Greece’s Groundhog Day

As riots in Athens grew violent today, Greek Prime Minister Lucas Papademos took a “take it or leave it” stance with his cabinet ministers. Either get behind the new austerity measures or quit. Six of them chose to leave.

 

On Sunday the Greek parliament votes on whether or not to accept another round of deep cuts lashed out in an hard-fought agreement reached yesterday.

 

For Wall Street, it’s a scene right out of Groundhog Day, the movie where the lead character wakes up day after day, only to play out the same scene over and over. News of an agreement—markets go up. Next-day second thoughts and fears—markets go down. Meanwhile, the world economy is waiting.

 

While it looks to some like Greece just won’t take its bitter medicine, others say more austerity is essentially political theater.

 

Dimitiri Papadimitriou is the head of the Levy Economics Institute of Bard College. He says the parties that negotiated the new austerity measures—the European Central Bank, the European Union and the International Monetary Fund—cannot realistically expect them to be implemented.

 

It’s a case of more austerity without a plan for growth, says Papandimitriou. And that’s a bitter pill for a country with no real manufacturing or industry to rely on. Even industries that could flourish in Greece—solar and wind energy or drilling for oil in the Ionian Sea—will be impossible if Greece is back to the drachma.

 

Still, Papadimitriou says he’s much less optimistic today about whether Greece can pull off this tightrope act of saying yes to austerity but not crushing the will of its people. He says, “I’m afraid that Greece might throw in the towel and leave the Euro.”