Sunday 15 September 2019

EU leaders will come to rue heavy-handed approach to debt crisis

A pensioner becomes emotional outside a closed branch of the national bank of Greece in Athens: nearly 50pc of pensioners live below the poverty line in Greece on pensions of less than €700 per month
A pensioner becomes emotional outside a closed branch of the national bank of Greece in Athens: nearly 50pc of pensioners live below the poverty line in Greece on pensions of less than €700 per month
Colette Browne

Colette Browne

In the end the Greeks were left with no choice. They had to use the nuclear option when it became clear that Troika technocrats are not interested in negotiating, but view them as nothing more than a Vichy government in place to rubber-stamp their policies.

Yesterday, speaking about the forthcoming Greek referendum on whether its people should accept a new bailout deal, Germany's state secretary Steffan Seibert said: "This is a legitimate decision by the Greek government. Of course we will respect the result."

Regrettably, European Commission President Jean-Claude Juncker didn't get the memo, describing the decision in a press conference a couple of hours later as a betrayal, blackmail and egotistical. At least Juncker wasn't hiding his real feelings behind politically expedient conciliatory statements. The truth is EU leaders and their bagmen in the Troika have treated the Greek government and, by extension, the Greek people with nothing but contempt since this crisis started.

A mere month after Syriza swept to power in a landslide victory, German finance minister Wolfgang Schäuble was warning he was unable to work with the new government; while, last week, IMF chief Christine Lagarde complained the Troika needed "adults in the room" if talks with the Greeks were going to succeed. Yesterday, Juncker's language was even more inflammatory. He flat out accused Greek Prime Minister Alexis Tspiras of lying, saying his government had walked out of talks just as negotiations on debt relief were about to start.

Strange, then, that the draft bailout proposal published by the EU Commission after the Greeks announced the referendum doesn't contain a single reference to its €370bn mountain of debt. Are people seriously expected to believe that, after months of discussions, the Troika was going to address the most contentious issue, debt relief, in a meaningful way at the eleventh hour?

Perhaps it would be easier to swallow Juncker's spin if he hadn't previously stated, in relation to the backroom deals that go on within the EU: "When it gets serious, you have to lie".

"We all know what to do, we just don't know how to get re-elected after we've done it," he joked last year, in reference to the problems pesky democracy poses for politicians. No wonder then that Juncker has reacted with incredulity to intransigence from a government that intends to actually keep its pre-election promises.

If the Troika negotiations with Greece were really about sustainable economic recovery, then a deal would have been done on its debt years ago. Instead, the primary concern has always been political, with EU governments that have docilely imposed austerity refusing to countenance any relief for the "radical" Greeks for fear that they will be punished by their voters.

This is why the Irish government has been so vocal about its opposition to a debt deal - despite the fact that such a deal would set a precedent that could benefit their own people. No, the Irish meekly agreed to repay creditors the full amount, so the Greeks must now do the same, even if no one believes they are capable of making the payments.

It's not as if the Greeks haven't tried the Troika plan. Since 2010, they have followed their prescription and it has decimated their economy. Unlike EU politicians, the figures do not lie. The Greek economy has contracted by 25pc, wages are down 37pc, pensions have been reduced by up to 50pc, public sector employment has been slashed by 28pc and food consumption is down by nearly 30pc.

In fact, the only thing that has risen is unemployment, which is at 26pc, while youth unemployment is even worse and stands at 50pc. For those unlucky enough to lose their job, unemployment benefit lasts only between six and 12 months. After that, people are left without any income. Despite this litany of human misery, the mantra coming from the Troika is that the lazy, feckless Greeks have failed to take their medicine and are continuing to live extravagantly.

A major bone of contention between the Greek government and the Troika is the issue of pensions, despite the fact that rates have already been decimated and the pension age increased to 67. Currently, nearly 50pc of pensioners live below the poverty line on pensions of less than €700 per month. The Troika doesn't care. It wants the government to cut them even further. It doesn't seem to recognise that pension rates are not the problem. It is the fact that unemployment is sky high with the result that an insufficient number of people are paying into the social security system. Would Jean-Claude Juncker or Christine Lagarde - who, as a member of the IMF, pays no tax at all on her €551,700 salary - be able to live on a pension of €700 per month? I suspect not, but I would like to see them try and then return to the negotiating table with a little humility.

It should be remembered that Syriza came to power just five months ago, so the European community cannot blame it for the state of Greece's economy or the failure of past governments to introduce reforms. The irony is that Syriza and the Troika agree on quite a lot when it comes to the reforms that Greece needs to introduce - like ensuring that tax evasion is tackled. But, starving the economy of income, and the Greek people of hope, will not facilitate Syriza in introducing these important measures.

When Syriza came to power, the new government vowed that it would no longer "extend and pretend" - agree to the extension of bailout agreements without tackling the underlying debt problem. When they realised that extend and pretend was all that was on the table, they decided to walk away and put the proposal to the people.

Whatever happens on Sunday, the result will lead to further chaos. A Yes vote will mean a new government will have to be elected and, while that happens, Greece will have defaulted on both the IMF and the ECB, who are due a €3.5bn payment on July 20. A No vote has been framed as Greece leaving the eurozone, a union that was supposed to be irrevocable. Once it is confirmed the euro is a temporary arrangement, the costs of possible contagion are incalculable.

The actions of EU politicians in the coming week will determine their legacy. They will be remembered as the ones who destroyed the eurozone or the ones who saved it.

Irish Independent

Today's news headlines, directly to your inbox every morning.

Don't Miss