Monday, June 22, 2015

Debt catatonia

The specter of default has instigated a fatal bank run in Greece. Greeks want their money securely in hand before an emergency conversion from the euro back to the drachma and subsequent devaluation diminishes their bank-held assets. The cash crisis and the Greek government’s fear of a Tarir Square-like rebellion is the Europeans’ best bargaining chip in bringing the West’s problem child to heel.

With friends like the these, old enemies can suddenly become allies. Russia is opening its arms to those who’ve had their fill of failed liberal democracy. The Financial Times reports:

As Washington tries to maintain a united western front in support of sanctions on Russia over Ukraine, a Greek default could provide Moscow an opportunity to sow new divisions among America’s European allies.

“You can easily see how geopolitically this would be a gift to Russia,” says Sebastian Mallaby at the Council on Foreign Relations. “You do not want Europe to have to deal with a Greece that is a member of Nato but which all of a sudden hates the west and is cosying up to Russia.”

Greece was regarded as a frontline state against the advance of Soviet-backed communism during the cold war. Its EU accession in 1981 is one factor that cemented its identity as a western democracy, something that was deepened 20 years later with the adoption of the euro.

Just so.

“The West is decadent and divided!” rings in my mind. That line was said by a comically bellicose Soviet general in the 1983 James Bond flick Octopussy, back in the days when we made fun of Russia’s false assuredness of strength. Does the West carry the same claims to superiority as it did then? Our debt catatonia suggests not.

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