Greece: Panic on the Aegean

By Peter Atwater

The conventional wisdom following the May Greek parliamentary elections has been that the Greeks are unified in their opposition to further austerity and bailouts.  

While that may be true, if that is all that global policymakers and capital markets participants took away from the first round of Greek elections, they woefully misunderstand what is occurring in Greece.

After the three failed formal attempts two weeks ago to form a new Greek government, Reuters reporter Dina Kyriakidou offered this assessment of the last ditch effort to form a broad-based coalition:

The final collapse of talks to forge a new Greek government triggered repeat elections and fears of a chaotic exit from the euro zone. But it is the manner of that collapse, the acrimony and rancor cited by Karolos Papoulias, that bodes ill for efforts after June polls to pull Greece back from the brink.  

‘It was a complete madhouse,’ a source at the socialist PASOK party told Reuters after their leader, Evangelos Venizelos, returned from the May 17 showdown. 'The discussion was unbelievable.'


Political collapse, acrimony and rancor are all natural accompaniments of severe declines in social mood.    

As a socionomist, I believe that social mood (our collective level of confidence) drives our decision making.  During periods of rising mood (as can be easily measured by major stock market indices) we consistently exhibit one set of clear behaviors and during periods of falling moods, the nature of our behaviors reverses.  These behaviors cut across all aspects of our lives: economically, socially, politically and even culturally.  

At the risk of oversimplification, at our peaks in social mood, we consistently display behaviors that reflect “us, everywhere, forever” decision making patterns.  At the bottom it is “me, here, now”. As individuals and societies, we routinely cycle from one end of this extreme to the other.  

Plotting the policy decisions of post-war Europe against the major European stock indices, one sees a clear pattern of ever increasing “us, everywhere, forever” behaviors as greater and greater economic integration gained momentum and as social mood and confidence rose.  That the euro was introduced into circulation as the markets and confidence were peaking is not a coincidence.  Few actions better symbolize “us, everywhere, forever” than a permanent, unifying single currency.  

But rising social mood also brings with it clear political behavioral changes [Figure 1].  During periods of rising mood, voters move to the center.  Consensus and bipartisanship mount.  We elect (and re-elect) “statesmen.”

During periods of falling mood, however, our increasingly “me, here, now” behaviors pull us away from the center, as what is good for “us” is replaced by what is good for “me” (Figure 2).  Political divisiveness and partisanship rise, and we vote out “statesmen” as we seek “warriors” who will fight for our specific interests. It is no surprise that long-time moderates like Senator Richard Lugar here in the U.S. are being forced out. They are rising mood, not falling mood, politicians.

But the May Greek elections tell a more troubling story.  Looking at the dispersion of votes from the extreme far left to the extreme far right, Greeks did not just move away from the center, they fled it (Figure 3).  Like a panicked herd, they went to wherever they believed they could find safety—to where their specific individual “me, here, now” interests could be met.

To conclude from the May elections that Greeks are unified in their opposition to austerity completely is to miss the message.  Greeks are unified in fear—the consequence of an extremely low level of social mood or confidence.  And, not surprisingly, we are now seeing a fleeing panic at Greek banks similar to the one we saw at voting booths.  

Greece isn’t failing, but collapsing economically, politically and socially. The country is a panicked, scattering herd.  

For European and global policymakers, the lack of a stable Greek political center poses enormous challenges—ones not likely to abate any time soon.  History suggests that during periods of low social mood governments re-form at an extreme.  

And Greece is hardly “unique.”  

Global policymakers and market participants would be wise to pay very close attention to the stock market indices of Europe. Further market declines in Spain, Ireland, Portugal and Italy are almost certain to exacerbate similar political and social divides (not to mention further pronounced economic weakness). And I’d not ignore the markets in Germany, France and other northern European countries.  Generosity is far more dependent on the confidence of the donor than the need of the recipient.  A falling DAX will severely challenge German benevolence.  



Peter Atwater is President of Financial Insyghts LLC., a consulting firm to money managers, corporations, and policymakers on how social mood affects decision making.  He is the author of Moods and Markets, to be published in August by the FT Press as well as a regular contributor to    

  [Image courtesy of stockfoto /]   

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