Larry Elliott writes: What a difference eight months can make. When Syriza came to power in Greece in January it did so on a wave of voter enthusiasm. There was talk of an austerity party breaking the mould of post “great recession” politics. Europe’s political establishment looked on in horror. The financial markets trembled.
All the euphoria and most of the apprehension had disappeared by the time Greeks voted today. Alexis Tsipras has won but the turnout was low and the mood sullen. The financial markets are no longer concerned that Syriza will be the template for a pan-European political backlash against budget cuts or that it could start the breakup of monetary union by leaving the single currency.
In reality, there is no reason for the markets to worry about Greece, at least for now. Tsipras quickly discovered once he had swept to victory in January that he could not deliver on a mutually incompatible trio of election pledges: to end austerity, to put the economy on the road to recovery and to stay in the euro. He has achieved just one of these objectives – remaining in the euro – but at a high price. [Continue reading…]
— Agence France-Presse (@AFP) September 8, 2015
AFP reports: Germany said it could take half a million refugees annually over several years as Greek islands struggled Tuesday to process a huge backlog of migrants desperate to travel to western Europe.
Reflecting deepening concern, the European Union’s president warned the EU faced a years-long refugee crisis, while the UN urged countries worldwide to help tackle the problem.
German Chancellor Angela Merkel urged greater flexibility in EU migrant quotas as her deputy, Sigmar Gabriel, said Berlin “could surely deal with something in the order of half a million (refugees) for several years.” [Continue reading…]
Many perspectives have been shared about the social and economic repercussions that the third EU bailout proposal for Greece may have. The impact of these tough austerity measures is yet to unfold for the country, for the other southern states, or indeed Europe as a whole.
But moving beyond a purely economic lens, there is already evidence about the extent of deprivation and youth unemployment of more than 50% during the past five years of the first and second bailout programmes, meaning that the likely effects of the third are easier to predict, at least for this generation.
The links between poverty and a range of risk factors for child mental health problems and related outcomes is well established. Nevertheless, the reality hit home a few weeks ago when I joined the Children’s SOS Villages in Greece in training their prospective new carers, or “mothers” and “aunts” as they are widely called. These carers work in a similar way to foster carers and residential care staff in other welfare systems. The villages were established in Austria after World War II to care for orphan children and since then their model has successfully spread across more than 120 countries.
Yanis Varoufakis writes: On July 12, the summit of eurozone leaders dictated its terms of surrender to Greek Prime Minister Alexis Tsipras, who, terrified by the alternatives, accepted all of them. One of those terms concerned the disposition of Greece’s remaining public assets.
Eurozone leaders demanded that Greek public assets be transferred to a Treuhand-like fund – a fire-sale vehicle similar to the one used after the fall of the Berlin Wall to privatize quickly, at great financial loss, and with devastating effects on employment all of the vanishing East German state’s public property.
This Greek Treuhand would be based in – wait for it – Luxembourg, and would be run by an outfit overseen by Germany’s finance minister, Wolfgang Schäuble, the author of the scheme. It would complete the fire sales within three years. But, whereas the work of the original Treuhand was accompanied by massive West German investment in infrastructure and large-scale social transfers to the East German population, the people of Greece would receive no corresponding benefit of any sort. [Continue reading…]
The Daily Beast reports: At first glance, nothing seems amiss on Greece’s northern border. Corn and wheat are slowly ripening in fields on the frontier with the former Yugoslav Macedonia. Along their edges, the uncultivated dirt bursts forth with poppies and chicory.
At dusk, the scene comes to life: Scores of people emerge from among the stands of poplars and plane trees that line the Vardar River. By nightfall, groups of hikers carrying backpacks and long walking sticks made from stripped branches gather at the borderline, preparing to cross north. They speak little, and only in whispers.
Almost all of them are fleeing war or repression in Syria, Afghanistan, Yemen, and Somalia. Most are trying to get to Germany, where they hope to apply for political or humanitarian asylum. They hope to follow the Vardar valley all the way to Serbia, often walking on a freight track that follows the river’s gentle contours. From there, they plan to walk through Hungary and Austria.
