A Short Story About The Greek Credit Crisis: A European Morality Tale

Let's imagine a situation. Let's imagine that times have been good for you and you decided to buy a house, a house that you always dreamed of, a place that you can call home. The only problem is that this place is a bit pricey, certainly a stretch financially but what the hell, times are good, your credit rating is just fine and the guys at the bank just love you.

Alas, the economy takes a downturn, your job isn't as secure as it used to be and the boss is muttering darkly about downsizing and wage cuts. Now those mortgage payment instead of being steep become vertical so you go to the bank and decide to ask them if some kind of deal can be made. They look at you aghast, they had no idea that you are unable to meet your financial commitments, otherwise why would they have sent you all those credit card applications or phoned so insistently wondering if you want a loan for a new car/holiday/kid's dental work/shopping/home extension. They are shocked, shocked to hear that you have been so profligate with their hard earned cash, how on earth could you have deceived them in such an underhand manner?

But rather than lose a long standing customer (and a house they'd never sale for money you paid for it) they decide to offer you a loan to cover your debts. The problem is that this loan comes with some pretty severe conditions, no more outings, eating in restaurants is a thing of the past, also the kids really should leave home, they're a drain on your resources and frankly, granny's presence puts the family budget over the edge.

Grudgingly, you accept the terms, what else can you do? The problem is that the job market is still not getting better, the boss is demanding ever greater "flexibility" when it comes to salaries and that loan you just took out to cover the mortgage is still just beyond your pay grade. No matter how low the interest payments are, they are piling up and up.. So you go back to the bank and explain the situation, maybe rather than foreclose they could be persuaded to cut the total loan and allow you to pay, at least some of it whilst keeping a roof over your head. The mere suggestion is enough to make them choke on their mid-morning lattes and you get the impression that all is lost.

Yet, these are finance professionals and they know that a foreclosure would not only look bad for the bank, it would also not do their careers any good at all so they come up with a compromise solution. this time they'll issue you a credit card to draw upon when you need to pay the next installment of the loan you took out to cover your initial mortgage. Your kid's college fund will have to go, and that pension plan you took out is way too extravagant for a family of YOUR means. While you look dumb struck, they add a final condition,"you have to sell the family car". But how will you get to work or find a better job without a car? "No", they say, "a car is simply a luxury you can no longer afford, the price of petrol alone means it's not a viable option. Have you considered cycling to work?"

Without a car you cannot earn enough to pay off the credit card installment which you needed to pay off the loan you took out from the bank to pay back the mortgage you had with them. You refuse, saying the conditions are unacceptable. 

Welcome to Greece.

Orwellian economics - The insane dilemma at the heart of the Greek debate.

For those unfamiliar with Europe's unique take on macro-economic theory, here is a primer that attempts to explain Greek government's dilemma in dealing with its creditors; But let us put the problem in its context through the use of an extract from the end of George Orwell's 1984; O'Brien, Winston Smith's torturer and now mentor lectures him on the relationship between numbers and political reality;




“Do you remember,” he went on, “writing in your diary, ‘Freedom is the freedom to say that two plus two make four’?”

“Yes,” said Winston.

O’Brien held up his left hand, its back toward Winston, with the thumb hidden and the four fingers extended. “How many fingers am I holding up, Winston?”

“Four.”

“And if the Party says that it is not four but five—then how many?
”
“Four.”

The word ended in a gasp of pain. The needle of the dial had shot up to fifty-five. The sweat had sprung out an over Winston’s body. The air tore into his lungs and issued again in deep groans which even by clenching his teeth he could not stop. O’Brien watched him, the four fingers still extended. He drew back the lever. This time the pain was only slightly eased.

“How many fingers, Winston?”

“Four.”

The needle went up to sixty. “How many fingers, Winston?”...

“Five! Five! Fivel”

“No, Winston, that is no use. You are lying. You still think there are four. How many fingers, please?”

“Four! Five! Four! Anything you like. Only stop it, stop the pain!”

In essence these are the two choices that Greece's newly elected Syriza administration is being offered by the Troika (as it is known locally) made up of the European Union, European Central Bank and the International Monetary Fund.

Either Athens tells its creditors that with the current terms and conditions the debt load is unsustainable and that any chance of paying back in full the 317 billion euros borrowed since the first bailout deal in 2010 is, in practical terms, impossible. In which case Greeks face the possibility of being unable to access further credit and so goes bankrupt with who knows what consequences for the national economy.

Alternatively Syriza accepts the current status quo, caves into creditors demands knowing that the terms and conditions imposed are impossible to meet in the long term and in the meantime is forced to impose yet more crippling austerity measures which have gutted the economic base.

More and more serious analysts, economists and observers consider the nation's debt cannot ever be repaid yet the Troika and many of the top EU players continue to insist there can be no serious renegotiation of the debt and certainly no debt relief.  Thus Europe, like O'Brien in 1984 has created an insane dilemma in which the protagonist has not only to submit no matter what logic and common sense dictate but also truly believe that this madness trumps reality.

If Greek finance minister, Yanis Varoufaki fails to pull off a Kobayashi Maru style game changer and resets the parameters of the debate as now set down then whatever Syriza chooses, their fate will be the fate of Winston Smith in 1984 and the people of Greece, like Smith will be made to suffer for believing that financial reality is more important than ideology,

Let us leave Orwell with the last word(s).

“You are a slow learner, Winston,” said O’Brien gently.

“How can I help it?” he blubbered. “How can I help seeing what is in front of my eyes? Two and two are four.”

“Sometimes, Winston. Sometimes they are five. Sometimes they are three. Sometimes they are all of them at once. You must try harder. It is not easy to become sane.”