Disorderly default, early elections and social unrest possible for Greece

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It remains uncertain whether the new draconian austerity will pass. Party divisions, labor union pressure and social unrest might jeopardize all plans.

The insanity of the “troika” (EU-IMF-ECB) to demand more austerity, more of the drug that utterly failed to contain the spiraling depression in Greece, meets the approval of the Greek government that seems to be determined to take whatever measures necessary to appease the troika’s officials and receive the next tranche of loans that will keep the country above water until December of this year. Further draconian austerity is not the answer to the troubles of Greece and to the systemic crisis of the Euro, since it does not address the fundamentals of the crisis and does not provide any solution to multi-dimensional structural flaws of the Greek economy and of the broader Euro architecture.

Despite the determination of the Greek government there are a number of internal issues that might jeopardize the new austerity package and result in the fall of the government, the need for early election and the disorderly default of Greece. These internal issues are first and foremost the mere fact that the new package of measures will have to meet the approval of a deeply divided parliament, the staunch resistance of labor unions that are on an extended strike and the possible escalation of mass protests that will force Members of Parliament and politicians to disapprove the new austerity drug.

The new austerity measures that the troika insists on go beyond what is politically feasible and socially acceptable. Back in June Greece was called to pass on a very strict package of austerity measures, labeled the “medium-term programme” that barely received the approval of the parliament with a slight majority of 155 out of 300 votes. Today the ruling party, the Pan-Hellenic Socialist Party, PASOK, is even more divided than it was back in June, while the rest of the parties pose strong objections to the demands of the troika. It would be a serious underestimation of the current divisions that exist in the entire political spectrum regarding the new measures, to conclude that the parliament will approve them. Even PASOK MPs might step back to save their reputation as socialists to keep their now-displeased voters. It remains very uncertain that the demands of the troika will be met in full from politicians.

In addition the labor unions in Greece are constantly on the roads protesting against these policies. There are strikes in just about every sector of the economy, from teachers to farmers, to workers at ports and airports, to drivers, doctors – everywhere. The broader picture is an overall strike of society against the impending disaster (Greece will certainly default even if the next tranche of loans is received – the inevitable Greek default is only postponed, probably until December). Every single Greek knows that his/her country cannot avoid default and thus sees no good in draconian austerity.

Unemployment in Greece is already around 1 million people in a population of roughly 11 million. This is a huge number, especially when we take into account that most are young well-educated people, who are now driven to the margins of a lost future. The indignant movement that is still present in the country is nothing compared to the social unrest that is brewing in every Greek household (except those households that have taken their money to Switzerland and other safe havens).

Within this environment, with all these pressures and tensions that are in place, the possibility of a new poisonous austerity drug passing the parliament is not as likely. Should Greece fail to meet the demands of the troika, the result will be chaos that will see the fall of the government, the need for early elections and the disorderly default of Greece which is the worst possible scenario for the whole Eurozone, since it will trigger a chain effect of mega-proportions that will escalate through Italian, Spanish, Portuguese, Irish bonds, strike at the heart of the quasi-bankrupt European banking system, eventually reaching the European core – and there is no plan or any way of containing such a shock wave, thus the euro might face the grave threat of collapse.

The future is uncertain. Greece is now between Scylla and Charybdis and has to pass through the straits. We shall soon know the results.