Why should Greeks accept austerity when they know foreign taxpayers will finance their extravagence?
Simon Jenkins
guardian.co.uk, Tuesday 21 June 2011
What would you do this morning if you were a Greek? Would you agree to your government cutting public sector jobs, pay and pensions, and increasing taxes? Or would you do what thousands of Greeks are doing and take to the streets, calling the bluff of Germans and French and making them dig deeper into their pockets?
I would not hesitate. I would take to the streets. Britain may not have that option, but Greece does. Eurozone bankers have been lending the Greeks loads of money for years, knowing they could not repay and assuming Europe's taxpayers would come to the rescue. The rescue is now costing $155bn and rising. This is not to save Greece's economy but merely to service the loans it already has. Why should Greeks accept the anguish of austerity when they know their extravagance will be financed from across Hamlet's "bourn from which no traveller returns", from foreign taxpayers beyond the grave?
Closer European union, so called, was a bad idea for precisely the reason now seen on the streets of Athens. It was an attempt by a supranational economic authority to supersede national democracy. Bluntly, it assumed the commercial culture of "greater Germany" could be imposed on a wide variety of cultures by virtue of geographical propinquity. Countries with a high propensity to work and save would discipline those with a lower one. Banks would finance it all. It was fantasy born of utopia, the perfect precondition for a sovereign credit bubble.
Greece is to a united Europe what Northern Ireland is to the United Kingdom. It forms just 2% of the European economy – having been admitted in the latter's most imperial earlier phase in 1981 and richly subsidised ever since. Greek politics has adjusted to half of all workers being reliant on the state. Eight hundred thousand civil servants have their jobs protected by the constitution. Prevented by euro membership from devaluing its currency, Greece has found the cost of financing its budget deficit way beyond its capacity. But this is no problem as Europe continues its subsidies and stands behind its loans. In particular, Germany always pays.
Now Germany is fed up – but it is fed up with the inevitable consequence of its own unionism. The EU admitted Greece when it was just seven years from corrupt military dictatorship; 30 years since, it still produces governments addicted to external support. There is no way Greece can sustain an overnight shift to Germanic efficiency, with an overvalued currency, slashed wages and hundreds of thousands thrown out of work. The parallel with Weimar Germany is too uncomfortable.
Sometimes political theory meshes with practice to serve a nasty message. If you invent a federation that requires nations to converge their economies, you must accept what happens when convergence fails. The Greeks were openly encouraged to believe that EU taxpayers would ease them painlessly into a modern economy, a foolish, implausible and now dangerous prospectus. Eurosceptics said so at the time.
Europe's paymasters can huff and puff, just as Greece's politicians can pledge and promise, but come the July meeting of the eurozone financiers, they will do what the politics of the moment demands, which is to keep the money flowing down Europe's arteries into Greece's bank balances. Europe will pay and Greece will again be off the hook.
There may be some "debt reordering" but the banks have already insisted they will help only in a "purely voluntary" role in this. As during the credit crunch they expect their risk-taking to be underpinned by Europe's taxpayers. The banks will play their old trump card, promising a "global credit meltdown" if Greece is not helped to finance its debts. Any hysteria will do to avoid them losing money.
The Greek predicament is a system failure. Democracy works only where accountability bites, where taxing and spending within a given timeframe are related to voting for party representatives. It arose in Greek city states, where people knew and could discipline each other in the arts of war and peace. It is thus within Britain's "united kingdom". No one talks about a Northern Irish budgetary crisis because that budget is subsumed under a general consensus. However economically rotten parts of the UK may be, London always pays.
European union requires richer nations to subsidise poorer ones. This includes Britain because, whatever David Cameron says, it signed up to "ever closer union" with Greece. These cross-subsidies, especially those supporting sovereign debts in Greece, Portugal and Ireland, enjoy no democratic accountability. They are the creation of banks and browbeaten ministers at late-night meetings. The ministers are the Fifa of high finance, an oligarchy in thrall to lobbies and special interests, floating on national subscriptions.
I assumed that one day Germany would get fed up with having its 20th-century war guilt exploited by a spendthrift Europe. But that day is not today. German and other banks need Europe's taxpayers to bail out their Greek and other loans. Debt must be indulged and subsidised again, whatever the political spin that covers it.
Everyone seems to agree that what should happen will not happen – that is a shrinking of the eurozone, a devaluation of Europe's peripheral "currencies" and a corresponding cut in their indebtedness. Germany and France, the joint custodians of "Europe", are not ready for such a step. A union is a potent thing. It usually takes a war to break one up, and Europe is not at war.
The EU has become so constitutionally flawed that few of its states dare put continued membership to referendum. The lesson is clear. Sovereign states with distinct political cultures should never surrender control over internal affairs to foreign agencies unless their people are amenable to such a loss of autonomy. Greeks eagerly joined the EU and the euro because they thought there was money in it. They were absolutely right. Why should anyone reject 30 years of such gift horses when others are paying?
European union was a commendable bid to rectify the failings of the past. But it is now something quite different, a bid to dump the failings of the present on the heads of the future. As a result one cynical motto should be hung round the neck of every EU institution: don't worry, the children will pay.
http://www.guardian.co.uk/commentisfree/2011/jun/21/eurozone-greece-debt-crisis
And Blessed Are The Ones Who Care For Their Fellow Men!
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