I sent a postcard from Athens to LDV six months or so ago as we waited for the Greek people to elect a new government – bringing to power the curious mix of Syriza (a collection of hard left factions that would make the People’s Front of Judea blush) and the Independent Greeks (representing the Greek chauvinistic right). This odd mix of nationalism and hard –left rhetoric has been colourfully described by one academic as “ethno-bolshevism”. Since then, it has certainly been eventful and I have been very much aware that political choices have consequences.
In the Greek election campaign, Syriza promised to free Greece to make its own financial decisions without interference form the much hated “Troika” (the IMF, the Eurozone and the European Union) while, at the same time, ensuring Greece could stay within the security of the European monetary union – even receiving debt relief from its other members. Greece duly voted to have its cake and to eat it.
Any attempts for other countries to assert the expressed will of their own electorates has been portrayed by Syriza as those countries ignoring the democratic will of the Greek people. Only Greeks, apparently, have the right to democracy in the world of Syriza. The problems have always been portrayed as coming for foreigners (particularly Germans) and any suggestion that Greece may have been the author of its own misfortune dismissed.
This reminded me of last year’s independence referendum back home in Scotland. The SNP claimed that Scotland could continue to use sterling but the Bank of England would have to allow Scotland to run its own fiscal policy. The Chancellor pointing out that the rest of the UK did not want this was presented as affront to the divine right of Scotland to take decisions impacting everyone else!
I always thought that the logical tensions within the Syriza position meant that we would ultimately arrive at a point of rupture between Greece and Europe-zone – I just assumed that one or both sides would blink first and we would have some sort of “fudged” solution. Alas that has not been the case.
In the early hours of Saturday morning, the Prime Minister announced a referendum on whether Greece would accept the deal being offered by its creditors – a deal that would be likely off the table by the time the referendum was held. I wandered out into my suburb an hour or so later and already, at 3am, all of the cash machines in the area had queues of worried Greeks wanting to recover their money as, by then, we all feared that the banks would not open on Monday. By Saturday afternoon, all of the machines were empty and a refilling of them on Sunday saw even bigger queues.
The banks have now been closed since last Friday and they won’t now open again until after the referendum result is known – and maybe not even then. In the meantime we will be able to take up to €60 per day from our bank accounts.
I am not sure what Greece wants. There is a clear support from sections of society (particularly the middle classes) for cutting a deal with European partners and keeping the euro. I am not sure though that Greece truly wants to give up the restricted practices, petty corruption and clientalism that Greece must relinquish if she is to compete within the rigors of the Eurozone. The return of the drachma would be traumatic for the economy, and particularly for the poor, but would allow a currency that could be devalued repeatedly to cover up poor management of the economy by governments wishing to appear generous to its “clients”.
The vote next Sunday is asking Greece if she wants to change and in what direction. I would vote Yes. I fear the people will follow Syriza in voting No.
* Stephen Harte is a lawyer and a member in Edinburgh West.
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No doubt there are many insults which can justifiably be hurled at Syriza and Greece. They should be ignored. The euro is the problem, and if it is not to fall apart as a result of this crisis, it will only continue to damage Europe’s economy until it eventually does fall apart.
Imagine China, India and Japan adopting a common currency and hence a single compromise exchange rate, which would of course be non-optimal for each of the individual countries. That would hugely harm the international competitiveness of all three countries. It would be madness. And yet it is what Europe has done.
Europe competes with the rest of the world as a prison chain gang, trying to outrace the rest of the world while chained together at the ankles. It is a self-imposed handicap. It will kill Europe if it is not scrapped.
For all our sakes, the Greeks should vote no.
Greek boomers and pensioners will likely vote YES, because they want to stay on the German ‘teat’, despite the fact that their take-up of the Eurodollar, has simultaneously handed their democracy and economy over to the Brussels-Berlin axis.
Young Greeks on the other hand have everything to gain by voting NO, and going back to the drachma. They can then kick that un-payable debt of 370 billion Euro back into the French ‘banking abyss’ where it belongs, and once free of that debt, they will have a currency they can rebuild a proper economy on. Short term they will suffer, but for young Greeks the choice is,… several years of economic pain, but the advantage of regaining their democracy,(and dignity), … or an eternity of taking orders from the Brussels dictatorship, and debt servitude for them, their children, and grandchildren.
If they do go back to the drachma, I’ll be one of the first to visit Greece, to help them celebrate their freedom, both politically and economically.
One final piece of advice to Greeks. Things are bad enough already, so be vigilant, and beware of someone called Victoria Nuland coming through Athens airport.?
On the internet, Greece has become a cyber left v right battlefield, which has obscured what is really happening. It is good to have an article that gives an account from ground level.
