Monday, February 13, 2012

Force is coming to Greece

Recently I wrote in Germany to Greece: Our money or your life that continued financial propping up of Greece with German money is a bad proposition for both countries. While the leaders of both countries press on with the charade, the people are waking up to the game: Greeks, because their Liberty is at stake, while Germany realize they are fleeced financially.

This situation is a stark example of what is wrong with the West - the issue that concerns me the most is the break-down of the trust between the leadership and the population - the unmaking of the social contract, based on honesty, and a representative government. The irony is that while the leaders have essentially reached an agreement, the public has soured on the whole enterprise.

The Germans are finally getting tired of their part in a Greek tragedy. While the German flags burn in Athens (along with flags bearing Swastikas) what is the upside for the Germans citizens from continued lending? There isn't one according to Der Spiegel, which has  recently published an article calling for the end to the farce. I added some translations to the graph provided by Der Spiegel showing the transfers of wealth (in euros). Germany comes out as the biggest sucker, I mean lender.

After decades of government overspending, compounded by costly political patronage, tax evasion and a strong union movement deeply linked with governing parties, Greece is in a sorry mess: The economy is set to contract for a fifth consecutive year, the government still spends almost ten percent more than it earns and unemployment is at a record high of nearly 21 percent — with the number of jobless exceeding one million in November.

The private lenders have (generously or desperately?) agreed to restructure Greek debt, which will be reduced by > 70% and rolled over into 30-year bonds with a low <4%  interest rate (called the coupon), still provoked Greek indignation: “The creditors are asking for 40 years of submission,” said Georgios Karatzaferis, who heads the right-wing Popular Orthodox Rally. “Greece will not give itself up,” he added.

Greeks have a lot of soul searching to do - for years their politicians cooked the books to provide social programs, which we given our like so many candies. I call this the trick-and-treat strategy, because the unpaid treats are essentially lies. The problem with socialism, as Margaret Thatcher pointed out is that "eventually you run out of other people's money". The Greeks spent their own money, the money of their children and have spent €110bn of the first bailout - mostly from German taxpayers. Now the state can't afford the goodies, and needs to withdraw them from an addicted population.

Lucas Papademos, the Greek economist who was appointed as a temporary Prime Minister in November of 2011, has worked hard to accommodate the demands of the so-called troika -- the European Commission, the ECB and the IMF. The demands included: cutting the minimum wage to less than 600 euros a month, cuts of 25 per cent in private sector wages and 35 per cent in supplementary pensions, abolition of at least one holiday allowance, closure of about 100 state-controlled organisations with thousands of job losses. According to the Financial Times, the list of demands also included cutting 150,000 public sector jobs within three years and cutting this year’s budget deficit by a further 1 per cent of economic output.

In addition, because Papademos’s term is set to end when general elections are held, most likely in April, EU and IMF officials seek guarantees from political leaders in Greece that they will stick to pledges made to receive the financing. If you have any ideas how this provision can be reconciled with meaningful elections in a sovereign country, please contact a Greek consulate immediately.

The Greek unity government knew about the resistance of the public to these terms, before it accepted them piece by piece during painstaking negotiations last week.

Among the warnings were those of representatives of Greek employers and the biggest private sector union on Feb. 3 called on Papademos to resist pressure to cut the minimum wage, holiday allowances other benefits. "The painful measures that create misery for the youth, the unemployed and pensioners do not leave us much room," secretary general of the ADEDY union, Ilias Iliopoulos, told Reuters.

More austerity risks triggering a “social explosion,” Hieronymos II, the head of Greece’s Orthodox Church, said in a statement on Feb. “We are being asked to take even larger doses of a medicine that has proven to be deadly and to undertake commitments that do not solve the problem, but only temporarily postpone the foretold death of our economy,” he said.

Meanwhile, more pressure was applied to the Greek leadership in Brussels - at a closed doors meeting on Thursday the euro zone finance ministers made it plain that they did not believe the figures provided by Greece. The bureaucrats in Brussels demanded that Athens must find an additional $428 million in savings — to make up for a shortfall created by the refusal of political leaders to slash supplemental pensions — before their next meeting, expected this Wednesday.

The birth-place of Western democracy is expressing itself by other means.
The Greek cabinet agreed to all Brussels' demands last Friday. Despite two days of striking by a Greece's two major labor unions on Friday and Saturday against these reforms, during which Athens was set ablaze, the parliament approved the austerity package on Sunday.

One headline summarized the reaction of the financial world particularly well: "Greece Burns as Markets Show Relief". This shows not the wisdom of the markets, but their wishful thinking that the deal will stick despite the desires of the people. The only way this could happen is if the dissenting citizens are beaten back into submission.

I am a big proponent of capitalism, as a source of independence and individual dignity. Unfortunately, the 'Third way' between capitalism and socialism tried in Europe, was essentially a gradual encroachment of the later, and a betrayal of the former. It's beyond sad to read how the perverted capitalist markets cheer, as the birth-place of democracy burns. Clearly, the markets would applaud the inevitable application of Force against the will of the people.

Papademos provided the justification for Force: "Vandalism, violence and destruction have no place in a democratic country and won't be tolerated". What democracy? Brussels demands that Greeks somehow promise to etch the deal in stone, so that the austerity program cannot be undone by elections in April. What other means to affect their government remains? The Greeks have lived above their means, but now they have lost not only their money, but their liberty, which is the upside of responsibility. Perhaps this calls for paraphrasing Ben Franklin's famous dictum to read "Those who give up an essential Responsibility for a little Security, deserve neither Liberty nor Security".

Successful continuation of the vast transfers of wealth would be a Pyrrhic victory for both Greece and Germany. As painful as bankruptcy would be for Greece, and much as it would spread 'contagion' through EU -- such an outcome would lead to a restoration of proper national responsibilities. Most importantly, it is the only way to preserve the democratic social contract in Greece, and prevent the spread of a far more dangerous authoritarian contagion in Europe.

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