The world is buzzing after Greece elected Europe’s first far-left head of state in decades, and reactions across the global marketplace tell the story: the EU is in serious trouble. Following last Sunday’s election of Alexis Tsipras as Greece’s new Prime Minister, markets dropped, anticipating Mr. Tsipras would make good on his campaign promise to force the Troika to cut Greece’s massive €240 billion debt in half. While experts discuss the dramatic posturing between Athens and Berlin, overlooked in the current dialogue is the strange similarity to Germany’s Weimar Republic during its post-World War I economic hardships, and the potential consequences of a restless people, humiliated and disillusioned under harsh austerity.
Recall that Germany bore a significant debt burden, exacerbated by reparation payments imposed by the Treaty of Versailles in 1918. The German people struggled in the ensuing years, battling serious hyperinflation, severe unemployment, and little hope to emerge from their economic crisis. Frustrated with dismal economic conditions, Germans turned to a radical, anti-democratic Nazi party for hope, and in 1933, Adolf Hitler rose as chancellor.
Today, after five tough years of austerity tied to the Troika’s bailout, discouraged Greeks turn to the well-spoken, charismatic – and former Communist – Mr. Tsipras, to rescue them from the throes of fiscal responsibility. Mr. Tsipras vows an end to austerity and a reversal of structural reforms, in addition to reducing Greece’s debt by half. Newly appointed Finance Minister Yanis Varoufakis promises a return of greater power to trade unions (including making it more difficult to fire workers), a minimum wage increase, and free electricity to those who can’t afford it – all of which violate reform requirements of the Troika’s current bailout package. Indeed, it is these very reforms that have guided Greece toward its primary budget surplus.
On Sunday, Mr. Varoufakis pledged Greece would go “cold turkey” and reject future bailout funds from the Troika, comparing Athens to a “drug addict craving the next dose” of bailout money. How then, does Mr. Varoufakis plan to pay for the very programs that contributed to Greece’s financial collapse in 2008? By anchoring high and demanding Greek debt be cut by 50 percent, he has room to settle for maturities extensions and a slash in interest rates. The good news for Mr. Tsipras and Mr. Varoufakis is that the freed up funds help them make good on their campaign promise to bring relief to suffering Greeks. The bad news for Greece is that this opens the door to revive the very socialist programs that led to its financial crisis, without addressing critical structural reforms the country needs.
This places the EU in a troublesome position, as both caving to Greece’s demands and the threat of Grexit – Greek exit from the Euro – are not ideal. The former opens the door to political contagion: if Greece’s radical anti-austerity demands succeed, Madrid and Rome will expect the same concessions. While unlikely, the latter is possible: Greece, Italy, and Spain exits could collapse the Euro and in turn catastrophically affect the United States, EU’s largest trading partner.
Could Greece’s anti-austerity movement be the start of WW3? We’re a much more civilized world today, and while the implications of a Euro meltdown may not be so draconian, its impact might be just as devastating. The EU must be cautious in what it does with Greece, and Greece’s leaders must be willing to stand for fiscal restraint.
I recently traveled to Athens during a visit with the U.S. Department of State, and found that Greeks have chosen to do one of two things: protest, or become self-sufficient. Serial entrepreneur Vicky Dallas, Founder of 9AM, POPU.PS & Startup.gr, says entrepreneurs shouldn’t have to deal with the uncertainty of a government changing tax rates or laws on a monthly basis. Still, she says, rather than protesting, “we should be focusing our time and energy on finding ways creative to run our businesses and create products and services.”
Adopting a culture conducive to entrepreneurship is how Greece must rise out of its financial woes. Indeed, the one glimmering hope for Greece remains in its entrepreneurs – if socialist policies don’t squash them. After sensing a need in the market, Alkisti Zina co-founded Bluperty, Greece’s first online real estate auction company. “The new government must commit to implementing bold reforms in judicial, public administration, and tax policies, to create an environment where Greeks will want to start and expand their own businesses,” she insists. “Rather than focusing on cutting the debt, which will do nothing, we must concentrate on growth to make our country more competitive.” Continuing down the path of socialism leaves Greece in a ripe position to collectively unite behind a political movement that ultimately will prove destructive.
The world is watching, and hoping that Greece will wisely exercise fiscal restraint, and understand where jobs and economic growth truly begin: the private sector, not government. Stavros Messinis, a Greek businessman who co-founded the Athens-based co-working space The Cube, says the financial crisis has been a wake up call to many Greeks: it’s not the government’s responsibility to provide for every need. When asked if Athens should allocate government money to fund startup spaces like his, Mr. Messinis said they didn’t need it. “I don’t want government grants. I want our entrepreneurs to do it themselves. We need to push our people to the limits.”
If all Greeks come to adopt these entrepreneurs’ perspectives, they very well may keep their country from plunging into another financial disaster.
Chris Garcia is a Southern California-based businessman who travels to Greece as a delegate for the U.S. Department of State’s Global Entrepreneurship Program.
