79.8%, or €282 bn. Even allowing for €9.3 bn in amortization (as per the same bulletin), and for €26 bn in intra-government liabilities (as per the government’s 2012 budget) we’re still short ~€41 bn (€206 bn versus €282-€9.3-26=€247 bn). The finance minister said there are other categories of bond holders that will be dealt with separately. Either way, this by no means a 50% reduction in Greece’s total debt: if we go by the €100 bn this is, in fact, a 28.3% reduction (€100/€353 = 28.3%).

Now, by 2014, the official sector will have loaned Greece up to €240 bn: €110 bn for the first bailout, €100 bn for the second bailout and €30 bn to facilitate the bond exchange with the private sector. But if you look at the forecasts done by the IMF in July 2011, Greece’s gross debt was supposed to be ~€389 bn in 2014. If you take that number and shave off €100 bn from the private sector (as per the finance minister’s remarks), you get €289 bn. That would leave only about €49 bn of private sector debt (€289 bn minus €240 bn). Is there a scenario under which the EU and the IMF will own, by 2014, 85% of Greece’s debt? Does that make sense and what will that mean?

I ask these questions because when assessing what this deal means for Greece, details matter. Greece had forecasted €17.9 bn for debt service in 2012 so a €4.5 bn reduction in debt service is a big deal, although this is a 25% reduction, not a 50% one. The government had budgeted a 1.5% of GDP primary surplus in 2012, which this deal could boost to 3.6%. What is less clear is debt amortization: Greece needed €35 bn to amortize debt in 2012 and €37.6 bn in 2013. Presumably some of that debt is either shaved off or pushed into the future. But we do not know how much yet – that can make a big difference on how much of the second €100 bn official sector tranche goes to merely replace private sector debt.

So much for the numbers: what does this mean for Greece? My feeling is that this is a major victory, a major defeat and neither of the two. Let me explain.

It is clearly a foreign policy victory. Greece was able to default without defaulting – it got strong multilateral support and was able to engineer a “voluntary” haircut without going into official default. It was also able to retain the 21 July agreement and it was able to resolve all questions (for now) about staying in the Eurozone. It gets more time to implement reforms and it gains some of the closure it wanted. As a foreign policy matter, this is a success.

It is also clearly a major political failure. It underscored the government’s inability to implement the initial program and it highlights the government’s deteriorating credibility with both markets and Europe’s leadership. A second bailout is needed because the first one did not succeed in important ways and now a haircut is needed because the second bailout was unlikely to succeed before it even started. So this is a victory via defeat – a strong showing that emerges from weakness.

It is also neither a victory nor a defeat. The math indeed looks slightly better and the deals follows my own view of what needed to happen – but the true test will be what the government does with this windfall. The finance minister has said there are no additional measures needed for 2011 and 2012. So is that extra €4.5 bn just going to repay debt? If so, does it provide any relief for the Greek taxpayer and consumer? And if this extra cash is merely used to repay debt, how does the Greek economy bounce back from its consumption-led recession? The economy needs a stimulus that will generate growth – how do these better debt dynamics create such stimulus? The government has yet to answer that question.

So the reason I think this deal is “neutral” is the same reason that I have always considered default a non-solution: it does not fundamentally alter the main dynamics in the Greek economy or Greek society. Public administration is still dysfunctional, the state sector is still too big, tax evasion is still pervasive, the courts are still erratic, education and health are still broken, and competition is still limited. This is what needs to change. Ideally, the government can put this windfall to good use by providing some tax relief that can stimulate consumption and hence economic growth. Or, it can waste the chance by only relaxing its resolve to reform.

Aldous Huxley once said that, “experience is not what happens to you. It is what you do with what happens to you.” Similarly, Greece’s test will be not what kind of reprieve it got, but what it does with that reprieve. It can put it to good use or it can waste it. Greek history is hardly reassuring where guessing which of the two it will be.

Wednesday, October 26, 2011

Four Principles on How Europe Should Deal with Greece

As leaders gather for yet another summit on the Eurozone crisis, the Greek crisis is at a critical inflection point. With bailout #1 having failed in its original premise (Greece going to the markets in 2012), and with bailout #2 seemingly derailed before it even got started, the European Union is looking for fresh ideas on what to do about Greece. Here are four principles on how to think about Greece.

