The human cost of the Euro ‘dream’

There are times when political discussion can based purely on ideology and principles, and there are times when it can’t. So while the Greek bailout is being debated in the German parliament and endlessly analysed elsewhere, I thought I would have a quick recap on the human costs of Greek austerity.
Healthcare is an obvious place to start and the stats are damning. According to CNN, “the country’s health care system is on the brink of collapse. Government health spending fell 25% between 2009 and 2012, after the country’s 2010 bailout package capped such spending.

Spending on drugs dropped by 32% since 2010. And the country owes international drug makers 1.1 billion euros ($1.2 billion), according to the European Federation of Pharmaceutical Industries and Associations.

Evangelisimos is the biggest hospital in Greece. With 1,000 beds, it is constantly running 10% to 20% over capacity. “There is just too many patients and not enough rooms,” trainee nurse Anastasia Karkasina said. Karkasina is three months away from becoming fully qualified. She is worried about getting a job.

“There are no available positions, because there is no money to pay for them,” she said while taking a short break with fellow trainee Anna Karafoti in the sizzling heat outside the hospital. If the two manage to get jobs, they can expect monthly salaries of about 700 euros ($780).”

A public health tragedy is surely looming, with under-staffed hospitals running at over-capacity.

_84294710_greece_unmet_medical_gra624

Continue reading

Greece: A single story

A few days ago I found myself watching a TED talk by the Nigerian author, Chimamanda Ngozi Adichie. Adichie is as engaging a speaker as she is a writer and she took to the TED stage to discuss what she calls the notion of a ‘single story’. The idea is a simple one: a single story is created by showing a nation (or continent) and its people as one thing, and only one thing, over and over again until that is what people believe them to be. To illustrate the point, Adichie uses an example close to her heart, that of the poor, sick and war ravaged Africa, crying out for the help of the benevolent white man; a narrative that treats Africans as unfit to control their own destinies. She also points to the stereotype of the lazy Mexican immigrant, any US Republican voter’s worst nightmare. In both cases, the story is blind to the realities of the individuals and communities tarnished by this lazy stereotyping. But within this critique lies the purpose of this single story. Whoever writes the past can control the present, and whoever illustrates the characters can also define the plot. The single story of the Mexican immigrant may be a depressing generalisation but it is also a powerful weapon for the American far right.

As events unfolded in the seemingly never ending Greek ‘crisis’ over the last few days I kept coming back to this idea of the single story. Since the crisis began we have been constantly told that the bloated Greek public sector must pay the price for years of mismanagement; that the Greek people must stop shirking blame and face the full consequences of living beyond their means; that the Greek government must not expect something for nothing from its friends and partners at the eurozone negotiating table; and, most importantly, that the responsibility for the entire mess lies in Athens. While a quick glance on social media sites will of course show that many people have seen beyond this myopic version of events, it is still the voice of the mainstream media that holds influence in the majority of countries. Controlling the narrative is the key to political success.

tsipras

Continue reading

Syriza’s defeat deals a blow to the European Left

“Orderly debt restructuring has been done hundreds of times, hundreds, like with Germany in 1953”.

 Pablo Iglesias

As the leader of Podemos has rightly pointed out on many occasions, sovereign debt restructuring is nothing new. Why, we may ask, should post-war Germany be helped to meet its financial commitments and rebuild its shattered economies, but Greece and other southern European states should not? Well, the standard narrative on the right is that after an initial helping hand, German productivity and fiscal acumen allowed it to become a regional manufacturing powerhouse. After West Germany had sufficiently re-established itself as a responsible and affluent member of the international community, it was then helped to reunite with its crumbling, post-communist sibling. The beauty of this simplistic version of events is that it is essentially a story of redemption and triumph over adversity, and so lends moral weight to Germany’s central role in contemporary European affairs. It does not, however, hold up to scrutiny of the facts. It was Germany’s central position in the cold war, as well as its divisive position in post-war Europe that made the USA aggressively promote it as a new capitalist powerhouse on the continent. By promoting the European Coal and Steel Community (the precursor to the modern EU) with German participation, the USA embarked on a project to strengthen the Deutschmark as an additional pillar of capitalist strength, and work towards the creation of a vast trading block. Nowhere is the commitment to rebuilding the German economy clearer than in the details of the 1953 debt restructuring, where debt repayment was tied to export revenue. Creditor nations therefore had a vested interest in buying German exports, thus allowing the indebted nation to repay its debts and become ultra-competitive on the global scene.

But in the 62 years that have passed since, the rules of the game have changed beyond recognition. The European project has boomed into a vast bureaucracy overseeing a continental marketplace. With the advent of the single currency at the beginning of the century, the Eurozone members committed themselves to the observance of strict financial rules in exchange for the so-called stability of a single unit of currency designed to reduce transaction costs and promote financial security within the bloc. It is now widely known that countries, including Greece, failed miserably to meet the requirements of euro entry but were admitted anyway through a combination of financial fraud and European bonhomie. Although this may look like a tragic mistake in hindsight, it was crucial to the project that the southern European countries join the single currency in an irreversible manner. As soon as Greece, Italy and Spain were locked into a currency position which did not allow for default, they had sacrificed their only effective means of making their economies more competitive in the face of German exports (which, as I previously discussed here, are made so competitive by breaking Eurozone rules). In short, they were therefore doomed to run current account deficits vis-à-vis Germany ad infinitum. But to make matters even worse, the lack of mechanism for fiscal transfer within the Eurozone (with the original rules explicitly removing this possibility) meant that there has never been any way for the German surplus to be recycled within the union in the interest of stability and balanced growth. The single currency has been deeply flawed from the start.

Continue reading

Greece and the Eurogroup: The more things change, the more they stay the same

‘”We cannot negotiate with those who say ‘What’s mine is mine and what’s yours is negotiable’”.

