Tag Archives: Greece bailout

Desperately seeking a vote of confidence

Illustration by Manos Symeonakis

Picture the scene: It’s two weeks after you’ve led your party to a disappointing election defeat against a faltering government. A high-profile member of your party is mounting a leadership challenge that will require the party faithful to make a choice. What do you do? Recognize where you and your party have gone wrong and explain how you plan to put it right? No. Instead, you call for a vote of confidence from your MPs, which threatens to tear your party apart.

Fast-forward almost four years and you are now prime minister. Your country is standing on the precipice of economic collapse and your foreign partners — who are for the time being preventing this collapse — are losing faith in you. What do you do? Set out clearly what you want to achieve and how you will achieve it? Convince your own party that there is a clear path toward salvation? No. Instead, you make a bungled attempt to form a government of national unity with an opposition that has no appetite for it, reshuffle your Cabinet to appease wavering deputies and then you call for a vote of confidence.

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The paradox of the ‘Indignant’

Photo by Stratos Safioleas

Thousands of protesters packed Syntagma Square in Athens for a third consecutive day on Friday. Those giving up another evening to vent their anger at Greece’s plight continued to display great enthusiasm and persistence. There was something dramatic about their protest, which took place as ominous clouds rolled across the Attica sky and boneshaking thunder boomed throughout the capital. It felt like someone had splashed out on the special effects in preparation for the ultimate battle: the people vs. the political system. The unstoppable force meets the immovable object.

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EU should invest in Greece, not just lend it money

Brussels – A restructuring of Greece’s debt or a second bailout from the European Union and the International Monetary Fund coupled with austerity measures and structural reforms will not be enough to ensure the country’s long-term economic future, according to the chief economist at a leading Brussels think-tank who is urging the EU to generate greater investment in the debt-ridden country.

“The key here is to create a positive economic and political future,” Fabian Zuleeg of the European Policy Centre told Kathimerini English Edition. “It is abundantly clear now that simple austerity measures are not enough: they are not going to lead the Greek economy to a higher growth path. If we want to give economic and monetary union a long-term perspective than we need to find vehicles to channel investment from the stronger countries to the weaker countries: true investment, not a transfer – something that will give returns.”

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The wrong battle

Illustration in linocut by Manos Symeonakis

“There is no Greek-German war,” government spokesman Giorgos Petalotis said last week. “Greece and Germany are not on collision course,” said Foreign Minister Dimitris Droutsas. All these statements can only mean one thing: Greece and Germany are very much at loggerheads. But their dispute is not just a bilateral squabble; at its heart it’s about divergent views on how to respond to the crisis threatening the euro and, beyond that, on the very purpose of the European Union.

The frantic attempts by the government to play down any rift between Athens and Berlin came after Greek Prime Minister George Papandreou decided on November 15 to dust himself off, stand on the ruins of the Greek economy and hit back at German Chancellor Angela Merkel with a rebellious passion. Speaking in Paris, Papandreou accused Merkel of driving up bond yields for weaker eurozone members by insisting that private investors should foot part of the bill for a permanent mechanism to support countries with failing economies, like Greece’s. “This could create a self-fulfilling prophecy,” said Papandreou. “This could break backs, this could force some economies into bankruptcy.”

On the face of it, there seems little wrong with Merkel’s insistence that private bondholders should accept losses, or a “haircut,” on their investment as part of a debt crisis mechanism to be adopted by 2013. Most Europeans would accept that this would create a fairer system although, clearly, German taxpayers would benefit the most as they’re the ones who would be called on more often to bail out failing eurozone members. But the self-serving element to Merkel’s position is not what should be of most concern to Europeans. Instead, it’s the way Berlin has tried to steamroller other EU countries into accepting the inclusion of the “haircut” clause ahead of a decisive EU leaders summit in Brussels next month. It’s this lack of consultation and the absence of consideration for struggling eurozone members that is undermining the Union.

Papandreou argued that making such a big fuss about investors having to pay their share simply gave jumpy bondholders a seriously aggravated case of the jitters, pushing up the yields on government bonds for Ireland, Portugal and Spain to dangerous levels. Few EU leaders backed Papandreou openly but there is great concern about Germany’s stubbornness. “When the history of the eurozone is written, last month’s German-driven EU summit agreement to devise a crisis resolution mechanism for countries to service their debts may well be cited as the event that pushed Ireland over a cliff,” Bloxham, Ireland’s oldest stocbrockers, said last week, a few days before Dublin turned to the EU and the International Monetary Fund for emergency loans.