The leader of one such group explained why he was there with his two eldest sons, aged 15 and 16. “I decided to leave Yemen so that I will never see my children fight for al Qaeda or any other side. Sooner or later, one militia or another will approach them.” Hashim, as he identifies himself, has had to leave behind a wife and four younger children he may never see again. [Continue reading…]
Chris Arnade writes: One of the first lessons I was taught on Wall Street was, “Know who the fool is.” That was the gist of it. The more detailed description, yelled at me repeatedly was, “Know who the fucking idiot with the money is and cram as much toxic shit down their throat as they can take. But be nice to them first.”
When I joined in Salomon Brothers in ‘93, Japanese customers (mostly smaller banks and large industrial companies) were considered the fool. My first five years were spent constructing complex financial products, ones with huge profit margins for us — “toxic waste” in Wall Street lingo — to sell to them. By the turn of the century many of those customers had collapsed, partly from the toxic waste we sold them, partly from all the other crazy things they were buying.
The launch of the common European currency, the euro, ushered in a period of European financial confidence, and we on Wall Street started to take advantage of another willing fool: European banks. More precisely northern European banks. [Continue reading…]
Almost as soon as the Greek deal was agreed, it began to come apart at the seams. Passage of the necessary legislation through the Greek parliament led to Syriza splitting in two as Alexis Tsipras, the Greek prime minister, drew on the votes of the right to force through a deal which is worse than anything that was on offer before the referendum on July 5.
Germany’s finance minister, Wolfgang Schäuble, revealed that many in the German government actually want Greece to leave the euro, effectively admitting that the deal was deliberately designed to be as tough as possible to force Tsipras to reject it. The deal’s passage through the German parliament will not be straightforward, and Finnish politicians have also expressed deep scepticism.
Meanwhile, the International Monetary Fund (IMF) has been engaging in a propaganda battle against its European partners in the Troika, leaking a memorandum in which it argues that Greece’s debt is unsustainable and implying that the agreement will fail.
Bloomberg reports: The hardliners who reject a Greek debt writedown to keep it in the euro are willing to pay much more to drive it out.
A “Grexit” would cost creditors almost 100 billion euros ($110 billion) more than keeping Greece in the currency union, reckons Alberto Gallo, head of macro credit research at Royal Bank of Scotland Group Plc. Zsolt Darvas at the Bruegel institute estimates that about 75 percent of the debt would not be paid to creditors following the return of the drachma.
“What this tells you is that policy makers are following politics instead of rational economics,” Gallo said. [Continue reading…]
Josh Barro writes: It reads like a dry, 1,184-word memorandum about fiscal projections. But the International Monetary Fund’s memo on Greek debt sustainability, explaining why the I.M.F. cannot participate in a new bailout program unless other European countries agree to huge debt relief for Greece, has provided the “Emperor Has No Clothes” moment of the Greek crisis, one that may finally force eurozone members to either move closer to fiscal union or break up.
The I.M.F. memo amounts to an admission that the eurozone cannot work in its current form. It lays out three options for achieving Greek debt sustainability, all of which are tantamount to a fiscal union, an arrangement through which wealthier countries would make payments to support the Greek economy. Not coincidentally, this is the solution many economists have been telling European officials is the only way to save the euro — and which northern European countries have been resisting because it is so costly.
The three options laid out by the I.M.F. would have different operations, but they share an important feature: They involve other European countries giving Greece money without expecting to get it back. These transfers would be additional to the approximately 86 billion euros in new loans contemplated in Monday’s deal. [Continue reading…]
Paul Mason writes: One of the most touching aspects of Greek life is people’s obsessional respect for parliamentary democracy. Syriza itself is the embodiment of a leftism that always believed you could achieve more in parliament than on the streets. For the leftwing half of Greek society, though, the result is people continually voting for things more radical than they are prepared to fight for.
