The Greek tragedy - the signs of a coming revolution?

We have all been watching the longest Greek Tragedy in human history: the nation's in a mess. 50% youth unemployment, scare stories of food and medicines running out due to capital controls implemented by Syriza, a victim mentality that is manifesting an aggressive nationalism, import restrictions, massive uncertainty about the future . . . the most unforuntate truth of this is that I could go on . . . and on and on. 

Will the Greek crisis lead to a revolution? That is a question I have heard asked with ever more seriousness. Tsipras is in trouble now. He's going to have a Herculean task to get the new bailout through his Parliament (bearing in mind a less austere bailout package was voted OXI by the Greek people). Even the EU is now trying to support him (today, Schulz, his former enemy at the bailout talks, has called him "the strongest Greek leader in decades," in a transparent attempt to sell the harsher bailout to the Greek people and Parliament).

I doubt it will work.

Tspiras does not have a popular mandate for these changes - even if he gets them through in the Greek Parliament, then the people will probably refuse to accept them and the Left wing coalition government could collapse. Even if he does get them through, other EU countries still have to vote the bailout measures through their national parliaments - and that is a tall order. By the end of this week, we could be back again at crisis mode.

And if this leads to the fall of Syriza, we can only guess at what might replace it. If it is collection of extreme nationalists who believe they have been wronged by Europe, then there is the possibility that they might inisist that no deal can be done with the EU and default on all their debt. The Left wing government have already paved the way for this with the Debt Truth Commission, that claims the debt as 'odious' and hence illegitimate, or by claiming that they are owed money by Germany for Nazi atrocities, or by saying that the London Conference in 1953 gave the Germans a haircut and hence the Greek's should have one too. They have whipped public sentiment into a rage against their creditors and made impossible promises of anti-austerity in a country that only has two options: to engage in austerity, or to leave the Euro. And the Greek people have rejected the former on the false promises of Tspiras and Syriza, who, perhaps knowing the chances of suceeding were so poor, decided to share the blame with the Greek people by offering them a referendum. At least now Syriza can say: "We offered you a choice, and you rejected the bailout. Don't blame us alone."

But in pledging the Referendum, and drawing out the time taken for a deal to be done, the ECB restricted its lending to hold up the Greek banking system, and capital controls were levied. Queues outside banks is a sure signal that economic decline is at hand. For business owners this is a complete disaster. The only things that will sell are necessities and items that hold their value, should a new currency be deployed. The economy, trade between people and business, will become impossible due to the contraction of the money available. Imports will dry up as there is no access to the money to pay for them. Debt as a proportion of GDP will soar as that GDP shrinks. The near-annihilation of the banking sector means that any recovery will be long in coming.

And yet, this week, we apparently have a deal between Brussels and Athens.  

As ever, economics will always trump politics. It's done this time and time again: it was economics that brought the Soviet Union to its knees, it was economics that forced Britain out of the ERM (and saw interest rates fly to the terrifying heights of 15%), and it was economics that contributed to the start of the Arab Spring. Politics that tries to trump economics is a very short term hand to hold, and one with which you will inevitably lose. The reason for this is that politics is defined by the reality of economics, never vice versa. Yet in the Greek crisis we see that the politicians in the EU are totally set against this truth: they are putting politics above economics, and it will fail. Either the Greek Parliament will not approve the new bailout conditions, or some national Parliament in the EU will fail to do so. And if they are put through, will the Greek people accept them?

So who will take over in Greece? That's impossible to tell. It might be that the spirit of the Colonels rise out from the grave to maintain public order (after all, the defence budget was spared serious cuts by Syriza - its military budget is still, even after 5 years of austerity, one of the highest in the EU going by a percentage of GDP). But if democracy is somehow usurped or compromised (and there are those that say it already has been as the referendum rejected previous austerity measures that were less severe than those Tsipras has had to go back to Athens to get through Parliament), then will it signal a contagion to other Club Med countries? Will Spain declare their debt odious and illegal and seek to put creditors and ex-politicians on trial? In countries which see huge drops in the standard of living, anger will be channelled by the ruling elites to maintain internal stability. And who better to target than the anonymous and much-maligned international banking groups?

We cannot foresee what will happen in Greece, or, eventually, Spain and Portugal and, the biggest domino of all, France. But there are certainly lessons to be learned from what is happening. To me, the most important one is that the public sector should be very limited in what borrowing it should be able to make in the name of a democratic mandate. A long term view is necessary. Chancellor Gideon's annual budget surplus target by 2020 is slightly unrealistic, but it sets the right tone for how government should behave. Borrowing should not be the norm. In Greece we have seen what happens when a populist cabel is formed on the strength of public anger, and what happens when it is led by inexperienced leaders, all down to the stresses of unsustainable debt. I fear that those same leaders might very well reap what they have sown if the Greek people refuse to accept the harsher terms of procrastinated bailout talks.