In Germany, though, there is a different view. “If Merkel were to abandon her plans, then it would be paradise for investors and weak governments,” wrote the Suddeutsche Zeitung newspaper last week. “The speculators could charge higher interests on Irish or Greek bonds without any risk of losses. And the Greeks could continue with their record indebtedness because they would have no more pressure from the financial markets and in an emergency would be rescued by their euro partners.” However, this ignores that when Greece tries to go back to the international bond markets in 2013, its borrowing costs will be pushed up anyway, as investors will be wary of having to take a haircut should Athens have to revert to the permanent EU mechanism for further loans.

The Greco-German dispute is symptomatic of the differing views emerging within the EU about how to combat the debt crisis. There is a tendency for the EU to speak with two voices and to pull in two different directions. “The euro, which was supposed to make European integration irreversible, could become its undertaker,” wrote the Frankfurter Allgemeine Zeitung daily last week. Every day the debt crisis gnaws away at the EU’s confidence, making the Union seem an exhausted shadow of its former sprightly self. This dissipation of energy and will is leading to division and, whether through bad luck or design, Merkel is at the forefront of creating ever-deeper rifts.

Speaking at a rally of her Christian Democratic Union (CDU) in Karlsruhe on November 15, the same day that Papandreou challenged her scheme for private investors, Merkel said her predecessor as chancellor, Social Democrat Gerhard Schroeder and his Finance Minister Hans Eichel had blundered when they allowed Greece to join the eurozone. “In 2000, Schroeder and Eichel couldn’t let Greece join the euro fast enough and they ignored all the warnings,” she said. “It was a political decision… political decisions are important but those which ignore the facts are irresponsible.”

It’s now obvious that Greece was not ready in 2000 to stick to the single currency’s fiscal guidelines, as prescribed by Germany. It’s also clear that allowing Greece into the eurozone was a political decision — one aimed at giving the nascent single currency numerical, if not necessarily economic strength, but also the opportunity to encourage economic reform and German-style efficiency in a sluggish European state. A decade ago, it was a convenient political decision for Germany — Greece, after all, became another market in the eurozone for its exports — but now it’s a terrible inconvenience for Berlin. But that’s the thing about political decisions: You take a risk. Sometimes you ignore the facts because you have a conviction that something greater is at stake, even if the numbers don’t back you up.

Merkel might consider, for instance, that the Marshall Plan, which ensured Germany’s post-war reconstruction and helped it become the economic powerhouse it is today, was a political decision. The United States, which led the effort, could have decided that paying to help rebuild Germany did not make economic sense but Washington chose to look at the bigger picture — the opportunity to fight “hunger, poverty, desperation and chaos” as US Secretary of State George C. Marshall said when he unveiled his plan in June 1947. Using words that are eerily relevant to today’s Europe, Marshall said: “The United States should do whatever it is able to do to assist in the return of normal economic health in the world, without which there can be no political stability and no assured peace.” Peace in Europe is not under threat in 2010 but the EU’s faltering economic health is putting its unity at risk.

While leaders argue over bond yields, haircuts, bailouts, deficit and debt, one very important factor is being overlooked. As was the case in the Europe of 1947 before the Marshall Plan, it’s the people that are suffering. They are the ones that pay the cost of failed economic policies and soaring bond yields — people who have fulfilled the wishes of politicians and bankers by mortgaging their futures to buy houses and cars and who believed the euro would bring the permanent stability they were promised. This is why unity must be restored.

Somewhere between Papandreou’s rebelliousness and Merkel’s intransigence, we’ve forgotten that the EU and its institutions were created to improve people’s lives. Many of these people are now losing their jobs, homes and hope. That’s why, even though Greece and Germany may not be at war, their dispute is confirmation that Europe is fighting battle, but the wrong one.

This commentary was written by Nick Malkoutzis and was published in Athens Plus on November 26, 2010.

Disposable heroes of hypocrisy

Illustration in linocut by Manos Symeonakis

Is Greece corrupt? If it’s possible to quantify such things, as the graft watchdog Transparency International does regularly, then the answer is yes. Does that make all Greeks corrupt? Emphatically, no. Does it mean that Greece is forever destined to walk Europe’s corridors of power feeling like an inbred among lots of thoroughbreds? Again, absolutely not. It’s really as simple as that. But over the past few days, much of the media and political world — no strangers to the odd corrupt moment themselves — decided it would be more fun to muddy the waters. At a time when thousands of people’s jobs are on the line and the country’s immediate future still hangs in the balance, they chose to play a childish game of pinning blame for the corrupt image that haunts Greece.

