Greece bailout: no one got what they wanted, but the show must go on

The EU dream is a tattered one these days.

“Europe has failed!” announce pundits from left and right alike. The image of a frail, white-haired Greek pensioner lying in front of a cash machine, which apparently had failed to disgorge his miserable ECB-specified stipend of €60, has gone around the world symbolising for many the moral emptiness at the European project’s core. The economics which were meant to heal a war-stricken continent have instead set countries at each other’s throats.

Economics is where politics and reality collide. Nowhere has this been more evident than in the case of the Greek crisis. Politically, the Greek government had a mandate reinforced by its referendum to put an end to austerity. Likewise, from the other side, the EU governments did agree on one thing the eurozone would not allow any bailouts. No ifs, no buts, no maybes. And yet here we are with the Greeks tucking into their third load of bailout money and signing up at the same time to another dose of increasingly powerful “austerity medicine”.

It’s confusing yet also impressive. The EU has grown up and passed its first big existential test. No one got what they wanted – certainly not the Greeks – but the show must go on. And assuming it does, it will be because, deep down, the EU exists precisely to harness this unflappable umpire characteristic of economics. Or, to put it another way, to turn bitter ethical and political disputes into simple bean-counting exercises. How often did we hear that the eurozone finance ministers were waiting to be told what to think by their experts? Well, maybe not often enough. But that’s the reality of the EU, and one of its strengths. Strategies are drawn up by technocrats and politicians are only allowed to delay implementing them.

However, there’s always a problem handicapping the dismal science. Economists do not agree on anything. And so politics re-enters by the back door and arguments break out all over again. The IMF calls for a write-down of Greek debt, yet hawks point out that the terms have been made so generous that in 2014, for example, the effective interest rate on its debt was actually slightly lower than that paid by Germany.

Other siren voices blame Greece’s woes on the rigidity of the euro, saying that if only Greece was brave enough to break free of its shackles, it could sell its (EU-subsidised) olives, and maybe its strawberries too, more vigorously. Goods such as strawberries – and rice – are what Greece exports; warships, luxury cars and, well, money, are what it imports. For the Greek farmers, the €2.5bn they receive from the EU is almost half (40%) of their income and so much of their profits that it would be more efficient to pay them to retire after all, and nuts to whatever the Nordic countries think. And within Greece it would seem to be more just too, which is really what the crisis is all about.

Why should it be just the nomenklatura – the lawyers, lecturers, civil servants and, of course, politicians who get the big cars, the island retreats and the early retirement deals? In the public sector, 33% of employees retire before 55 and another 44% between 56 and 61. Austerity has meant a rush of people hurrying to retire on the generous package supposed to be phased out in future.

If Alexis Tsipras did not actually say “Gentlemen, unfortunately, we are bankrupt again” on his arrival in Brussels a few months ago – maybe he should have done. Instead, it was another Greek prime minister, Charilaos Trikoupis, who uttered those immortal words, way back in 1893 as his economy ground to a halt in a very similar way.

The International Financial Control that followed led to sales taxes from the state monopolies of salt, oil, cigarettes and so on going directly to the lenders, an indignity that lasted until 1978. Yet it allowed the Greek economy to keep going. If national humiliation is still the aftertaste of the medicine on offer, that does not mean it will not work.

Martin Cohen is editor of the Philosopher. His most recent book is Paradigm Shift: How Expert Opinions Keep Changing on Life, the Universe, and Everything

Powered by article was written by Martin Cohen, for on Thursday 20th August 2015 06.00 Europe/ © Guardian News and Media Limited 2010


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