Although in the past one could not easily make a connection between geopolitics and finance, in today’s age of trade interdependency, regional economic blocks, and global financial policemen (i.e. World Bank & IMF), it’s easier to connect the dots and see how a large scale financial disaster could be detrimental to national security issues, especially for a small country like Greece.

The financial crisis in Greece is the result of many years of public finance mismanagement, excessive borrowing, imbalanced budgets and incorrect (or even fraudulent) reporting of deficit, inflation and GDP numbers. The fact that the crisis is only manifesting itself in the last few months is purely a function of Warren Buffet’s famous quote “Only when the tide goes out, you find out who is swimming naked”. In other words, while the global economy was robust, all the symptoms of the disease had not made themselves obvious. Now that lending standards have been raised and sovereign debt has come under scrutiny, the degree of fiscal rottenness is obvious and is putting a visible strain on both the government and the people.

At this stage, the debate centers around the likelihood of Greece defaulting on its sovereign debt and as a result being bailed out by its rich neighbors and EU partners, namely Germany & France. With Greek Government bonds trading at 400 basis points above the “risk-free” German Bunds (the highest spread since 1999 when Greece entered the Eurozone) and with the ECB refusing to take Greek bonds as collateral, the markets are betting that a bailout of the country might eventually be inevitable.

Prime Minister George Papandreou insists that the austerity measures that are going to be implemented will curtail the deficit to only 3% by the end of 2013, down from a current 12.7% for 2009 and control the ballooning of the national debt that is currently standing at 113% of GDP. Comparatively, the Stability and Convergence Pact also known as the Maastricht Treaty of 1992 calls for debt-to-GDP ratios not exceeding 60%. The official word from the Greek Government is that Greece will not need a bailout and it will succeed in getting its fiscal house in order.

We sure all hope this will be the case. The alternative can have devastating results not only on the financial stability of the country but also on the Greek government’s ability to protect its national interests.

Several examples of the past have shown how financial demise can lead to political compromises on the world stage. Past experiences from Latin America, Asia and Africa show that the IMF and the World Bank do not restructure debts without certain concessions. In most cases, because the conceding country is already in dire financial strains, such compromises are either in the form of long term concession of natural resources or a political compromise to the ones who are doing the bailout.

Suharto’s Indonesia after the 1997 Asian Crisis is a prime example where the country had to concede opening up its vast natural resources to foreign corporations and abide by foreign-imposed austerity measures that perpetuated the impoverishment of the general population. Noted that I am not a fan of General Suharto, whose policies were mired in cronyism and corruption but the point is that the people suffered and the country had to make concessions at a national level as a result of the bailout. Also, whether one agrees with the East Timor independence movement or not, the UN-mandate was also a result of Indonesia going to the big powers with an extended hand and agreeing to East Timor’s self-determination in exchange.

A similar scenario took place in Brazil and Argentina as a result of back-to-back bailouts in the late 1990s and early 2000s. Currency devaluation & privatization of state-owned enterprises to foreign shareholders compromised national interests, while foreign banks and corporations made out like bandits.

But also in Greece itself, after the famous “Δυστυχώς επτωχεύσαμεν” of Harilaos Trikouplis in 1893, the Diligiannis Government would restructure Greece’s sovereign debt with its foreign lenders under larcenous terms. The result would be the devastating military loss against the Ottoman Empire in the war of 1897 and the submission of Greece to the “International Economic Control” (ΔΟΕ) which collected revenue from state monopolies in matches, salt & petroleum as well as the Customs revenues to pay down debt. ΔΟΕ lasted until 1978!

One could argue that the circumstances of Greece’s global position today would warrantee different results, in the event of default or bailout. Greece is now a part of the EU, the Eurozone and part of the developed world. That is after all why it’s number one focus when it comes to sovereign debt monitoring: It would be the first developed country to default in recent history.

Nevertheless, Greece remains a small country at the edge of Europe with very few natural resources and a small population. Its contribution to the EU’s GDP and production capacity is limited and its potential default will not have a permanent effect on the Euro itself as a currency. Semantics do not warrantee different treatment and if one asks for a handout, the powers to be will ask for concessions. Greece might be a member of the EU but the world has not changed that much since Machiavelli wrote “The Prince”.

Making matters worse, Greece is poor in natural resources of value to large multinationals and its tax collection system is somewhat broken. And this is where the danger to issues of Greece’s National Security gets entangled in the equation. As a result of a potential bailout, the government might need to make political concessions as part of a back room deal.

Only recently in 2008 in defense of its national interest, did Greece veto the entry of FYROM into NATO contrary to the wishes of the Bush Administration. Turkey is calling for a turning of the illegal status quo in Cyprus into a permanent solution where the Northern Occupied part of Cyprus would acquire some legitimacy under Turkey’s control. Concurrently, there is increased pressure within and outside of NATO with regards to the air regime in the Aegean, pressure emanating from Turkey’s attempts to share the airspace.

The US (and to some extent the European Powers) have an obvious geopolitical objective in incorporating FYROM into NATO and in accommodating Turkey (an important regional ally in the Eastern Mediterranean and the 17th largest economy in the world) with its demands.

Even though Greece is an important US ally, a member of the European Union, and is rightfully defending its positions based on historical truths and international treaties, it is still standing between the Great Powers and some of their pure geopolitical interests.

Unfortunately, a country asking for a handout will have a hard time keeping its head up and standing firm on its positions in the face of mounting international pressure.

It is therefore clear that the new government and the people of Greece need to get their fiscal house in order. It’s not just money at stake but also national security. The fiscal crisis could be a much more troubling enemy than the Turkish military machine.

Views and opinions expressed here do not necessarily reflect the views and opinions of AHC Board members.
Have a comment or question? - Contact the author

PLEASE SUPPORT OUR BUSINESS NETWORK MEMBERS
	Buy Earth Friendly Products Detergents & Soap that are kind to clothes, dishes and the environment