greece crisis shifting from financial to political

8/2/2019 Greece Crisis Shifting From Financial to Political

http://slidepdf.com/reader/full/greece-crisis-shifting-from-financial-to-political 1/5

Greece's Crisis: Shifting from Financial to Political February 28, 2012

LOUISA GOULIAMAKI/AFP/Getty Images

Greek Communist Party members demonstrate at the Parthenon temple in Athens

Summary

The European financial crisis centered for several years on the idea of preventing

Greece from defaulting on its national debt. However, the rest of Europe has had

time to prepare itself for any potential fallout from a Greek default. This is changing

the dynamic between Greece and Europe even as emerging societal trends within

Greece are illustrating changes in the relationship between Greece's political elite

and its people. These trends will continue as the crisis transforms from a financial

one to a political one.

Analysis

Since the beginning of the financial crisis in 2008, European leaders' actions have

been dictated by a presumed need to keep Greece from defaulting on its massive

national debt at all costs. Even at the cost of losing domestic popularity forsupporting a Greek bailout, and even if Greece seemed unwilling or unable to repay

the money Europe poured into it, European politicians prioritized the prevention of a

Greek default in order to prevent the euro -- and possibly the European Union --

from collapsing. However, that could now be changing, along with the relationships

between Greece and the rest of Europe and between Greece's political elite and the

Greek people.



When Greece received its first bailout package in 2010, the prospect of a Greek

default and financial contagion created a dynamic similar to mutually assured

destruction between Greece and the rest of Europe. If Europe did not continue to

pay, Greece would go bankrupt, and if Athens defaulted on its debt, many other

European countries likely would do the same. However, without notable reform

efforts in Greece -- or at least the show of an effort -- the continuing bailout would

be politically unacceptable in the rest of Europe. This led to a back-and-forth

between Greece and Europe -- Greece fails to meet its reform commitments and

Europe withholds funds and demands more austerity measures; Greece attempts to

enact more austerity, but just as it appears on the verge of default, European

funding resumes and prevents disaster. After two years, however, this balance

could be shifting.

Europe has had time to sequester potentially bad Greek debt and build upinstitutional defenses against contagion, buffering itself from the aftermath of a

Greek default. It is hard to find exact figures describing how much European entities

have decreased their exposure to the estimated 350 billion euros (about $469

billion) of Greek private and public debt, but the European Central Bank has taken

unprecedented steps in the last couple of years to reduce the threat. After three

years of difficult reforms, the Greek situation has only worsened. Greece is entering

its fifth year of recession with approximately 25 percent unemployment. The

benefits of avoiding default and remaining within the eurozone are becoming less

obvious to the average Greek, as are the long-term benefits of increased austerity.

Once-taboo discussions of a Greek default are becoming more prominent inGreece and elsewhere in Europe.

Stratfor's assessment of the European financial crisis is that it is political in nature,

not economic. The European financial condition will deteriorate, and the disparity of

social and economic conditions among EU member states will combine with a

(perceived or actual) loss of national sovereignty, aggravating nationalist sentiment,

bringing more radical ideologies to the mainstream and ultimately leading to a

fundamental break in the system brought about by political, not economic,

differences.

Before this, we would expect to see certain societal shifts occur in individual

European countries. Such a shift appears to be starting in Greece, where Stratfor

has noted several anomalous events recently: violence at social protests,

increasing support of alternative political ideologies and a diminishing presence of

the more moderating societal elements as more people leave urban areas or

emigrate in search of employment. These events could signal the transformation



from a primarily financial to a primarily political crisis within Greece, a trend likely to

spread throughout Europe.

Greece's Evolving Protests

The first recent anomalous event inside Greece was the violence that broke out

during mass demonstrations in Athens ahead of the Feb. 12 parliamentary approval

of the most recent austerity package. The country has been in a nearly continuous

state of protest for two years over austerity measures, and this was the first time

that a relatively small number of protesters turned an organized demonstration to

violence. By the time the incident had ended, some 48 buildings in Athens had

been set on fire; 150 businesses had been looted; 100 people, including 68 police

officers, had been wounded; and 130 people had been detained. Similar but more

contained riots occurred the following Saturday before the parliament approved

another 325 million euros in budget cuts.

Athens has passed at least five major austerity packages in the last two years, so

the Feb. 12 parliamentary vote was not particularly drastic. Furthermore, although

the protest the weekend of Feb. 11-12, with an estimated 80,000 demonstrators,

was one of the larger recent demonstrations, it was smaller than the 100,000- to

120,000-person protests of similar austerity measures in June and July 2011. Still,

despite the frequency and size of the protests, violence has been rare and had not

risen above the level of small-scale clashes between small numbers of protesters

and police. Peaceful demonstrators have been known to restrain or retaliate against

the masked or hooded rioters, who are in the minority and are more interested infomenting chaos than having their grievances redressed. If violent incidents like the

one that occurred Feb. 12 continue, it would suggest a fundamental shift in the

nature of social unrest in Greece.

