Monday 15 June 2015

BREAKING NEWS! Three ignominious Greek 'firsts'

Posted by Martin Cohen

Unfortunately, Icarus flew too near the sun, and the heat caused the wax and feathers to melt. The feathers fell off, and Icarus plummeted to the sea.

Here are Three Ignominious Greek 'Firsts'.
1. In a diplomatic first, March 2015, the Greek defence and foreign ministers threatened to unleash a “wave of millions of economic migrants” and jihadis on Europe unless the eurozone backed down on austerity demands.

2. In an international grade, damn lies and statistics, first, the country was only able to enter the currency bloc after brazenly claiming its deficit was less than 1 percent of gross domestic product, cocking a snook at the bloc’s 3 percent threshold. However, European Commission reports  reveal that Greece’s budget hasn’t been within the 3 percent limit a single year since its accession. Financial tricks have included failing to count gigantic military expenditures, or billions in hospital debt. Other countries fudged the figures to gain entry to the euro, but ten years on the Greeks had turned into a fudge factory - the deficit had expanded to 12 per cent. Part of the methodology for achieving this financial disaster in the face of the European Union rules, was expensive advice on concealing its trail from investment banks like Goldman Sachs. Goldman, who also played a helpful role in bringing the US banking system to its knees, arranged complex currency swaps for the Greek government which on magicked the debts off into the future.
3. And now the third unfortunate first is to be the first country excluded from the Euro.

Long, long ago, I wrote a piece (for the Guardian*) on how ethics - not economics - was the real sticking point on solving the Grexit Euro crisis...

Well, time has moved on and really now all the facts are in and the answer is that Greece is on the way out of the single currency, as Reuters posted on Sunday 14th June -  bar a theoretically possible change of heart amongst the Finance minsters in Luxembourg on Thursday. But there won't be a change of heart and here's why.

My take (as a philosopher and social scientist)  is very different from what the academic economists like Andrew Farlow even last week insisted was the logical situation.

Yes, the Greeks are victims - but not of the ECB or Germany - of their own splintered and dysfunctional society. 'Austerity' never touched the military budget, at 2.5% one of Europe's highest, and  the wealth of the Greek Orthodox Church remains, well, sacrosanct - the church is exempt normal taxes.

The fact is, that Greece is one of the most unequal societies in Europe, and one of the most corrupt. It has money for the Generals to have new warships, and to pay train drivers on rural routes that in the rest of Europe would long ago be closed down, salaries of $130 000 and retire at 50. It is both very poor and very affluent - with some of the highest rates of second home and luxury car ownership in Europe - indicators harder to falsify. But not entirely!

A few months ago, (per reports) the Greek traffic police caught Michalis Liapis, a former transportation minister, driving his luxury sport utility vehicle through a stop sign in the seaside town of Loutsa outside of Athens.

It turned out that the former 'New Democracy' minister was driving with fake plates and no insurance, characteristic of the tax avoidance endemic in Greece

“I am a pensioner, and I, too, have been affected by the crisis,” he told reporters, prompting Greek papers to print their own estimates of Mr. Liapis’s net worth, which appears substantial and certainly includes owning 20 properties. A mock “Free Liapis” Twitter campaign sprang up, and the former minister was jeered as he came to court in December. But in the West, too many take such self-serving accounts uncritically.

Okay, but wouldn't it be the end of the Euro if the Greeks go bust? Why should it be? The Greeks are tiddlers in this fishpond - a mere Bear Stearns or Northern Rock or Halifax. Crude geopolitics allowed them into the Euro despite not meeting the criteria, it must not try to keep them there.

Update, Thursday 18 June 2015 - the day of the Luxembourg Showdown

There's an old Eastern European joke that gives a profound psychological insight into the Greek mindset. Part of the problem with the interminable Greece-Eurozone negotiations has been that it is Western Europe talking to Eastern Europe - Mars to Venus!