No loan disbursement is guaranteed. Europe and the IMF have been good at ensuring that no loan disbursement under the first bailout is a “given.” While this creates continuous anxiety in Greek circles and in the Greek press, such pressure is necessary. It is only under the pressure of “we will not get the next tranche” that Greek politicians decide to act. In that sense, there can be no “solution” to the Greek problem – the constant fear that Greece may not get the next tranche is a necessary ingredient for success. That said, the troika has already disbursed 66% of its funds and has approved the next installment that brings the total to 70%. So its leverage from bailout #1 weakens with time.

Restructuring, voluntary or not, is always an option. A corollary to “tranche ambiguity” is “default ambiguity.” As a matter of strategy and tactics, Europe should stop saying that it will not allow Greece to default. The fear of default is necessary to force reform in Greece; it is also essential to secure a deal with foreign banks, which need to know that a less pleasant alternative awaits them if they do not volunteer some roll-over. More importantly, saying that default is an option is necessary because, well, Greece may well default. The debt math has never been good, and default is quite possible. Drawing a hard line against default just means you risk looking foolish afterward.

Leaving the Eurozone is off the table. For many economists, Greece’s decision to try to stay in the Eurozone is silly – why not exit the common currency, launch a new drachma and use a competitive exchange rate to generate export-led growth? While plausible, this syllogism is faulty for three reasons.

The first is that, from Europe’s perspective, the Greek problem is only incidentally a currency problem. European banks are exposed to Greek debt and they will be in trouble if they write it down – that problem is “currency-independent.” Their predicament would be the same if the debt were denominated in drachmas or any other currency.

Second, a new drachma does little to resolve the myriad structural problems that the country faces – a bloated public sector, tax evasion, lack of accountability, corruption, red tape that stifles entrepreneurship, broken educational and health systems, a slow and erratic judiciary, and many others. A drachma is a like giving aspirin to a patient that needs surgery.

Third, Greece leaving the Eurozone would be catastrophic for the Eurozone. Not because the Eurozone cannot live without Greece – it can – but because it will trigger capital flight from other EU countries. If you are a Spaniard or an Italian and you see that Greece has been kicked out of the Eurozone and that Greek savings have been converted from euros to drachmas (at a sharp discount), your first act will be to take your savings and move them out of the country. Such fear would trigger a greater deposit withdrawal than these countries have experienced so far. Their banking systems would collapse.

Push for real reform, not just fiscal gymnastics. This is the toughest one for Europe to manage. Greece needs to plug a big fiscal hole and, so inevitably, the international focus is on measures that will close that hole. Yet the process so far has suffered from several deficiencies.

The first is that Greece has continued to fudge the numbers, albeit in a less dishonest way – for example by accruing arrears and cutting from public investment to meet its fiscal targets (see here). A narrow focus on fiscal targets means more opportunity to do so by procrastinating on real reforms.

The second is that continuous tax hikes are yielding few results because the population at large has less money to give. Thus the measures are intensifying an already deep recession (see here). Again the single-minded search for revenue is counter-productive.

Third, new measures are creating widespread public fatigue and discontent, especially from people who see other reforms pushed back. So additional measures are harder to stomach. Such policies are also fueling a sense that the government is only going after the “little guys” while leaving entrenched interests intact.

And fourth, a focus on fiscal math has meant evading tackling with real problems – throughout 2010 and early 2011, the Greek government was focused on easy measures to close its fiscal gap. Of course any government starts with the easiest tasks first, but when it came to harder reforms, the government was neither prepared not had it build sufficient political will. The troika failed to see this until much later and is now belatedly expanding its mandate.


The four principles show decisiveness but they do not necessarily “resolve” the crisis. The crisis has no solution after all – what Europe can do is to draw some clear lines by saying that default is possible but exit from the Eurozone is not; and it then needs to assume a greater role to ensure that the broader agenda for change, rather than accounting fixes, drive the benchmarks for more financial support.

Tuesday, October 18, 2011

Greece as a Striking Nation

“The first man to raise a fist,” wrote H. G. Wells, “is the man who's run out of ideas.” This is the thought that goes through my mind as Greece goes on general strike. Readers of this blog know that I have had little sympathy for protestors; and they will also know that I took a decidedly pessimistic turn over the past month. So pardon the dark thoughts but the times warrant them.

