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I am in Greece, attending a conference to mark the 100th anniversary of the Russian Revolution. I was here in 2016, taking part in a conference on the island of Lesvos, at the height of the refugee crisis/humanitarian disaster that was afflicting the EU’s Mediterranean members, as well as 2015, participating in a conference at the Athens University School of Law on the Greek debt crisis.
Greece, then as now, was, and is, reeling from the punitive fiscal regimen imposed on it by the “troika” (the IMF, European Central Bank (ECB), and the EU) when Greece tried to withdraw from the eurozone. The regimen was not designed to “rescue” the Greek economy, but to punish Greece for wanting to bail on the eurozone, to deter any eurozone members who might be tempted to follow the path Greece was starting to take, and above all, to safeguard the interests of the German and French banks which had lent irresponsibly to the Greek 1%, knowing full-well these loans would never be repaid, and which faced severe losses in the event of a Greek default. 90% of the bailout money has been used to absorb the bad debt of the reckless French and German (and some Greek) private banks which lent to the Greek oligarchs with a joyous abandon under the previous right-wing Greek government. The reckless “too big to fail” banks knew European Monetary Union taxpayers would be stiffed to cover their losses, and of course they were right.
Pratap Chatterjee has a lapidary summary of what these banks did to Greece and other countries during those years of “plenty”:
[These banks] facing interest rates in the low single digits in their own countries, leapt to loan money to Greece and Spain where interest rates were 14-15%:
The logic was clear: In the mid-1990s, national interest rates in Greece and Spain, for example, hovered around 14 percent, and at a similar level in Ireland during the 1992–1993 currency crisis. So borrowers in these countries were eager to welcome the northern bankers with seemingly unlimited supplies of cheap cash at interest rates as low as one to four percent.
Take the case of Georg Funke, who ran Depfa, a German public mortgage bank. Depfa helped Athens get a star credit rating, raised €265 million for the Greek government railway, helped Portugal borrow €200 million to build up a water supplier, and gave €90 million to Spain to construct a privately operated road in Galicia. For a while, the middle class in Greece like the middle classes in Spain and Ireland, benefited from the infrastructure spending stimulus. When Depfa nearly collapsed in 2008, Funke was fired.
Or take the case of Georges Pauget, the CEO of Crédit Agricole in France, who bought up Emporiki Bank of Greece for €3.1 billion in cash in 2006. Over the next six years, Emporiki lost money year after year, blowing money on one foolish venture after another, until finally, Crédit Agricole sold it for €1 – not €1 billion or even €1 million – but a single euro to Alpha Bank in October 2012. Crédit Agricole’s cumulative loss? €5.3 billion.
Money poured in from other banks like Dexia of Belgium. Via Kommunalkredit, Dexia loaned €25 million to Yiannis Kazakos, the mayor of Zografou, a suburb of Athens, to buy land to build a shopping mall. It made similar loans to other Greek municipal authorities including Acharnon, Melisia, Metamorfosis, Nea Ionia, Serres, and Volos.
“The tsunami of cheap credit that rolled across the planet between 2002 and 2007 … wasn’t just money, it was temptation,” financial writer Michael Lewis wrote in Vanity Fair. “Entire countries were told, “The lights are out, you can do whatever you want to do, and no one will ever know.”
Even the right-wing London Daily Telegraph noted that the bail-out was not for the Greek people but for these greedy and irresponsible banks:
Yet leaked minutes from the IMF board meetings showed that all the emerging market members (and Switzerland) opposed the terms of the first loan package for Greece. They protested that it was intended to save the euro, not Greece.
It loaded yet more debt onto the crushed shoulders of an already bankrupt country, and further complicated the picture by allowing one large French bank and one German bank – no names please – to offload much of their €25bn combined exposure onto EMU taxpayers.
The euro has always been a liability for the poorer members of the eurozone— the ECB imposed stringent borrowing requirements on Eurozone member countries as a condition of membership, making it difficult for them to borrow in order to prime their economic pumps when a downturn was underway. The euro’s “one size fits all” architecture, creating a highly inflexible de facto Gold Standard of the kind which cratered the world economy in the 1920s and led to the Great Depression, was after all intended to benefit Germany, which used its position as the EU’s foremost economic power to make certain this architecture was totally congruent with the requirements of its own economy.
The troika, unheeding of Greece’s pleas, wielded its brutal bludgeon by imposing a draconian austerity policy which reeked of economic racism (“Sell your islands you bankrupt Greeks! And sell the Acropolis too!” the German tabloid Bild screamed hysterically) as a condition for the restructuring (certainly not the same as reducing it) of Greece’s debt. The tottering Greek economy duly tanked.
The troika’s austerity regimen was of course based on a dogma rather than a clear-sighted analysis of Greece’s economic situation. As CounterPuncher Dean Baker put it, Greece now had to do battle with the troika’s “creationist economics”.
What ensued was as drastic reduction in Greek living standards and a fire sale of its public assets, primarily to German financial institutions. Greece had resisted Nazi Germany valiantly in World War 2, now it faced another invasion, this time on the economic front, and it was powerless to resist. As another CounterPuncher Michael Hudson has pointed out, the German lenders “are using finance as the new means of war”.
