European Solidarity to Greece revisited by Dimitris A. Kazis

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European Solidarity to Greece revisited

We Greeks are indeed primarily responsible for what is happening to us, but let's have a look now at exactly what the Eurozone mean when they speak about “Solidarity”.

Question: How is it possible that a country with a GDP only 2% that of the EU and 0.4% of the world's threatens the euro and other strong currencies?

The collapse of an economy is linked with the bankruptcy of its banking system. When the American giant Lehman Brothers collapsed in 2008, the European banks suffered heavy losses and the ECB and national governments had to step in to prop them up: the banks were far too exposed to speculative investments, instigated primarily by American financial circles. Yet, the anger of those who suffered losses wasn't directed against the US because, among other things, the USA is a superpower and therefore they didn't dare demand anything.

Not long after however, the significant exposure of mainly Western-European banks to risky state bonds of small countries such as Greece triggered the accumulated anger of those who invested in them, and they turned their fire against our weak country. Why did they do that? First, because we ourselves laid the ground. Second, because it was necessary to give time to the German and French banks to get rid of their toxic Greek debt, primarily through the ECB. Third, because they needed a scapegoat to put all the blame on, even for bad choices and moves made by themselves, some related to our country and some not, something which is both unfair and dishonest. There have been voices according to which, the strict Protestant ethics of those in power today in Germany demand the exemplary punishment and the public tarring and feathering of sinful Greece and the use of the country as the “example to be avoided”. Others argue that the northern European mass media launched a name and shame attack on Greece in order to divert public attention away from the mistakes of their own banks and governments. It could be so.

Realising consequently that the crisis is “systemic”, i.e. that the collapse of one part of the eurozone could cause a domino effect in a number of other troubled economies, they used Greece as a guinea pig in order to gain time and to try various scenaria aimed at handling the wider crisis. The measures imposed on Greece (with the joint responsibility of the Papandreou Government which proposed them based on party clientele criteria) proved utterly fruitless; they killed the economy and pushed total unemployment to 25% and that of the youth up to 50%...

According to Bloomberg, “German banks between 2009 and 2011 withdrew between 300 and 466 billion euros from Eurozone countries. Before that happened they were risking loosing a lot of money if Greece left the Euro. Now that the Greek debt has been transformed into public debt, the losses will be split among all taxpayers of the Eurozone – particularly those of France, the banks of which still own many active loans to Greece. Perhaps that's what some German officials mean when they say that the Eurozone is now better prepared for a Greek exit. On the other side, Greece received a total of 340 billion Euros in official loans to cover the deficit, to restructure its debt, to recapitalise its banks, and to replace the capital that left the country. Only 15 billion Euros came directly from Germany. The rest came from the ECB, the EU and the IMF”. If this is the case it offers a satisfactory explanation as to why the Germans didn't promote investments in Greece at the same time (e.g. project HELIOS – 30 bn) to keep unemployment down: their concern was limited to safeguarding their banks, to minimise the amount of aid or guarantees required of them and to punish the Greeks and make an example of them to the rest of the “unruly” South. I wonder though, if we were in their position, wouldn't we also try to safeguard our own interests?

60% of German exports go to the rest of the European countries. This means that the money flows are moving mainly towards Germany (and a few other northern countries) and away from the weaker economies of the Eurozone. The existence of the Euro facilitates those capital flows and rules out the possibility that national governments exercise their own monetary policy. Consequently, we witness a constant deterioration of the weaker economies that have to borrow at higher interest rates and at the same time the strengthening of the German economy, which borrows with zero interest rate and then lends to the weaker, for a profit.

Those all are the result of the weaknesses of the euro, the birth of which wasn't founded on solid grounds. Without a unified fiscal audit framework, without investment in the weaker economies and without regular transfer of resources from the centre to the periphery the Euro is heading to dangerous imbalances and it already seems groggy. And when a monetary system grows increasingly out of control then just a “nudge” may be enough for its collapse.