I am not sure what a YES or a NO vote would really mean. The deadline will have passed and Greece already in default; wouldn’t this require a new arrangement? A NO cannot conjure money into existence, but there is no mechanism to leave the Euro; what does the Greek government do when it does not have the money to pay salaries and pensions? Is a return to its own currency really possible? Wouldn’t any Greek selling land or a house for example still want a price in Euros? It seems to me that having their own currency would lead to parallel economies that would exacerbate the disparity between the haves and the have nots.
It’s ironic that the country that suffered the most from the treaty of Versailles and triumphalist asset stripping is the one doing exactly that on Greece. The Germans don’t want to stop lining their own pockets at the cost of other Europeans and so Greece has to default.
@George Carpenter Greece didn’t have to join the Euro, nor accept loans and bail-outs from its partners, nor do nothing to end endemic corruption and tax evasion.
Choices bring consequences.
First of all, Mr Harte misidentifies the “Troika” — it is not “the Eurozone” but the European Central Bank and not “the European Union” but the European Commission.
Second, Mr Harte refers to “attempts for other countries to assert the expressed will of their own electorates.” Leaving aside the question of whether it is appropriate for one “electorate” to impose its will on another, for which it lacks either sympathy or responsibility, one may point out that every one of the Troika institutions is an unelected body, whose membership is not determined by the “electorates” of “other countries” at all.
The “Troika” does not represent the will of the European peoples, who have never been consulted, but rather that of a very small European political and financial elite who are largely insulated from responsibility (if their strategy with respect to Greece fails, who will hold them to account? Who of them will resign, or even admit responsibility?) and whose approach to the Greek crisis has been ridiculed as counterproductive and punitive by notable economists.
Of course it is a very British response to consider this as something “horrible, fantastic, incredible” happening in a “far away country of which we know nothing.” But in fact events in Greece will effect, first the entire Eurozone and then the EU; the political consequences being more salient than the economic ones. The real question being asked here is “Who rules Europe?” and the failure of the European system to generate truly democratic oversight of the bodies which have real power in it will come to the fore. A Grexit will significantly increase the likelihood of Brexit, which in turn is likely to bring down the house of cards that is the British constitutional structure. Before we express cavalier platitudes about the Greek crisis, it is worth remembering that, in a few years’ time, Greece’s problems may well come home to us.
I would like to see a regular ‘Letter from…’ piece on Lib Dem Voice. Maybe every month it could be from a different country, from a Liberal activist or journalist, summarising its current political scene and big current issues. I imagine, in some cases, that would require pseudonyms. Anyone else?
Really knowledgeable insight, thank you so much! It perfectly illustrates why liberalism is needed to protect people from clientelism. An Italian example of clientelism I found concerned licensing of taxi drivers in the south. Long story short, if you weren’t lucky enough to be born into a taxi driving household, you wouldn’t be able to get a taxi driver’s licence from the council. They were protesting reforms to the licensing system that guaranteed their jobs as part of the liberal reforms to the Italian economy as if this was an EU diktat on the Italian ‘little guy’. The other side of the coin is that the system is deeply unfair to plenty of other ‘little guys’. The pain in Greece is partly self-inflicted if the Greek government won’t come to grips with tackling problems like these that hold back their economy.
I also thought the parallel with the SNP’s democractic will argument about keeping the pound illuminating. I think that probably had a big part in spreading English nationalism like a wildfire in the aftermath of the Scottish referendum.
George – I’m sorry but that is so unreasonable. The Germans are hardly lining their own pockets as the money is flowing the other way at a much greater rate. It’s also about the democratic will of the people of the other Eurozone countries, including plenty which have endured austerity or have lower living standards than Greece.
TCO “Choices bring consequences” and Jo “the money is flowing the other way”. But which Greeks are the gainers?
The Greeks who fiddled taxes big time, and took their money out to buy London mansions or to hide in Luxembourg tax havens, are the rich kleptocrats who voted for the Right. The Greeks who suffered the resulting pain, and are now being punished for the debts of the rich, are the poor who voted for Syriza.
Juncker wants to leave the tax dodgers alone and visit the pain on the Greek poor and the Left. Shame on Europe.
David-1:
We could all club together and vote that you give us money, but that would not mean that you would give a penny. The ECB and the European Commission can only provide finance if the member states agree. This means a vote in the Bundestag and other parliaments. Given the choice Germany is far more inclined to provide money for the Baltic states and other newer EU members who are poorer than Greece. This is not a question of vindictiveness, simply a question of effective use. It seems to me that realising this the Greek government have resorted to alternative tactics that depend on the presumption that a disastrous outcome for Greece will be disastrous for the whole EU. This looks very much like blackmail, but we are loathe to say so because it is hard to admit that any state in the EU would behave in this manner.
A default and worse would certainly be destabilising, but I am not so sure the Euro would not become stronger, since I doubt the experience of Greece would entice others down the same route.
There may be consequences for Cameron too if there is a stiffened response to UK demands that look anything like attempts at blackmail.
