Here, carved into the southern slope of the Acropolis, lie the lovely white ruins of an ancient, acoustically perfect, open-air amphitheater: the Theater of Dionysus . This gorgeous site witnessed the birth of Greek tragedy in the fifth century B.C., when playwrights such as Sophocles and Aeschylus crafted theatrical adaptations of popular, well-known Greek myths.
Back then, there was no fear of spoilers; dramatic irony was rampant, meaning audiences knew well in advance any plot’s twists, turns and dreadful, eye-gouging denouements long before they happened. Somehow knowing that Oedipus was doomed to kill his dad and marry his mom inflated the play’s suspense rather than neutralized it.
Two-and-a-half millennia later, this dramatic legacy lives on. Because it’s hard, after all, to watch the ongoing, can-kicking Greek debt tragedy and not know deep down how it will end: Despite optimistic denials by our obstinate protagonists, a default of some kind is inevitable. The only question is when and how orderly it will be.
Greece owes the International Monetary Fund 1.6 billion euros (about $1.8 billion) next week, and there’s no way in Hades that it will be able to pay. Greek leadership has been meeting and fighting and posturing alongside IMF officials and euro zone finance ministers to try to come up with a new loan to pay this fast-approaching bill. But so far, the draconian conditions the creditors want before injecting yet more funds into their troubled southern neighbor look nothing like the conditions the beleaguered and broke Greek populace is willing to endure.
Even if there is an agreement this week that allows Greece, through yet another loan, to make its June 30 IMF installment, a major restructuring or default has to be in the offing soon.
Consider just a few reasons this is true.
For one, as Harvard economist and financial crisis scholar Carmen Reinhart notes, the private and public sectors are already behaving as if a default and exit from the euro are imminent, with actions that could well become self-fulfilling. Greeks are hoarding cash and sending their savings abroad; by a conservative estimate, Greek bank deposits have fallen by about 45 percent since their peak in 2009. Recent talk of capital controls and bank closures has only accelerated this bank run (or, as some have dubbed it, a “bank jog”), making the banking sector weaker, and, by the day, even more in need of European assistance. Last week alone, Greeks withdrew an estimated 4 billion euros. For those keeping track, that’s two-and-a-half times what the country owes the IMF at the end of the month.
The Greeks are not exactly known for paying their debts or taxes in a timely fashion, and such arrears have grown as fears of a government default mount. About half of bank loans are now nonperforming, with the share rising to more than three-quarters when credit card debt is included. Many Greeks have stopped paying their taxes (to the extent that they paid them at all). And why should they pay them? It makes little sense to hand over money to a government that’s on the verge of reneging on its own payments; better to keep the dough and use these euros when everything inevitably sells at fire-sale new-drachma prices later on.
The government, meanwhile, has been financing itself by not paying its bills, which Reinhart notes strongly resembles events preceding the 1998 Russian default and the 2001 Argentine default. Foreshadowing, if you will.
Plus, next week’s IMF payment of 1.6 billion euros is only the first of Greece’s colossal summertime bills. The amount coming due in July is about 6.9 billion euros; in August, 5.6 billion; and September, another 6.1 billion. These figures are, Reinhart points out, several times larger than current government cash balances.
Severe austerity measures have already left the economy — like that Dionysian theater — in ruins, lopping off a quarter of Greece’s gross domestic product. Further tax hikes and spending cuts, as the country’s creditors demand, will only further reduce the government’s ability to pay. The troika of the European Commission, European Central Bank and IMF can keep pretending that this crisis will end with the profligate Greeks’ bills remitted in full, but there’s just no possible way that this can happen without a massive writedown and restructuring.
That’s their fate, even if they don’t know it yet.