I asked one of Syriza’s grassroots organisers, a tough party cadre who had been agitating for a “rupture” with lenders for weeks, whether he could put his members onto the streets to keep order outside besieged pharmacies and supermarkets. He shook his head. The police, or more probably the conscript army would have to do it.
When it comes to the now-abandoned Thessaloniki Programme, the radical manifesto on which Alexis Tsipras came to power, there is always talk of implementing it “from below”: that is, demanding so many workers’ rights inside the industries designated for privatisation that it becomes impossible; or implementing the minimum wage through wildcat strikes. But it never happens. When strikes are called, it’s by the communists. When riots happen, it’s the anarchists. The rest of leftwing Greece is mesmerised by parliament.
Little does it understand how scant was the power its ministers actually wielded from their offices. And now the realisation dawns: the Greek parliament has no power inside the eurozone at all. It has the power only to implement what its lenders want. [Continue reading…]
Marina Prentoulis writes: After five months of negotiations, Sunday evening brought a moment of painful realisation: democracy has left the EU building. The proposals put forward by the German government and its allies were preposterous – a clear message that any government opposing neoliberalism and austerity should be brought to its knees at all costs.
Their agenda completely ignores the human suffering the proposals will inflict, while also disregarding the political cost of dividing the European community and the economic cost of proposing a “temporary” Grexit. An economic solution to the crisis – a crisis that was inevitable in a monetary and economic union structured to create winners and losers – was never the primary objective. Instead, the deal with Greece has been seen as an opportunity for declaring a two-speed Europe.
Despite 11th-hour attempts by France, Italy and others to keep the eurozone – and effectively the broader EU – united, the damage has already been done, and now we have to deal with the aftermath of that blow. For the Greek government the next few days are critical: it has to explain why it ever made the assumption that the neoliberal eurozone could be reasoned with. Caught between a rock and a hard place, blackmailed and threatened for months, it eventually had to accept a very painful deal and more austerity. With an impossible mandate – to stop austerity and stay within the eurozone – the government could go only as far as the European directorate would let it. For the Greek people, the glimpses of hope to be gleaned from the prospect of some measures of debt restructuring and investment are of little comfort. [Continue reading…]
Wolfgang Münchau writes: A few things that many of us took for granted, and that some of us believed in, ended in a single weekend. By forcing Alexis Tsipras into a humiliating defeat, Greece’s creditors have done a lot more than bring about regime change in Greece or endanger its relations with the eurozone. They have destroyed the eurozone as we know it and demolished the idea of a monetary union as a step towards a democratic political union.
In doing so they reverted to the nationalist European power struggles of the 19th and early 20th century. They demoted the eurozone into a toxic fixed exchange-rate system, with a shared single currency, run in the interests of Germany, held together by the threat of absolute destitution for those who challenge the prevailing order. The best thing that can be said of the weekend is the brutal honesty of those perpetrating this regime change.
But it was not just the brutality that stood out, nor even the total capitulation of Greece. The material shift is that Germany has formally proposed an exit mechanism. On Saturday, Wolfgang Schäuble, finance minister, insisted on a time-limited exit — a “timeout” as he called it. I have heard quite a few crazy proposals in my time, and this one is right up there. A member state pushed for the expulsion of another. This was the real coup over the weekend: regime change in the eurozone. [Continue reading…]
When Alexis Tsipras walked into the meeting with the remaining 18 eurozone leaders at the weekend, he may have had in mind, not a line from Greek antiquity, but perhaps one from the Italian middle ages. Dante Alighieri’s version of hell had a simple message at its gate: “Abandon all hope, ye who enter here”. It was a very difficult, and very long, meeting for Tsipras, but my first impression is that he managed the best he could under extremely difficult circumstances.
For a start, the Greek prime minister had to explain to eurozone leaders why he was pushing for an economic agreement which, at the end of the day, had been overwhelmingly rejected in a referendum by his own people. This raised a significant issue of trust and credibility. Despite Tsipras having won Greek parliamentary support (251 out of 300 Greek MP’s gave him the “green light” to strike a deal; perhaps any deal that would keep Greece in the euro) was he trustworthy to implement what was about to be agreed?