According to The Guardian, using the Hellenic Republic Asset Development Fund as its source, among the Greek public assets put up for private sale, an asset-stripping amounting de facto to an act of colossal larceny, were:
- Hellinikon Olympic complex (now part owned by a private consortium)
- Ports of Piraeus and Thessaloniki (Piraeus now owned by a Chinese shipping company, Thessaloniki by a German equity firm)
- 14 regional airports (now majority-owned by the German company Fraport AG)
- PPC power company, including ADMIE, the electricity transmission operator
- DEPA natural gas company (now 49% owned by the Azerbaijani oil company SOCAR)
- Hellenic Petroleum (now 42.7% owned by the Latsis Family Group)
- Hellenic Post (now 10% owned by Eurobank Ergasias)
- Athens Water Supply and Sewerage Company (privatization blocked by Greece’s constitutional court)
- Xenia Hotels in Rhodes
- Marinas of Chios, Pylos and other locations (privatization negotiations are currently underway with several private consortia)
Pensions, and health and education budgets were slashed, and taxes raised to reduce the deficit.
Even today, several years after it went belly-up, the Greek economy is on life-support. It has had to be bailed-out 3 times since 2010.
The crisis has disappeared (somewhat) from the news outside Greece, though the Greek people still shoulder its crippling burdens (well, maybe not the billionaire oligarchs with their Swiss bank accounts and tax-dodging wheezes, but certainly Stavros the Athenian taxi driver and Anastasia the hotel maid, who were thrown under the bus by the troika with the connivance of the Syriza government).
Greece has lost 25% of its GDP per capita since 2007 (during the Great Depression the US decline from 1929 to 1933 was 31%), and there is no reasonable hope that this will be restored in the foreseeable future (the US economy moved into growth in 1933, while Greece has stood still until the last 3 quarters of 2017). Greek unemployment levels which have swung between a high of 27.8% in July 2013 and a low of 21.2% in June 2017. Current living standards are at levels last seen in the 1960s.
Greece’s debt-to-GDP ratio has soared since the start of the bailouts, going from 128% in 2010 to over 181.6% in 2017 (by comparison, the UK’s was 92.2% in 2017, the US’s 106.1% at the end of 2016). However, assessing the impact of debt-to-GDP ratios is more educated guesswork and impression-management than exact science– Japan’s stood at 250.4% at the end of last year, due in large part to an economy that has been sluggish for decades as well as the impact of its significantly older population, but the IMF is not getting fainting fits over this, nor is its prime minister Shinto Abe treated like a pariah at international gatherings the way Theresa May and Donald Trump are experiencing, albeit for different reasons.
Faced with such dismal economic prospects, the young and educated have been leaving Greece in droves (as of September this year youth unemployment was at a staggering 43.3%), a drying-up of the talent pool Greece will need desperately if it is to refloat itself in the coming years.
At the same time 2017 has brought a modicum of good economic news for Greeks. The reduction in unemployment has already been noted, and in addition to this GDP expanded by 0.5% in the second quarter of 2017. Nonetheless the long-term downward trend of household consumption continues, dropping by another 0.1%, fixed investment has declined 4.5%, and in 2016 more than a third of loans on the books of Greek banks were “non-performing”, i.e. past due. Greece’s poverty rate remains the third highest in the EU, behind Bulgaria and Romania.
The Greek economist C J Polychroniou (from whom some of this data is taken), has rightly pointed out that it is a sick joke to take these extremely modest gains as a marker of Greece’s “economic success”, as Alexis Tsipras, the Syriza leader, has done. Tsipras, elected on a radical left agenda, did an immediate “somersault” (the Greek word is kolotoumba) when the troika held his feet to the fire over Greece’s withdrawal from the eurozone. Tsipras is now an enthusiastic implementer of the neoliberal “reforms” sought by the troika, and Syriza is far behind in the opinion polls.
The western capitalist press, once coruscatingly critical of him, is now gushing in its praise of Tsipras. The worn-out neoliberal narrative is being trotted out yet again: the medicine imposed by the neoliberal troika was bitter and hard to swallow, but Greece had to do it because there was no other way, and now the patient is slowly starting to recover.
To quote The New York Times: “Since then [i.e. when Tsipras masqueraded as an economic radical], Mr. Tsipras seems to have pivoted toward restoring political and economic stability…. He now appears bent on burnishing his legacy by making the country financially self-sufficient again during his tenure”.
Do what the big banks want and screw your country in the process, and the NYT will love you and the way you are “burnishing your legacy”!
The refrain “there is no other way” (TINOW), shades of the ghastly Thatcher’s “there is no alternative” (TINA), is an essential plank of fascism (as Dimitrios Patolis pointed out to me in a helpful conversation), though of course not the only one. In fact, I always thought Thatcher was an incipient or proto-fascist from the way she cosied-up to Pinochet and the racist bastards who ruled apartheid South Africa.
The EU has never been a democratic institution. It has an elected parliament, but this is a debating chamber only, and the real decisions are made by its non-elected commissions, an endless source of sinecures for Eurocrats.
TINOW is exactly what one would expect from a non-democratic organization.
It is of course undeniable that Greece had major problems of its own before its economic collapse—in particular, rampant tax evasion on the part of its oligarchs, and low productivity despite the fact that its workers put in the longest hours in Europe. However, troika-imposed austerity has done nothing to remedy these.
What stands Greece in good stead today has nothing to do with the troika, EU, or US.
The crushing burden Greeks have to bear has been mitigated somewhat here and there by the strength of its solidaristic networks. Greece has always had strong locally-based communities, thanks to the precapitalist forms that have managed to survive the capitalist wave. These solidaristic networks include health clinics set-up voluntarily by medical professionals donating their time and skills, food banks and kitchens relying on donations and staffed by volunteers, student groups providing support for those who are house-bound or lacking in mobility, and legal aid centres have sprung-up to deal with the effects of austerity.
I have met some of the people involved in these undertakings, and they are deeply impressive. Give me one of these to any number of Eurocrats, Greek oligarchs, and their cronies and lackeys!