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Greece was the civilization where drama and farce were established as theatric forms. The negotiations with the Eurozone were a drama for the Greek people, and a farce for the European leaders.
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Greece was the civilization where drama and farce were established as theatric forms. The negotiations with the Eurozone were a drama for the Greek people, and a farce for the European leaders. In fact, it is a drama for all, and the end of the most radical dream after the Second World War. Let us see why. It will be a little long, but without some history it is not possible to understand how we come to this situation.
Media have been presenting the German-led diktat to Greece, as a cultural difference, between the hard working ant and the irresponsible cigarra, from the Esope tales, plus the labor ethics of the protestant north versus catholic in the south (Greek are orthodox). Those are realities, but this leaves out important truths.
First of all, let us recall that the euro was a political design, not an economic project. It came out from an agreement basically between Mitterand and Kohl. Those afraid of the power from a reunified Germany (I like so much Germany that I prefer to have two, quipped the French President), did ask the German chancellor to abandon the very strong German Mark, and accept a European common currency, so that Germany destiny would be forever integrated with the other European countries. Kohl, who was like all leaders of the time genuinely (except Thatcher) committed to European integration, did accept the idea, and even that the first Governor of the European Central Bank would not be a German, as its electors would have loved. For Germans to abandon the German Mark was a strong psychological sacrifice, after their painful experiences of financial instability. Kohl did act as a European statesman, at great personal cost with his electorate: something today simply unimaginable.
The design of the euro was clearly incomplete, without fiscal unity and further financial integration. But at the time, everybody thought that the euro would automatically accelerate the European integration. The Berlin Wall came down just a year before, in 1989, and nobody could foresee how the end of the communist threat would change politics within the capitalist world.
In the years after the introduction of the euro (2012), a larger and stronger Germany did increase its strength, thanks also to market reforms done under Schroeder, which brought some pain to the poorest Germans. This has left the country with the conviction that they made their share of sacrifices, and austerity did work, and was the receipt for crisis. German become a net exporter inside the European Union, and used its surplus to further expand internally. Germans see those surplus as a result of their sacrifices and work, and do not look with sympathy to countries with deficit. The common street comment is: why my money should go to people who were not able to run their country?
It is here that you can see the difference between a statesman and a politician. Merkel (who by the way did push out of politics Kohl, who was her mentor), never tried to educate her electors to a European vision. So few Germans understand that their wealth is coming in great part from the European consumers (who are also European citizens). Their attitude with the bailout of miniscule Cyprus was of total intransigence. And there was never any effort from the German authorities to explain their citizens that they were in the same boat.
Ii is fair to stress that Merkel is by all means not alone in riding national feelings. The same is happening all over Europe. The times of De Gasperi, Adenauer, Schuman, is over. In the EU we have gone from Delors to Juncker. Vision and idealism have given space to national interest and the view of the EU as a cow to milk. The unspoken drive for the enlargement of the European Union to 28 countries has been: money.
The euro has become therefore a straitjacket for the countries with deficit, and a tool of power for the countries with surplus as the Nobel Price Paul Krugman wrote in the New York Times, calling the euro the Roach Motel, where after you enter you cannot escape. Greece is 2% of the European GNP. But the same mechanism that has until now made impossible for a region of 450 million people to agree on how receive 40.000 refugees, many from countries like Syria and Libya, in which destruction Europe has a direct responsibility, has been playing with Greece.
The creditor’s countries insist that Greece has already received two bailouts: one in 2010 for 110 billion euro, on the condition that it would eliminate is deficit, and another in 2012, for 220 billion. What has been largely unreported is that those loans were disbursed under a strict control of the BCE, the IMF and the EU, who did make sure that 80% would go directly to the European banks who did invest before in Greek bonds, because they were the most profitable. German and French banks were the most exposed. Only 20% went into the Greek economy. And the austerity which come with the loans, has brought a social and economic devastation. The other countries which did also get a bailout with the austerity program attached (Spain, Portugal and Ireland) have lost 7% of their GNP in the crisis. Greece, 26% of the GNP. Salaries have gone down by 14%. Greece is the only country of the EU were the minimum salary has decreased. Unemployment is at 26% (youth at 50%). Over 75% of the unemployed has been so for over a year. According to OECD, one person in five cannot afford a meal. Homeless have tripled in the last two years. Minors in poverty are now 40.5%.
