Monetary union, that most unlikely of thrills, took Europe for another hair-raising ride today, with the German parliament voting 523-85 in favour of the terms of another rescue package for beleaguered Greece. Meanwhile Greece continued to slide towards crisis and confrontation — as IMF finance wonks arrived in Athens to administer the latest round of austerity measures and audits, they were locked out of the offices by public servants, who occupied six sites across Athens.
Protests continued in Syntagma Square outside parliament, and the roving “no cuts” protesters went from place to place, protesting the range of new taxes — most of them coming down on the lower-middle class, and those working-class people with some capacity to save. George Papandreou, hereditary prime minister, gave speeches to the Greek people and to German MPs, and the cute double-dealing — playing nationalist to his own people, European satrap to the north — was gone. He sounded like a man who had started out thinking he had a mountain to climb, only to realise it was the edge of the abyss.
Greece has paid and paid and cut and cut, and it has done very little to solve its greatest problem — skyrocketing interest rates from a monopoly financial market, and a smooth supply of bailout cash from EU governments. Why should it? The world saw the nature of the financial markets with the now notorious clip of trader Alessio Rastani, claiming that he “dreamt of the next recession” and that “Goldman Sachs ran the world”. Rastani was calumnied around the world, as an “appalling” person, “evil”, etc.
I thought he possessed at least the virtue of honesty, which is more than one can say for all the rhetoric associated with the Greek crisis, in which the undoubted problems of the country have been targeted as the cause of a bankruptcy brought on by the determination of the financial markets to talk it into a lucrative crisis in 2010. Had there been 10 Alessio Rastanis a year ago, Papandreou would never have got his people to consent to their own slow impoverishment — PASOK would have revolted and perhaps deposed him.
Perhaps that will still happen, but the latest German vote has saved him for a time. There was more than Papandreou’s position riding on it — Angela Merkel identified herself with the vote, which increased the lending capacity of the European Financial Stability Facility to €440 billion (about $600 billion). Fifteen members of the Christian Democrats crossed the floor, but the opposition SDP had lent their support to it, so it passed strongly — “this one time”, the SDP noted. The move also allows the fund to buy up bonds of the PIIGS countries, in order to ease their desperately high rates, and to lend at an earlier stage, before countries hit crisis.
Much of the sudden flurry of activity has been begrudging, and prompted by demands from the US that Europe sort things out (which is pretty rich — good thing someone is). Doubtless some form of trade war was threatened as the price of not complying, but the effect was simply for the US to take one side of the struggle within the EU — between economistic eurocrats determined to eschew nearly all fiscal policy at an EU level, and almost everyone else, who recognise that the whole European project, a half-century labour of union by stealth, was on the verge of collapse.
The Right — which can’t decide whether it likes the euro or not — is arguing that the crisis is all about living within your means. But it’s rather the opposite — it’s a product of the EU’s goal over the past 30 years, to take a whole host of decisions about the economy out of the hand of elected governments. The EU — which transmogrified from the EEC to the EC across the late 1970s and ’80s, with Margaret Thatcher a keen agent of its expansion — was the means by which that transformation could take place, both a continuation of the original European ideal, and its co-option to neoliberal dogma.
European union was meant to produce union, but a thing becomes its opposite as da Man said, and what the eurozone has bred, at least in Greece, is intense national resistance, and the destruction of the legitimacy of the major parties. Indeed Greece is almost textbook — as dislocation, everyday poverty and anomie grows (and the best reports to access on that, essential viewing, are those of Paul Mason on the BBC, an ex and long-time member of tiny Trot sect Workers Power), the only party that retains legitimacy and authority are the Communists.
Greece has borne out the “weak link” thesis of historical change to the nth degree — it is the place where all the contradictions of Europe are concentrated so tight that they cannot but come into conflict. From the start, the Communists have said “you can trust us — we will never go into coalition” and that stance has borne fruit. Is a revolution possible in Greece? Yes it is, it absolutely is. The folly of the EU, of the Greek mainstream elite, of the financial markets have brought it to this point. If it happens, it won’t look like 1917 — but it won’t be utterly dissimilar either.
More power to it. Then the country should leave the EU, restore the drachma, take investment from China on any terms demanded, and thereby turn Europe on its ear.
Greece, and others, just need to leave the monetary union and get the EU back to where it was before that folly.