@David Allen “The Greeks who fiddled taxes big time, and took their money out to buy London mansions or to hide in Luxembourg tax havens,”
Well, perhaps the poor Greeks should have voted in governments prepared to deal with widespread tax evasion.
David-1
“European peoples, who have never been consulted”
None has asked the European people but if you assume the result would be for more taxpayers from other European countries constantly sending money to Greece you may be disappointed:
http://www.bloomberg.com/news/articles/2015-03-15/germans-tired-of-greek-demands-want-country-to-exit-euro
‘52 percent of [Germans] no longer want Greece to remain in Europe’s common currency’
‘a view held by 80 percent of Germans that Greece’s government “isn’t behaving seriously toward its European partners.”’
And let’s be clear here there hasn’t been a nominal debt write down but there has been a real terms write down of between 50%-60% but as government accounting rules are so dodgy it allows politicians to fiddle the figures to not explain their actions to their electorate.
“A Grexit will significantly increase the likelihood of Brexit”
Do you want to provide an argument or evidence or just going for random assertion?
TCO: I doubt whether any of the parties offered the poor Greeks the chance to vote for a serious onslaught on tax evasion. Yes, Syriza could and perhaps should have done. It is difficult at this distance to know how practicable that might have been. Syriza might reasonably argue that when you are up to your neck in alligators, you do not have time to consider draining the swamp. Clobbering rich evaders is probably just too difficult – the rich have enough money to ensure that what they’ve stolen stays stolen. Clobbering small-time dodgers would probably be easier, but counterproductive for a government which needs all the support it can get from the voters.
@ david1 – “A Grexit will significantly increase the likelihood of Brexit, which in turn is likely to bring down the house of cards that is the British constitutional structure.”
I dispute that.
If the greeks are cast out and left to their fate, then yes, why would we want to be a member of such a club!
If an orderly exit mechanism is made for them (ending ever closer union for us), we’d be more likely to stay.
Whats with all the fear, uncertainty and doubt regarding the frailty of our constitutional structure; if there are fundamental differences it is better to address them rather than pretend they’re not there, surely?
Too much talk here which looks at the North European perspective of the crash of 2008 etc. i..e. Get out of your problems via a balanced economy of industries and strong service sectors. Greece is a small country which is both cultured and tourism-inclined but doesn’t have industries nor a strong service sector in N. European terms. No-one could run the Greek economy as if it was like Germany. How could Greece devalue the Euro unilaterally when it “failed” on German conditions? How could Greece pay back to the IMF which didn’t put its loans into strengthening the Greek economy but merely looked for “pay-backs” when interest rates were low? Too many years have been spent by failed governments in Greece, failing to address the Greek economy as it exists and offering no solutions to a “tourism state”.
@TCO:
“Choices bring consequences.”
“Well, perhaps the poor Greeks should have voted in governments prepared to deal with widespread tax evasion.”
Nice bit of victim blaming there. How many more people must go hungry, go without vital medication and other necessities of life all so the rich investors (and investment always carries a risk) who gambled on Greece can get their money back? How many more people have to die or take their own lives all for the sake of the capitalist nightmare which is infecting other EU countries?
You seem quite content (or at least, ambivalent) about the effects this crisis has had on people in Greece and other EU nations. Shame on you and others like you who put the needs of investors and central banks above the needs of human beings. What a nasty, anti-human and cold-hearted world our current economic system has created. People’s lives are, to me at least, always more important than money, always more important than making sure the rich don’t take a hit. Always.
Out of interest, is anyone here advocating that Lib Dems should be urging the UK government to contribute to a Greek bail out?
For those who believe Greece should be bailed out – why not?
Stephen Campbell
“Nice bit of victim blaming there”
No, the point is there are choices, the Greek population had a choice that they should have dropped out of the Euro at the start, of the crisis.
That way the Greek economy could return to the old method of dealing with its political culture and economic reality (regular devaluation). This would have imposed the losses on the foreign investors, and made the relevant domestic governments responsible for managing any fall out.
Alternatively they should have adapted their economy to address the underlying issues, that would have been harder and less chance of success. It would have been really painful but the upside would have been a more productive economy in the medium term.
In short you can have your cake or eat it.
I find it interesting most of the people who you appear to consider “cold-hearted” would have suggested that dropping out at the beginning (personally I was preferring a split between Northern and Southern Euro then let Greece drop out so it wouldn’t have been such a shock).
It looks like the Greek people will get to decide at a referendum what they want to do stay and pay or leave and default. The Greek government won’t phrase it that way but work is out, that is the choice.
If everyone else is cold hearted, what was your solution back at the start of this?