Anyway, here's the joke:
A man receives a visit from his fairy godmother and she says he can have whatever he wishes for. But of course, there's a catch, which is that whatever it is that he wishes for... will be given to his worst enemy two-fold – twice as good! (So if the Greek President wishes for a new car - the German one will have two lovely new cars...)
So what does the man request? Why, that one of his eyes be gouged out.

And here's todays quote from Dimitris Stratoulis, the Greek Social Security Minister, for comparison:
“If we are forced to say the big no the difficulties will last for a few months …. but the consequences will be much worse for Europe.”

UPDATE2! July 10

The new Greek proposals look acceptable. They should do, as they were written by the French using insights from what the Germans thought were confidential discussions between Hollande and Merkel on what would make the next Greek proposal acceptable. Proud Mr Tsipras could not quite bring himself to sign them though, nor Mr Varoufakis to vote for it (citing 'family commitments')...

The battle remains as it ever was, between spendthrift European governments, led by France, and those who make the Euro work - led by Germany. And  the billion euro question for the Eurozone remains not what the proposals say, but the willingness to implement them. That is clearly... nil.

See also:



Matthew Blakeway said...

I too think that Greece will be pushed out. I think it could turn into a failed state as mobile wealth increasingly looks to leave. Grexit will certainly trigger a massive capital flight, but their political leaders might be the first to make the withdrawal.

Thomas O. Scarborough said...

I would hesitate on this one, in that we may too easily treat politics as a simple rational exercise, or we may too easily think idealistically in regard to such things. We may be surprised. Is there a gadget which would permit us to place bets here?

docmartincohen said...

Thanks for your comments! I'm interested in the way - shall we say the Kantian glasses way - that people see in the situaiton what they expect to see. The well-meaning liberal economists insist that the problem is the inflexioility (or greed) of the lenders - the conspiracy theorists see the hand of the far right/ far left/ CIA/ Russians, the EU haters see the inevitablity of it all... But very few people seem to see the very real evidence of hypocrisy in the Greek stance: why are the cuts always on the pensioerns and teachers and dotors? Why not on the Generals and their battleships - or the Orthodox Church and its untaxed wealth, or any of those on the list of Greek-Millionaires-Evading-Taxes ?

Unknown said...

The EU is being blackmailed by Greece much as by the boat migrants on the Mediterranean.

Perig Gouanvic said...

I think I've seen this fight as one of the most popular in Greece; the new finance minister is a kind of Elliot Ness, his life is in danger all the time, and I think that he has cracked down on several big shots.

I think that there's a distorsion, due to distance: the Greek are immersed with obscene inequality, and react to policy changes that address corruption at home; others outside tend to downplay that and to see things through their own lenses, as you say, wondering where they might be involved (some saying the Greeks are going to rob them, others saying that it's a collective responsibility of predatory lenders and their objective allies (us)).

Perig Gouanvic said...

Yes, actually, Varoufakis said that Greec has been treated as a colonial property (indeed), like the rest of the South. I just disagree with the word "blackmail". They want democracy, justice. Think about the money in WWII compensation that was never payed! And it's even worse for the global south.

Perig Gouanvic said...

Greece is a sideshow. The eurozone has failed, and Germans are its victims too | Aditya Chakrabortty | Comment is free | The Guardian

docmartincohen said...

I've written a wee bloggie on this for an education website - the Guradian is run by people who all think that the Euro is an evil capitalist conspiracy (which is the Gk government's view too at the moment). It's about the way academic theories - notably 'Game Theory' led the Gks to misjudge their hand. But it's not coming out unitl Friday - will post a link here though then? Meanwhile, this piece by someone who is living there I think isi very insightful - worth a read!

Perig Gouanvic said...

Now that Varoufakis has left, the truth becomes obvious:

"Suddenly, a permanently unsustainable Greek public debt, without which the risk of Grexit would fade, has acquired a new usefulness for Schauble.

What do I mean by that? Based on months of negotiation, my conviction is that the German finance minister wants Greece to be pushed out of the single currency to put the fear of God into the French and have them accept his model of a disciplinarian eurozone."

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