The eyes of the financial world were on Greece once again this weekend, as the Hellenes went to the polls for the second time in six weeks. It’s fair to say that the world hasn’t been this focused on Greece for more than 2,000 years, and the ability of this nation of 11 million people to hold the world in thrall is, on the face of it, rather extraordinary.
But Greece has become the domino of the moment, the symbol of all that is wrong with the European Union and its euro currency, and heading into the election, the world confronted the prospect that a left-wing coalition rejecting the recent bailout would win a majority and plunge the euro zone into a crisis of epic proportions.
Instead, it seems that the New Democracy Party in alliance with PASOK, the socialist party, will form a coalition that will honor many of the conditions of the bailout and prevent, for the moment, a spiraling financial crisis triggered by a Greek exit from the euro, setting off a financial chain reaction that would engulf Spain and then Italy, and so end in flames the European financial union.
But those same financial markets are not so easily placated in today’s world. Remove one proximate cause of a global synchronous meltdown, and another springs to take its place, or another two or three, which in its hydralike fashion is an ironic paean to ancient Greek mythology. The financial world has yet to adjust to the reality of global linkages and the potential for global meltdowns that the crisis of 2008 revealed as one of the signal dangers or our era. The possibility that the fragile coalition of PASOK–New Democracy might just crumble before a government is formed was enough to temper the initial enthusiasm of markets, which are far more prepared for crisis and catastrophe than for resolution and moving forward.
The meeting of the world’s leading economic powers at the G20 summit in Mexico on Monday and Tuesday is already focused on how to halt the wildfire spread of panic throughout Europe and the potential for that to go viral and global. You would be hard-pressed to read one piece of informed (let alone uninformed) commentary and analysis that speaks with much optimism and hope that the leaders of the world given the current economic structures of various countries can act effectively to staunch contagion. Judging from the tenor of these analyses, we are doomed now or doomed later, but doomed we are.
We are told that the Germans will countenance no “mutualization” of European debt akin to what bound together the American states in the 1790s and binds them together even now. We are told that China’s economic model is showing not only cracks but early signs of terminal flaws; that the United States is headed for a fiscal cliff; that the once-stellar emerging stories of Brazil and India are losing luster fast; and that the world is drowning in a sea of too much debt, too much austerity, too little growth, poor leaders, and structural problems that will get worse before they get better.
Such certainty about the future, such numbing pessimism, should give one pause. Greece did not lead to the worst of all outcomes on Sunday, and Spanish banks were indeed bailed out last week, albeit in flawed form. Germany continues to provide more money, grudgingly and ineffectively, and U.S. interest rates stay low and lower even as the long-term debt issue remains unresolved. China is still charging ahead, slower but with confidence and confusion, and Brazil has not yet announced that its recent bout of confidence was fatally flawed.
In fact, the continued disconnect between life as it is actually lived by most people and life as seen through the lens of the financial markets is surreally distinct. There is a deep crisis in Spain, Italy, and Greece, especially because of ossified labor markets, zero growth, and a dearth of avenues for the young to craft their own future. But elsewhere the crisis is more existential, if at all.
In the United States, Americans are coming to grips with structural unemployment and a mass of unemployed and underemployed that defies the cyclical experience of the 20th century, combined with lower levels of growth than most Americans expect. At a recent Manhattan demo for young technology entrepreneurs hosted by TechStars, however, the attitude could not have been more different: hopeful, ambitious, and passionate about a better future. Overall, the United States faces a challenge, but not precisely a crisis and certainly not a yawning abyss.
So Greece was not the final straw, or at least not today. All may go to hell quite soon, but given that the amen chorus is singing notes of doom, a contrarian would be advised to consider the risks that everything doesn’t fall apart, that world leaders continue to show a remarkable ability to muddle through at the last moment, and that while the tail risks are shudderingly fearsome, the stability of the system as a whole is far greater than most imagine. Now, markets will turn to Spain, Italy, debt—who knows—and affix the same anxieties that have been so indelibly attached to Greece.
But for a few hours, let’s pause and breathe an earned sigh of relief. We can always go back to worrying; we are still in a bull market for fear. But after today, maybe, just maybe, a tad less so. The Greeks have taught us many things, both now and then. After all the terrors of Pandora’s box, hope remained. It was never a foolish reminder.