Very useful article this Stephen. LDV’s correspondent in Greece :p. The scary thing for me is that the radical left, which is gaining popularity in some areas, seems to think that capitalism can be abolished. Pensions and investments, they seem to think, don’t really matter. Well I am afraid they do matter. Not everyone can have a public sector pension or will be satisfied with just a state pension.
At the same time, I don’t know why the IMF loves VAT, but some reforms are necessary.
Martin,
When people talk about a “bail out”, they mean two separate things.
One is the rolling-over of debts by creating new loans in order to pay off the old loans. That is a transfer of money from one rich bank to another. It gives nothing to Greece.
The second is debt relief, the acceptance by a creditor that some or all of the debt will never be repaid. Europe has not (in this round) actually offered any debt relief – though as soon as Tsipras declared his referendum, Europe said that debt relief would be part of a settlement. (I wouldn’t trust that further than I could throw it if I were Tsipras.) Debt relief is what actually gives something to Greece.
Britain does own some Greek debt. Britain could concur with debt relief. We do have the option of advocating this. I suggest that we should, albeit with strings.
Creditors who offer only debt roll-over, while demanding Greek austerity, are just bullies who are all take and no give. Creditors who do offer debt relief, on the other hand, are entitled to impose tough conditions on the debtor in exchange for their generosity. Those conditions should be designed to make sure that the remaining (un-relieved) debt does get repaid.
Greece will only be able to repay if the Greek economy can make money. The creditors should therefore impose conditions which maximise the chances that this will happen. Jean-Claude Juncker should clamp down hard on tax avoidance and evasion (cough, splutter, won’t happen, will it?). Austerity policies which cause economic contraction should be avoided where possible, because they will be self-defeating. However, early pension payments and government waste are valid targets. In any case, the creditors are entitled to decide what conditions to impose – but only if that is in exchange for debt relief. If debt relief is not on offer, the Greeks are better off out.
For another perspective read this by Alex Andreou.
https://www.byline.com/column/11/article/126
Very little – around 11% by most estimates – of the bailout went to Greece. All the rest went to bail out (mainly) French and German banks that had foolishly lent too much and would have taken huge losses if Greece had defaulted at the outset as it should. But that would never do; those banks had to be made whole so the powers that be contrived that they should get heir money back and the Greek taxpayers should be stuck with the bill and that when Troika forecasts proved hopelessly over-optimistic then EZ, largely German, taxpayers were left to foot the bill for the further bailouts needed.
So now Greece, that is the Greek taxpayers are stuck with a devastated economy and a huge debt, much larger than it was at the start of this sorry saga and even more unpayable. This all tells us all we really need to know about who the system really works for (hint: it’s not you or me or Greeks or Germans).
David Allen: So the 50% ‘hair cut’ did not reduce debt?
My solution would have been to let Greece default and have a debt holiday for a few years, but of course your claim that none of the money does not actually go to Greece is not exactly true; in fact my solution would have been, in effect, to make your statement true. I said ‘would have been’ because that would only work if Greece had a primary surplus, I am not fully sure it ever really did, but six months on it certainly no longer has even the pretence of a primary surplus.
However, if anyone outside Greece believes that other countries should be making up the deficit, then they need to be lobbying their own governments to do just that.
David Allen should say whether he is a Liberal Democrat member, supporter or voter.
For once I more or less agree with Jedi. I wouldn’t want to be part of a club that lets a country sink on an inflexible principle. To be honest, the whole fiasco does sort of confirm some of my doubts about the European Project’s lack of democratic accountability or regard for the effects of policies on people rather than markets.
David Allan
“One is the rolling-over of debts by creating new loans in order to pay off the old loans. That is a transfer of money from one rich bank to another. It gives nothing to Greece.”
It depends on how it is rolled over if it is rolled over from a 12 month to a 30 year with no increase (or a cut) in interest rate then that is debt relief as the real value has fallen considerably.
“Debt relief is what actually gives something to Greece.”
And there has been debt relief and would have been more, the only reason other countries didn’t want to say so was they don’t want to admit how much they have given.
“Jean-Claude Juncker should clamp down hard on tax avoidance and evasion”
No tax is a domestic policy the Greek government should start to run a functioning tax system . Expecting the commission to do so their job for them infantilises Greece, if they want revenue the Greek government needs to start collecting it like other countries do.
“If debt relief is not on offer, the Greeks are better off out.”
It has been given and more was on offer, but they appear to be better off out. When the changes that were needed were asked for the Greek government couldn’t or wouldn’t deliver, prolonging the agony seems pointless in these circumstances.
We should be careful about modern Greek claims to be the foundation of democracy.
Ancient Athens was democratic, provided you were not a woman, or a child or a slave and provided that Athens was not at war with Sparta, which, tp put it mildly, was not a democracy, and provided you had time to go to the meetings and supported direct democracy as compared with representative democracy..
When the current Greek Prime Minister talks about democracy what he appears to mean is democracy as defined by sovreignty, but if he wants Greece to be independent of the EU he is taking a different view from many in the Greek electorate, who have experience of the drachma.