As for the rest, interesting read.
The FT has published the George Soros solution ” How to avoid a 2nd Great Depression”.
he recognises the core issue being the ” concentrated deleveraging ” which propels the group mindset to failure so he crafts a solution around a bank guarantee facility from the EFSF with tight monitoring by the ECB which in turn lowers its discount rate enabling low cost funding for the weak like Spain & italy.
Importantly he steers away from ECB/EFSF purchases of bonds..allow the markets to determine that.
Greece then defaults but without a market meltdown.
He detects a fatal weakness in present negotiations around Article 123 of the Lisbon Treaty ..which his proposal respects.
Teachers and garbage collectors and nurses should all work without pay so that some spivs in London and NY and Frankfurt can maintain their lifestyle. Oh yeah, there’s gonna be a revolution, and not just in Greece.
Interesting piece…
But it is not simply the rivers of gold flowing from the EU or the monopolistic banking system at the core of the Greek tragedy.
As I have stated elsewhere on Crikey, the best OECD numbers estimate the Greek black economy – undeclared and untaxed income – at 39% of GDP. The entire tourism sector of Greece is 17% of GDP. Essentially the Greek national budget is hemorrhaging. And it is due in large part to the refusal by the Greek middle class and the rich to pay tax. They are on strike and have been for 30 years.
It is reportedly impossible to see a doctor and expect a receipt. Everyone who can operates on a cash only basis. The Greek Government has become so desperate that they have begun using Google Earth satellite images to identify symptoms of conspicuous consumption. As a result there is an acute shortage of tarpaulins as Greek lawyers, doctors, accountants and self-employed others rush to cover their swimming pools and yachts.
About the only people who pay tax in Greece are the salaried wage earners – a disproportionately huge number of whom work for the state. It is a giant ponzi scheme in which the Greek government seems to be funding its own inadequate tax revenue using borrowed money.
Cuts to public sector employment in these circumstances will simply cut those tax returns and trigger yet a further decline in the fiscal position. A spiral into collapse. It is only by drastically improving both its tax base and its citizens’ compliance that the Greek economy has a chance of getting its head above water over time.
That will be resisted vehemently and yes, perhaps the Argentine approach would be a better option for Greece. Didn’t do them any harm. Only trouble is that the money market will then turn its attention to the next weak link … Italy most likely or any number of other EU countries with high debt exposure. It is a contagious disease.
No, there is a solution to this mess and if the EU eventually finds the right road it, all its members will be both stronger and will have learned a lesson. Guy’s medicine may well be worse than the disease, which is why the Germans keep voting for continued bail-outs (530 for, 85 against), though actually it is just providing bank guarantees. Part of the mix is devaluation of Greek bonds by about 50% (ie. default) which can make them viable; it took them an age to get to that inevitable point, especially the Germans whose banks have a significant fraction of Greek bonds, but they are there now.
But several things the Greeks and everyone else, including the Germans and French, have learned is that the neo-liberal (as GR calls it, really it is exactly as the French have called it these past 4 decades: the AngloSaxon disease of easy finance and credit). Most of all the Greeks need a functioning tax system and it is this that the rest of the EU should insist upon and–risking further insurrection by the Greek people–tight oversight then enforcement. I am not talking about some draconian tax-the-poor system (which is what happens now because the middle classes and above can always avoid paying tax). No, an across the board reform. Italy needs it too. Oh, and don’t forget that leaving the EU would not remove the debt which is denominated in Euros and will not magically transpose into Drachmas. Most Greeks do not want to leave the EU experiment, but those marching on the streets do want the bankers to carry some of the burden and most of all, their own society to share the burden fairly amongst the different levels of society.
Greece, along with Ireland and Portugal are pissant countries that would fall back into the desperately poor and impoverished places they were before they joined the EU, often run by military juntas (or the church). Perhaps Guy did not see them in that manifestation, or perhaps he believes in the dignity of poverty?
I also wonder when Guy says “across the late 1970s and ’80s, with Margaret Thatcher a keen agent of its expansion”. Thatcher was a little Englander if ever there was one. She and Edward Heath were mortal enemies and he of course was the Tory EU champion–the UK would be part of Eurozone if he had his way (and he would be right, you want to be part of the club then join and dump stupid old historical ways, if ever there was a country that needs to it is the UK).