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.

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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.

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The case for the defence: militarisation and capitalism

In the post Cold War years it looked for a brief moment like we had entered a new era under the so-called ‘peace dividend’. With no clear or significant ideological enemy on the landscape, growth in military expenditure began to recede from frontline political discussion. This brief interlude has of course long since been shattered, and defence spending is well and truly back in the headlines and in the public mind. Russian aggression has been the most recent and immediate cause for concern in western defence departments but this is just the latest in a sequence of security issues going back to before the ‘war on terror’ even kicked off.

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As millions of people suffer due to reduced state spending throughout Europe, it may be useful to ask why increased military spending has become such an important issue at a time when so many other areas of the economy are underfunded. Luckily, there has been no shortage of neo-conservative fanatics and defence lackeys running to the press in recent days to help us understand why military spending is top priority. Former Conservative defence minister, Gerald Howarth, said last week that reduced defence spending would “diminish us in the eyes of our closest allies, the United States of America.” A serious matter indeed! Former MI6 boss, John Sawers, has at least tried to be a little more specific in pointing out that increased Russian aggression requires increased military spending. In other words, “we’re going to have to spend more on our defence and our security because the threats are greater.” It is easy to believe that establishment figures would rather ramp up the tension of this situation rather than consider the diplomatic and strategic mismatch between the west and Russia which has brought us to this juncture. What is less easy to comprehend, however, is how someone like Sawers could realistically believe that embarking on a new arms race could be to anyone’s benefit.

But we can glimpse the true rationale behind this mentality in the words of the US army chief of staff, General Raymond Odierno, quoted in the Guardian this weekend as being “very concerned” about reports of Britain’s falling military expenditure as % of GDP. In particular, Odierno states that the spending concerns are about “having a partner that has very close values and the same goals as we do.” Herein lies the truth of the matter. Having the predominant military position on the world stage is essential to neoliberal capitalism, and the burden of this position should be shared by ideological allies. As western capital goes in search of new markets, inputs of production and investments, corporations are required to operate in regions which can be hostile to their interests. The growth of globalisations and the spread of the multinational corporation therefore rely on the support of the state to open foreign markets and demand that the rights of western investors are upheld. Since the early days of the British Empire it has been hard to see the spread of western capitalism and increasing military intimidation as being anything other than inextricably linked.

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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.

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The Roots of Protest

The post-2008 political landscape in Europe has been littered with public discontent and protest. In Spain and Greece this has manifested itself in revolt against the European establishment and a refusal to be bound by the financial practices of the past. In England, immigration has raced to the forefront of the political agenda, while in Scotland and Catalunya nationalism has come to the fore in a way that would have been unimaginable only a few years ago. In France the National Front has eroded support for the rightwing UMP while simultaneously appealing to much of the working class. Even Germany has not been immune to an element of political unrest.

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Although the principles underlying these movements may differ greatly, it would be foolish not to wonder if there is a common denominator running through European protest. If history has taught us anything it is that the lines separating socialist uprisings from fascist popularity are not as clear as we may like to think. Political movements often thrive on the charisma of their leaders and their ability to build a narrative that chimes with the misery or discontent of the public. In Germany’s broken socioeconomic structure of the 1920’s it could easily have been the communists who came to power on a wave of popular support instead of the National Socialists. But the Nazis were more adept at political maneuvering and public manipulation. One of the many lessons available from this episode however is that most individuals are not remotely concerned with political ideology. Instead they back parties that offer the best guarantee of personal and collective security. This security can and does take many shapes, but it is the desire to protect one’s self and one’s security that is at the core of electoral and public decision-making. But electoral decisions are also often made with rejection in mind – rejection of the incumbent political force and policies. Under these circumstances, a clear and workable alternative vision matters less, since the public desire to oust those who have led them into darker times will often be sufficient to create political change. This is the predominant theme in modern politics and since voters are often hard pressed to identify the core differences between candidates, a vote for one is largely just a rejection of the other.

But the current wave of demonstrations across Europe is about something greater than electoral choice, it represents a rejection of modern politics. The SNP, UKIP and the Catalan nationalists may promote very different ideals but all try to tap into the disenchantment of voters in the face of globalised, neoliberal politics administered from a distant centre of power. All seek to recapture a real or imaginary notion of local identity from the clutches of external bureaucratic institutions. All offer a vision of the future which appeals to those who want a greater say in shaping their local culture and society. As citizens feel increasingly distant from the centre of power they strive to have a greater say in organising their communities in a way which is consistent with their own beliefs and identity rather than those of policymakers in London, Madrid or Brussels.

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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.

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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.

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Focus on Putin masks roots of Ukraine conflict

“Here’s my strategy on the Cold War: We win; they lose.”

 Ronald Reagan

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As the 20th century drew to a close there was hope that the tension of the cold war was well and truly over, with both the USA and Russia ready to stand together as self-styled leaders in the international community. NATO’s bombing of Serbia in 1999 may have put a strain on the new relationship but with the election of George W. Bush the following year it seemed that the new personal relationship between Presidents could cement ties. Indeed, in the immediate aftermath of the 9/11 terrorist attacks the first call of solidarity to President Bush came from Vladimir Putin. The two superpowers looked ready to fight the war on terror together.

But public vows of friendship merely masked underlying tensions which had been building since the mid-90’s. As the Cold War drew to a close, the first President Bush had made a deal with Mikhail Gorbachev that NATO would not expand eastwards into the Soviet Union’s sphere of influence. In return Gorbachev agreed to withdraw Soviet troops from the occupied eastern European states, beginning a de-escalation of the military aspects of the conflict. But by the Madrid NATO summit of 1994 it became clear that the rules of the game had changed, and that that new members would be welcomed into the NATO alliance. The Bush-Gorbachev agreement was finally wiped off the diplomatic map in 2008 when Georgia and Ukraine were lined up to join NATO.

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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.”

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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.

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

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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.

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Crunch time in Greek debt crisis: time for compromise?

It is well and truly crunch time and this week will be pivotal in defining the future of Greece and the Eurozone. It was interesting to read criticism this morning of Syriza’s approach to negotiations over the last couple of weeks, with at least one commentator pointing out that Varoufakis’ negotiating actions have not matched his academic knowledge of game theory. Let’s not forget though that at least he is showing willingness to resolve the situation in a way that will keep Greece solvent and avoid disaster. This is more than can be said for his Eurogroup partners.

Later today Syriza faces a vote of confidence in the Greek Parliament. Although it is likely to gain enough votes, this is just a precursor to tomorrow’s meeting in Brussels of EU finance ministers which could be one of the last opportunities to take steps towards a compromise before things start to unravel. After the ECB stopped accepting Greek bonds as collateral on loans last week, the National Bank of Greece has been forced to increase its operations through the Emergency Liquidity Assistance (ELA) in order to prop up the Greek banks. This is essentially a form of credit sanctioned by the ECB but with the proviso that it can be cut off at any moment if the ECB feels it is excessive. The end of Greek ELA would be the point of no return, leading to a run on Greek banks, bankruptcy and a certain exit from euro. Even now, Greek bank deposits continue to plummet at an alarming rate, adding to the likelihood of a run on the banks. Unless things change dramatically Greece will surely have to institute capital controls very soon to hang on to what’s left in their financial system. According to the ECB, Greek banks have lost around 21 billion euros since December, amounting to unsustainable losses. Although capital controls would break the European Union Treaty, this is not without precedent, and Cyprus was allowed to introduce this measure, with some success, in 2013. However, this will be an unpopular measure within Greece and is likely to be a severe test for Tsipras and his government.

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