Greece's Crisis: Shifting from Financial to PoliticalFebruary 28, 2012 LOUISA GOULIAMAKI/AFP/Getty Images Greek Communist Party members demonstrate at the Parthenon temple in Athens SummaryThe European financial crisis centered for several years on the idea of preventing Greece from defaulting on its national debt. However, the rest of Europe has had time to prepare itself for any potential fallout from a Greek default. This is changing the dynamic between Greece and Europe even as emerging societal trends within Greece are illustrating changes in the relationship between Greece's political elite and its people. These trends will continue as the crisis transforms from a financial one to a political one. AnalysisSince the beginning of the financial crisis in 2008, European leaders' actions have been dictated by a presumed need to keep Greece from defaulting on its massive national debt at all costs. Even at the cost of losing domestic popularity for supporting a Greek bailout, and even if Greece seemed unwilling or unable to repay the money Europe poured into it, European politicians prioritized the prevention of a Greek default in order to prevent the euro -- and possibly the European Union -- from collapsing. However, that could now be changing, along with the relationships between Greece and the rest of Europe and between Greece's political elite and the Greek people.
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Greece Crisis Shifting From Financial to Political
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8/2/2019 Greece Crisis Shifting From Financial to Political
Greece's Crisis: Shifting from Financial to Political February 28, 2012
LOUISA GOULIAMAKI/AFP/Getty Images
Greek Communist Party members demonstrate at the Parthenon temple in Athens
Summary
The European financial crisis centered for several years on the idea of preventing
Greece from defaulting on its national debt. However, the rest of Europe has had
time to prepare itself for any potential fallout from a Greek default. This is changing
the dynamic between Greece and Europe even as emerging societal trends within
Greece are illustrating changes in the relationship between Greece's political elite
and its people. These trends will continue as the crisis transforms from a financial
one to a political one.
Analysis
Since the beginning of the financial crisis in 2008, European leaders' actions have
been dictated by a presumed need to keep Greece from defaulting on its massive
national debt at all costs. Even at the cost of losing domestic popularity forsupporting a Greek bailout, and even if Greece seemed unwilling or unable to repay
the money Europe poured into it, European politicians prioritized the prevention of a
Greek default in order to prevent the euro -- and possibly the European Union --
from collapsing. However, that could now be changing, along with the relationships
between Greece and the rest of Europe and between Greece's political elite and the
Greek people.
8/2/2019 Greece Crisis Shifting From Financial to Political
When Greece received its first bailout package in 2010, the prospect of a Greek
default and financial contagion created a dynamic similar to mutually assured
destruction between Greece and the rest of Europe. If Europe did not continue to
pay, Greece would go bankrupt, and if Athens defaulted on its debt, many other
European countries likely would do the same. However, without notable reform
efforts in Greece -- or at least the show of an effort -- the continuing bailout would
be politically unacceptable in the rest of Europe. This led to a back-and-forth
between Greece and Europe -- Greece fails to meet its reform commitments and
Europe withholds funds and demands more austerity measures; Greece attempts to
enact more austerity, but just as it appears on the verge of default, European
funding resumes and prevents disaster. After two years, however, this balance
could be shifting.
Europe has had time to sequester potentially bad Greek debt and build upinstitutional defenses against contagion, buffering itself from the aftermath of a
Greek default. It is hard to find exact figures describing how much European entities
have decreased their exposure to the estimated 350 billion euros (about $469
billion) of Greek private and public debt, but the European Central Bank has taken
unprecedented steps in the last couple of years to reduce the threat. After three
years of difficult reforms, the Greek situation has only worsened. Greece is entering
its fifth year of recession with approximately 25 percent unemployment. The
benefits of avoiding default and remaining within the eurozone are becoming less
obvious to the average Greek, as are the long-term benefits of increased austerity.
Once-taboo discussions of a Greek default are becoming more prominent inGreece and elsewhere in Europe.
Stratfor's assessment of the European financial crisis is that it is political in nature,
not economic. The European financial condition will deteriorate, and the disparity of
social and economic conditions among EU member states will combine with a
(perceived or actual) loss of national sovereignty, aggravating nationalist sentiment,
bringing more radical ideologies to the mainstream and ultimately leading to a
fundamental break in the system brought about by political, not economic,
differences.
