A Collective Moutza from the Greeks

3p is proud to partner with the Presidio Graduate School’s Macroeconomics course on a blogging series about “the economics of sustainability.” This post is part of that series. To follow along, please click here. [caption id="attachment_85974" align="alignright" width="275" caption="Demonstrators in front of the Greek Parliament give a collective moutza on June 29, 2011. (Photo credit: ggia, Wikimedia Commons)"][/caption] By James Ince-Scott The taxi drivers in Athens aren't happy. Neither are the café owners or the workers at the state-owned power monopoly. Its plain Greece's 700,000 government civil servants are also upset, not to mention the multitudes of retirees younger than 55. The bruising cuts and taxes being foisted on them, politely called “austerity measures,” are being used to combat what is now famously called the Greek Debt Crisis. The citizens of Greece say they are just too much to bear. And so they instinctively respond to it all with a “moutza.” A moutza? Yes – what better way to express your simple and utter disgust than with this uniquely Greek hand gesture? The moutza is something the street protesters in Greece are teaching the rest of the world. You give a moutza like you are casting a curse. You extend your arm towards an offender with your five fingers spread out, almost like you’re pushing air at them, and with it you intone the gruff interjection "να!" (pronounced "nah!"), meaning "here!" or "here you go!" To see the moutza in action, click here. Moutzos is the old Greek word for cinder and refers to the practice of spreading ash on a criminal offender’s face to enhance their shame. All the grief and frustration and moutzas emanating from Athens today are in response to what is just beginning to hit home. Tens of thousands will lose their jobs, despite a 16% unemployment rate. And hundreds of thousands will likely lose theirs in the next few years. Those fortunate enough to stay working say the belt-tightening and additional taxes will amount to the equivalent loss of one month's pay for an average family – tough medicine to take if you are living at the margins. With the country already reeling in the third year of a recession, these additional measures will likely lead to a further contraction of the Greek economy and make it more difficult for the Greek government to collect the revenue it needs. An unknown factor is how impactful the protests and strikes triggered by this latest package of cuts and taxes will be. The first indications will come soon as the effects of a national strike by government workers in early October will be followed by a 24-hour general strike on the 19th by the country's two largest unions. The Germans, who are largely funding the massive bailout, feel the measures are necessary, but they still may not be enough. Greece appears to be sliding into default. However, given this seemingly endless series of ever harsher steps, what are the Greeks to do? Where is their voice in all this, except on the streets? The 17 nations that make up the Eurozone are bound together in an economic and monetary union that suffers from what Josef Joffe, editor of the German newspaper Die Zeit, calls a "birth defect" in an NPR interview. By this he means that since its inception roughly a decade ago, the eurozone has been a monetary union without any corresponding fiscal union. Sure, there is a European Central Bank that sets the monetary policy for the eurozone with the heads of the national central banks of the eurozone member states, but there isn't a common European government that can decide upon taxes and expenditures for all 17 states in common. This may be the fatal flaw in the euro system as it exists today. Think of the US. In this country there is the Federal Reserve Bank that establishes the nation's monetary policy traditionally by raising or lowering the short-term federal funds interest rate (although I'll concede that doesn't seem to be so much of a tool lately). But it is the US Congress that passes taxes and decides on spending bills for the entire country; indeed it alone sets our fiscal policy, with input and influence from the President. Where is the European equivalent? It doesn't exist. Instead each eurozone country decides what to tax, what amount to budget and where, when and how to spend it. It is only recently that these countries even deigned to let their fellow eurozone members look at each other’s budgets, a highly controversial part of the European Stability Mechanism (ESM) reforms. Beyond that, each country also sets and enforces its own laws concerning the actual collection of taxes and the deterrence of corruption. In the case of Greece, many believe corruption and commonly-practiced tax avoidance has exacerbated the Crisis. The fiscal choices made by Greece were largely based on national and cultural priorities. But if this less-than-a-decade-old experiment with a single currency is to continue to function, the whole of the membership of the eurozone needs to be able to make more informed fiscal choices based on the economic outlook and goals of the entire region. What’s transpiring in Greece is almost a distorted case of taxation without representation – the eurozone’s monetary policy is forcing a de facto shift in bitter fiscal policy on the cradle of democracy from outside. This is hardly conducive to unity. The Crisis is raising a larger question – does the union split up and devolve into something resembling the segregated Europe of the past, or do they take this shock as an opportunity to strengthen their ties and deliberately take steps to become closer to a complete and cooperative system, a sort of United States of Europe? Could the moutzas and misery of the Greeks be signaling the end of the euro, or a new beginning? _______________________________________ James Ince-Scott is an MBA candidate at Presidio Graduate School. He works as an Environmental Health & Safety Manager for a prominent eyewear manufacturer in Southern California. *** Want to learn more about Presidio and this project? Click here.