Greeks are also victims of their country’s profligacy

Columnist

Wednesday 29 June 2011

Greece, birthplace of democracy – as all the tourist brochures say – is in the grip of another two-day general strike.

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Ian Bell

Tomorrow, its parliament begins to vote on still another programme of austerity measures. Yet another finance minister is warning that if these fail to pass, an EU/IMF rescue will be refused. Next month, the money, the actual cash, will begin to run out.

Like any bad dream, the process has its own logic. Greece will then default on its debts, and will almost certainly be driven from the Eurozone. The bond markets will turn their attentions to the next weak link, namely Spain. The European banking system will tremble again. And chatter about the future of the European Union itself will cease to be idle.Amid all this, David Cameron’s brave boast that Britain will have nothing to do with a Greek bail-out is beside the point. For one thing, it’s not true: we are party to the proposed IMF emergency loan of 12 billion euros. For another, proud insularity won’t help if European banking seizes up and inter-bank lending suffers another “credit crunch”. Contrary to any impression Mr Cameron gives, Britain is still borrowing steadily, though at affordable rates.Optimists like to argue, nevertheless, that none of this is likely to happen. Greece, in the infernal jargon, is “too big to fail”. But how big is that, exactly? Its population is only slightly better than twice that of Scotland. Is there a demographic antibody that protects against a debt crisis? Or is it simply an article of faith that the Germans (and the rest) will cough up once again for the sake of the EU, the Eurozone, and the banks?In that happy argument, two things are assumed. First, that austerity cures all ills, sooner or later. This was the patent medicine that made the 1930s such fun, but the fact seems to have been forgotten. Secondly, it appears to be taken for granted that Greeks will swallow their medicine. Can’t pay, don’t spend: how complicated could it be?In the first case, the obvious parallel is Ireland. It has received the ministrations of the IMF’s creative thinkers, and been lectured by the Germans, and surrendered the last of its economic independence. Yet after four austerity budgets in a little over two years – October 2008, to December 2010 – Ireland has entered its fourth year of “negative growth”. The Irish “national recovery plan” – what some in Dublin call sado- monetarism – is liable to leave Greeks unimpressed.But that’s the second case: surely they have no choice? If they default, depart from the Eurozone and manage to return to the drachma, how would it help? Greece, unable to borrow or invest, could spend a quarter of a century discovering what life was really like in neighbouring Albania under Enver Hoxha. Greece would be cast adrift, and deprived of hope or help.Ordinary Greeks, expected like ordinary Irish people to pay for economic crimes they did not commit, and for decisions they did not make, might yet refuse to be intimidated. George Papandreou’s Pasok (nominally socialist) government won a parliamentary vote of confidence just a week ago. It could well win the necessary votes on austerity measures today and tomorrow. Will it also be able to enforce those measures?It too has a four-year blueprint, by no coincidence. As redefined last Thursday by Evangelos Venizelos, the new Finance Minister, it will extend the plans introduced last year: 28.6 billion euros will be raised through tax increases and spending cuts, 50 billion euros through wholesale privatisations. According to the IMF, there is no alternative.The fact that last year’s austerity round shrank the Greek economy by 5.5%, eradicating the country’s ability to earn its way out of trouble, is of no consequence to the monetary fund, or to a panicked EU. The fact that 50 billion euros worth of assets held in the name of the Greek people could go at knock-down prices does not trouble the IMF even slightly. In its well-thumbed book, privatisation is never a bad thing. Greeks have noticed that. Those on strike across the country, public sector and private, have observed that the crisis has become an excuse to reorder the basis of their society. They define it as blackmail.Shouldn’t they have paid their taxes more often, then, and been less eager for decent pensions and welfare provisions, or more honest with themselves when politicians – conservative politicians, it so happens – were misrepresenting the national finances?No doubt. It was obvious a decade ago, when Greece joined the euro, that its credentials for a stability pact were based on creative book-keeping. The Greeks were not alone in that. But Greece is one of those countries – like Ireland, Spain, Portugal and the east Europeans – whose accession to the EU was supposed to mark an escape from poverty and/or dictatorship. They followed economic models, madcap growth and madcap borrowing, over which the IMF once purred.Real tax evasion is a game for the Greek elite: some of them have been at it since the Colonels were torturing trade unionists. The 2008 banking crisis was not, meanwhile, of Greek manufacture: Greece owes the bulk of its bond debt to the agents of that debacle. Ordinary Greeks meanwhile wonder why a generation should be crushed because those same bond hagglers, and their puppet rating agencies, smell a profit in a crisis.In Athens it is being suggested that the austerity scheme will pass through parliament and founder in the face of civil disobedience. There is a move afoot to refuse to pay the new taxes, or accept the sell-off of assets. It could work. It could certainly bring into relief arguments over what is owned, in human terms, through the ownership of a country’s debt. It could also have Greeks learning Albanian.Our own, parochial interest should be self-evident. Austerity: a cunning plan, and unavoidable, for a responsible coalition government? Slash the public realm to satisfy the markets, and pray that growth will follow. A prayer in extremis never fails, does it?

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Greeks are also victims of their country’s profligacy

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