Giles Frazer writes: Somewhere in a Greek jail, the former defence minister, Akis Tsochatzopoulos, watches the financial crisis unfold. I wonder how partly responsible he feels? In 2013, Akis (as he is popularly known) went down for 20 years, finally succumbing to the waves of financial scandal to which his name had long been associated. For alongside the lavish spending, the houses and the dodgy tax returns, there was bribery, and it was the €8m appreciation he received from the German arms dealer, Ferrostaal, for the Greek government’s purchase of Type 214 submarines, that sent him to prison.
There is this idea that the Greeks got themselves into this current mess because they paid themselves too much for doing too little. Well, maybe. But it’s not the complete picture. For the Greeks also got themselves into debt for the oldest reason in the book – one might even argue, for the very reason that public debt itself was first invented – to raise and support an army. The state’s need for quick money to raise an army is how industrial-scale money lending comes into business (in the face of the church’s historic opposition to usury). Indeed, in the west, one might even stretch to say that large-scale public debt began as a way to finance military intervention in the Middle East – ie the crusades. And just as rescuing Jerusalem from the Turks was the justification for massive military spending in the middle ages, so the fear of Turkey has been the reason given for recent Greek spending. Along with German subs, the Greeks have bought French frigates, US F16s and German Leopard 2 tanks. In the 1980s, for example, the Greeks spent an average of 6.2% of their GDP on defence compared with a European average of 2.9%. In the years following their EU entry, the Greeks were the world’s fourth-highest spenders on conventional weaponry.
So, to recap: corrupt German companies bribed corrupt Greek politicians to buy German weapons. And then a German chancellor presses for austerity on the Greek people to pay back the loans they took out (with Germans banks) at massive interest, for the weapons they bought off them in the first place. Is this an unfair characterisation? A bit. It wasn’t just Germany. And there were many other factors at play in the escalation of Greek debt. But the postwar difference between the Germans and the Greeks is not the tired stereotype that the former are hardworking and the latter are lazy, but rather that, among other things, the Germans have, for obvious reasons, been restricted in their military spending. And they have benefited massively from that. [Continue reading…]
The Guardian reports: In a dusty field that straddles the Greek-Macedonian border, quite where one country ends and the other begins is not entirely clear.
But several Macedonian soldiers in the area are very certain. “Get back,” one shouts through the darkness, herding hundreds of refugees a couple of metres further south from where they stood a moment ago. “Get back to the Greek border.”
The crowds shuffle briefly backwards, and the soldiers seem satisfied. “Please,” a Syrian mother calls back, a toddler in her arms. “We are a family. Where should we go now?”
It is a filthy spot, filled with the detritus of past travellers. Surrounded by farmland, the only lighting comes from a nearby train track, and the only bedding is the sand the woman stands on.
“You must sleep here,” the Macedonian replies.
It is an alarming order – not just for these refugees, who have walked 40 miles to reach this point, but for the people of the country they have just crossed. Greece has received nearly 80,000 refugees this year, a record figure that has seen it overtake Italy as the primary migrant gateway to Europe. Migrants are arriving in such high numbers by dinghy from Turkey that the authorities – already battling an economic crisis – cannot feed, house, or process their paperwork fast enough, leading to bottlenecks on the Greek islands.
One factor helping relieve the pressure was the constant stream of refugees out the other side of Greece, near the northern border town of Idomeni, into Macedonia. But in the past fortnight, the Macedonian government has begun to regulate the flow. Until a few days ago the route had been blocked for a whole week – raising the spectre of a refugee bottleneck at both ends of Greece, at a time when the country is struggling to support its own citizens, let alone a record wave of refugees. [Continue reading…]
The eurozone crisis must not be allowed to derail the greater European project that has been decades in the making
Mark Mazower writes: At the heart of the European project is a deep ambivalence towards nationalism. Nineteenth-century theorists of nationalism saw no incompatibility between love of country and international solidarity. But that was before two world wars. Twentieth-century fathers of federalism, such as the Italian Altiero Spinelli, had a barely disguised loathing for the excesses of nationalism, which they associated with fascism and war.