It seems unlikely that PASOK could be elected in the UK, so a party to the left of PASOK is difficult to describe in the UK.
We should remember that Greece has a relatively small economy compared with the EU member states in the eurozone. We should also remember that the current German government is a coalition of CDU and SPD, led by an “Ossie”.
The UK has had a coalition of the Conservative Party and the Labour Party. It was led by Winston Churchill and Clement Attle at a time of crisis from 1940-1945 (and yes, the Liberal leader had the Air Ministry).
Please see Nigel Lawson’;s memoirs. As UK Chancellor he took the realistic view that some debts owed by mainly African countries to sovreign states were uncollectable and should be written off,. He obtained collective agreement, at zero cost.
The same states resisted pleas from the US President (Bush senior) to help with bad debts from South America which were largely owed to commercial banks in the USA.
Richard Underhill
“David Allen should say whether he is a Liberal Democrat member, supporter or voter.”
Only if he wants too, his arguments should be judged on their merits.
If a governemt needs revenue it should increase the effectiveness of tax collection, which pays off at a rate of about one thousand percent. Thr UK could do this if it wishes to reduce the the fiscal deficit.
Greek governments have sacked tax collectors to save expenditure.
Why?
Moderator’s note:
Richard Underhill,
David Allen has stated several times on LDV that he is a member of the party. Indeed, his standard bio, which he has given to us to accompany his articles states:
“David Allen is a member of the Rushcliffe Local Party and has been a member of the Lib Dems or its (SDP) predecessor since 1981”
But as stated above, nobody here has to state whether they are a member, supporter or voter of/for the party, or give their real name on the site. All we insist on is a valid email address.
David Allen said “Europe competes with the rest of the world as a prison chain gang,”
He should distinguish the eurozone (not including the UK) from the European Union (including the UK).
The USA has a single currency. Should we compare the bankruptcy of New York in 1975?
https://en.wikipedia.org/wiki/History_of_New_York_City_%281946%E2%80%9377%29
I have holidayed to Greek Islands for years. I remember the Drachma days, the introduction of the Euro and saw for myself the benefits (at the time) that the Greeks gained. Cheap loans – the average Greek car changed from battered Fiat’s and Peugeot’s to BMW’s and Mercs. Big capital projects with signs showing that the funding came from the EU. In the Islands this includes Zakynthos Airport new terminal and new roads in Rhodes & Crete. No doubt a lot more EU money was spent on the mainland with similar EU flags appearing on development hoardings. Little wander that most Greeks are desperate to stay in the Eurozone.
Much is said about the early retirement age. However the family spirit is strong. The elderly are not pushed into a nursing home. They remain in the family home – they look after Grandchildren, some still work the land. They do not have a system of Social care for the elderly in the same way as we do in Northern Europe. Certainly not on the Islands.
The reality is that even if some elements of the Greek economy were opened up, it is unlikely that they will ever be able to pay back the debt. The debt is not the fault of the Greek people. It is the fault of their political leaders and the Eurozone for not checking that the criteria for Greece to enter the Eurozone was met in the first place. Therefore the Eurozone, if it is to be an ultimate Fiscal Union has to relieve some of the debt for their part in this. If Greece does default on the whole lot then that debt will be foregone in any case. I therefore find it difficult to understand why they have not done so in exchange for Liberal reforms to the Greek economy that I feel is absolutely necessary. The Greeks have been talking about War Reparations for decades and surely the opportunity should have been taken to relieve the debt under the general banner of War Reparation.
The Greeks are the most friendly people you could find and it distresses me deeply as to what is going on.
John Bland:
“The debt is not the fault of the Greek people. It is the fault of their political leaders and the Eurozone for not checking that the criteria for Greece to enter the Eurozone was met in the first place.”
The point about democratic systems is that people are responsible for whom they vote for in the ballot boxes. A differently managed economy could have made the Greeks inclusion in the Euro work out. The issue is dysfunction in the Greek economy and the state administration. War reparations 60 years on is a red herring.
John Bland
“The Greeks have been talking about War Reparations for decades and surely the opportunity should have been taken to relieve the debt under the general banner of War Reparation.”
Absolutely not. When debt relief is given it should be labled as such. WWII has nothing to do with this and should be left in the past.
Martin 7.36 pm: Yes, there was some debt relief for Greece in the past, which is why I said that there wasn’t any “in this round”. If you think that was a bit disingenuous, sorry. But of course Greece is not the only country which has had debt relief in the past, so, in spades, has Germany!
Psi 8.10pm
You make some valid points, though they tend to blunt the edges of my sword rather than breaking it. Yes, an extension of the loan period does to some extent offer something real to Greece, though it also prolongs the agony. A 30-year loan period is probably only saying “we’ll never get this back, but we’ll leave it to the next generation of Eurocrats to make such a damaging admission, and of course it will give them leverage to keep Greece permanently on the rack should they so wish”.
