Will Germany Ease Up Now That Greece Is Toeing the Line?

Test ticker

Monika Bauerlein,
CEO

Dear Reader,

The next few months are make-or-break for Mother Jones’ fundraising, and we need more online readers to pitch in than have been of late. In "It's Not a Crisis. This Is the New Normal," we take a level-headed look at the brutal economics of journalism, why investigative reporting like you get from us matters, and why we're optimistic we can grow our base of support in a big way—starting with hitting a huge $300,000 goal in just three weeks. Please learn more and donate if you can right now.

The next few months are make-or-break for Mother Jones’ fundraising. We need to raise $300,000 quickly, and we need more online readers to pitch in than have been. Please learn more in "It's Not a Crisis. This Is the New Normal," where we go into the brutal economics of journalism, and what makes Mother Jones unique and worth supporting if you can right now.

Fight disinformation: Sign up for the free Mother Jones Daily newsletter and follow the news that matters.

Like a lot of people, I figure that victory in this weekend’s Greek election is purely Pyrrhic. Greece is in for years of mind-numbing austerity no matter what happens next, and whichever party is in charge during this period is probably writing its own death warrant.

But maybe not! Here’s a scenario that allows this weekend’s winner to stave off certain disaster.

Basically, Greece has two options. In Option #1, they commit to following the austerity measures imposed by Germany and the rest of the EU. This dooms them to years of pain and suffering. In Option #2, they repudiate their debt, leave the eurozone, revert to the drachma, and devaluate their currency. Since no one will then loan them money, they’re forced to live within their means, which also dooms them to years of pain and suffering.

So which option should they choose? Well, Option #1 probably means a little less pain and suffering because they continue getting aid from the EU, but it most likely also means a longer period of pain and suffering since it will take a long time to rebalance their economy as long as they’re yoked to the euro. Option #2 would be a sharper economic shock, but devaluation would solve Greece’s underlying problems and probably lead to a genuine recovery within a few years.

Greek leaders know this. German leaders know this. Everyone in the EU knows this. And now that conservatives have won a tenuous victory in Greece and committed to following EU austerity guidelines, it’s possible that Germany will agree to ease up a bit. Partly this would be to reward Greek voters. Partly it would be because Germany knows perfectly well that a tenuous victory won’t last long if austerity bites so hard that there are riots in the Athenian streets on a weekly basis. With the election over, it might now be in Germany’s best interest to take a softer line if they truly want to save the euro.

Of course, even if Germany does ease up it will still be tough sledding for the party in power. As we all know, “Things are bad, but they’d be even worse under the other guys” is not a stellar electoral message. We’ll see.