There is no need to be a Nobel Price like Krugman and Stiglitz to observe that in a country with little industrialization, a bloated bureaucracy and poor productivity, to correct years of mismanagement and corruption, tax evasion and an inflated welfare, would have required a progressive and complex adjustment. The austerity receipt was that in two years from 2010 to 2012, the budget should be in parity. In the last five years, Greece has cut expenses and increased taxes for 30% of the GNP. No other European country has been able to do this. But as you study in the first year at university at economic studies, the GNP is made by four items: public investments, which have disappeared. Surplus in trade, which was never a Greek condition. Investments in research, education, health, sectors which have been brought back by several decades .And finally, by citizens spending, which has come to a halt. How just by cutting expenses and salaries, a budget could go even? How you can solve fiscal evasion in a few months? It is not a coincidence that in five years six parties have been in government and the country has been led by four prime ministers (five, if you include an elected caretaker).
When Greece did join the euro, everybody knew that their statistics were doubtful. The BCE governor, the Dutch Duisenberg, did even sound an official alarm. But those were fat cow’s times. And Greece was the cradle of Europe, and a small economy, so nobody did care. Then, in 2004, the center-right wing Karamanlis come to power, And found out that the budget deficit was not of 1.5, but 8.3%., and decided to keep it secret, as the Olympic Games were returning to Greece, where they were borne, in that August. But the budget of course become unsustainable, and in 2008 the country’s tax collection (which was already a disaster, as it left out the rich and reached only those with a fix salary), collapsed. The hole in the budget become too large to hide. In 2009 the country credit rating was downgraded, first by Fitch and then by Moody’s. The cost of borrowing spiked, and European banks found out that there Greek titles were losing value day by day.
So, in 2010 a first loan was given, under the absurd condition to bring swiftly the budget into balance. The cuts in all sectors of the country brought huge demonstrations and in just the 2011 three governments did follow. The conservative Papandreou accepted in 2012 a second loan, with the same conditions of austerity. And of course, the situation became even more untenable, as the social disaster did aggravate.
Now it is interesting to read Tim Geithner memories, “Stress Test, Reflections on financial crisis”, which come out in 2014. Geithner was Secretary of Treasury in the first Obama government. United States recovery from the crisis is due to the fact that instead of taking the path of austerity took the path of growth, albeit partly. And the American government has been always trying to convince the Europeans to abandon their fixation with austerity. So Geithner, at the time of the second bailout, went to visit the minister of finance of Germany, Schauble, the champion of the austerity economic theory (by the way, he is a lawyer, not an economist, so he knows more about rules than about economy).But he found Schauble convinced that Greece had to go, as a message for the other debtor countries, especially France and Italy. His point was that there was a need to redefine the European design, by making it more homogenous and under strict common rules. In other words, instead of a European Germany, as was Adenauer, Kohl, Schmidt vision, a German Europe. He was totally opposed to the second bailout, as he did not trust the Greeks as able to bring their budget in parity. He was overruled by Merkel with great difficulty.
In September 2014, the then Prime Minister Samaras flew to Bonn and appealed to Merkel. He explained that the unpopular economic measures Greece was required to enact, were feeding the rise of a radical left wing party, Syriza. Merkel totally ignored him, and advised him to go ahead with the reforms right away. In January Alexis Tsipras was elected by an exasperate electorate.
Now a lot has been written on how Syriza Minister of Finance, Varoufakis, as a Marxist economist did confront all his European colleagues. How the referendum called by Tsipras on the Euro was considered a mistake by Merkel and the other creditors. How the referendum was held in a campaign of fear, with appeals to the Greek voters from the President of the European Commission, Juncker, to the President of the Eurogroup, Dissenblaum, to the vice premier of Germany Gabriel, and so on: in other words, from conservative to social democrats. The BCE did close the flow of money to Greece, contrary to its rules, to aggravate the climate of fear. What went unnoticed was the political reading of the referendum and the arrival of Tsipras, which become more relevant than Greece itself.
