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Friends and journalists often ask me to describe the worst aspect of my negotiations with Greece’s creditors. Not being able to shout from the rooftops what the high and mighty were telling me in private was certainly frustrating, but worse was dealing with creditors who did not really want their money back. Negotiating with them, trying to reason with them, was like negotiating a peace treaty with generals hell-bent on continuing a war safe in the knowledge that they, their sons and their daughters are out of harm’s way.
What was the nature of that war? Why did Greece’s creditors behave as if they did not want their money back? What led them to devise the trap in which they now found themselves? The riddle can be answered in seconds if one takes a look at the state of France’s and Germany’s banks after 2008.
[...] Overnight, France’s main banks would be facing a loss of 19 per cent of their
‘assets’ when a mere 3 per cent loss would make them insolvent.
To plug that gap the French government would need a cool €562 billion
overnight. But unlike the United States federal government, which can shift
such losses to its central bank (the Fed), France had dismantled its central bank
in 2000 when it joined the common currency and had to rely instead on the
kindness of Europe’s shared central bank, the European Central Bank. Alas, the
ECB was created with an express prohibition: no shifting of Graeco-Latin bad
debts, private or public, onto the ECB’s books. Full stop. That had been
Germany’s condition for sharing its cherished Deutschmark with Europe’s
riff-raff, renaming it the euro.
[...] France’s top officials knew that Greece’s
bankruptcy would force the French state to borrow six times its total annual tax
revenues just to hand it over to three idiotic banks.
It was simply impossible. Had the markets caught a whiff that this was on the
cards, interest rates on France’s own public debt would have been propelled
into the stratosphere, and in seconds €1.29 trillion of French government debt
would have gone bad. In a country which had given up its capacity to print
banknotes – the only remaining means of generating money from nothing –
that would mean destitution, which in turn would bring down the whole of the
European Union, its common currency, everything.
the rest of the explanation has to do with the eurozone, greece's deficits suddenly becoming more visible and fatal after the credit crunch of 2008, etc
There are 10 million Greeks living in Greece (falling fast due to emigration), organized in around 2.8 million households with a ‘relationship’ with the tax authorities.
Of those 2.8 million households, 2.3 million (and 3.5 million tax file numbers) have a debt to the tax authorities that they cannot service.
One million households cannot pay their electricity bill in full, forcing the electricity company to ‘extend and pretend’, thus ensuring that a million homes live in fear of darkness at night and the electricity company is insolvent. Indeed, the Public Power Corporation is disconnecting around 30,000 homes and businesses a month due to unpaid bills.
For 48.6 per cent of families, pensions are the main source of income. Meanwhile the troika demands that pensions be cut even further. What was the €700 old age pension has been reduced by about 25 per cent since 2010 and is due to be halved over the next few years.
The minimum wage has shrunk (on the troika’s orders) by 40 per cent. Other benefits have been cut by more than 18 per cent.
Some 40 per cent of the population say they will not be able to meet their financial commitments this year.
Unemployment has risen 160 per cent so that 3.5 million employed people now support 4.7 million unemployed or inactive Greeks.
Of the 3 million people constituting Greece’s labour force, 1.4 million are jobless.
Of the 1.4 million jobless only 10 per cent receive unemployment benefit and only 15 per cent any benefits at all. The rest must fend for themselves.
Of those employed in the private sector 500,000 have not been paid for more than three months.
Contractors who work for the public sector are paid up to 24 months after they provide the service and pre-pay the sales tax to the tax office. Between 2008 and 2014 small and medium-sized companies reduced their workforce by 29.3 per cent and their output (in value added terms) by 40.2 per cent.
Half the businesses still in operation throughout the country are seriously in arrears with their compulsory contributions to their employees’ pension and social security funds.
In 2013 36 per cent of the population officially lived at risk of poverty or social exclusion. That percentage is on the rise.
Household disposable income has contracted 30 per cent since 2010.
Healthcare expenditure was cut by 11.1 per cent between 2009 and 2011 alone, with significant rises in HIV infections, tuberculosis and stillbirths.
damn. a speech he gives in parliament in jan 2015
[...] Since 2010 the troika had been promising the Greeks that the silver lining to the cloud of wage cuts would be a growth in exports, as the reduction in the costs to business within Greece would increase its competitiveness. By the end of 2014 the troika and the government were on an I-told-you-so spree, along with the foreign media, financial newspapers, government and EU economists. ‘Greece posts first current-account surplus for many decades,’ they trumpeted.
Had they considered the last time Greece posted a trade surplus, they might have understood that the situation was actually awful. This was in 1943, under the Nazi occupation, when Greeks could not afford to eat, let alone import goods from abroad, but still managed to export a few oranges, a few apples and the like. In 2014 the economic collapse had produced a similar state of affairs. The sorry reason for our current account surplus was that the deepening recession had crippled imports, while exports of goods were flat despite the massive reduction in labour costs. 8 A cause for mourning had been spun as a reason to celebrate.
[...] his theory that the ‘overgenerous’ European social model was no
longer sustainable and had to be ditched. Comparing the costs to Europe of
maintaining welfare states with the situation in places like India and China,
where no social safety net exists at all, he argued that Europe was losing
competitiveness and would stagnate unless social benefits were curtailed en
masse. It was as if he was telling me that a start had to be made somewhere and
that that somewhere might as well be Greece.
