The bailout of Greece is done. All hail the bailout!
The euro, tapped on the knee, responded by rising a fair amount in response to the news. Yes, that’s nice enough, but much of the analysis and reaction suggest that the rise is less about optimism and celebration, and more about extremely short positions being trimmed to “still pretty short”.
So why isn’t anybody celebrating? The debt relief package certainly doesn’t rank as a defeat for anybody. Everybody worked hard to create this solution (as long as you also include “political blustering” as work), and what they got is more or less what was hoped for.
I see two simplistic explanations for this lack of a victory march.
First, the solution is more like the uncertain amputation of a suspect limb than a miraculous surgery to cure the patient. There’s no assurance that Greece will recover at a reasonable pace. “Austerity” is a pleasant word for a pretty awful situation. People are being laid off in droves, depriving the government of a tax base, reducing the goods and services being produced, and increasing pressure on the government to provide support services. There’s a lot of human fear and misery, which leads to protests against the government, which in turn creates instability and bureaucratic second-guessing that harms the country’s ability to decisively progress.
Today’s deal doesn’t address any of the new debt and new problems that will arise in the future; this was simply about figuring out what to do with a country that wasn’t going to pay its existing debts. And as the Eurozone Train careens down the track with the risky fire in the caboose still burning (that’s Greece, I love analogies, please try to keep up) its government also hasn’t really enabled itself to uncouple the burning car from the rest of the train. This wasn’t an “all is forgiven, please carry on” deal; and many banks in many countries will still need to be paid by Greece in the coming months and years. If they kick Greece out of the Eurozone (or if Greece kicks itself out), does that really increase the chances that those banks will get paid? Not from where I’m sitting…
Second, I have a belief that all together, the world’s fiscal policymakers do not actually have the slightest idea of what is really going wrong in the global economy, and all prescriptions for the cure to date are nothing more than hopes and guesses.
We argue and fuss over explanations and solutions, but it has proved impossible to plainly analyze all events that led to our current global morass of a reluctant economy. Countless people — some draped in titles and degrees and workplace pedigrees, and others whose qualifications are limited to being able to connect to Teh Interwebs and type angrily — have advanced theories and ideas, but so far not one of them has elegantly and indisputably laid out what has gone wrong.
If one cannot clearly identify a problem, then one’s efforts toward a solution have at best an accidental chance to succeed. So far, that axiom holds true, and I see no signs of that changing any time soon.
I think today’s agreement is good to the extent that it offers a limited solution to a limited problem. Greece’s upcoming debt payment problem, which is pretty clearly understood, has been resolved. But deep down, what we really want is a plan to get the whole world out of the scary, dangerous mess it’s in, and we have no idea individually or collectively about how to do that.
No wonder there isn’t much cheering.