Quiet Emergency

23/11/2012 at 4:08 pm

Beginning with Hurricane Sandy and the elections in the US, this has been an eventful a month as ever. We saw how markets started to fall over fears of the “fiscal cliff”. These fears were not new, exactly – just forgotten. Incredibly, one of the biggest fears of recent times seems to have become largely forgotten in their place.

The Greek crisis is alive and well. It hasn’t been making the same sorts of headlines; but there has been a two-day general strike, a knife-edge budget vote, and a new round of negotiations with and infighting between the country’s major creditors. It is still unclear exactly what the outcome of all this will be, but it is obvious that Greece’s emergency – while it may be in hiding – has not gone away.

So far, however, the world is taking all this in its stride. In fact, Greek bond prices have climbed since the beginning of the month, as has the Athens stock market, which has now risen by almost 25% since the start of the year.

As negotiations continue, what opinion there remains on the situation is divided. One Greek paper yesterday carried the headline, “Greece And Lenders Edge Towards Compromise On Debt“. The piece saw the remaining obstacles and adjustments as being relatively immaterial. On the other hand, the Wall Street Journal maintains that “Greece’s Only Option Is Default“. Here the view is that the economy is irrevocably shattered, society has plunged into savagery and despair, and that only another debt write off can salvage things.

It is impossible to decide with any confidence which of these views is correct as the facts of the situation are unchanged. Nonetheless: local markets are clearly much more sanguine than they have been at any time for a year or more, and that is not something which should be dismissed out of hand. And improvements to projections for the Greek budget over the next couple of years were a material bright spot in an otherwise gloomy EU Commission autumn forecast.

It was Aesop who gave us the phrase “familiarity breeds contempt” in one of his fables. It does seem applicable to the reaction which has been displayed to recent events in Greece so far. The fable is a short one and worth quoting:

When first the Fox saw the Lion he was terribly frightened, and ran away and hid himself in the wood. Next time however he came near the King of Beasts he stopped at a safe distance and watched him pass by. The third time they came near one another the Fox went straight up to the Lion and passed the time of day with him, asking him how his family were, and when he should have the pleasure of seeing him again; then turning his tail, he parted from the Lion without much ceremony. FAMILIARITY BREEDS CONTEMPT.

In the tale the fox gets away with it, which is of course not always the case with Aesop. We must hope for the same outcome with respect to his modern-day countrymen. It would be a pity for the world to have conquered its fear only to be eaten by the lion after all.

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