Greece: Hey can we join the Eurozone?
Europe: How is your economy?
Europe: Welcome aboard!
Greece: Hey Europe! We’re having a tough time with the financial crisis. Could you lend us some money?
Pundits: CONTAGION!!! PIIGS!!! RINGWALL!!!
Europe: Sure, this should cover you for the next three years or so. Try to cut back on expenses since times are tough, ok?
Greece: Ok, this is kind of embarrassing, but do you think you could spot us some more cash? We’ll use that to make payments on the money you loaned us three years ago and we’ll definitely pay you back this time.
Europe: Ok, but you’ve really got to cut back on expenses this time.
Greece: I was going to pay you back, but ummm
Europe: Hey I did some digging and your economy wasn’t ‘quite strong’ in 2001. You’re going to have to make some deep cuts this time if you want money.
Greece: We would totally do that, but it would be so much easier if you just gave us the money instead. Do it or we leave! We’ve elected socialists and everything!
Pundits: Oh snap!
Europe: Let’s negotiate in good faith. This is going to hurt for you, but will help you in the long run.
Greece: We’re not having any of that. Give us what we want. We’re holding ourselves hostage, you financial terrorists!
Europe: That doesn’t even make sense. We’re willing to give you money, just compromise…
Europe: These are our terms. Take them or leave them.
Greece: THIS IS SPARTA!!!
Greece: Oh crap. Maybe putting it to a vote will allow us to save face… ?
Greek People: THIS IS SPARTA!!!
Greece: Hey there Europe! So here’s the deal: I know we flaked out on the first two loans you gave us and we haven’t cut back our spending. We flipped you the bird and let the deadline pass and chalked that up as a victory. Then we realized we were in real trouble so we thought maybe the Greek people would vote to accept your terms. They didn’t and they chalked it up as a victory. We are suddenly very aware of the reality of our situation and would like to negotiate in good faith. Yanis even quit so the Germans will talk to us. We totally accept the previous offer you extended before the deadline.
Europe: You’re gonna need to sweeten the deal now. “Privatize” some islands, infrastructure, and pretty much anything that’s not nailed down that we can hand out to our friends.
Greece: That wasn’t the deal.
Europe: We are altering the deal.
Greek Crisis Translated:
Greece probably shouldn’t have been allowed in the Eurozone to begin with, but it made everyone look good so they got in. Worldwide financial calamity happened and Greece needed help so Europe bailed them out. Greece had a tough time recovering and needed another bailout, and even though Europe was starting to catch on that Greece wasn’t so great at budgets, Europe gave them another bailout. Both sides knew it would be a long hard road to payback this second bailout. Greece didn’t reign in its spending and was quickly running out of money. Rather than negotiate in good faith, they elected a new government to take a hardline no-austerity stance. The new Greek government stalled Europe as long as they could, often insulting their negotiating partners between sessions. Europe presented one last offer to Greece before the deadline for payment (which Greece could not pay). Greece turned it down and were hailed as heroes at home, but soon realized that was a mistake and put the issue to the Greek voters (the Greek people were voting on an offer that no longer existed a week after the deadline to enact it had passed). The voters overwhelmingly rejected the non-offer, giving their elected officials no cover for their last move. Game theorist and instigator Yanis Varoufakis resigned, bringing Europe back to the table. That is truly remarkable, by the way. A group of the world’s best negotiators, people who deal with outrageous demands for a living, refused to deal with this guy even if it meant the entire country of Greece suffered. Possibly the world’s greatest troll. Anyways, Varoufakis resigned and Tsipras caved to Europe’s demands… and made some further concessions including an agreement to sell Greek assets under the supervision of the European Institutions in Luxembourg. This raises the issue of who exactly is in charge of Greece right now if the government went against the will of the people. Will the Greeks toss Syriza to the curb, elect a new government, and then say the deal is invalid? Will the current government stay on, but now Greece has to answer to Europe regarding financial decisions?
It’s a shame that it has come to this, but it is a teachable moment. Greece is big enough to matter, but small enough not to spark global catastrophe. This should give some guidance to other countries that are struggling in the Eurozone (Spain, Italy, Portugal) and hopefully reduce future uncertainty.