A strike is what you resort to when all arguments, bargains and negotiations have failed. Unless you are Greek, of course. In that case, you go on strike first; then you start talking. A strike is an appetizer in Greece, not even the main course, much less the dessert. So what does it say about Greece that people go on strike so often?

A society without restraint. The speed with which Greeks go on strike is as damning as the frequency with which they do so. If rights also entail responsibilities and if maturity is knowing when to not do something, then the Greek people have so abused this right that they can hardly claim it any more. Like the kid who cries wolf every time, a strike says nothing about the righteousness of the cause or the desperation of the victim. And so when the real wolf comes, no one listens. Taming impulses is supposed to be the hallmark of a civilized society and of a civilized person.

A society without institutions. Frequent strikes are a symptom of a weak political system – they show the lack of mechanisms through which to bargain and compromise. People become mobs when they lack channels through which to make their voices heard, but this process creates a vicious cycle – if the strike is the way disputes are settled, there will be few alternatives developed. The strike breeds another strike which breeds another strike – your power is the loudness of your voice, your ability to gather people in a square, your resolve in closing off a street.

A society without meritocracy. When wages are set through brute force and when your livelihood depends on your ability to mobilize, then meritocracy has no meaning. You should get paid relative to what you contribute, and this elementary principle is lost in Greek society. There is, of course, discontent at people who make exorbitant salaries, but there are also those who will defend (and go on strike to defend) those salaries solely based on the fact that they exist. I should earn this because I earned this in the past, not because I deserve it. In such a society, how can you tell hard-working Greeks to keep working? The rewards go to the loud, not to the able.

A society without empathy. Modern society survives through interdependence – you can be a teacher because someone else is a farmer, a hunter and a weaver. Our social pact rests on the ability to count on others – to grow food, discover medicines, pick up the trash. A strike is the ultimate recourse because it transforms a confrontation between employer and employee into a broader, social battle. When buses don’t run, pharmacies are not open or you cannot buy bread, this is no longer a local issue. But the frequency and speed with which you resort to a strike and are willing to inflict such inconvenience on your compatriots speaks to how much you value your own interest versus that of others. When you say, “I am going on strike, the world be damned” – and do so frequently and with few reservations – you are showing how much you value yourself and how little you care for others. Με το έτσι θέλω, as Greeks say.

A society without predictability. What makes life in Greece so frustrating is its unpredictability. I always remember an exchange with some American friends who were visiting me in Athens and were on their way to an island on the ferry. The boat was scheduled to arrive at 5 pm and they had booked a cruise for 5:45 pm. I told them to change the cruise because they would miss it – the boat would be late. Why would the boat be late, they asked, unless there was a mechanical problem? Because it would, I said. And it was.

No life is predictable, of course. Stuff happens. But to know that you live in a society where your daily routine is subject to the whims of this or that minority; to know that no matter what you do, you have little control over your simplest move; and to feel that your ambitions and your hard work are being hijacked; in other words, to live in a society with no restraint, no institutions, no meritocracy, no empathy, and no predictability – that is the modern Greek tragedy. And to see the country paralyzed by strikes is a reminder that this crisis is no accident, it was not born in Europe or Frankfurt or New York. It is Greek, through and through.

Η Ελλάδα της Απεργίας

«Αυτός που πρώτος θα σηκώσει τη γροθιά του», έγραψε ο HG Wells, «είναι αυτός που έχει ξεμείνει από ιδέες.» Αυτή είναι η σκέψη μου βλέποντας την Ελλάδα σε μια ακόμα γενική απεργία. Οι αναγνώστες μου ξέρουν ότι δεν έχω ιδιαίτερη συμπάθεια προς τους διαδηλωτές και γνωρίζουν επίσης ότι έχω γίνει πιο απαισιόδοξος τον τελευταία καιρό. Συγχωρέστε μου τις σκέψεις αλλά οι καιροί το επιβάλλουν.

