The choice before voters in Greece as they went to the polls yesterday was not unlike that of a lamb that was being led to the slaughter. They were being asked if they preferred to be killed instantly with a shot-gun or slow-bled to death in the halal tradition. The Greeks, it appears, have opted for the halal tradition, evidently in the belief that prolonging the agony gives them a chance to cheat certain death- an exit from the euro arrangement.
By voting to give a slender majority to parties that have pledged to keep Greece within the euro arrangement, Greeks have in effect given their consent to the slow-bleeding of the economy through austerity measures: this will manifest itself in the coming months in cuts to government programmes and welfare measures.
But to ease the pain, they will be given the morphine of bailouts, under the effect of which they won't even realise if their limbs are being amputated.
Markets are well pleased with the outcome, because by averting the imminent prospect of a Greek exit from the eurozone, they've given themselves a little longer to pretend that the eurozone's problems have been sorted out. But even this only delays the inevitable. And as happened after the 100 billion euro Spanish bank bailout deal last fortnight, the "feel good"effect from yesterday's election outcome may not last for long.
In fact, attention has already turned to the other lambs that are being lined up for slaughter, particularly Spain and Italy. On Monday, barely hours after the Greek election victory, Spanish 10-year bond yields have surged back above 7 percent, reflecting that markets haven't been calmed by the political developments in Athens.
Societe Generale economist Michala Marcussen notes that while "Greece was the catalyst for the latest round of tension, the weak fundamentals that weigh on Spain and Italy have not been altered by the Greek election outcome." In her estimation, market stress will again be felt, perhaps in the run-up to the end-June meeting of the European Council, when markets don't see the additional risk-sharing that is required to ease fears about Spain and Italy.
Greece is in its fifth year of recession, largely as a result of the savage austerity measures imposed as a condition for the lifeline of bailouts. And that misery is to be compounded by yet more austerity measures that voters have just signed on for.
It has become fashionable for leaders in core Europe to blame the "lazy", "unproductive" and "tax-dodging" Greeks for the debt crisis that has dragged them into this mess. But in fact, as Paul Krugman points out,"the origins of this disaster lie farther north, in Brussels, Frankfurt and Berlin, where officials created a deeply - perhaps fatally - flawed monetary system, then compounded the problems of that system by substituting moralizing for analysis."
And it's something of a myth that Greeks are "lazy": As the Guardian notes, Greek workers actually put in longer hours than anyone else in Europe - 42.2 per week, compared to just 35.6 in Germany.
Yet, Germany, France and the "Eurocrats" have reduced this to a bizarre morality play, which risks pushing Greece into a 1930s-style Depression, and perversely establishing the conditions for Greece to be forced out of the monetary union. And whenever Greece keels over, the other dominos too - Spain, Italy, perhaps even France - are at risk.
What happens in faraway Europe could have a profound impact on the Indian economy as well, and in much the same way that the 2008 collapse of Lehman Brothers caused shockwaves to reverberate around the world, India and much of the emerging markets are extremely vulnerable.
As outgoing World Bank president Robert Zoellick told the Observer over the weekend,developing countries need to "prepare for the uncertainty coming out of the eurozone and the wider financial markets". In his estimation, "It will be better if they can avoid piling up short-term debts that can come due in volatile periods and look to the fundamentals of future growth - infrastructure and human capital."
That's exactly the department where India has slipped up the most. Which is why the frenzied screams of the lambs being led to the slaughter in Europe will be heard in India as well.
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Updated Date: Dec 20, 2014 10:52:56 IST