It is exactly this nudge from Greece they dread. Not because Greece is unreliable and undisciplined but because the whole system of the Euro is “shaking”, as a result of deficiencies, ignorance, shortsightedness, self-interest of some countries, lack of bold decisions, and delays in taking action. At the same time the Euro is also being attacked by financial circles and speculators, mainly from the US, who I think are trying to restrain the increasingly independent Germans and regain the dominance of the Dollar. Since it is not just the Euro that is suffering but also the global financial system as a result of the promiscuous and totally uncontrolled globalisation, any lurching of the Euro will affect the Dollar and consequently the Chinese Yuan. It is unclear to what degree, but because the “markets” react nervously and with fear, governments are scared of turbulence, crucial or just undesirable, due to the spreading of the crisis in the periphery of the Eurozone and to the forthcoming American elections.

Greek politicians are the main responsible for the collapse of the Greek economy, but jointly responsible are the Eurozone (primarily Germany who pulls the strings), the IMF, the creditors and the speculators. It is important to stress here that the European Central Bank was conveniently exempt from the “haircut” the private sector had.

Unfortunately it is primarily the majority of the Greek people who are paying the price for these experiments, for the wrong, improvised and dodgy decisions of the recent governments, and who are being vilified internationally by well-wishers on a daily basis.

Following that, one wonders:

• Could one consider this attitude of the Eurozone towards Greece as a substantial support just because they gave us loans to avoid bankruptcy but at 4% interest and with suffocating conditions whilst at the same time playing those games? Shouldn't the interest rate be much lower and the repayment time postponed since everybody knows that we are currently unable to pay such high interests?
• Is it realistic to demand, as the Memorandum does, that in 2-3 years time we sort improprieties and issues that lasted for decades let alone in a country that did nothing to this aim during the last 2,5 years?
• Since current financial policies and some other terms dictated by the Memorandum have ruined the economy and created huge reactions in Greek society, would it not be wise to reconsider them?
• Can a society, even one with bad habits, show maturity and trust under a regime of cultivated terror, shame, humiliation and insecurity?

Germany is indeed the steam engine of Europe and as such they have the main initiatives. But their attitude towards the other peoples of the E.U. has recently become authoritarian and arrogant, it reminds increasingly of other times past and it's endangering the whole European idea. Particularly their blackmail during the election of our country and threatening "warnings" and delays of part of the agreed loans, as well as the massive reluctance of German tourists to visit our country are unacceptable pressures and it is not yet clear exactly what they are aiming at. However, I believe that Germany and other critics are basically right in many of their accusations, without this constituting an alibi for their own mistakes. It would therefore be wise on our part to pay particular attention to their accusations and take a close look at the mirror.

Greece needs patience, perseverance, guarantees (e.g. Eurobonds), investments and technical assistance to achieve the structural changes needed if it wants to recover whether or not within the Eurozone. Since the basis of everything is education, we need to shape it quickly so that it develops rationalism and produces responsible citizens. This will of course take a long time. In the meantime, however, we have much to learn from some of our partners, particularly as regards the amelioration of our state mechanism. Therefore, I believe that the most significant contribution of the Eurozone could be the European Consulting Group (“Task Force”) for the modernisation of our public administration, on the condition that we make good use of it. For this reason, I insist that any attempts to this end must be supported by all of us, to get away from our feudal type state and to rationalise its structures as soon as possible.

Rightly or wrongly, the international communities are getting tired of the Greek problem and are turning their attention elsewhere. Now it is imperative to have more supporters and fewer enemies. Fr. Hollande's initiatives could be beneficial to us. We can either take it seriously and make use of this last (?) chance, or isolate and be forced to face the harsh reality solely on our own forces, thus sacrificing a generation and possibly surrender land or other national interests. Yesterday’s elections confirmed that most Greeks wish to stay in the Eurozone. Let us then get down to work NOW before we are overrun by international developments that are already emerging in the grey horizon.

18.6.2012

Dimitris A. Kazis,
F. Senior Researcher at the Centre of Planning and Economic Research, Athens.

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