My rejoinder was that the obvious solution was the globalization of welfare
benefits and living wages, rather than the globalization of insecure working
poverty. In response, he reminisced at length about a secret mission he had
undertaken in the 1970s and 1980s, to liaise with the East German authorities
on behalf of his Christian Democrat party. ‘The DDR people were not bad,’ he
told me. ‘They had good intentions for a social welfare system that was not
economically possible.’ The insinuation was perfectly clear.
schauble. feb 2015
to play devil's advocate: on what grounds what schauble be right? maybe insecure working poverty is the only possibility given the current conditions of production? it's the best way forward in the long run, in order to spur innovation etc in the short term?
the rebuttal to that is: there is no way to viewing our current conditions wtihout a bias, as if from the heavens. can only view from a given position, assess acc to a particular earthly perspective. the current situation works for those who are benefiting from it, and sucks for the rest, and that is all you can say
As he spoke, Schäuble directed a piercing look at Sapin. ‘Elections cannot be
allowed to change economic policy,’ he began. Greece had obligations that
could not be reconsidered until the Greek programme had been completed, as
per the agreements between my predecessors and the troika. The fact that the
Greek programme could not be completed was apparently of no concern to
him.
What startled me more than Wolfgang Schäuble’s belief that elections are
irrelevant was his total lack of compunction in admitting to this view. His
reasoning was simple: if every time one of the nineteen member states changed
government the Eurogroup was forced to go back to the drawing board, then
its overall economic policies would be derailed. Of course he had a point:
democracy had indeed died the moment the Eurogroup acquired the authority
to dictate economic policy to member states without anything resembling
federal democratic sovereignty.
what is even the point of elections then lol. if you cant declare bankruptcy, what are you supposed to do? let the greek state fall and get occupied by somebody else? move your whole life elsewhere? submit to your humiliation?
‘Greek shipyards are dying, and skills acquired over millennia are dying with them,’ I told the ambassador. So I proposed, in a second phase of collaboration, that Cosco and other Chinese companies should invest in our three main shipyards, turning them into repair hubs for the container ships that Cosco would increasingly attract to our part of the Mediterranean. ‘But what is the point of securing the port of Piraeus,’ I continued, ‘if the railway that will transport your containers to central Europe is derelict, slow and unsafe?’ I argued that a similar investment in Greece’s railways made sense as well. Lastly: ‘Greece has a highly educated workforce, yet wages have fallen by 40 per cent. Why not get companies like Foxconn to build production or assembly facilities in a tech park, enjoying a special business tax regime in an area close to Piraeus?’
errrm buddy
As we were making our way to lunch, I spotted a canteen where some employees were taking a break and broke away from my hosts to speak to them. They shook my hand and smiled a lot, but when I asked them about working for Cosco they were coy. ‘It’s good,’ was about as much as they were willing to say. The expressions on their faces were hard to read. Looking over my shoulder, I saw Captain Fong and his Greek white-collar entourage watching us. I made a mental note to insist on full union rights for all workers as a prerequisite for any deal before saying my goodbyes.
lol...
In response I told Wieser that unless we received a sign from the creditors
that they were serious about a compromise on the reform agenda and a
sensible fiscal policy made possible by meaningful debt restructuring, we
would not reach 30 April without a default to the IMF. ‘Independently of our
preferences and political will,’ I said, ‘our liquidity will run out well before
then.’
He replied that we could last much longer by plundering the reserves of
non-governmental but publicly owned institutions such as pension funds,
universities, utility companies and local authorities.
‘And why would we want to do that?’ I asked. If the creditors showed no
interest in negotiating in good faith, why should we continue to extract yet
more flesh from the scrawny body of our society in order to service a debt to
the IMF that even it considered to be ultimately unpayable?
hell yeah let all those old people die, they're not contributing to the economy anyway
‘Why not?’ she replied. ‘I find it just amazing that in the Wall Street Journal
you defended the pharmacists. I thought, Not Yanis! I found it amazing that you
support their monopoly of baby foods and cosmetics – which I know causes
problems, from when I was finance minister. And I had my fights.’
I knew of the IMF’s obsession with Greek pharmacies. These invariably
small family-owned businesses were protected by a law that permitted only
pharmacy school graduates to own one and prohibited the sale of nonprescription drugs by supermarkets. But that, of all possible subjects that
needed tackling, the managing director of the IMF, faced with a European
country on the brink of default, wanted to discuss this one? I had to pinch
myself. I explained that the pharmacies’ monopoly over the sale of baby foods
and cosmetics had already ended, and that what I opposed was not the end of
their monopoly over certain other commodities but the proletarianization of
thousands of owner-pharmacists via the takeover of the pharmacy sector by
one or two multinational chains.
hmmm interesting, never considered this before. useful illustration that sometimes consumers' interests and workers' interests are sometimes at cross-purposes (and that workers' interests are more important sometimes, in the absence of enough resources to find a better compromise)
A few months later, at a conference in Italy, Jens Spahn, Wolfgang Schäuble’s deputy, reprimanded me for saying that the third bailout was an example of latter-day gunboat diplomacy. ‘But your parliament voted in favour of it with a large majority, didn’t it?’ he pointed out. Sure it did, I replied. Except that consent without the freedom to say no is a form of slavery, as feminists and civil right campaigners taught us long ago.