Posted by: Chris | June 12, 2012

The Runs of August

98 years almost to the day after Archduke Ferdinand’s assassination , another march of folly portends thanks to some damned foolish thing in the Balkans:

On June 17, Greece faces its second national elections in six weeks. Alexis Tsipras, the 37-year-old leader of Syriza who wants to reject the terms of the EU bailout while remaining in the euro, has a serious shot of topping the polls. To some observers, defaulting on debt while staying in the Euro is a contradiction, but there is a clear strategic logic to Tsipras’s position.

Tsipras believes his trump card is that Greece is too big to fail. So, rather than touting a graceful way out of the euro, he wants the prospect of a Greek exit to be as horrific and contagious as possible — an economic cataclysm that would drag everyone else down, as well. Essentially, he is arguing that Greece and Germany exist in a state of Mutual Assured Destruction: Germany will never pull the plug on Greece regardless of what it does because the risk to itself is just too high. And if Tsipras can convince the Greek people of this, they may vote him in — they’d get to have their cake and eat it too…

This is why after warning that a Greek exit from the eurozone could cause a global economic collapse, European officials are now suggesting it might not be so bad. German Finance Minister Wolfgang Schauble said“protective mechanisms” mean “the risks of contagion for other countries of the euro zone have been reduced and the euro zone as a whole has become more resistant.” EU Economic and Monetary Commissioner Olli Rehn saidthat an exit would hurt Greece, but that the rest of Europe is “certainly more resilient” to a Greek exit than it was two years ago when the bloc would have been “massively underprepared.”

Don’t be fooled by these reassuring words. Fears of contagion are as high as ever but, to prevent a Greek exit, European leaders must pretend it doesn’t matter very much for anyone but the Greeks. So now they are going over Tsipras’s head to tell the Greek people to tell their leaders that if they reject the bailout they will be forced from the euro, which will only hurt Greece. If the rest of Europe can convince Greeks of this, they may decide not to risk a Tsipras-led government.

In the wake of WWI, observers blamed everything from the insulation of the political institutions to the rigidity of the military schedules for the previous years’ bloodshed.  But it can as simple as states or leaders with divergent interests myopically pursuing those interests toward a mutually destructive equilibrium.

By the by,  if you have not read The Guns of August, you should endeavor to rectify that.  It’s one of the best written nonfiction books you will encounter and is short enough (and captivating enough) to plow through in a weekend.

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