Cut Greece Loose

Cutting the Gordian knot

Talk about Zeitgeist - last Saturday morning I was in Porto, reading about the Greek crisis in The Economist. It was my first trip to Portugal, which I guess was good timing for them, economically speaking. Next month, Spain receives some of the Pragmatic Pound. And I'd like to think I'm doing my bit for Ireland, albeit on the meter, by assisting a financial start-up there (sorry, still in stealth).

But I won't be bailing out Greece.

Tax-dodging, low productivity and overly generous pensions aside, The Economist reckons the key to that country's dismal plight is political patronage. "Greece needs transparent and impartial rules, but politicians are not keen to limit the scope for dishing out favours." Everything from railways to medical budgets leaks cash to powerful lobby groups.

And, reading on, it seemed to me that in this sense the Greek rioters have more in common with the proponents of the "Arab Spring" than their EU colleagues. As the ebbing economic tide exposes the littered wrecks of corrupt schemes and relationships, the have-nots are descending in droves on the survivors and what's left of their loot. In Syria, the crowds are putting the "squeeze on Assad" by demanding a "civil democracy" that comprises free elections, freedom of speech and assembly, protection of minorities and an end to repression. The longer the government resists, the more citizens withhold labour, and capital flees. In return, the regime dishes out more favours, stokes inflation and the country edges further toward meltdown. Egypt is clearly further along. Libya perhaps further still.

This chaos is vital for renewal - though bloodshed is not essential. Back in June '09 I suggested that the UK's constitutional reform must be a messy process, and it's proving just that, but riot-free (you can ignore the photo calls). A dynamic, open, democratic process that encourages broad engagement by all stakeholders cannot realistically be neat and linear.

Though in May 2010 I also suggested going short EU banks and long riot shields. And if things do turn nasty it's perhaps worth bearing in mind Mathias Koenig-Archibugi's reminder to The Economist of the lines from "The Third Man":

“In Italy for 30 years under the Borgias they had warfare, terror, murder, and bloodshed, but they produced Michelangelo, Leonardo da Vinci and the Renaissance. In Switzerland they had brotherly love, they had 500 years of democracy and peace, and what did that produce? The cuckoo clock.”

The point is, we do the Greeks no favours by bailing out their system of political patronage. The bureaucratic emperors must be shown to have no clothes.

So cut Greece loose, I say. Only then will the Greeks have their Renaissance.