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Why Greeks are wary of a troika bearing bailouts


Supporters of the Greek Communist Party in Athens last week as June 17 was set for a new election

Supporters of the Greek Communist Party in Athens last week as June 17 was set for a new election

Supporters of the Greek Communist Party in Athens last week as June 17 was set for a new election

IN ATHENS, the debate about austerity and growth is not theoretical. As regards growth, it's simple. There isn't any. The IMF thinks the economy will shrink again this year by 6 per cent. Unemployment is more than 20 per cent and rising.

What does austerity mean? It's like this -- your pension of €600 a month is reduced to €400. A tax of €400 is levied on your two-room flat and added to your electricity bill. No pay, no power. Rents are not paid. Shops close down. People are laid off. They line up for food donations, they go into deep depressions, they commit suicide.

Now you may reasonably ask: is it not the Greeks' own fault? Isn't their administration bloated and inefficient? Isn't there a lot of corruption? By and large these charges are true, but given time and a realistic programme for change, the Greeks would have backed a serious plan of reform.

Besides, Greece is not the only European country with a bloated and inefficient public sector. But it is the only EU state that has been reduced to pitiful penury and social suffering on such a broad scale.

For this, the troika must take full blame. The penury and privations, as the Wall Street Journal has pointed out, come from the troika's "insistence on slashing spending in a recession". Thus the troika's every visitation is followed by cuts and tax rises which deepen the recession and increase the level of debt.

If this month's election proved anything, it was that the policy is not politically viable. The two big parties who agreed the bailout got less than a third of the votes between them. And now that a repeat election is on the cards, the principal party opposing the bailout, Syriza, is forecast to win. The bailout looks like mission impossible.

The summer ahead presents an appalling vista. Cuts of €11bn are demanded for June. But the people will not -- indeed cannot -- pay anymore. After all, when your government has bankrupted you on a personal level, you don't worry too much about warnings of national bankruptcy.

What has this to do with the Irish referendum on the fiscal treaty? Quite a lot, actually. The treaty is intended to provide the theoretical justification for the policy of slashing spending in a recession. An Angela Merkel doctrine whose practical consequences can now be seen on the streets of Athens.

But what specifically does Ireland get from the treaty? One line of argument that you are unlikely to hear from the Yes camp is that the fiscal treaty contains this or that positive element which will benefit Ireland. The Yes camp is unable to point to any specific benefits of the treaty simply because there aren't any. And even the most ardent supporter of the treaty is hard-pressed to show how it will relieve the existing euro crisis.

So arguments in favour of ratification are essentially statements about what will happen if we do or do not ratify. For example, we are told that ratification will promote development. But search the treaty for elements likely to promote development and you

will end up scratching your head. Or that non-ratification will have the opposite effect or have other dire consequences.

So what's in the treaty? Actually, nothing much that is new. Most of the diet of debt reduction and eliminating deficits is contained in existing EU regulations, such as the 'Six-Pack' adopted last December. You never heard of the Six-Pack? That's because you were not consulted.

And that lack of consultation, bordering on secrecy, is the crux of the problem. For years now, under the pretext of safeguarding the euro, the economic sovereignty of the member states using the euro has been whittled away. Economic policy has been skewed sharply to the right, in a process that has received little publicity.

The only significant new element in the treaty is the requirement for the euro states to include a 'debt brake' in their constitutions or other legislation 'of binding force and permanent character'. But this promises more than it can deliver.

Article 8 of the treaty concerning the enforcement of this requirement will cause ructions, if it is ever used. Under this, while the Commission polices implementation, it does not have the power to bring a case before the European Court of Justice. This would be done by one of the other countries, ie Germany!

Again we are told that 25 of the 27 member states have enthusiastically signed up for the restrictions in the fiscal treaty with only the British and the Czechs opting out. But under Article 14, only the member states using the euro will incur real obligations under the treaty. The non-euro member states are accorded a sort of 'hurler on the ditch' role. Positive noises cost them nothing.

The only argument of the Yes side with some substance is the non-availability of assistance from the European Stability Mechanism (ESM) in the absence of ratification. The Government has stated that funding would not be available from any other source. But this is a statement of faith rather than of fact.

The ESM argument is also a bit of a two-edged sword. The Yes camp does not spell out that Ireland will be required to pay €11,000m-plus to the ESM by way of a contribution, which can be increased.

Nor does the Yes camp spell

out that the ESM is to be a whole new European institution with a permanent headquarters, governor, staff and premises in Luxembourg. The Finance mandarins must be salivating already. No referendum is planned on the ESM. But you can vote against it by voting No to the fiscal treaty. So you get two referendums for the price of one.

The success of the ESM is,

of course, linked to the survival of the Merkel Doctrine. Right now, there are signs it will go the way of the Brezhnev Doctrine. Because a Europe-wide reaction against the Merkel Doctrine is gathering steam.

In France, the election of Francois Hollande marks the demise of Merkozy. But even in Germany there is growing opposition. A two-thirds parliamentary majority is required for ratification. But the Social Democratic opposition has indicated that it will not vote for ratification without the addition of something on growth.

The austerity front is fragmenting. More and more, it looks as if the Irish Government is playing on the wrong team. It seems to be oblivious to what is going on in Europe. This is strange, given that the Tanaiste holds the Foreign Affairs portfolio.

The fiscal treaty will do nothing for our existing national debt burden. Ireland recently had a visit from Joerg Asmussen, the German member of the six-man executive board of the European Central Bank in Frankfurt. In short, he is the voice of Frankfurt incarnate.

Mr Asmussen held out no hope of easing Ireland's debt burden. He said that the debts associated with the banking crisis are not different from other sovereign debt. He warned that "any desire to offload this debt could have dire consequences". Translated into plain language, the message to the people of Ireland was, "Carry your cross for Frankfurt, boys."

It looks like a majority of Greeks will refuse to carry that cross. They are sending a message to Europe. Is Ireland listening?

Padraic (Pat) Cradock is a retired Irish ambassador to Greece, living in Athens. The countries in which he represented Ireland include Belgium and Romania. In Dublin, he served as Assistant Secretary in the Department of Foreign Affairs

Sunday Independent