Our View: Greece could still leave Euro
Outside Parliament in Athens, tens of thousands of angry demonstrators protested German Chancellor Angela Merkel's visit on Tuesday to Greece to meet with Prime Minister Antonis Samaras. Most of the protests were peaceful, while often acerbic. One column of army reservists marched and chanted, "Go home, Nazis!" A handful of demonstrators threw stones and bottles.
Despite well-founded concerns about third-quarter Greek earnings being reported this week, Merkel hasn't given up on austerity measures. Her tone was careful and judicious — she needs the bailout to succeed if she's to be re-elected next year. "I am convinced that although it's tough, this path will pay off for Greece," she said, linking the difficult reforms in East Germany and West Germany after it reunited following the collapse of the Soviet Union in 1991. "Germany will be a good partner and friend along the way."
Financially strapped European Union nations expected German bailout money. Many civilians and politicians find the austerity measures that come with that money difficult to contend with. Yet the public can only be blamed to a certain extent. An entitlement-based society marked by out-of-control spending that conditions individuals to contentedness will find it difficult to take away those entitlements in one fell swoop. It's a recipe for discontent.
Besides the bailout, the only thing Germany and Greece have in common is that their names begin with a "G." One is fiscally prudent. The other is not and has a long way to go to get there. Greece's normal retirement age is 65, but early retirement is at 55, according to the Organization for Economic Co-operation and Development.
On top of an unsustainable public-sector wage and unfunded pensions, Greece has had special retirement exemptions for people in nearly 600 occupations. For decades, a notoriously weak government agreed to union demands. It is something of an embarrassment that the government allowed trombone players, radio announcers, hairdressers and pastry chefs to retire as early as 50 because their work apparently opens them up to breathing problems. By contrast, Germany may increase its normal retirement age to 69 (early retirement is at 65).
So revolted were the Greeks with austerity measures that despite electing Samaras, a conservative leader and their last hope if they hope to keep the euro, the neofascist Golden Dawn party has gained tremendous popularity. The trouble is not over. In August, Samaras, who was opposed to the bailout 18 months ago, told Merkel that Greece wants to "stand up on our own feet" and hopes to negotiate more breathing room. At the same time, he also stressed his commitment to implementing austerity measures and has said that a euro exit would be disastrous.
The "2013 perfect storm scenario I wrote on months ago is unfolding: (eurozone) crisis, US stall speed, China hard landing, (emerging markets) stall, Mideast time bomb," New York University economist Nouriel Roubini wrote on Twitter. Roubini, who forecasted the US housing crisis, has called for a Greek exit from the euro common currency.
A Greek departure likely would cause a euro collapse — creating market freeze-ups that will directly affect America. Europe would likely rescue its currency but not without further deepening the recession. An exit, were it to happen, won't occur this autumn. But it's no secret many American businesses in Europe are bracing for it.