The hazards of having a parliamentary system in a bitterly divided country (from Reuters):
Greece abandoned a nine-day hunt for a government on Tuesday and called a new election that may hand victory to leftists who might cut the nation’s financial lifeline, pushing it closer to bankruptcy and out of the euro zone.
After six rounds of fruitless wrangling, party leaders emerged from a final session at the presidential mansion to gloomily declare that deep divisions over a 130-billion-euro foreign bailout package had killed any hope of a coalition deal.
“We shouldn’t have reached this point,” said Socialist leader Evangelos Venizelos, who personally negotiated the rescue package from the European Union and IMF which the hard left says has imposed too harsh an austerity regime. “For God’s sake, let’s move towards something better and not something worse.”
The last elections were held just nine days ago.
In case you’re wondering what’s the difference between the “leftists” referenced in the first paragraph and the Socialist quoted in the third, the “leftists” are members of a party named the Coalition of the Radical Left. The party has said it wants to ditch the bailout — and the austerity measures imposed by the countries, namely Germany, providing the cash — but keep the euro currency.
The math involved makes such a position practically impossible. The only ways Greece can meet its debt obligations in the short run are a) to borrow more money from its European neighbors or b) to devalue its currency, which involves having its own currency, which involves dropping the euro. They can’t be against both, but that’s what the Coalition says it favors.
Markets turned a promising day of gains into yet another day of losses on the news, and the increased likelihood of turmoil for the euro currency — and, perhaps in turn, larger countries such as Italy and Spain. That would mean big trouble for the European economy, and in turn our economy.
And, along the way, France will have to reckon with its newly elected president and his mandate to reverse the country’s “austerity” policies (contrary to popular belief, French government spending has continued to rise annually).
This is what happens when you kill an economy’s animal spirits by subsidizing failure and punishing success for years and years on end.
On a brighter note: If you’re inclined to spend your money rather than watch your investments shrink and savings earn no interest, Europe is on sale again!
– By Kyle Wingfield