Greece and the euro – a Trojan tragedy

By Christian Nielsen

The Greeks are putting a new spin on the legend of Troy by snubbing the fattest gift horse they're likely to get from the weary euro club.

Sunday 12 February 2012

Violence continues to rock the streets of Athens, as anti-austerity protestors vent their anger at what unions see as meddling outsiders “covertly abolishing or eroding democracy and national sovereignty” in Greece.

Last week, the unions called a 48-hour strike – the latest in a series of anti-austerity actions which have taken place since the European Union and International Monetary Fund began bailouts in the wake of the financial crisis of 2008 – and sporadic violence erupted as some 10,000 unionists rallied around Greece's Parliament, where leaders are meeting to thrash out the terms of the next installments.

“The tombstone of Greek society” is how trade unionists in Greece describe the €3.2 billion in cuts needed this time to save the country from sliding into the Aegean.

For several weeks, the right-wing Laos party has been deliberately blocking the austerity package – a move many predict could see the country fail to secure the new €130 billion EU-IMF bailout needed to stave off imminent default on Greece's sovereign debt. Then last week, Laos promptly quit the new coalition government altogether.

Prime Minister Lucas Papademos, a technocrat recently chosen to lead Greece out of this mess, still has a majority in the Parliament. But as talks heated up in Brussels last week, euro-club finance ministers insisted all of the main parties – including Laos – will have to sign a pledge to respect the latest round of austerity measures after elections in April.

Greece's position in the euro zone is very much under threat – rightly so, in my view. Yet despite his party's clear distaste for outside intervention, Laos leader Georgios Karatzaferis said Greece should remain in the euro, like it was some kind of ancient privilege that does not involve duties too, but not “under the German boot”. “I am very disturbed not by the sacrifices we have to make, but from the humiliation of Greece. They have stolen our dignity,” he asserted.

So, while the rest of troubled euro zone countries tighten their belts, commit to work harder and dig ever-deeper into their pockets to pay for Greece's profligacy, we should feel sorry for the Athenians who are feeling humiliated. That kind of farce is worthy of Greek tragedy, no doubt.

Just to put Greece's waste, graft and work ethic into perspective, the latest figures fresh from the Greek finance ministry show that the government has managed to collect only 1% of the €8.6 billion in tax penalties issued over the past two years.  According to media reports, had the government managed to collect even a third of the fines, the new austerity package may not have been needed.

The European Commission is starting to talk tough, hinting in statements last week that it could absorb the impacts of a Greek default and departure from the euro zone. A Commission spokesman said on 10 February that the increased presence of EU and national experts in Greece leading up to the next possible tranche is part of the new bailout deal, helping the government do what the rest of Europe manages to do – collect taxes.

It doesn't seem to matter how much money and concessions you throw Greece's way. The ‘good money after bad' adage keeps bubbling up. Only a few months ago, EU and IMF leaders put an astounding deal on the table for Greece. Under intense pressure from world leaders fearing that an imminent Greek debt default would sink the whole euro zone, member states and banks agreed to wipe 50% off current obligations.

That's like borrowing a €100,000 to extend your house or expand you business, and then being told: “Don't worry, you only have to pay half back!” What kind of message does that send to Greeks who already appear to have a distorted understanding of the connection between saving, spending, borrowing and other such financial fundamentals?

And what does it say to other EU members, many of them newly entering the euro zone and some struggling with their own debt demons? No doubt the Hungarians who are having to pay back huge loans taken out in Swiss francs when the euro was strong, would like a piece of that action. So, too, would the Slovaks who earn considerably less than the Greeks and had to make many concessions to enter the euro under what now seems like a fading hope that it would improve their lives.

So, are the Greeks delighted that the rest of Europe is chipping in to help them out? Apparently not. Their pride is hurt, and they don't like what the gift horse comes saddled with … “austerity measures”, unpopular measures that many other Europeans are also having to endure, despite the social unrest and anger they unleash.

According to the UK's Guardian, around the time of the last bail-out, some 60% of Greeks thought the European deal was bad for the country. “In most polls, voters have voiced their support for remaining part of the euro, but have increasingly vented their frustration at austerity measures,” the paper noted. “Cuts in the bloated public sector, reductions in pay and pensions, new taxes and privatisations of airports, state lotteries, the Greek water supply and the postal service are part of the deal agreed.”

Fat chance of that happening while Greece remains hooked up to life support. It's time to switch off the machine. Let Greece regain its pride without the euro and all these Olympic coaches teaching it how to tread water.