Στην απεργία καταφεύγεις όταν τα επιχειρήματα, τα πάρε δώσε και οι διαπραγματεύσεις έχουν αποτύχει. Εκτός αν είσαι Έλληνας. Τότε, πρώτα απεργείς και μετά διαπραγματεύεσαι. Η απεργία είναι ορεκτικό στην Ελλάδα, ούτε καν το κυρίως πιάτο, πόσο μάλλον το επιδόρπιο. Τι λέει για την Ελλάδα ότι απεργεί ο κόσμος τόσο συχνά;

Μια κοινωνία χωρίς αυτοσυγκράτηση. Εάν τα δικαιώματα συνεπάγονται και υποχρεώσεις και αν ωριμότητα είναι να γνωρίζεις πότε να μην κάνεις κάτι, τότε ο ελληνικό λαός έχει τόσο καταχραστεί το δικαίωμα της απεργίας που δύσκολα μπορεί πια να το επικαλεστεί. Όπως το παιδί που όλο φωνάζει ότι έρχεται ο λύκος, η απεργία δεν μας λέει τίποτα για το δίκαιο ή την απόγνωση των απεργών. Και έτσι, όταν όντος έρθει ο λύκος, κανείς δεν ακούει πια. Η αυτοσυγκράτηση είναι το σήμα κατατεθέν μιας πολιτισμένης κοινωνίας και ενός πολιτισμένου ατόμου.

Μια κοινωνία χωρίς θεσμούς. Οι συχνές απεργίες απορπέουν από ένα αδύναμο πολιτικό σύστημα και δείχνουν την έλλειψη μηχανισμών για διαπραγμάτευση και συμβιβασμό. Οι άνθρωποι βγαίνουν στους δρόμους και γίνονται όχλος όταν δεν έχουν τρόπο να εκφραστούν, αλλά αυτή η διαδικασία δημιουργεί έναν φαύλο κύκλο: αν οι διαφορές λύνονται με την απεργία, τότε δε θα καλλιεργηθούν εναλλακτικοί δίοδη για διαπραγματεύσεις. Η απεργία γεννά άλλη απεργία που γεννά άλλη απεργία - η δύναμή μου είναι η ένταση της φωνής μου, η ικανότητά μου να μαζέψω κόσμο σε μια πλατεία, η απόφασή μου να κλείσω ένα δρόμο.

Μια κοινωνία χωρίς αξιοκρατία. Όταν οι μισθοί καθορίζονται από την ωμή δύναμη και όταν το προς το ζην εξαρτάται από την ικανότητά μου να κινητοποιηθώ, τότε δεν υπάρχει αξιοκρατία. Η ανταμοιβή πρέπει να αντικατοπτρίζει τη προσπάθεια και αυτή η στοιχειώδης αρχή έχει χαθεί στην ελληνική κοινωνία. Υπάρχει, βέβαια, δυσαρέσκεια προς εκείνους που παίρνουν μεγάλες αμοιβές, αλλά υπάρχουν και εκείνοι που υπερασπίζονται (και πάνε σε απεργία για να υπερασπιστούν) κάποιους μισθούς μόνο και μόνο γιατί υπάρχουν: θα πρέπει να παίρνω τόσα γιατί πάντα έπαιρνα τόσα, όχι επειδή το αξίζω. Σε μια τέτοια κοινωνία, πώς μπορείς να πεις στους σκληρά εργαζόμενους Έλληνες να συνεχίσουν να δουλεύουν; Οι ανταμοιβές πάνε στους ηχηρούς και τους ισχυρούς, παρά στους ικανούς.

Μια κοινωνία χωρίς συμπάθεια. Η σύγχρονη κοινωνία βασίζεται στην αλληλεξάρτηση – μπορώ να είμαι δάσκαλος επειδή κάποιος άλλος είναι αγρότης, κυνηγός ή γιατρός. Το κοινωνικό σύμφωνο στηρίζεται στο ότι κάποιος άλλος καλλιεργεί τρόφιμα, ανακαλύπτει φάρμακα, μαζεύει τα σκουπίδια. Η απεργία είναι η απόλυτη προσφυγή γιατί μετατρέπει μια αντιπαράθεση μεταξύ εργοδότη και εργαζομένου σε μια ευρύτερη, κοινωνική μάχη. Όταν τα λεωφορεία δεν κινούνται, τα φαρμακεία είναι κλειστά ή δε μπορείς να αγοράσεις ψωμί, αυτό δεν είναι πια ένα τοπικό ζήτημα. Όμως, η συχνότητα και η ταχύτητα με την οποία καταφεύγεις σε μια απεργία και είσαι πρόθυμος να ταλαιπωρήσεις τους συμπατριώτες αναδεικνύει πόσο λογαριάζεις το δικό σου συμφέρον έναντι των άλλων. Όταν λες, «Κάνω απεργία, δε με νοιάζει τίποτα» - και το κάνεις συχνά και χωρίς επιφυλάξεις – αυτό δείχνει πόσο αξία δίνεις στον εαυτό σου και πόσο νοιάζεσε για τους άλλους. Με το έτσι θέλω δηλαδή.

