Fear and loathing in Brussels

July 13, 2015

I am still reeling from the events of the weekend, I nearly exhausted myself following the saga into the early hours. I think the EU is a different place after the events of the last few days. Essentially the Greeks said more or less yes to everything that had been demanded of them only to be told that it was not good enough and they had to give much, much more.

I was reminded of the lines from the U2 song “So Cruel”:

“I gave you everything you ever wanted
It wasn’t what you wanted”

What this ridiculous performance confirmed is what should have been obvious since the beginning of this attempt to ’solve’ the Greek crisis: you cannot help a bankrupt by lending them more money. If you do that then all that happens is the size of the debts increase and the scale of bankruptcy grows. I cannot see anything in the agreed package that will cause Greece to start growing again. I cannot see anything in the agreed package that will make the Greek debt burden sustainable. All that will happen is that the humanitarian disaster in Greece will continue and deepen.

It is not clear that the Greek parliament will agree this deal. It is not clear that some other EU parliament will agree this deal (the Finns in particular are very unhappy). It is clear that great damage has been done to fabric and reputation of the EU.

Syriza now has to not only get approval for this package in the Greek parliament but has also been given a deadline to pass the following laws by Wednesday!

Paul Krugman in an article in the New York Times entitled “Killing the European Project” had this to say:

“Suppose you consider Tsipras an incompetent twerp. Suppose you dearly want to see Syriza out of power. Suppose, even, that you welcome the prospect of pushing those annoying Greeks out of the euro.

Even if all of that is true, this Eurogroup list of demands is madness. “

Robert Peston at the BBC had this to say:

We simply haven’t seen since the 1930s a rich developed country collapse as Greece is doing right now – millions of people threatened with losing their life savings, companies on the point of collapse, cancer sufferers unsure what treatments, if any, will be available to them.

Now to most outsiders, this demarche is in part the consequence of the incompetence and greed of a succession of Greek governments, and the negligence, incompetence and political insensitivity of the rest of the eurozone and the International Monetary Fund.

In other words, debtor and creditors are both to blame, arguably in equal measure.

So what is particularly horrifying to dispassionate observers is the perception that most of the eurozone, and especially Germany, is hell-bent on making an example of Athens, humiliating the government of Alexis Tsipras, as the price of a financial rescue that – in a best case – will continue to make Greeks poorer, though not as poor as leaving the euro would do.

The unappealing facts are these.

On Friday, Mr Tsipras capitulated – and accepted tax rises, pension cuts and economic reforms that his creditors had been demanding and which the Greek people overwhelmingly rejected in a referendum a few days earlier.

But rather than using Mr Tsipras’s personally painful climbdown – which involved forming an entente with hated opposition parties and splitting his own party – as a basis for consensual discussions on a sustainable bailout, Eurogroup finance ministers, led by Germany’s Wolfgang Schaeuble, denigrated it as too little, too late.

Instead, Mr Schaeuble tried to bundle Athens towards a door no one thought existed, since the euro is supposed to be forever – the one marked “temporary exit”.

This so terrified Mr Tsipras that he has since, in the Eurogroup meeting and an all-night meeting of eurozone government heads – which at the time of writing is still continuing – allowed himself into negotiations that, if successful, would rob Greece of all meaningful economic sovereignty.

Tax, spending, privatisations and the structure of industries – the stuff that shapes lives – would be determined by emergency legislation rushed through the Greek parliament by Wednesday, with no opportunity for serious debate.

Is that democracy?”

Paul Mason also has a piece on this deal in which he points this out:

If you doubt how it might play on the Greek streets, consider the headline of Dimokratia, a conservative tabloid: “Greece in Auschwitz: Schauble attempts eurozone holocaust”.

“Last night the eurozone leaders presented Greece with an ultimatum that shredded all vestiges of control the government has over the economy going forward, and reversed every law it has put through parliament since being elected with 36 per cent of the vote in January.

While Greeks vented, and the hashtag #ThisIsACoup went viral across the globe, Tsipras and his team negotiated. They knew that to have any chance of getting the deal through parliament they must free themselves of IMF involvement, resist the foreign-held privatisation fund, get some commitment to debt reprofiling and an assurance that the ECB will turn the taps of emergency lending back on to the banks.

I said last night that without these things there was no chance of getting the austerity measures through parliament. It seems this morning that each of the measures has been fudged: so the privatisation fund remains in Athens, not Luxembourg; the IMF invovement is still there but apparently muted; the debt restructuring is there but unspecified.”

BTW the original proposal from the Germans included a demand to transfer 50 billion euro of Greek assets to a Luxembourg based organisation called the Iinstitution for Growth whose chairman of the board is Wolfgang Schäuble the German Finance minister!

It will take a while to make sense of all this but I have to say this entire episode has deeply shaken my commitment to the EU project. Its now possible that I would support Brexit in the referendum.

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