The world spokesman of the economic circles is, by general consensus, the Wall Street Journal. Why the New York Times wrote an editorial to criticize the austerity fixation of Europe and the selfish role of Germany, the WSJ on the 6th of July wrote an editorial commenting the referendum: better a euro exit than the risk of anti-reform political contagion. The editorial said that unless the political contagion will not be stopped: “Parties of the left in Italy, Portugal and Spain will have a new argument to make against the reforms that have begun to show some progress…. This could doom the Spanish center-right government of Mariano Rajoy as it goes to the polls later this year”. On the 7th another editorial indicated that a victory of Tsipras would strengthen Podemos in Spain, and that the left wing party Sinn Fein in Ireland, has also started to use Tsipras for their internal campaign. And on the 8th, the authoritative Holman Jenkins J. said it openly: “Portugal, Italy and Spain, core European welfare states, have already made the same transition to dependence on external other people money “to uphold their welfare systems”. Therefore, the defense of Greece from a usually subjugated France, is obvious: is a welfare state defending the European welfare system against the reforms that the neoliberal system requires. And Jochen Buttner, the political editor of Die Zeit, the weekly conservative, repeats the same arguments: Why Greece needs to go, in an opinion published by the New York Times.” Unemployment in Italy Portugal and Spain remains high, and anti-European Union populists are on the rise on all three. The conclusion that people there could draw from a third bailout for Greece would almost certainly be that voting for radical parties and obstructive behavior are eventually rewarded.”
Therefore, there is an open call for a change of government in Greece, and a punishment for its citizens, whom ignored all the appeals from the European leaders, to avoid a political contagion. This is a far cry from the idea of European solidarity, and ä” ever integrating union”, as its chart says. It is a precise definition of which Europe the system in power wants. And the system has no problem in taking a double standard. Let us look to Ukraine, who has just asked for a bailout, that IMF estimates in the order of 60 billion dollars. While the Greek deficit is a result of mismanagement, the Ukraine’s one is a result of embezzlement and corruption, as is widely known. Well, the government, supported by IMF, is asking for a haircut (or a partial cancellation) of its debt. According to Andrew Kramer of the New York Times, negotiations have been opened on this point. Merkel has been very adamant: no haircut to Greece, even if the IMF has clearly stated that there is no possibility that Greece will pay its debt, which is now at 200% of its GNP (no wonder, considering that they have to repay 240 billion dollars of the two precedent bailouts). IMF has even threatened to do not get involved in the implementation of the third bailout, if a reduction of the deficit is not taken. The third bailout is couched in the most humiliating terms, by even subtracting to the Greeks 50 billion euro of their assets, to be liquidated by a fund administered under the creditor’s control. Germany wants to wash its hands from that implementation, and prefer IMF to do the dirty work.
The Greek saga is not over, and it will last for many years, as the austerity project is out of reality, and as things are, will only make things worse. Beside, will be interesting to see how parliaments from creditor’s country will process the third bailout. National egoisms will clearly come to light. But something is already now clear. The European project has radically changed. It is not based on solidarity and union, but on money and markets. And the euro, which was supposed to be the point of departure for further integration, is now a mechanism which as Krugman says, will exasperate the gap between strong and weak countries. Now Europe will have to face the Brexit, or the British referendum on its permanence in Europe. Merkel has already made positive noises on Cameron requests, including changing Europe’s constitution. The new Europe, led by Germany, will be based only on economics, with a reduction of the welfare state, little concern for social issues and a growing social inequality.
A year after the first Greek bailout, in 2011, at the annual convention of its party, in Leipzig, Volker Kauder the leader of the CDU in the German parliament, said among great applauses: “all of a sudden, Europe speaks German. Not in the language but in the acceptance of the instruments for which Angela Merkel fought so long and so successfully”. An assertive Germany has kept growing since then, and in March a prominent Berlin political scientist, Herfried Munker, published a book “The power in the middle”, a great success. Germany, he wrote, has the duty to lead Europe, because neither Brussels nor another EU country is strong enough to do so.
Gone are the lessons of history. Germany was deeply humiliated by the Versailles treaty after the end of the First World War, and this brought Hitler to power. Greece, of course, is a small country, so its humiliation is no threat. But Greece did vote at the end of the Second World War, in favor of cutting the German debt by 40%. The question, therefore is: I it is a good reading of history to think that to lead Europe imposing to everyone its internal model as the only reality does not lead to stress and tensions? It is high time that Germans start pondering this question…
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::autore_::by Roberto Savio::/autore_:: ::cck::688::/cck::
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