You say “there has been debt relief and would have been more, the only reason other countries didn’t want to say so was they don’t want to admit how much they have given.” Evidence? Presumably if other countries have not “admitted” giving debt relief, you are speculating that it has been given, by some sort of under the table mechanism?
In reply to Martin – if the UK should contribute to a Greek bail out? We will contribute to the bailout with or without ‘urging’ – the UK holds 10.8 billion Euros of ‘bank debt’ (as supposed to ‘bail out debt’). See BBC or my facebook.
The question: For those who believe Greece should be bailed out – why not? – is symmetrical. Equally valid question would be Why yes?
It is not a question of Why not? or Why yes? It is a question of How? How can Greece be bailed out without antagonising the rest of Europe?
Richard Underhill 8.27pm
In a sense of course you are right – it is the eurozone which competes in the global economy as a prison chain gang linked by the ball and chain of its common currency. This does not include the UK. However, the UK may also suffer to a lesser extent from the problems of its main trading partners.
You mention the common currency of the USA. The difference is that in the US federation 23% of tax revenue is collected centrally, enough to enable large-scale transfers of revenues from economically central states to economically peripheral states, and thereby preserve unity. The same thing happens in Britain e.g. via the Barnett formula and is what diminishes the economic disparity between London and its provinces, at least to a point at which the provinces fight back through the democratic process rather than by force of arms!
In the EU only 1% of revenues are raised centrally, and although much is made of structural funds and transfers to the poorer periphery, these simply aren’t big enough to overcome pre-existing disparities. In the early days, it was nations like Italy who benefitted, and there was a fairly genuine will within central Europe to bring the Italian economy up to speed with Germany and the Benelux. But now Europe has widened its membership to include countries like Bulgaria whom central Europe do not genuinely want to see growing into strong economic competitors. This is a mistake – if we didn’t want to help them grow, we should not have taken them on. The same comment applies to Greece.
Richard Underhill 8.12pm
There are plenty of valid criticisms that can be made of Greece and its political and economic history. However, I fear that when pro-Europeans make such claims, there is an element of denialism involved. Blaming Greece is a means of avoiding the awkward point that Europe also has a great deal to answer for.
Europe has allowed massive economic disparities between its nations to evolve. The PIIGS as well as Greece have suffered from an over-high currency valuation which has made their products uncompetitive and promoted mass unemployment. Sure the PIIGS and Greece have often resorted to financial shenanigans in the absence of productive industrial economies, but is that all their fault? Meanwhile Germany has what to them is a beneficially low currency valuation which helps them export and take all the business. If Europe has retained individual currencies, revaluation could have restored equilibrium. Without that, economic disparity is inevitable, and will only grow until it provokes a violent resolution.
The euro must go. I say that as a pro-European. We can only achieve European unity if it grows organically. We cannot impose a common currency and then expect magical adaptation to conform with it. The opposite has happened. The euro has caused maladaptation and conflict.
J George SMID
“How can Greece be bailed out without antagonising the rest of Europe?”
I disagree, the question is what option is most likely to get to a solution? European electorates will be antagonized with whatever option is chosen the aim is to can this saga.
Staying in will require major reform that no one has delivered. That reform may be achieved by more severe suffering and higher unemployment, forcing the change in culture (in many forms). I can’t see that it is worth it.
Alternatively they could default, return to their own currency. This will mean they will not make the required reforms as quickly but it will at least make the transition period more bearable (assuming people are planning for that post-exit stabilisation).
The focus will have to be how to manage the exit from the Euro in a way that doesn’t cascade.
The euro works just fine — as a common French-German-Benelux currency.
@ David – “You mention the common currency of the USA. The difference is that in the US federation 23% of tax revenue is collected centrally, enough to enable large-scale transfers of revenues from economically central states to economically peripheral states, and thereby preserve unity. The same thing happens in Britain”
In support of your comment, and to further expand upon it:
Federal US taxation is ~25% of GDP and the variation in spending levels between rich and poor states is ~5% of GDP, so a variation of roughly 20% of federal spending.
How big a budget would the EU need to be able to slosh around 5% of combined GDP into the poor regions (bearing in mind the current budget is only 1% (and heavily constrained by CAP payments)?
The other point is that americans accept this, they are all american, whereas we are rapidly finding out just how german the germans are, and finnish the finns are, when it comes to firehosing cash at nations they consider to be essentially delinquent! In the UK this ‘sloshing’ occurs in the form of:
a) National pay-bargaining which benefits poorer regions (teachers, nurses, etc)
b) National social benefits more generous than poorer regions could afford alone (eg.housing benefit in glasgow)
c) Targeted regional development grants/discounts to encourage business growth (objective 1 EU/WEFO funds)
d) Additional infrastructure spending to support the local economy (the mainland-skye bridge)
e) Operating national services hubs from depressed regions to boost wages (DVLA in swansea, etc)
Unless Germany recognises the ‘familial’ relationship, and the obligation that goes along with that, then it needs to leave for the good of its neighbours.
