Joseph Mariathasan explains how the euro-zone is not unlike the Hotel California – you can check out any time you like, but you just can never leave
For Greece, having checked into the euro-zone, the issue of what the edifice is really like has become an existential issue. Is it akin to the Burj al Arab, the self-styled seven-star hotel in Dubai that purports to offer the height of luxury?
Staying there, however, can only ever be a short-term holiday for rest and relaxation before stepping back into the hard grind of reality. Greece certainly saw a huge rise in living standards when it joined the European Union. But the drachma was a stable currency for at least two years before Greece joined the euro, and inflation was in check as well.
The benefit to Greece on then joining the euro-zone was macroeconomic stability and the psychological assurance that participation in the euro would bring Greece closer to the Western European countries within the EU and thus enhance its security against what it perceived as aggressive and unstable neighbours surrounding it. The stabilisation of buying power through checking into the euro-zone made debt more easily available – many people borrowed to purchase properties and saw their lifestyles improve.
But was this always destined to be just a temporary respite from the more hum-drum and harsher lifestyle Greece had before – in other words, is the so-called Grexit inevitable, either through Greece’s own volition or because it is pushed? Or is the euro-zone like the famed Hotel California in the 1977 hit by the US rock band The Eagles?
The lyrics are an apt description of at least the intention of the euro-zone: “We are only programmed to receive. You can check out any time you like, but you just can never leave!” As the Eagles’ intrepid traveller was thinking in the song, “This could be Heaven or this could be Hell”.
Unfortunately for Greece, the euro-zone turned out to be the latter. Checking into Hotel Euro-zone has meant prices of food items are comparable to those in Paris or London, whilst average wages in Greece are at least half those of France, Germany and the UK. A half-Greek friend of mine owns a trendy wine bar in the poorer East End of London just off the wealthy financial district. It’s a great place for us to discuss Greek politics, but, despite being an ardent Hellenophile, he serves only South African wine – no wine from Greece. Even for him, the price is too high. His customers would never buy it. Needless to say, he is keen on Grexit.
“Last thing I remember, I was running for the door – I had to find the passage back to the place I was before” runs the Eagles’ lyrics, and that’s a good reflection of my friend’s hopes. What the average and honest Greek family is faced with in the Hotel Euro-zone is that what they hoped would be heaven has now turned into hell. The Hotel Euro-zone may have improved lifestyles but not to the point of luxury. Instead, the middle classes are now facing long-term unemployment and an imminent danger of losing their properties.
The main consequence of the crisis has not been the loss of a Burj al Arab-level of comfort but the loss of a normal lifestyle, which existed even before checking into Hotel Euro-zone. One Greek ex-professor, dispelling the myth of Greeks scrounging off the taxes paid by Northern Europeans, pointed out to me that he must know 300 or more average middle-class individuals in his social circle, and none of them has a Porsche. For this particular professor, his personal solution was to leave Greece and work in the UK as an engineer. Unfortunately for Greece, that ‘brain drain’ has not stopped.
Perhaps the real answer is that, for Greece, the Hotel Euro-zone was neither akin to the Burj al Arab nor the Hotel California, but actually more akin to Caesars Palace, the casino hotel in Las Vegas. Joining the euro-zone was a gamble for Greece that the Greek politicians and business elite were prepared to bet their children’s future on – or perhaps more accurately the children of the masses, since their own wealth meant their own children did not have to rely on the roulette wheel or the poker cards landing in their favour for their future prosperity. But they should have realised the odds were stacked against them from the beginning.
Going back to a new drachma may well be the wish for some, although perhaps not the majority of the Greek population. For them, the hope still exists that the Hotel Euro-zone is a real community and not just a trade federation. But as my Greek friends complain, Greece’s politicians did not warn the electorate of the dangers, even if they knew them themselves when the country’s economic statistics were being manipulated to allow Greek entry.
But a wider issue for the EU as a whole is whether Hotel Euro-zone itself can survive a country leaving when it really has been only programmed to receive. For the country itself, “the Greek metanoia will be fast and furious when it comes”, says my half-Greek friend. The management at Hotel Euro-zone will be hoping he is wrong.
Joseph Mariathasan is a contributing editor at IPE