Μια κοινωνία απρόβλεπτη. Αυτό που κάνει τη ζωή στην Ελλάδα τόσο δύσκολη είναι ότι δε μπορείς να προβλέψεις τίποτα. Θυμάμαι πάντα μια κουβέντα με κάτι φίλους Αμερικανούς που με είχαν επισκεφθεί την Αθήνα και θα πήγαιναν με το καράβι σε ένα νησί. Το πλοίο θα έφτανε στις 5 το απόγευμα και είχαν κλείσει μια κρουαζιέρα στις 5:45. Τους είπα να την αλλάξουν την κρουαζιέρα γιατί δε θα προλάβουν – το πλοίο θα αργήσει. Γιατί να αργήσει, μου λένε, εκτός αν πάθει βλάβη; Γιατί θα αργήσει τους λέω. Και άργησε.

Φυσικά η ζωή δεν είναι προβλέψιμη. Πάντα κάτι θα συμβεί. Αλλά το να ξέρεις ότι ζεις σε μια κοινωνία όπου η καθημερινότητά σου εξαρτάται από κάποια μειονότητα· να ξέρεις ότι ό,τι και να κάνεις, δεν ελέγχεις ούτε την πιο απλή σου κίνηση· και να αισθάνεσαι ότι η σκληρή δουλειά δε πιάνει τόπο· με άλλα λόγια, να ξέρεις ότι ζεις σε μια κοινωνία χωρίς αυτοσυγκράτηση, χωρίς θεσμούς, χωρίς αξιοκρατία, χωρίς εμπάθεια και χωρίς προβλεψιμότητα - αυτή είναι η σύγχρονη ελληνική τραγωδία. Και όταν βλέπεις τη χώρα σε παράλυση από μια γενική απεργία, τότε καταλαβαίνεις ότι αυτή η κρίση δεν είναι τυχαία, ούτε μας ήρθε από τη Ευρώπη ή τη Φρανκφούρτη ή τη Νέα Υόρκη. Είναι Ελληνική, απ’ άκρη σ’ άκρη.

Monday, October 10, 2011

New GDP Numbers Show Greece’s Lost Decade

The Greek Statistical Authority has revised its GDP estimates for 2006 to 2010. All the revisions, save the one for 2010, resulted in a lower GDP estimate, bringing 2010 GDP down by 2.9% in real terms. I don’t want to read too much into these revisions, but consider the following: the government now says it expects the economy to shrink by 5.5% in 2011 and by 2.5% in 2012. With the revisions in both the historical numbers and the new forecasts, Greece’s GDP in 2012 will reach 2003 levels (one caveat: the Greek Statistical Agency will also revise 2000 to 2005 numbers). In other words, Greece in 2012 will be exactly where it was in 2003 – effectively losing a decade’s worth of economic activity.
This fact is a painful reminder of the sacrifices made by the Greek people whose income will have declined by 14% during a five-year recession (if not longer). It also underscores that the Greek people are running out of patience – asking for more sacrifices during a prolonged recession becomes progressively harder as time goes by. The two questions that remain: can the government find ways to stimulate the economy (see here)? And more importantly, what comes at the end of this recession – will this has been an opportunity to pass serious reforms or will the “lost decade” be truly lost?

Saturday, October 08, 2011

Three Scenarios to Fill Greece’s Political Vacuum

Alongside economic collapse and social unrest comes the gradual but steady disintegration of Greece’s political system. The latest poll by Public Issue shows not just growing frustration and discontent (nothing new), but also the public’s eroding faith in Greek political institutions, parties and personalities. The political system is marked by its absence rather than its presence.