This principal applies equally to the netherlands and finland, but since it is Germany that is the driving economic power for the euro’s sake the answer must be ‘right’.
One mechanism to equalise this foriegn exchange disparity would be eurobonds. To compensate for a higher than natural foriegn exchange rate the wider currency union would borrow collectively, and thus lower their borrowing costs on the back of Germany’s strength.
IMF director Paulo Batista says that the bailout money went to save the skins of German and French banks:
http://www.keeptalkinggreece.com/2015/03/04/imfs-director-batista-greek-bailout-was-to-save-german-french-banks-video/
Psi and Martin
In 1942 The Bank of Greece made a loan (whilst Greece was under Nazi occupation) of 476 Million Reichsmarks at 0% interest to Germany. In 1960 Greece accepted 115 Million Marks as compensation for the victims of Nazi crimes but the issue of the loan has never been settled – at the time Germany was partitioned and still rebuilding. There was nothing to be gained by raising it then. In 1990 prior to German reunification the question of war reparations to the Allies was settled. Greece was not one of the Allied powers. Courts have since found in favour of subsequent claims by victims, so the issue of compensation was not entirely closed in 1990.
The loan issue has been raised from time to time domestically by various Greek politicians but was not aired significantly on the international stage until the economic woes of Greece became apparent. There is a legal question and a moral one. If the Bank of Greece had not been forced to make that loan would it be in a better financial state? The German President has accepted that Greece may have a claim as have some opposition parties in Germany. Whilst 476 Million Reichsmarks would be very difficult to value in today’s values, in 1942 it would have been worth $190,400,000.
The point I am making is that it is clearly a point of contention for the Greek people and is being used to drive nationalist tendencies in a very fractured democracy. The aim of the European project is to achieve an ever closer Union. In a Union such as the UK or the USA the poorer areas would be supported by the richer ones. This can’t happen in the Eurozone because it is not a proper Union. Therefore a fudge is required. If the Eurozone can do a deal after a “Yes” vote in the referendum that includes an element of debt relief in the form of a permanent 0% loan in exchange for liberal reforms by Greece, then that would help put the can of worms which has been opened during the Greek financial crisis to bed.
I have not read every comment in this thread thoroughly, because it became clear that some we’re made from a position of some ignorance of the facts.
If someone has already mentioned the rather sorry tale of UK interference in Greece under Churchill (another of his less than wise and less than moral moves) I apologise for drawing attention to it again.
The Guardian carried an interesting piece only the other day which might help inform and provide a bit of background to those making comments on the basis of even less knowledge than I have —
http://www.theguardian.com/world/2014/nov/30/athens-1944-britains-dirty-secret?CMP=share_btn_fb
@John Tilley this article sums up the occupation of Greece thus “The Greeks fought valiantly and defeated the Italians, but could not resist the Wehrmacht. By the end of April 1941, the Axis forces imposed a harsh occupation of the country.”
No mention, it would seem of the British and Empire forces numbering some 62,000 who were sent to help resist the German invasion: https://en.wikipedia.org/wiki/Battle_of_Greece#British_expeditionary_force
How odd that in his link to the Guardian article accusing Churchill of various wickednesses in Greece John Tilley doesnt seem to have noticed that the Guardian’s reader’s editor subsequently pointed out there is no evidcne the allegations are true
http://www.theguardian.com/media/2015/mar/28/readers-editor-on-athens-44-british-army
TCO and Simon McGrath do not seem to have read the article from The Guardian to which I provided a link.
TCO, if you read it you will see it is very much about the British forces that were sent to Greece.
Simon McGrath, you have perhaps accidentally misrepresented a comment; nobody disputes Churchill’s role in this and the original article makes copious references to relevant documents in The Public Record Office at Kew. it also includes direct quotes from eye witnesses one of whom is an MEP in his 90s. Why wold you seek to deny this?
I did not write the article in The Guardian and do not have to defend it word for word.
I provided a link because it provides background and information on the political divide within Greece today and over the sat 70 years.
@John Tilley doesn’t seem to understand the point of the comments Simon and me made. Namely, that the Guardian chose to focus on what it perceived (and which Simon shows was erroneous) to be the British involvement in repressing Communist partisans in 1944, and its ignoring of the British Empire contribution to the attempt to prevent a German invasion of Greece in 1941.
