It has been a torrid political July in Greece. Deadlock with
the Eurozone brought in capital controls and closed banks on 1 July followed by
a stunning 61%/39% referendum vote rejecting further austerity on 5 July. The
euphoria was short-lived, even though slippery New Democracy leader Antonis
Samaras resigned; high profile finance minister Yanis Varoufakis was also
dropped and on 12 July Alexis Tsipras and new finance man Euclid Tsakalotos
were forced to accept astonishingly harsh terms from the Eurozone for a €86bn
third bailout. These terms were approved by Parliament on 15 July, with SYRIZA
badly split, but with much opposition help. Turmoil and recriminations abound.
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| Tsipras besieged and defiant |
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| Tsakalotos exhausted and depressed |
Illusions and contradictions have plagued this issue in a
bewildering manner. The Greek government misled its people by offering both
continued membership of the euro and an end to austerity. It was either one or
the other – not both. An end to austerity could only come, after a turbulent
period, from Grexit, while staying with the euro involved a bailout on harsh
terms. The Greeks decided that Grexit was too risky and they had to swallow the
bailout terms. They were in no position to resist further. The stark fact is
that Greece will have borrowed €336bn in 3 bailouts; its lenders expect to be
repaid and have little sympathy for a serially mismanaged debtor.
The Eurozone for years has maintained that membership is
permanent and unchangeable. Yet Germany suddenly proposed that Greece “takes 5
years out” to steady herself with her own new drachma currency, helped by the
others, in a “velvet” Grexit. This might have been the way forward if it had
been suggested months ago but it was aired far too late and seemed to be just
another bright idea from incurably Hellenophobic Wolfgang Schaeuble. Angela
Merkel and the EU Commission seem to have rejected the idea, but it still hovers
somewhere in the Brussels/Berlin miasma. We may well hear more of this
proposal.
The economic “thinking” behind the new bailout terms is
absurd. Greece should certainly enact laws to overhaul its pension system,
update labour laws, liberalise professions and slash government extravagance in
a Thatcherite fashion. The €50bn “trust fund” however is a naked asset-strip
and its expectation of being “monetised” soon is fantasy – who will buy
nationalised Greek assets at a fair value? This provision has all the hallmarks
of the poison pens of Schaeuble and his Dutch minion Dijsselbloem. But Greece
is in no position to increase taxes (assuming they are collected) nor to run an
annually increasing surplus; her economy is in its 6th year of deep
recession. She needs stimulus, not deflation. Most of all she needs jobs for
her 26% unemployed, few of whom receive any state benefits. Europe has failed
to bring any intellectual vitality to the party.
Reaction in Greece has been predictably bitter. Successive
Greek governments bear most of the blame and the situation is not helped by
insults and lurid adjectives. Protests took a predictable course; anarchists
tossed their traditional Molotov cocktails at the riot police; civil servants
went on strike; Varoufakis tweeted about the idiocy of the Eurozone. The
fraught issue of debt sustainability will re-surface soon, as all know Greece
cannot shoulder such high debt and write-offs are inevitable in due course.
Talk of the solidarity of the Eurozone and its inevitable progress have a
hollow ring here – never have European states hated each other so much since
1945.
Nobody comes out of this well and no fundamental issue has
been resolved. Greece was dealt a weak hand yet failed to find any dependable
allies or set out a coherent narrative; Merkel showed that she was wholly
lacking in leadership qualities, whatever her many flatterers may say: France
seemed helpful in the last days but was essentially doing Germany’s dirty work
politely: the EU Commission fluttered about but Juncker is not an inspiring
figure; only Schaeuble was presumably satisfied that his arrogance and vindictiveness
triumphed, but at how high a cost for the reputation of Germany and the
blighted future of Europe.
Europe has never been more disunited and disgraced. Greece
is a side-show but her martyrdom will be regretted and ever deplored. The
British people will surely remember how Greece was treated in the UK’s 2017 Referendum
together with the craven actions of the EU and they will cry “OUT” to defend
their own national integrity with an overwhelming voice.
SMD
17.07.15
Text Copyright © Sidney Donald 2015
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