Before this, we would expect to see certain societal shifts occur in individual
European countries. Such a shift appears to be starting in Greece, where Stratfor
has noted several anomalous events recently: violence at social protests,
increasing support of alternative political ideologies and a diminishing presence of
the more moderating societal elements as more people leave urban areas or
emigrate in search of employment. These events could signal the transformation
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from a primarily financial to a primarily political crisis within Greece, a trend likely to
spread throughout Europe.
Greece's Evolving Protests
The first recent anomalous event inside Greece was the violence that broke out
during mass demonstrations in Athens ahead of the Feb. 12 parliamentary approval
of the most recent austerity package. The country has been in a nearly continuous
state of protest for two years over austerity measures, and this was the first time
that a relatively small number of protesters turned an organized demonstration to
violence. By the time the incident had ended, some 48 buildings in Athens had
been set on fire; 150 businesses had been looted; 100 people, including 68 police
officers, had been wounded; and 130 people had been detained. Similar but more
contained riots occurred the following Saturday before the parliament approved
another 325 million euros in budget cuts.
Athens has passed at least five major austerity packages in the last two years, so
the Feb. 12 parliamentary vote was not particularly drastic. Furthermore, although
the protest the weekend of Feb. 11-12, with an estimated 80,000 demonstrators,
was one of the larger recent demonstrations, it was smaller than the 100,000- to
120,000-person protests of similar austerity measures in June and July 2011. Still,
despite the frequency and size of the protests, violence has been rare and had not
risen above the level of small-scale clashes between small numbers of protesters
and police. Peaceful demonstrators have been known to restrain or retaliate against
the masked or hooded rioters, who are in the minority and are more interested infomenting chaos than having their grievances redressed. If violent incidents like the
one that occurred Feb. 12 continue, it would suggest a fundamental shift in the
nature of social unrest in Greece.
The Rise of the Far Left
The current Greek government, consisting of the conservative New Democracy
(ND) party, the Panhellenic Socialist Movement (PASOK) and the much smaller far-
right Popular Orthodox Rally, was only intended to last long enough to pass the
unpopular reforms needed to secure a second bailout for Greece and the approvalof the European Union and the International Monetary Fund (IMF). With that done,
Greece has announced its intention to hold general elections in April. This is the
context for the second anomaly within Greece: the growth in support for peripheral
far-left parties.
Historically, ND and PASOK have dominated the Greek political scene, alternating
8/2/2019 Greece Crisis Shifting From Financial to Political
power over the past several decades. During Greece's last general elections, in
2009, the two parties combined represented 77 percent of the total vote, a
testament to the relatively limited influence of smaller, more radical parties. In
recent weeks, ND public condemnation of further austerity measures fueled a
dramatic rise in the party's support, which reached as high as 30 percent. Prior to
the Feb. 12 parliamentary vote, ND seemed well positioned for Greece's next
elections.
However, just days after ND and PASOK voted to approve the latest austerity
package, both parties saw their standings in public polls drop to an all-time low, with
ND's standings reaching 19 percent in some polls -- a more than 10 percent drop
from its popularity before the vote. The same polls showed that three far-left parties,
combined, are polling at around 37 percent, compared to the mainstream ND and
PASOK's combined approval rate of 32 percent. All three leftist parties opposed the
current terms of Greece's bailout -- Communist Party of Greece leader AlekaPapariga went so far as to declare unilateral default as the only way forward for
Greece.
For as long as avoiding default has been Greece's primary imperative, Greek
politicians -- regardless of ideology -- have had little choice but to pass whatever
additional austerity measures the European Union and the IMF demanded. Now, as
a Greek default presents less of a threat to Europe, Greek politicians will lose the
support -- and interest -- of European powers that has allowed them to override
domestic political and social will. Further, as Greeks tire of their situation,
alternative solutions such as default will be considered less radical and will becomemore popularly accepted. The influence of Greece's mainstream politicians, who
have been cooperating with Europe to avoid default, could be waning both within
Greece and throughout Europe.
Greece's Population Shifts
Along with violence at protests and the increasing popularity of Greek far-left
political parties, a relocation of Greek population segments is contributing to the
emerging societal shift in Greece. The moderating elements of Greek society are
leaving Athens and other major cities, and some are leaving the country entirely.Current internal migration and emigration statistics for Greece are difficult to find,
but there is plenty of anecdotal evidence to suggest that people are leaving the
cities or the country at an increasingly rapid rate. Greece has a strong tradition of
both internal migration and emigration in times of economic hardship.
Most Greeks who are able send their children abroad to study. Given that the
8/2/2019 Greece Crisis Shifting From Financial to Political