David Allen
“an extension of the loan period does to some extent offer something real to Greece, though it also prolongs the agony. A 30-year loan period is probably only saying “we’ll never get this back, but we’ll leave it to the next generation of Eurocrats to make such a damaging admission”
It depends on the circumstances whether extensions are worth it, by how likely it is that the debt can be repaid and economic growth potential. The 30 year period would depend on your perspecetive of the Greek growth potential, I don’t think it is high right now but someone taking a more positve view of the countries potential would see it as perfectly reasonable to be repaied.
“You say “there has been debt relief and would have been more, the only reason other countries didn’t want to say so was they don’t want to admit how much they have given.” Evidence? Presumably if other countries have not “admitted” giving debt relief, you are speculating that it has been given, by some sort of under the table mechanism?”
It is not an “under the table mechanism” it is a fact of the accounting. Governments can extend loans to other countries and don’t have to show a cost being incurred. If a private business were to offer these type of extensions they would have to account for the loss in real value as a cost being incurred. Accounting for a private organisation is reflective of the real situation government accounting is not. The “not admitted” bit is because they have avoided pointing out how this works and that the relief has been given, it is a lie of omission (hence not admitted) rather than a positive lie (stating that it hasn’t been given).
John Bland
Just to check, your suggestion is that Germany lends $190.4m at 0% to Greece?
If I put the principle aside for a minute, this is s figure which is basically meaningless when talking about the requirements. Any action is going to take a lot of money either that will be in the form of further loans to stay in or aid after exit to help stabilise the country as the cash savings of the citizens held in the Greek Banks are wiped out in the banking collapse, the inflation following the new currency’s launch etc. You are talking Billions for stabilisation.
But back to the principal, the war was a very long time ago it is better to leave it there, the tendency to use it every time someone wants to attack Germany is ridiculous. If people want to criticise the German economic approach, do so, but we should not just accept people trying to reference the actions of 70 years ago to attack modern Germany.
“The aim of the European project is to achieve an ever closer Union.”
At some point someone has to put this idea out of the European people’s misery. The idea made sense when talking about the European Coal and Steel Community evolving through many of the permutations it has passed through; but if simply followed indefinitely results in a hugely centralised and standardised continent (I am not saying that is where we are now) which is as odds with what the population actually want.
Moving from a gradual lifting of steel tariffs to a position where the EU can take action against monopolistic practices by multinationals is a very positive move. But we are at a point where the European parliament expresses views about the speed cars should drive on the streets round where I live, they have lost perspective. This activity shows the idea of “ever closer” is illogical. Still using the term when one of the “ever closer” steps has imposed suffering on a significant number of people doesn’t help the EU’s cause. Too much of a good thing is always bad for you; just try drinking too much carrot juice.
It looks as though we could do with a further postcard from Athens soon.
What will a large NO vote mean? I find it very hard to imagine that the creditor nations some of whom, such as Estonia, Slovakia and Slovenia, have a significantly lower standard of living, will roll over and fund Greece. If George Osborne announces a budget with large scale cuts and at the same time wiped out the UK’s 10 billion Euro exposure to Greek debt there would be a mass revolt.
The vote seems to be expressed in terms that reject the financial changes that might start to rebuild trust at the negotiation table. Greece could officially go into default but can its revenues fund its public sector?
What would be the consequences of Greece issuing its own currency? Some claim that there would be ‘contagion’ across the Euro economies. I cannot quite see how that works, since unless Greece rapidly prospered (which will not happen), other countries would be strongly motivated to avoid any risk of going the same way. The damage is more likely to be through the losses to the creditor economies, which could end up suppressing demand and slowing down the economies.
What it means is that we now have a very good reason to scrutiny the way Europe works, the way Europe fails, and what can be done to create a better Europe that serves all European peoples (including both British and Greek) rather than serving an out-of-touch international elite.
The problem is not the concept of European Union — the problem is how that concept has been realized, by whom, and for whom.
Thanks to PSI for the alert about this discussion thread. I had referred to not hearing Lib Dem voices on the Greek situation. Of course, this is largely but hopefully not exclusively a range of people talking to each other through this medium. I was referring to public comment by the party itself. I am sure someone will tell me if the party has issued a statement.
My problem is that the current Eurozone arrangements are an unsatisfactory half way house. The euro doesn’t work as a financial system where there are wide disparities between participating countries and where there are no mechanisms for transfer of resources between partners in surplus and those in deficit. Either Eurozone countries move on to create a full, federal political and fiscal union or the attempt at a common currency should be abandoned and individual countries return to their own individual currencies and consequent mechanisms for dealing with deficits.
A regular ‘Letter from…’ piece has appeared in Private Eye. i remember one about Kenyatta-isation as its first President after independence became wealthier.
Someone should blame Mussolini for invading Greece, which the Germans had not intended to do.
Despite the speed of their actions in Greece the Germans were delayed in their invasion of the Soviet Union,
perhaps forgetting Napoleon’s invasion of Russia and subsequent withdrawal with reduced forces.