The Rise of the Far Left

The current Greek government, consisting of the conservative New Democracy

(ND) party, the Panhellenic Socialist Movement (PASOK) and the much smaller far-

right Popular Orthodox Rally, was only intended to last long enough to pass the

unpopular reforms needed to secure a second bailout for Greece and the approvalof the European Union and the International Monetary Fund (IMF). With that done,

Greece has announced its intention to hold general elections in April. This is the

context for the second anomaly within Greece: the growth in support for peripheral

far-left parties.

Historically, ND and PASOK have dominated the Greek political scene, alternating



power over the past several decades. During Greece's last general elections, in

2009, the two parties combined represented 77 percent of the total vote, a

testament to the relatively limited influence of smaller, more radical parties. In

recent weeks, ND public condemnation of further austerity measures fueled a

dramatic rise in the party's support, which reached as high as 30 percent. Prior to

the Feb. 12 parliamentary vote, ND seemed well positioned for Greece's next

elections.

However, just days after ND and PASOK voted to approve the latest austerity

package, both parties saw their standings in public polls drop to an all-time low, with

ND's standings reaching 19 percent in some polls -- a more than 10 percent drop

from its popularity before the vote. The same polls showed that three far-left parties,

combined, are polling at around 37 percent, compared to the mainstream ND and

PASOK's combined approval rate of 32 percent. All three leftist parties opposed the

current terms of Greece's bailout -- Communist Party of Greece leader AlekaPapariga went so far as to declare unilateral default as the only way forward for

Greece.

For as long as avoiding default has been Greece's primary imperative, Greek

politicians -- regardless of ideology -- have had little choice but to pass whatever

additional austerity measures the European Union and the IMF demanded. Now, as

a Greek default presents less of a threat to Europe, Greek politicians will lose the

support -- and interest -- of European powers that has allowed them to override

domestic political and social will. Further, as Greeks tire of their situation,

alternative solutions such as default will be considered less radical and will becomemore popularly accepted. The influence of Greece's mainstream politicians, who

have been cooperating with Europe to avoid default, could be waning both within

Greece and throughout Europe.

Greece's Population Shifts

Along with violence at protests and the increasing popularity of Greek far-left

political parties, a relocation of Greek population segments is contributing to the

emerging societal shift in Greece. The moderating elements of Greek society are

leaving Athens and other major cities, and some are leaving the country entirely.Current internal migration and emigration statistics for Greece are difficult to find,

but there is plenty of anecdotal evidence to suggest that people are leaving the

cities or the country at an increasingly rapid rate. Greece has a strong tradition of

both internal migration and emigration in times of economic hardship.

Most Greeks who are able send their children abroad to study. Given that the



unemployment rate for people under age 25 in Greece is nearly 50 percent, it

appears few young people are returning from abroad. In September 2011,

organizers of a government-sponsored program on emigration to Australia, a

program that reportedly attracted only 42 people in 2010, were overwhelmed when

more than 12,000 people signed up to attend.

Those who cannot leave the country are beginning to reverse the mass

urbanization that occurred in major Greek cities over the past couple of decades.

Greece's population is approximately 11 million -- the population of Athens alone is

just more than 4 million. According to the Greek farmers union, between 2008 and

2010 -- even before austerity reforms began taking effect -- about 38,000 members

of the business community in the country lost or quit their jobs in the city and

returned to the country to farm. Most Greeks who left the countryside for the city still

have ties to family and land in their home villages.

After four years of recession with no foreseeable end and a government

increasingly losing control over the country's future, the Greeks who remain in the

cities are those whose options for improving their own situations are limited and

who see themselves -- and Greece -- as having diminishing control over their

circumstances. As the moderate segments of society leave the cities, they create

more space for extremist viewpoints to come to the forefront. This, combined with

Greece's other emerging domestic shifts and the fundamental changes occurring in

Greece's relationship with Europe, is turning a crisis that once centered on the

Greek financial situation into a political crisis between both Greece and Europe and

between the Greek government and its people.

Greece is unique among European countries for many reasons, and the evolution

of the crisis in Greece will be unique as well. Nonetheless, it serves as a good case

study in what could develop elsewhere across Europe. Stratfor will be watching for

the trends emerging in Greece -- social protests giving way to violence, the

increasing popularity of extremist political views, reverse urbanization and

increasingly rapid emigration -- to surface in other countries as the center of

Europe's crisis moves away from the financial realm and into the political arena.

Comments? Send them to [email protected]

mailto:[email protected]




greece crisis shifting from financial to political

Documents