Greece is a mess. Its economy is in free fall. Its unemployment rate is now over 25 percent. Its banks have lost 99 percent of their value over the last year as depositors have fled with their life savings. Interest rates have soared to more than 28 percent. The government’s cash-on-hand is measured in days, and bureaucrats are sweeping the bank accounts of public entities, including government-run hospitals, in a desperate attempt to scrape together enough money to pay its pensioners and public employees on July 1.
European leaders are preparing for the disastrous consequences of a Greek debt default, a result that would likely plunge Europe into a recession and certainly lead to Greece’s ignominious exit from the European Union.
In the face of these challenges, Greek Prime Minister Alexis Tsipras’ hardball negotiating tactics with Greece’s Eurozone creditors are baffling. This week, after the latest bailout negotiations stalled, Tsipras said, “We will wait patiently until [our creditors] accede to realism. We do not have the right to bury European democracy at the place where it was born.”
For six years, Tsipras and his leftist Syriza Party allies have played on the hopes and prejudices of the Greek people. They campaigned against governmental austerity, promising to roll back unpopular benefit cuts required by the first Greek bailout. They trivialized Greece’s crippling national debt, persuading voters that a Syriza-led government could collect hundreds of billions of euros in World War II reparations from Germany as recompense for the Nazis' looting of Greek banks in the 1940s. They stoked nationalistic pride, blaming Greece’s financial problems on “greedy” German bankers and Eurozone finance ministers. They promised to take a hard line during negotiations with Greece’s creditors, concluding that Europe had far too much to lose from a “Grexit” and therefore would never allow it to happen. Tsipras and his cronies were voted into office last fall, and by every objective measure, life is much worse in Greece because of it.
What Tsipras and Syriza have failed to grasp, to the exasperation and incredulity of its Eurozone creditors, is that democracy is not so powerful that it can alter reality. Elections do not establish truth; they merely reflect the expressions of the hopes of those who vote. But Tsipras’ defiant stance with Eurozone finance ministers has generated some new “realities” for the Greek people. It has hardened public opinion against Greece, making it politically impossible for European leaders to accede to Tsipras’ wishes. Europe is calling Tsipras’ bluff, something he clearly did not anticipate. All of Greece’s chips are on the table, and it is going to lose big-time.
We should all pay close attention to what happens in Greece over the coming months and years. We just might witness the devolution of a First World country into a Third World country. The drachma will soon replace the euro, and it will immediately collapse in value as Greek finance ministers attempt to recapitalize Greek banks with drachmas. Real incomes will plummet, and pensioners on fixed incomes will be the hardest hit. The political turmoil that will ensue will be entirely unpredictable. Greece may never recover.
Democracies are capable of charting their own course in the world. We all know that they can facilitate the highest expressions of freedom and prosperity. But they can also commit incomprehensible acts of self-destruction, especially when the people lose their grasp on reality. Demosthenes once observed to his fellow Athenians, “Nothing is easier than self-deceit. For what each man wishes, that he also believes to be true.” This latest Greek tragedy should remind all of us that reality is not negotiable.
Dan Liljenquist is a former state senator and former U.S. Senate candidate.