More pain, no gain

Difficult to see how the measures imposed on Greece will not lead to further recession, deterioration of public finances, further suffering and political upheaval.

The only positive elements of this deal have to do with rationalizing pensionable age and partly tackling entrenched sectoral and union interests.  It saddens me that the country needed to get on its knees for a government to accept to deal with this gross inequity among its citizens.

But the Greeks are at their best when acting in extremis.  If it was not for the Olympics, Athens would not have a decent motorway system, airport, metro or light rail.  Athens metro had been reported to commence operations more than 40 times (my UG thesis topic) between the second war and 1990!  They only started in earnest in the early nineties with operations commencing in 2000!  At the same time the Olympics was a travesty of misspending and of concentrating white elephant projects on the capital.  The estimate, before the crisis, was that half the Olympic venues had no prospect of commercial use and cost the taxpayer 50 million a year to maintain shut.  A blueprint for the Greek euro-debt: undertaken during the good-times, serves somebody else’s needs, badly designed, badly executed, imposed under duress and totally unnecessary.

Treating Greece like a child that needs discipline is short-sighted.  It undermines the euro project and makes a mockery of the solidarity stated and implied in the EU Treaties.  Not to mention that setting-up a 50 billion fund is a ludicrous concept, unworkable policy and outright offensive to the dignity of all Greeks.  Should Germany have sold-off Bavaria to pay-off its war debt?  A country cannot be treated as a colony if agreements are presumed to be among equals.  So, Germany came-out as not a primus-inter-pares but a hegemon.  It appears not only dominant but also domineering.  And as a good friend said yesterday, one cannot escape the conclusion that Greece is being made into an example to frighten any other potential miscreants.

The fact that the new deal for Greece does not stipulate growth or deal with the lack of viability of its debt has left me bewildered.  At the same time, taking away fiscal responsibility from the Greek government is irresponsible.  Is an EU country to be treated as an adolescent?  The implication of all this is that the key players in Europe either do not recognise the severity of the situation in Greece or they do not care.  The idea that they had no room for manoeuvre is preposterous.  Fiscally neutral or low cost options could have included: a 30 year moratorium on interest and capital repayments, repayments made during upswings in the business cycle, separting good and bad debt and putting bad debt on a subsidised repayment schedule etc.  There are dozens of policy instruments and financial inventions available if the EU had the political foresight to invest on Greece and help it grow.  They chose not to.  And therefore the debate has shifted from one about the wayward and amateurish Greek government, to one about the colonisation of the EU periphery.

It is likely that the issue of the Greek debt (and that of other states and regions in the EU growth periphery) will remain on the agenda for the foreseeable future.  The eurozone will either integrate fiscal policy and agree on high levels of transfers to the periphery or it will dissolve.  In the latter case, the current crisis will be seen by historians as the pre-amble to the combustion of the EU project and the end to pax-Europeana.

A lot of good articles are being written.  The points raised by Verhofstedt and Malkoutzis in the Guardian and the arguments of Evans-Pritchard in the Telegraph are very insightful.

PS (July 16) Merkel is gambling away Germany’s reputation according to Jurgen Habermas.

PS2 (July 20) Krugman has overestimated the competence of the Greek government.

PS3 (August 17) Varoufakis’ annotated new memorandum agreed with the Eurogroup and voted by the Greek Parliament.

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