Greece’s ‘Stranger Than Fiction’ Past and Present

Greece’s government official in charge of privatizing state assets privatized himself Friday, announcing his resignation based on what we presume are creative differences with the new Conservative-led coalition. Costas Mitropoulos almost made it a year in the post (navigating three prime ministers to make it that long). In all, the saga involving this troika-mandated post reads like the tale of modern Greece in both recent years and recent centuries. Ultimately, three years after Greece’s debt woes were unveiled, it simply seems there’s nothing we’ve not seen before.

For decades, the Greek government has cast a long shadow over industry in the nation—a source of both inefficient capital use and cronyism predating even the military juntas (the Colonels) that ruled Greece until the 1970s. Call it socialism or favoritism, for eons it’s frequently used posts managing state-run businesses as a reward for political allies and supporters. So when new governments are elected (or, often more apropos in Greece, cobbled together) departmental leaders from prior regimes are typically jettisoned—and replaced with like-minded folks who helped on the campaign trail.

None of that is terribly unusual globally—in many nations, leaders want their own appointees to consult with. But for a nation mandated by international creditors (the troika of the EU, ECB and IMF) to sell €50 billion in state assets by 2015, one can see how political gamesmanship with said privatization might ruffle creditors’ feathers. Then again, the ouster of the chief who oversaw the privatization program’s many recent delays might not much confound the troika—especially if the new government can make quick progress before the troika’s review completes in September. Besides, Greece has missed more austerity targets than it’s met and breached its deficit targets in recent years, and privatization delays are well-documented. We rather doubt EU officials would be shocked if that were to continue—and even a modestly better showing from the new regime is likely enough to warrant a bit more flexibility from creditors when bailout negotiations resume.

Meanwhile, the Greeks are seeking a bridge loan for use in redeeming a bond 100% owned by the ECB. We ask (somewhat rhetorically): What are the chances they don’t get the loan? To us, they seem quite close to zero. Another major creditor—the EU—actually guaranteed Greek bonds posted at the ECB as collateral following Greece’s selective default in February in order to persuade the ECB to accept them.

And news broke Friday we could very well see the collateral-acceptance show again. The guarantee offered to the ECB expires on July 25—one major reason, perhaps, the ECB announced Friday it won’t accept Greek bonds as collateral beginning next week. Of course, even this doesn’t mean Greek banks are high and dry should they need aid beyond then—the Greek central bank could extend credit borrowed from, well, the ECB.

Now, we’d understand if you said, “None of this makes any sense.” But Greece, despite its reputation as the birthplace of democracy, has regularly found itself dependent on the will of others. When Greece won its independence from the Ottoman Empire in the 1820s (the war claiming the life of famous British poet Lord Byron), it replaced the Ottomans with Otto. Otto, the first king of Greece, was a Bavarian regent. How was this Germanic leader appointed? With the help of Britain, France and Russia, all Greek allies whose war aid was instrumental. Different troika, but heavy international involvement nonetheless, which made the newly independent Greek state look somewhat dependent. And then, as now, these nations seemed determined to help pull Greece through.

Overall, the reality is Greece’s odd present isn’t very far removed from its history. And at this point, the news is anything but breaking. But as it pertains to Greece, it sure seems Lord Byron’s words still largely ring true, nearly two hundred years later: “The truth is always strange, stranger than fiction.”