On the embassy

This week things finally heated up. Rupert Murdoch's empire - and David Cameron's reputation - both came under increasing pressure; Angela Merkel and Nicolas Sarkozy decided on a managed Greek default; and meanwhile, in the Agora, it just got hotter. After a mild summer, it finally got as hot as I dreaded when I signed up for this dig, pushing past the 40 degree mark in the sunlight. Luckily, this year a grand tradition was revived, in which all our excavators are invited to a party at the pool in the official residence of the American Ambassador to Greece. We lazed around in the cool lawn next to the well-tended garden and the tennis court; beyond the gates, a wave of debt-inspired distrust was spreading outward from Athens over all the capitals of Europe.

It's hard for me to see how the story of phone-tapping at The News of the World has been receiving pride of place in the British press in the past few days. One part of an enormous media conglomerate broke the law; a Leader of the Conservative Party once hired a former editor of that newspaper; it doesn't seem to follow from these facts that it is likely or even desirable that the multi-national be disbanded or that the Prime Minister be forced to resign. All the same, the persistence and aggressiveness of the recent attacks on Cameron have reminded me how hated he is by many of my English friends. Hated for many reasons - but only one is relevant here, and that is the most important.

Many people despise the current conservative government because among its first acts in power was to enact a sweeping program of austerity measures, cutting or freezing the budgets of virtually all administrative departments (though health was ring-fenced, and overseas aid was actually increased). Here in Athens, a lot of people hate the Socialist government of George Papandreou for identical reasons: austerity measures mean painful cuts to valuable government programs. Many of them come to Syntagma to demonstrate, hurling slogans across the road at Parliament. It might seem hard to disagree with them. And yet the austerity measures pushed through by Cameron and Papandreou, Berlusconi and Zapatero - politicians from both sides of the ideological divide - make sense. They may not be right, or even the best option, but they make sense.

I don't think we need Aristotle to tell us why such policies make sense, but I'm a classicist so I'll bring him in. 'Increasing income is one way to become wealthier', this Athens-based commentator tweeted through time, 'Another is to reduce expenditure'. This kind of economics - from the Greek oikonomia, household management - is understandable to anyone. If you're living beyond your means, you have two choices: get more money or spend less.

Of course, economics at the national level is in some ways more complicated. One complication is added by the notion that the government can stimulate the economy during economic downturns by injecting liquidity into the market. Such policies, championed by the British economist Keynes, have become very popular of late, and for good reasons: Roosevelt's use of the idea helped get America out of the Great Depression. But in the most recent round of global recessions we were reminded of an inconvenient truth: governments, like individuals, only have so much money, and they can only borrow so much more before others start to wonder whether they will ever pay it back.

The countries of the rich west, after the first dip in the current crisis, that sparked by sub-prime mortgages and fueled by the collapse of Lehmann Brothers, decided to spend large sums of money stimulating their economies. That was reasonable enough. But now someone needs to pay for the cost of the stimulus packages, as well as all the admirable government programs that various nations have been running. And we are back to our basic law of household management: you can have more money by getting more, or spending less.

The Conservatives in Britain and Italy, and the Socialists in Greece and Spain, have opted for the second option: spending less. Their policies make sense; but they are not necessarily the right option, or even the best option. The other option - to get more money - may be better. Getting more money would mean raising taxes, though in practice a lot of the money could be obtained by levying higher taxes on the super rich and collecting them effectively. The British government has retained a temporary 50% top tax bracket, but even Labour has been shy to suggest tax raises as a solution to the nation's financial woes. No wonder - what politician in any Western democracy isn't aware that raising taxes is electoral suicide?

As simple as the principles may be, the structure of global finance has become almost incomprehensibly complex. A runny nose is one part of the system quickly leads to ful-blown epidemic a continent away. If European leaders wanted to avoid default, they would have had to take measures years ago either to increase income, or reduce expenditure. Instead, the single currency created a single interest rate for Germany and Greece, meaning that Greeks were offered the temptation of easy loans that were suitable only to central European manufacturers. They took them - like the Irish, the Spanish, and others - and now they are trapped with interest rates to high for them to borrow their way out of a mess.

After a day at the ambassador's house we wandered back to

Kolonaki and stopped for gelato at a sweet shop. My friend lent me a Euro - we get paid tomorrow, and I was into my last lefta. I looked at the owl and olive-branch motif on the reverse of the coin, one of the symbols chosen by the Greeks for the common currency. It goes back to the sixth century BC, when the Athenians chose it as a national symbol to replace the coats of arms that powerful aristocrats had placed on previous coins. The olive is for peace, appropriate for the peace that the Union, so many European think, has secured for their generation. The owl, of course, is Athena, goddess of wisdom and foresight. I flipped the coin in my hand, wondering if I was witnessing the fading of a dream - a noble one, perhaps, but a dream nonetheless.