Buried under all the nonstop Election 2012 coverage, Middle Eastern turmoil, and New York Knicks star Jeremy Lin’s magical NBA run, the EU finance ministers are currently deliberating whether or not to grant Greece another $172 billion bailout. In qualifying for it, the interim technocratic Greek government passed another round of stiff austerity measures that sparked more violence, protests, and rioting in recent weeks over the cuts in spending from public sector pensions to minimum wages.
A Greek default would have a strong effect throughout the rest of the continent by putting EU banks at risk to exposure, and indeed, could potentially pull the world economy down, too. Greece provides us with an extreme case scenario of many of the problems that are plaguing economies across the globe, including the United States.
I’ve been saying for years now that the sooner Greece and the EU divorce, the better off all parties will be. But an interesting trend I’ve noticed in recent weeks is the generational divide between plans for Greece’s future. I’ve concluded that while the older generation firmly intends to keep Greece in the EU, the millennials of Greece believe a future in the euro zone leaves no future for them.
To give you an idea of how bad things are in Greece, at one point their debt levels had surpassed 180% of GDP. That’s insane. Since the technocratic administration of Lucas Papademos took over, they’ve successfully lowered Greece’s debt to 160% of GDP, but in order to qualify for another EU bailout to avoid a default on loans due March 20, the EU stipulated that the government had to implement more austerity to try and lower Greece’s debt to a “manageable” 120% of GDP by 2020.
We didn’t have to wait too long to find out what the population’s reaction was to it. More protests, more riots, more torched buildings, and more cars flipped over.
Yet according to a survey by pollster MRB for Sunday’s Realnews newspaper, 72.7% of Greeks polled claimed that they want the country to stay in the euro. So how can a clear majority of the country both want to stay in the euro zone, yet protest the reforms the EU requires of them to do so?
I believe the answer is this: There’s a growing generational divide within Greece.
It would make sense that older generations with money tied into businesses, property, and government bonds would want the country to stay in the euro to protect their investments. If Greece were to leave the euro zone tomorrow and fall back on the drachma, it would open up a new door of options for the government to take (such as quantitative easing to make their exports very cheap and competitive) but at the price of a highly inflated drachma worth pennies. Property values and private equity within the country would be in free fall.
And let’s be honest, check out the countless videos of riot footage in Greece on YouTube, and you won’t see many middle-aged or senior citizen Greeks tossing Molotov cocktails at banks and riot police.
Instead, you’ll see it all being conducted by the youth of Greece, which should come as no surprise. In a country where unemployment has now risen to a whopping 20.9%, the youth of Greece is suffering from a 48% unemployment rate. Millennials of Greece could care less about property value and private equity at this point. They just want a job and career, and almost half of them have no opportunity in Greece right now.
I’m sure there’s plenty of blame to go around, starting squarely with their parents’ reckless, fiscal irresponsibility and unsustainable entitlement spending. But more interesting to watch is where this is all going. On a continent where the recent EU crisis has led to a rise in the polls for far right/nationalist parties, the recent troubles in Greece have produced an opposite effect. The country is scheduled to hold elections in April, and while the center right New Democracy Party leads the pack with a mere 28.5% average in February polls, an average 51.5% of the electorate support far left socialist and communist parties (split among four parties) while the far right/nationalist party, the Ultra Orthodox Rally, only shares an average 5% support.
I predict that the EU will indeed approve the $172 billion bailout, but the bigger question is where does Greece go from there? If things still don’t get better for its economy, the EU will be all out of options. A third bailout will lead to political suicide for the regimes in the rest of the continent. Some are speculating that the EU is already preparing to kick Greece out if/when they have to, leaving Greece to wonder how much more future it has in the euro zone.
But the youth is already left wondering whether they even have a future in Greece at all.
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