Greek crisis needs more than a Band-Aid solution: Don Pittis

It would be easy to make the case that Greece is the latest "sick man of Europe." So far, too much of the public squabbling has been over who to blame for the illness.

There are early signs that Europe's politicians are finally moving past that and may actually come up with a plan this week to prevent a terminal financial collapse in the Mediterranean country.

For now at least, that should prevent the Greek economic malady from turning into something worse.

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If they succeed in hammering out a deal, European politicians will deserve congratulations. But the hardest part of reviving the ailing Greek economy will still be in the future.

Blame game

It is a positive sign that the blame game has been largely set aside. In earlier rounds, the Greeks were blamed for borrowing too much money and spending it foolishly. Europe was blamed for fudging the numbers to let Greece into the eurozone. 

In a country traditionally riven by class conflict, the poor blamed the rich for not paying taxes. The business class blamed bloated government, powerful unions and luxury-class pensions. 

At one point the Greeks pulled out their history books and blamed the German government for damage done by the Nazis, almost as if Greece's own intervening spell of military dictatorship had never happened.

Finally the name calling seems to be quieting down as all sides start to realize how devastating a Greek collapse and exit could be for Greece, for Europe and, as Russia's Vladimir Putin begins to play his Greek cards, for the International Monetary Fund, one of the unexpected hardliners in the negotiations.

The easy-exit myth

A motivator for all sides as the deadline approaches is the realization that the theory of a surgical euro exit and default is purely mythical. 

Already the Canadian Greek community has been growing fearful about what will happen if there is no deal, University of Toronto professor Phil Triadafilopoulos said on CBC Radio yesterday.

Politically aware people of my generation will remember the film Z, which told the story of an elected politician murdered by the Greek military dictatorship amid vicious street battles. For most younger Canadians the country's violent streak is forgotten. But not in the Greek community, many of whom came here to escape that chaos.   

"If we see a re-emergence of what's been a left-right split become radicalized because the economy's sent into a real panic," Triadafilopoulos told Matt Galloway on CBC's Metro Morning, "this is worrying to people here."

Until now, Europe and Greece have both adopted the negotiating stance that it really did not matter whether they failed to reach a deal. Increasingly the two sides are recognizing their common interests. Greek banks verge on collapse, and would have collapsed already without European support. The streets of Athens fill with demonstrators from opposing sides.

The Europeans realize a default will cost France and Germany alone €150 billion. A volatile Greece would represent a contagious wound on Europe's nether parts. 

Higher taxes

The details of a deal are leaking out only slowly. An increase in some taxes. A higher retirement age.

This is on top of structural changes already completed as outlined by University College of Dublin economist Karl Whelan, who says Greece is gradually moving to get its house in order.

But even if a deal is done, European leaders cannot dust their hands and walk away. Greece remains a troubled country, weakened by austerity, drained of capital by the banking crisis, still burdened by an impossible debt. The rich and the educated have been running away.

The one bright spot of a default would have been that the country might have been given a fresh start. Pushing those loans into the future without getting the economy back on track is like lending to a person unemployed by illness such that they can't afford medical care. If they don't get well they can never pay you back.

It is easy to forget that for many Greeks the European experiment has been a success, one that was interrupted by the global cash crunch of 2008. As Triadafilopoulos and others have noted, before this long-drawn-out debt crisis, Greece was on its way to becoming fully European as the children of workers and farmers became educated. 

A financial deal with Europe and the IMF is essential to moving back into that sweet spot. But it is not sufficient.

"The sick man of Europe" has been used to describe so many different countries, most people don't realize to which the term first applied.

A deal this week may mean that for Greece, too, the illness is temporary, and the country will be able to take the first steps on the long road to recovery.