Analysis

Wednesday 23 July 2014

Padraic Cradoc: Meaningless verbiage is a load of old gobbledygreek

Padraic Cradoc in Athens

Published 18/11/2012|05:00

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While Greeks go hungry, Brussels offers nothing but obscure jargon.

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SEEN from Greece, the euro crisis could be viewed as pure farce if it was not the cause of so much human suffering. The endless make-or-break meetings in Brussels. The obscure jargon that emerges from them and is largely incomprehensible to the average Greek. The stock reply that the report of the troika must be awaited before the great leaders can reach a decision on Greece – the political equivalent of a clumsy kick to touch. The Greeks must meet their commitments, an abstract formula that conveys no idea of the social reality it involves.

Greek TV has a great capacity for regurgitating this verbiage. It seems so unreal, but the resulting decisions affect masses of people. Their unemployment benefit is finished. The extended family survives on the grandmother's pension which has already been cut twice. They can no longer pay the rent. The latest statistic – the electricity company is disconnecting 30,000 customers per month and the winter has not really begun yet.

A further gem was the statement by the German chancellor that her heart bled when she thought of the plight of the Greek pensioners. A discreet crocodile tear might have been in order, but this bleeding heart stuff was too much.

Chancellor Angela Merkel visited Greece in September, bearing no gifts but warm words. She said she wished for Greece to remain in the Euro, provided of course that Greece carried out its undertakings. Now Greece has passed into law the punitive measures demanded. The cuts to pensions and wages required by the troika have been incorporated in its 2013 budget. The passage of the legislation was accompanied by conflict almost approaching civil war. There were mass demonstrations against the measures. The shaky three-party coalition government lost almost half of its majority. The smallest coalition party, Democratic Left, abstained. It was an achievement for the prime minister to get the legislation through. He assured the people that these would be the last austerity measures. This assurance was greeted with general scepticism. And few expect that the measures can be implemented as they stand.

After all the aggro, the release of the loan tranche of €31.5bn outstanding for months was not agreed by the meeting of the eurozone finance ministers last Monday.

Before the meeting, German Finance Minister Wolfgang Schaeuble, in an interview in Die Welt newspaper, said there would be no agreement to release the money, which was a surprise for most people. He blamed the Greeks for the delay. (In fact, Brussels had delayed a decision until after the US presidential election, at the wish of the Obama camp.) Questioned as to whether the Greek bailout had been conceptually flawed, he denied that this was the case.

The IMF has recently conceded that it underestimated the impact on growth of austerity policies, but this champion of austerity knows no such doubts. As to the hardship imposed on the people, he accepted that there might have been hardship "in individual cases", but this was unavoidable – Greece was in a difficult adaptation process (adaptation to what?). He failed to answer a question about how Greece, now heading into its sixth year of recession, could be expected to pay its debts.

Neither did Schaeuble come clean on the reason for the German "No" – the IMF proposal for a haircut on Greek official debt which it has been urging on the EU now for some time. The IMF now realises that Greek debt at its present levels is "unsustainable". In plain language, it is never going to be repaid and needs to be reduced by debtors relinquishing part of their claims. At last Monday's meeting, the EU ministers agreed to give Greece two extra years, to 2022, to reduce its debt level to 120 per cent of GDP – defined as sustainability. But IMF managing director Christine Lagarde insisted that the deadline of 2020 should be retained. This is not an academic debate about dates – the EU proposal means muddling along without drastic solutions whereas the IMF wants the debt issue confronted now. If the dispute is not settled, the logical consequence is a pull-out by the IMF from the programme – the troika would be reduced to two horses. To date, Christine is sticking to her guns.

Schaeuble wishes to avoid having to call on the German taxpayer to pay for the German share of the haircut, particularly before next year's election. Without the benefit of any inside information, I have the impression that Merkel and Schaeuble are not completely at one. He seems to consider that the crisis would be more manageable with Greece out of the euro. But she has pulled back from this step before for fear of the consequences. It would certainly cost the Bundesbank billions, under the arrangements between the eurozone central banks, if Greece defaulted. And there is the spectre of a complete break-up of the eurozone.

The Germans have got themselves into a serious economic dilemma by the insist-ence on austerity regardless of the social costs. The policy they have foisted on the eurozone has contributed to the recession, which looks like affecting even Germany. On the Greek situation, the view of experts is that either Greek debt is reduced or they will default. We can expect a lot of fudging of this issue in the coming weeks. It would be a surprise if the next "make-or-break" meeting of eurozone finance ministers, on Tuesday, agreed on a solution.

Padraic Cradoc is a former Irish ambassador to Greece and now lives in that country

Sunday Independent

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