At the sidelines of the International Monetary Fund and World Bank meeting in Washington last Friday, the head of the Eurogroup, Jean-Claude Juncker, held a news conference. During this session, which was not attended by any Greek journalists, Juncker referred to a Greek prime minister openly admitting that his country was corrupt. When his comments were later reported second- and third-hand, it sparked faux moral anguish from scores of politicians and journalists. Suddenly, there was a hunt on to uncover this dastardly Greek premier, who so heartlessly sold his country down the river to snobbish European bureaucrats. It was a game that PASOK and New Democracy played with glee.

Forgotten for the past few months in the fusty attic that politics reserves for retired leaders, Costas Simitis sprang into life like a well-oiled jack-in-the-box to vehemently deny he’d ever claimed Greece was corrupt — even though this was the same Simitis who, as prime minister, in a frank assessment of his nation’s deep-rooted incompetence following the sinking of the Samina Express passenger ferry in September 2000 had said: “That’s Greece.” Another ex-premier, Costas Karamanlis, the talking bear whose pull string no longer works, also let it be known via his friends that he would never bring such shame on the country he served for five and a half years — even though this was the same Karamanlis who six months after coming to power in 2004 had told a select group of MPs over souvlaki and beer that he was determined to confront corruption by taking on the “five pimps” (industrialists and publishers) that controlled the country.

As it turned out, Juncker had not recounted a private conversation with either of these premiers. The head of the group of 16 countries that use the euro currency had simply referred to one of several public comments over the last 12 months by current Prime Minister George Papandreou about his country’s unsuccessful battle against graft. This appeared to settle the dispute but, aided by compliant members of the media, ND and PASOK tried to squeeze a little more playtime out of the affair, launching claims and counterclaims at each other. Oblivious to the hypocrisy of it all, ND even demanded an apology from PASOK on behalf of Karamanlis for implicating the ex-prime minister. Meanwhile, nobody spared a thought for the Greek people, who were the ones really deserving of an apology.
All this flapping over trivialities meant that an added, more important dimension to Juncker’s comments went largely unnoticed in Greece. The Luxembourg prime minister said he’d known for some time that the Greek economy would hit a brick wall but he “could not go public with the knowledge.” The crisis could have been avoided, in Juncker’s opinion, if Greece had adopted different policies in the past. “It was clear that this problem would occur,” he said, according to the Irish Times, which was actually at his news conference. “We knew it would, because we were discussing it among the Germans, the French and myself.”

How gratifying it is to know that Greece’s failed policies, for which the same Greek taxpayers have been paying for so many years, provided a hot topic for conversation between our continental partners — partners who, for reasons that Juncker did not clarify, decided to remain silent about these catastrophic shortcomings. Could it be that as long as Greece was useful to Germany and France as an importer of goods and purchaser of weapons, nobody wanted to rock the boat? Or, was it that they feared the impact on the single currency if widespread corruption and mismanagement was uncovered in one of the eurozone’s member states? Maybe Juncker will eventually reveal what prevented Europe’s big players from enforcing the strict terms of monetary union and forcing Greece to put its house in order, allowing instead one of the members of what was once known as a “community” and now as a “union” to dig an ever deeper hole for itself as they looked on in silence.

Of course, Juncker and other European leaders would argue that they cajoled their Greek counterparts in a way that avoided publicity so as to minimize the damage to the country’s credibility. Presumably, they would also argue that, ultimately, it was Greece’s responsibility to implement the changes its eurozone peers had recommended. Both arguments are valid. After all, it would be a serious dereliction of duty if a country’s leader consistently ignored warnings that disaster would strike unless specific measures were taken, wouldn’t it?

It was illuminating, therefore, to read Tony Barber’s account in the Financial Times last week about how European leaders arrived in April and May at the decision to provide, with the assistance of the IMF, 110 billion euros of emergency loans to Greece and then set up a 750-billion-euro “stabilization mechanism” for the other eurozone countries. Barber describes how on May 7 in Brussels, Jean-Claude Trichet, the president of the European Central Bank, spoke bluntly to the leaders of eurozone countries about the dangers to the single currency. “Mr Trichet told the leaders that the crisis was partly their own fault because they had too often turned a deaf ear to ECB appeals for fiscal discipline after the euro’s launch,” writes Barber. “The ECB, he said, had repeatedly warned of the need for strict control of public borrowing and spending.”

Well, what do you know? Could it be that at the same time Greek leaders were unwilling to heed advice because it involved taking non-politically expedient measures, their European counterparts were doing exactly the same thing?

The furor over Juncker’s comments should not disguise that Greece has a serious corruption problem, which is clear to all regardless of whether our leaders admit it publicly or not. But the dust that’s been kicked up this week by politicians and journalists should also not cloud the fact that although hypocrisy is a Greek word, it’s not an exclusively Greek trait.

This commentary was written by Nick Malkoutzis and was published in Athens Plus on October 15, 2010.