The Greek people have voted No! to the European ultimatum. This means they won’t accept the EU’s punitive terms for a bail-out. Whether it means Greece leaves the European shared currency remains to be seen. Lots more trouble remains for Greece. But they can face the difficulties better now that they have chosen their own fate.
One aspect of the story that I haven’t read in any of the press coverage is that “Oxi!” has a historic resonance with the Greeks. My wife spent part of her childhood in Athens and tells me that each year on October 28th the Greeks celebrate Oxi Day, a remembrance of their defiance of German and Italian forces threatening Greece in 1940.
Myy wife remembers Oxi Day from the perspective of a little kid in the late 60s. The Wikipedia page linked above tells only a little. From Wikipedia we learn that in late 1940, by which time Poland, Belgium, Holland and France had fallen to the Nazi Germans, the Greeks received an ultimatum from Italy and Germany: Greece must permit them to march across their land and to occupy certain strategic places (sea ports, airports, etc.) If they refused, the Germans would not simply march through a subjected Greece, but would attack and defeat it as an enemy.
The Greeks said, “Oxi!”
If you didn’t click, you missed Franklin Roosevelt and Winston Churchill praising Greek courage for standing against the German threat. What’s more, Hitler says the Greeks fought with the most courage of any enemy the Germans faced in the war, and he says that the delay caused by Greek resistance meant a late start and consequent failure of Germany’s attack on Russia. Stalin is quoted saying Greek resistance decided WWII.
So history repeats itself. An underdog Greece, motivated by its desire for self-government, stands up to a ruthless Germany and says, “Oxi!”
Depending on where you get your news, you may be saying, “But didn’t the Greeks run up a big credit card bill? Aren’t they now refusing to pay their just debts?” Good question, and the answer is, again, Oxi!
Paul Krugman and other economic experts have written extensively about how the single shared currency, the Euro, has doomed Greece (and probably will doom other countries.) If you want an economic explanation, you can’t do better than any of the posts on Krugman’s blog. Here’s Krugman’s Monday morning editorial in the New York Times.
If you prefer a non-technical explanation, then think of the single European currency as a thermostat. You usually don’t think about them, but your house has several temperature controls. There is a thermostat to control the temperature in the rooms. There is another thermostat in your water heater. The oven in the kitchen has a thermostat, too.
Now imagine that your house has only one temperature control and it is connected to everything. This is analogous to Europe having only one currency. Europe’s leaders can adjust the money supply and the exchange rate to benefit the economy. But since there are many countries in Europe and only one currency, they can only set the currency to benefit one country. And that country has been Germany since the EU began.
If you set your single thermostat at 72 degrees, the rooms will be pretty comfortable. But the bath water will feel chilly. And you can forget about baking anything. You can raise the single thermostat to 400 degrees and cook your Thanksgiving turkey, but you’ll die. A single thermostat controlling everything in a house just isn’t feasible. And this absurd scenario is exactly analogous to how Europe’s shared currency
works doesn’t work.
One other aspect. You may have heard that the Greeks spent lavishly after joining the EU, trying to live up to the European standards. Have you heard that much of that spending was mandatory? Joining the EU meant embracing EU standards for things like automotive emissions. And guess which country makes and sells the cars that satisfy the EU standards. Did you guess Germany? Good for you. So even to the extent that the Greek people (as opposed to the Greek government) was extravagant, they were forced to spend by the fist of Germany.