Friday 28 October 2016

Time to tear up the script on Fianna Fail and Greece

From Bertie Ahern's leadership to tax evasion in Greece, it always pays to look at the big picture

Published 19/07/2015 | 02:30

Former Taoiseach Bertie Ahern
Former Taoiseach Bertie Ahern
'Syriza undertook to tackle such endemic corruption and reform the system of public administration in Greece, but so far has been remarkably slow to do so'

The prevailing narrative, from the economic collapse here to the related events in Greece, can become so embedded that sometimes it is difficult to see the wood from the trees.

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In recent weeks, the Banking Inquiry has done a reasonable job at unravelling the narrative surrounding the collapse here, which had become that big, bad Fianna Fail wilfully drove the country onto the rocks.

After the evidence of Charlie McCreevy, Brian Cowen and Bertie Ahern, some are still finding it more difficult than it needs to be to develop that rather lazy interpretation into a more rounded assessment of what really happened.

If blame is to be apportioned, then the banks and regulatory system, in tandem with international events, are in line ahead of administrations led by Fianna Fail, which, apparently, is now also to be also faulted for not micro-managing the entire financial system.

That is not to absolve Fianna Fail of all blame, only to put more in context the events which occurred on its watch. The economic model followed by Fianna Fail-led governments to play catch-up with much of the rest of Europe became reckless beyond a certain point in the mid-Noughties, somewhere between 2003 and 2006. Then those governments did not apply the brakes soon enough when it became apparent that the sub-prime mortgage issue in the US was about to threaten the global financial system with devastating consequences, which exploded with the bankruptcy of Lehman Brothers in 2008.

These events, primarily played out in the banks, at an international level and inevitably at home, on the watch of a not-fit-for-purpose regulatory system, also avoided the proper scrutiny of the all-powerful international ratings agencies, the IMF, the OECD, the European authorities and, at home, those governments and opposition, the ESRI and social partners, and just about everybody else, except for a few commentators, whom nobody, including the public, really wanted to hear.

In time, the events in Greece will also come to be seen in a different light to the prevailing narrative that has become big bad Europe, led by Germany, beating up on poor defenceless Greece, which should be allowed to write down debt without first fully living up to its side of the bargain.

That narrative was expressed last week by Jurgen Habermas, an intellectual figurehead of European integration, who said Germany had "unashamedly revealed itself as Europe's chief disciplinarian and for the first time openly made a claim for German hegemony in Europe".

Habermas also argued that Europe was "stuck in a political trap" and said that without a common financial and economic policy, the national economies of pseudo-sovereign member states would continue to drift apart in terms of productivity.

"No political community can sustain such tension in the long run," he said.

While I would not hold with his view that Germany has gambled away the efforts of previous generations to rebuild the country's post-war reputation with a hard-line stance on Greece, I do agree that the solution to Europe's problem is more, not less integration, but with a deeper democratic remit.

In this context, the Euro Summit statement last week made it clear that the Greek reform package has to be "seriously strengthened".

Over the past five years, Greece has failed to implement many of the reforms and measures included in previous agreements because, ultimately, they amount to changing the fundamental social and cultural approach to work or welfare in Greece.

This is not just the fault of Syriza, the left-wing government which has played a poor hand woefully badly, but of successive governments in Greece of the centre and on the right.

A key issue is the level of corruption and tax evasion.

The OECD estimated in 2009 the size of the Greek black market to be around €65bn, or 25pc of GDP, resulting each year in around €20bn in unpaid taxes.

That is a European record in relative terms and, in comparison, almost twice as big as the German black market.

Transparency International also found in 2009 that 13pc of Greeks paid what is called 'fakelaki', which is bribery in the form of envelopes with cash, which was estimated to account for €787m in yearly corruption payments. At the same time, it was estimated that €1bn was paid by companies in bribes to public institutions to avoid bureaucratic rules or to get other benefits. When calculating all sorts of corruption in Greece, the total amount is estimated to be roughly €3.5bn a year.

In October 2009, the Government had on its agenda to increase the fight against fakelaki and other forms of corruption. However, it refused to look into a list of 1,991 potential tax-evaders with Swiss HSBC bank accounts that it received in 2010 from former French finance minister Christine Lagarde, now the head of the IMF.

The list included an adviser to the then Greek prime minister Antonis Samaras, as well as a former minister and a member of Samaras' New Democracy political party, plus the names of officials in the finance ministry.

Furthermore, the Inspector of General and Public Administration started an online census of civil servants. In connection with this census, he uncovered a number of criminal offences, including an entire non-existent health authority.

Syriza undertook to tackle such endemic corruption and reform the system of public administration in Greece, but so far has been remarkably slow to do so. Implementing proper reforms is, however, estimated to be a slow process, requiring at least two legislative terms before they start to work.

The manner in which Syriza has concentrated fire on European authorities, rather than on tax evasion and corruption, is illustrative of how the prevailing narrative can become lost in an ideological battle. As Lars Feld, a member of the German Council of Economic Experts repeated last week, the problem with socialism is that eventually you run out of other people's money.

Sunday Independent

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