John F. Kennedy

So after all the negotiation, tension and gamesmanship of the past few weeks Greece is essentially back to where it started. Have no doubt about it, the announcement that Syriza has agreed to a four month extension of the existing bailout programme is a defeat for the new Greek government. As predicted on this blog over the last couple of weeks, it was always likely that a short-term deal would be found which could keep Greece in the game and offer some breathing space for all sides to work out a long-term deal. This is not the bridging loan envisaged by Varoufakis in his opening Eurogroup discussion but it does at least offer the much needed finance and some element of budgetary freedom. But it does so at the expense of maintaining the crushing austerity measures which were at the heart of Syriza’s electoral campaign. It is hard to see how Syriza can dress this up as anything but a defeat and as Varoufakis’ erstwhile nemesis, Wolfgang Schäuble (maybe he should be renamed Wolgang Schadenfreude) has delighted in pointing out, this deal will be hard to sell to the Greek people.

1200x-1

But if the popular press is to be believed, the Greeks have not reacted badly to this austerity extension. Perhaps political pragmatism has come to the fore with recognition that this was the best deal on offer. However, Syriza has until tomorrow to present its creditors with a list of reforms that will accompany the finance extension. The devil, as always, will be in the detail and Tspiras and Varoufakis will be hard pressed to word this in a way which maintains their commitment to shaking off the shackles of austerity.

It seems incredible that Syriza has only been in power for a few weeks. But more incredible is the extent to which they have bent to the will of the troika and the Eurogroup in the face of inflexibility from their negotiating partners. Talk of 50% debt haircuts was watered down into growth-linked bonds before finally morphing into what looks like a continuation of the current programme. This is not only a defeat for the democratic will of the Greek people, who had firmly rejected the current austerity measures, but it is a reinforcement of the financial straight-jacket which has been at the root of Greece’s humanitarian crisis. Syriza may have secured additional short-term funds but much of this will be returned to its creditors in the form of debt and interest repayment. Very little (if any) will find its way to the Greek people, who must continue to suffer so that financial principles can be upheld.

Continue reading

Is it all over for Greece, common sense and humanitarianism?

As I watched Dutch Finance Minister, Jeroen Dijsselbloem, brief the press core on the collapse of yesterday’s Eurogroup meeting, Trotsky’s acerbic put-down of Tsar Nicholas II came to mind: “It seemed as though between his consciousness and his epoch there stood some transparent but absolutely impenetrable medium.”

x

The stance of the European Finance Ministers in recent days has been close to financial fanaticism. Tied together by a currency union designed to play by German rules of fiscal austerity, the Eurozone countries have all toed the official-line since the election of Syriza in January: The terms of financial bailout enforced by the Troika are non-negotiable. Yes, the Dutch Finance Minister claimed that there is some flexibility in the current programme, but only if it continues to be implemented on the Greek side. As is now being openly discussed in the corridors of Brussels, Greece has long since lost its financial autonomy.

But can this really be the end of the road? This week looks likely to offer a definitive answer to this question and it is hard to see what could unblock negotiations. As I have said over recent weeks, Syriza cannot concede much more from its side of the table. Its extraordinary election success was built on a backlash against austerity and Troika policy. To go back on their electoral promises and swallow whole the medicine being forced upon them by the creditors would be a crushing defeat for national democracy and one which would surely blow Greek politics (and society) apart.

Continue reading

Syriza, Greek debt, and the Ottoman Empire: History has a way of repeating itself

20110629_Moutza_demonstrations_Greek_parliament_Athens_Greece

Big countries have a history of making small countries pay their debts. Historically it does not matter whether loans were taken out voluntarily or whether they were imposed via some imperial gunboat diplomacy, but there should be no doubt that economic giants like to uphold a contract. When the once powerful Ottoman Empire defaulted on its obligations to French and British bondholders in the 19th century, the two great European powers promptly set up an Ottoman tax collection agency and effectively launched a financial coup d’etat on the Sultan and his flagging empire. The new Ottoman Public Debt Administration (OPDA) was launched in 1881 to ensure that foreign creditors would receive their dues, and grew into a vast bureaucracy of almost 10,000 employees. In addition to debt collection the OPDA also branched out into wider financial affairs and became an important intermediary for European companies looking to invest in the Empire. Due to its vast reach in the Ottoman public service, the OPDA guaranteed both financial security and favourable commercial opportunities for its partners. What began as a debt default morphed into an imperial occupation in all but name, with contractual obligation and trade opportunity being the core principles. It mattered little that much of the Ottoman Empire’s public debt had been acquired through its role in the Crimean War, a conflict in which it fought side by side with both the British and the French. A deal was a deal, and when the Ottoman Empire ultimately defaulted on its debt, its ‘allies’ swooped in to enforce repayment.

I was reminded of this financial colonisation last week with Wolfgang Schäuble’s offer to send 500 German tax collectors to Greece. The circumstances are obviously different but perhaps there are still parallels we can draw. Greece entered the Eurozone in collaboration with its European partners in celebration of the collective vision of European integration. Countries across the continent came together to become firm economic allies, united by a shared currency. It has subsequently become clear to all however that Greece did not meet the original economic requirements for euro membership. Allegations arose that the Greeks had cooked the books and worked with Goldman Sachs on a deal which involved cross-currency swaps at fictional exchange rates. This enabled them to circumvent the Maastricht rules and ‘meet’ the Eurozone requirements. Military and healthcare expenditures were often left off the balance sheets over the years as accounting fraud helped to maintain the illusion of financial stability. None of this is anything new of course and Angela Merkel has expressed her belief on multiple occasions that Greek euro membership should never have been approved.

Continue reading