euro crisis

What Greece Wants

As a European, I am just a detached observer of Asian affairs. But when it comes to the destiny of the European Union, I feel I am personally involved. Although this is a blog about Asia, I cannot ignore what is happening in Europe, and I want to write a few words about it. 

On the statement he published this morning on his own blog, Greece’s former Minister of Finance, Jiannis Varoufakis, explained that what the Greek government wants is simply:

an agreement that involves debt restructuring, less austerity, redistribution in favour of the needy, and real reforms


They are not asking for their debt to be written off, as some media has argued; they just want their debt to be sustainable. As Varoufakis said in one interview (as I can speak Greek, I am following the actual debates in Greece), he thinks that the austerity policies of the troika are not viable for Greece, because they hinder growth and create a situation of instability that makes the recovery of Greece impossible. 

Without growth, employment, investments and fairer taxation (the troika has objected to taxing the rich more heavily than retirees and the middle class, as Tsipras said in an interview), Greece will never be able to get back to its feet and actually repay its debt. The policy of the EU has created a vicious circle that is damaging not only Greece, but the whole continent.

The obtuse and absurdly neoliberal attitude of some European governments and technocrats is condemning the EU to instability and poverty. It is deliberately destroying Greece to make up for the debt of European banks (chiefly German and French banks). In fact, as ‘The Guardian’ explained, around 90% of the money received by Greece from the bailout programmes “went to the banks that lent Greece funds before the crash”. Less then 10% was used to finance reforms, investments or welfare services. De facto, the Greek people were squeezed in exchange for money that went to private banks. 

After 2008 Germany reacted to the crisis through more state intervention. Among the measures adopted by the government there was the so-called “Conjucture Package II“, which included an eco subsidy for cars, reduction of the income tax, subsidies for companies that did not lay off workers but offered them courses to upgrade their skills and qualifications, and many other reforms. Moreover, Germany bailed out its banks and bailed out bankrupt automaker Opel. 


Whereas Germany overcame the crisis through more state intervention, the mainstream neoliberal narrative ignores this fact. Surprisingly, the German government, while adopting state-led measures at home, has preached neoliberal ‘free market’ reforms in the rest of Europe: dismantling the welfare state, scaling down government investments, focusing exclusively on debt reduction, etc. 

I do not know of any country in history which has been able to develop by NOT investing in education, infrastructure, industry etc. While it is certainly a good thing to avoid wasting money, an economy cannot work if there is no investment and no growth. What Greece needs are policies that can develop its economy. But Europe has become so incompetent that it has unlearnt how to create growth. 

People who say that Greece is corrupt should remember that corruption is no hindrance to wealth. China is corrupt. The USA in the 19th century was corrupt. Taiwan under martial law was corrupt. Hong Kong was so corrupt that British Governor Murray MacLehose created the Independent Commission Against Corruption in 1974. The list could go on. As Oxford economist Chang Ha-joon has argued in his book 23 Things They Don’t Tell You About Capitalism, it is actually more difficult to fight against corruption in poor countries. Paradoxically, the poorer the country, the easier for corrupt elites to embezzle public funds, blackmail and squeeze the weak. 

People talk about a ‘Grexit’ as the best solution for all. This is an illusion, and we will all pay a high price if this is implemented. First, Greece will plunge into chaos, and it will be unable to repay its debt. Currency devaluation won’t help Greece because the country has not enough goods to export, while imports (raw materials, electronics, cars, clothes etc.) will become more expensive. 

The EU will be destabilised, the markets will lose their faith in the ability of the European institutions to handle the continent’s problems. And, most importantly, the Grexit will once again allow Europe’s politicians to avoid the most important questions: how to create growth, raise the people’s standard of living, maintain a sustainable welfare state, reduce trade deficits and promote industry. These questions have been systematically obliterated from public debates over the last four decades; the only thing European leaders and parties do is to preach poverty for all and self-regulating markets for their own sake.

I am certain that the EU’s reaction to the Greek debt crisis will go down in history as the biggest failure of European economic policy after 1929. 

If China should succeed in stabilising its stock markets trough government intervention, we will have yet another example of European stupidity versus Chinese shrewdness. Who would have thought that 26 years after the collapse of the Soviet-led bloc of Communist states and the Tiananmen Square protests, the European Union would be more divided and incompetent than a Communist one-party state?  

  
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Categories: euro crisis, Europe, Greece

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