The Greek tragedy – what is it all about?

There are two topics that I carefully avoid discussing in this blog: religion and politics. I would only have to touch on either of these and I would alienate a whole bunch of people. I have plenty of other ways to generate alienation, so it seems only reasonable to avoid the obvious. In “real life”, I am also wary of these topics, but, with the benefits of the richer communication afforded by an in-person dialog, upset can be minimized or avoided.

Today, however, I am going to almost disobey by rule. And I am not going to talk about religion …

Well, it may not even strictly be politics that I want to talk about. I am pondering the Greek situation.

When I think about the country of Greece and Greek people, various things come to mind:

• The ancient Greeks, who essentially invented democracy, philosophy and most of the basis of mathematics. They also had good line in gods and mythological stories.
• The holiday destination, which I have visited quite a few times [and have plans for 2016]. I have mostly been to the islands and I have got quite a few more to explore.
• The alphabet, which is, I think, unique in Western Europe. Most countries have alphabets that do not depart too far from the 26 letters in English. Greek, however, is something else entirely. As I have a scientific education, Greek letters are quite familiar, as they are used extensively in mathematical notation. I am always amused by the way place names get translated in a rather random way to English letters. For example, my favorite island of Kefalonia can be spelt lots of ways – Cephalonia for example …
• Retsina is white wine to which resin is added, which gives it a very distinctive flavor [think of well-oaked Chardonnay, only much more so], Most people I know think that Retsina tastes like paint thinners, but I actually quite like it. [I am not sure what this says about my wine palate.]

My thoughts about Greece would not normally turn towards money – until recently. Although I did include a Greek money-oriented story in a blog post some time ago. For many years, the currency in Greece was the Greek drachma; then, in 2001, they joined the Euro. I had mixed feelings about this. I was surprised that the country met the required economic criteria, as the UK, which I thought had a healthier and more stable economy, did not. There has since been much discussion about the validity of their application evidence, which is all beyond my understanding. However, I was pleased to have the convenience of another vacation destination embracing the common currency. Although the UK does not use the Euro, I find it incredibly convenient that so many countries do, as I have less foreign currencies to deal with when traveling.

I have been trying to understand the current Greek situation, which has been a dominant news story [at least it has been in Europe] for the last few weeks. I am not an economist and I have no inside knowledge, but my perception is quite simple. The Greek government has run out of money. They cannot just print more [and risk the inflationary consequences] as they are part of the Euro. They have arrived at this situation by just spending more than they have – paying out more than they are receiving in tax. This is, for example, because there is widespread tax avoidance and they allow people to claim a state pension when they are very young [55, I believe]. In the last few weeks they have been negotiating a program to fix things – essentially borrowing money to continue functioning and implementing an austerity program to reduce their outgoings.

Why did this problem occur? It sounds like people were just being stupid, but my experience of Greek people does not suggest that this is a national trait. Far from it – they are commonly very astute businesspeople. From what I have gleaned in talking to “real” people [i.e. not journalists or politicians], it is just a question of economic culture. Historically, Greek society has been dominated by two groups: the rich minority and the poor majority, with very little in between. Such a disparity is common almost everywhere, but it was/is particularly strong in Greece. So, there was no culture of entitlement or assumption that a loan could be the solution to a financial problem. Suddenly, by being part of the Euro, the average Greek could easily obtain credit to make their lives better.

In many countries, certainly across Europe and in the US, there has been [and still is!] a culture of “financial impatience”, resulting in many people borrowing too much in order to fulfil their aspirations. these bad loans have had a very significant impact on the world economy. Hopefully we are recovering from this crisis now. But why was it worse in Greece? The reason is that many people, having no background in getting credit, were not equipped to decide whether a loan made sense or not. To them [as, to be honest, to quite a few people in most countries] it was almost impossible to distinguish between a loan and a gift …

Can we learn from this? Well, maybe. The European Central Bank [ECB] made the error of assuming that Greek financial culture [at the street level] was compatible with mainstream values in the rest of Europe etc. However, I feel that the ECB should not be blamed too much. How often do people and governments just assume that the culture of other people or countries is much the same as their own? Or, worse, their culture might be improved by being brought into line. There is no Western government that is innocent of this mistake. Fortunately, most of the time, the error is observed and avoided before too much damage is done. But there was this guy in 1939 who really thought that he knew what was best for everyone else …