We can have a little more confidence than that. Even the No vote in the Greek referendum was, so the polls suggest strongly and as the prime minister, Alexis Tsipras, has acknowledged, a vote for Europe and even for continued membership of the euro itself. And if, after five years of the worst depression since the 1930s, the Greek public still recognises the merits of participating in Europe, we can be sure public opinion in most other countries contains a solid core of pro-European sentiment. This is for historical reasons (memories of the world wars), geopolitical (fears of Russia and of fallout from the Middle East), and also because people can see that the real problems ahead lie well beyond the capacity of single states to tackle – global warming, endemic conflict in Africa and the Middle East that is generating hugely destabilising movements of people.
But we should not push things too far, which is precisely what the euro, at least as administered until now, has done. For one thing, it has too often been presented as just a question of signing up to rules, as if central bankers and not the elected representatives of member nations should make the fundamental decisions in any kind of democratic confederation. For another, it has lacked any redistributive or solidaristic dimension. [Continue reading…]
Yanis Varoufakis writes: Greece’s financial drama has dominated the headlines for five years for one reason: the stubborn refusal of our creditors to offer essential debt relief. Why, against common sense, against the IMF’s verdict and against the everyday practices of bankers facing stressed debtors, do they resist a debt restructure? The answer cannot be found in economics because it resides deep in Europe’s labyrinthine politics.
In 2010, the Greek state became insolvent. Two options consistent with continuing membership of the eurozone presented themselves: the sensible one, that any decent banker would recommend – restructuring the debt and reforming the economy; and the toxic option – extending new loans to a bankrupt entity while pretending that it remains solvent.
Official Europe chose the second option, putting the bailing out of French and German banks exposed to Greek public debt above Greece’s socioeconomic viability. A debt restructure would have implied losses for the bankers on their Greek debt holdings.Keen to avoid confessing to parliaments that taxpayers would have to pay again for the banks by means of unsustainable new loans, EU officials presented the Greek state’s insolvency as a problem of illiquidity, and justified the “bailout” as a case of “solidarity” with the Greeks.
To frame the cynical transfer of irretrievable private losses on to the shoulders of taxpayers as an exercise in “tough love”, record austerity was imposed on Greece, whose national income, in turn – from which new and old debts had to be repaid – diminished by more than a quarter. It takes the mathematical expertise of a smart eight-year-old to know that this process could not end well. [Continue reading…]
Jeffrey D. Sachs writes: The Greek catastrophe commands the world’s attention for two reasons. First, we are deeply distressed to watch an economy collapse before our eyes, with bread lines and bank queues not seen since the Great Depression. Second, we are appalled by the failure of countless leaders and institutions – national politicians, the European Commission, the International Monetary Fund, and the European Central Bank – to avert a slow-motion train wreck that has played out over many years.
If this mismanagement continues, not only Greece but also European unity will be fatally undermined. To save both Greece and Europe, the new bailout package must include two big things not yet agreed.
First, Greece’s banks must be reopened without delay. The ECB’s decision last week to withhold credit to the country’s banking system, and thereby to shutter the banks, was both inept and catastrophic. That decision, forced by the ECB’s highly politicized Executive Board, will be studied – and scorned – by historians for years to come. By closing the Greek banks, the ECB effectively shut down the entire economy (no economy above subsistence level, after all, can survive without a payments system). The ECB must reverse its decision immediately, because otherwise the banks themselves would very soon become unsalvageable.
Second, deep debt relief must be part of the deal. The refusal of the rest of Europe, and especially Germany, to acknowledge Greece’s massive debt overhang has been the big lie of this crisis. Everyone has known the truth – that Greece can never service its current debt obligations in full – but nobody involved in the negotiations would say it. Greek officials have repeatedly tried to discuss the need to restructure the debt by slashing interest rates, extending maturities, and perhaps cutting the face value of the debt as well. Yet every attempt by Greece even to raise the issue was brutally rebuffed by its counterparties. [Continue reading…]