Waiting for the next Greek crisis: Don Pittis

Don't be fooled. If Greece is on its way back tonormal, as many reports are saying after the latest deal with Europe, it may not be the kindof normalmost of us and most financial marketshave been hoping for.

With banks reopening andGermany promising debt relief, global markets have heaved a collective sigh of relief andare kickinginto "crisis-averted" mode. Gold and oil arefalling. Stocks, bondsand the euro are stabilizing.

• Greece crisis: Banks reopen as government eyes return to normal

"We are entering a new stage which we all hope will be one of normality," said Louka Katseli, head of the Greek bank association.

New normal

If this is normality, it maybe a special Greek kind that involves serial bouts of crisis. Whilethe current deal could calm things down for a while, the European crisis surrounding Greece is far fromover.

It is revealing that Alexis Tsipras, the socialist prime minister so widely blamed for precipitating the latest battle over Greek austerity, has acceded to all of Europe's demands. That's because the election of Tsipras was not a cause of the most recent dispute, but a symptom.

The real cause is a clash between two powerful institutions that normally only makeEurope stronger: Finance anddemocracy.

Finance depends on people making agreements over money and, for the most part,keeping them.Democracy represents the will of the people.

When things are going well, the two can work inharmony. Wise electorates vote inprudent governments. Governments are careful to share the wealth to avoid defeat.But as we saw last Januarydemocracydoes not deal well with generalized social pain.

Falling expectations

It is widely theorized that revolution springs notfrom grinding and relentless poverty, but from thwarted expectations. And at their best elections are theprocess of gradual revolution.

Certainly the expectations fora majority of Greeks are about to get decidedly worse. Household articlesfrom food to condomswill get roughly 10 per cent more expensive as value-added tax (VAT) included in the basic price of goodsrises from 13 to 23percent.

For better-off people, that will mean goods cost more. For poorer people who spend everything they earn, itmeans getting 10 per cent less stuff. Meanwhile, retired people face cuts in their pensions.

And those extra taxes will not go to make the country's economy stronger. For the most part that moneywill flow out of Greece. Because instead of debt forgiveness, the "debt relief" currently proposed by rich countries will merely extend Greek loans, and the taxes to pay the interest on those loans,far into the future.

Under austerity, it is normal for things to get worse before they get better. But unlike in other countries such asIreland and Portugal that have accepted austerity, for Greeks the light at the end of the tunnel seemsdim.

Endless austerity?

Unemployment, already at 25 per cent could very wellrise. Property values are still falling.Wages are unlikely to keep up with rising prices, leading to further labour unrest. The money and people thatleft the country during its long crisis are unlikely to return.

This week, the Greek parliament is expected to vote for even more austerity for its people. And while Greeks have generally backed their current prime minister, that could change after the new round of cuts start to bite.

Credited with inventing democracy in ancient times, since the practice was reintroduced in the late 1800s, the modern Greek state has had a volatile history. Leftist governments have alternated with those of the right.Democracies have alternated with militarygovernments.

So long as Greece remains a part of the European Union, it is hard to see democracy being overthrown again.But there is a strong likelihood thatdemocracy will once again rebel at what feels like endless austerity.It will mean that,like all the supposed solutions before it, the current fix for Greece is a temporary patch-up job, not a resolution. We should prepare for the next chapter.

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