We are approaching the endgame of the protracted negotiations between Greece and the EU over its debt. Last Sunday’s referendum, in which the Greek people decisively rejected the previous EU austerity package, was supposed to have strengthened the Greek government’s hand in the negotiations. The new Greek proposals submitted on Thursday accept, however, an even greater degree of austerity than that rejected by the Greek people. Against this background, it is worth reiterating some basic points about Greece, the EU and the bailout:
The bailout is not of Greece but of the banks that so recklessly lent to Greece. Less than 10 per cent of the bailout money has gone to Greece. Most of the money has gone to creditor banks. Greece could have, should have, defaulted in 2010. Such default is not unusual – Germany defaulted on its debts four times in the last century, Italy six. But Greece didn’t default – in effect it wasn’t allowed to – because Germany, France and other major EU countries wanted to protect their banks and the institutions of the EU and to prevent ‘contagion’. It is for this that austerity is being imposed on Greece.
One of the key criticisms of any plan for a bailout without harsh austerity is that this would reward Greece for its mistakes, for breaking the rules of the Eurozone project and indeed for the fraud that Athens had previously perpetrated in accounting for its debt. Such a bailout, many argue, will lead to moral hazard – the rewarding of wrongdoers for the wrong they have done.
It is worth pointing out that rule-breaking was once almost the norm in the eurozone. When the single currency was launched in 1999, all nations agreed that a country’s annual deficit should be limited to 3 per cent of GDP and the total accumulated debt to 60 per cent of GDP. Miscreants were supposed to face a heavy fine. Within five years the two biggest economies in the Eurozone, Germany and France, had broken the debt rules for three years in a row. Not wishing to slap down the most important countries in the project, Eurocrats quietly ignored the rule breaking. No sanctions were imposed.
In any case, who exactly are the wrongdoers now being punished by austerity? Not the bankers, whose reckless pursuit of easy profit has been rewarded by a taxpayer-funded bailout, nor the corrupt politicians and rich oligarchs of Greece, nor the politicians that allowed Greece into the Eurozone, and then insisted that it could not default, nor yet the bureaucrats in Brussels who are still cooking up new schemes, not having learnt the lessons of the failures of the old ones. Rather, the people being punished are the pensioners and street cleaners and teachers of Athens and Thessalonika upon whom an invidious austerity programme is being imposed as the price for being ‘bailed out’.
The endgame for the EU has always been protecting its institutions and ensuring that all played by its unwritten institutional rules. Even before last Sunday’s referendum, EU officials made clear that their aim was regime change in Greece. Martin Schulz, president of the European Parliament, called for a ‘technocratic government’ to bridge the gap until a Greek government more acceptable to the EU could be elected. If the technocratic government could reach ‘a reasonable agreement with the creditors, then Syriza’s time would be over’.
After the Greek people decisively rejected the EU package, the EU made it clear that it would only negotiate if the Greek was willing to accept a worse deal than then one the Greek people had just rejected. And it effectively used blackmail, threatening to withhold emergency funds. Unwilling to stand up to EU pressure, the Syriza government has capitulated.
The EU strategy towards Greece may be blatant and crass, but it is not new. The EU has a long history of refusing to accept referendum results, imposing technocratic governments and bypassing democratic wishes.
And then they wonder why populist ant-EU parties are on the rise.
Much of the left has blindly defended the EU as a progressive cause. They view it as a bulwark against nationalism, a means of creating pan-European solidarity, a vehicle of supra-national projects.
In practice, however, the EU as an institution has rarely expressed any form of progressive solidarity. From austerity to immigration, EU policies have been not only highly reactionary but have embodied anything but pan-European solidarity. As for being a bulwark against nationalism, the EU’s crass anti-democratic stance has helped exacerbate, rather than alleviate, nationalist sentiment, and often nationalist sentiment of a nasty kind.
We desperately need pan-European solidarity. The trouble is, the EU has shown little evidence that it is capable of promoting it, or even of understanding what it means.
Well said, Kenan.
The situation and its solution are blantly obvious. And, at the same time, so complicated as to provoke endless arguments.
The situation is that an assortment of special interest groups, presently flying in the close formation called, for convenience, “the 1%ers”, continues to grow their hold on power. They invoke security, democracy, technocracy, pan-nationalism, and they may as well use motherhood and (insert your favourite desert).
The end result is that these accumulators are frittering away humanity’s last chance at becoming the rational animal.
I blame it on language – the hidden sentient species that has us by the declensions.
For a remarkably perceptive analysis of the Greek situation, along with the rest of the world,, sans political mumbo jumbo, please see Steve Keen’s blog: http://www.debtdeflation.com/blogs/
Fantastic commentary Kenan, you hit it right on the head.