The most damning number in the whole report is the intention to vote: New Democracy (the main opposition party) is estimated to get 31.5% of the vote; ruling PASOK is given a 22.5% estimate. Thus, the two largest parties can claim a combined 54%, which is barely a majority. Now note that in every election since 1981, these two parties have gained anywhere from 77% to 86% of the popular vote, which puts that 54% number in its proper historical context and underscores the complete collapse in these parties’ popular standing. Let us look at the rest of the numbers:
  • Only 7% of the public are satisfied by how the government is handing the country’s problems; the number is marginally higher (10%) for the main opposition party.
  • Only 11% think that a PASOK government is best suited to handle the country’s problems, which is the exact same percentage as a New Democracy government. A mere 1% has faith in a joint government and 73% trust neither. 
  • The two most popular politicians are leader of far right LAOS, George Karatzaferis (38% positive) and Alexis Tsipras of leftist SYRIZA (36%). The leader of the opposition, Antonis Samaras, follows narrowly behind (35%). Prime Minister George Papandreou’s popularity continues to tumble and fell 7 percentage points in October 2011. 
  • Only 22% think that Papandreou is the most appropriate prime minister versus 28% who think that Samaras is; 47% think neither.
  • 36% think that best solution in the next election would entail some political compromise either in the form of a broad unity government (18%) or a PASOK-ND coalition (18%). 
  • A majority (57%) thinks the country will head to early elections, while 33% think the government will exhaust its four years in power.
  • A growing share (39% vs. 14% in January), think the country needs elections. An equally growing share (now 59%) believes that ND would win those elections. 
  • The intention to abstain has stabilized at roughly 34% and has come down marginally since the summer when it peaked at 38%.
Such political vacuum is at once an obstacle and an opportunity. An unpopular government is less likely to pass tough reforms and be able to implement them. But it is also an opportunity to wipe clean the political slate. Greece needs a new social pact – one that replaces patronage and corruption with political coherence and accountability. Disillusioned by the inability of the current leadership to provide, well, leadership, the Greek public will search for and embrace alternatives. That search can lead to either of three outcomes.

The first outcome is polarization with growing support for the extreme left or extreme right. The Greek public, in this scenario, will seek a simpleminded but all-encompassing narrative that concentrates blame on someone (foreign capital, immigrants, etc.) and that absolves the Greek public from the need to be introspective and look for ways to improve itself. Support for LAOS and, to a lesser degree, SYRIZA can be seen in that light.

A second outcome is cynicism and disengagement. The public basically gives up on the political system, accepts that all politicians “are the same” and that corruption is too endemic to fight against. The political system becomes, therefore, more clientelistic as narrow personal interest remains the only medium for citizen-political interaction and any vestiges of hope and political ideology fade away. In that scenario, Greece will devolve into a (pre Arab spring) Middle East-type society where extreme cynicism trumps political ambition and participation and where the belief that “nothing can change” defines public life.

A third outcome is a new liberal social contract. The Greek public becomes progressively cynical, as above, but it finds, within that cynicism, some kind of hope. That hope comes from deep in the Greek psyche and remains, at first, impossible to articulate. It taps into the thirst for accountability and meritocracy, and it feeds on the hope that things can and will change. Such scenario needs a strong leader – young, articulate, idealistic – who will paint a picture of Greek society in 2020 and form a broad but plausible agenda on how to get there. That leader would basically tap into growing frustration and re-galvanize the Greek public to give the political system another shot.

Which scenario is more likely? I won’t answer that; instead, I will leave you with a maddeningly ambiguous reference from the movie the American president:

“Lewis (chief domestic policy advisor): People want leadership. And in the absence of genuine leadership, they will listen to anyone who steps up to the microphone. They want leadership, Mr. President. They're so thirsty for it, they'll crawl through the desert toward a mirage, and when they discover there's no water, they'll drink the sand.

President Shepherd: Lewis, we've had Presidents who were beloved, who couldn't find a coherent sentence with two hands and a flashlight. People don't drink the sand, 'cause they're thirsty, Lewis. They drink it 'cause they don't know the difference.”