"La democracie c' est s’addresser a l’intelligence des citoyens plutot que d’exciter leur peurs."
Francois Hollande, October 2015
The underlying intention of this presentation has been to provide an answer to the apparent inconsistency between the declared objective of assisting the Greek economy go back to economic development and the means presently employed to achieve this. The ailing Greek economy has been obliged to undergo a severe austerity programme over a lengthy period at a time of world recession as a precondition for receiving economic facilitation to stay in the Eurozone and return to economic development.
The designers of this policy should
firstly explain to the economic community how the aim of putting the country
back on the road to economic development is served though austerity policies.
So far none has bothered to explain and, alarmingly, none has asked for such an
explanation. The cost of applying this
fundamentally flawed approach on Greece has raised questions as the country’s
economic magnitudes – and its population – have been paying a heavy cost:
- Unemployment has risen twenty percentage points from six to twenty six percent,
- the GDP has shrunk by twenty four percent in just six years,
- the disposable income has plummeted by thirty one percent in five years, and
- private bank deposits have been depleted by a quarter as citizens-many of them out of work- have been trying desperately to maintain their living standards.
Minimum wage provisions and
pensions have been slashed, social security funds have been looted, public
health barely exists and amid this horizontal destruction mania there are
institutions such as IOBE suggesting this is the only way. It is evident
something does not click. Instead of seeing a return to economic growth we see
a consistent economic decline – as manifested by the receding GDP – and no
reason why this is going to change. The opposite in fact is the case, the
capital controls introduced last summer have further impacted negatively
private spending and public revenues have presently a gaping hole as a
consequence.
What we have seen so far is
that economic facilitation to stay in the Eurozone through Eurogroup and
Troika designed policies do not lead Greece back to economic growth, they do
the exact opposite instead at the rate of an average 4% shrinkage every year. So there is an antithesis
between declared intentions and actual outcome. As the outcome cannot be
disputed, the Greek economy is still on the brink of collapse while debt is
rising, it is the declared intentions where the problem lies. One wonders if
there has been an error, an accident, or a lack of knowledge on the part of the
designers of these policies.
Regrettably no such allegation
can stand to serious scrutiny as we are talking about professionals of high
caliber overseeing the effects of their policies over a long time period. The
choice of austerity and deflation has therefore been deliberate and in
knowledge of what it would cause. Why then a member of the Eurozone should be
treated like this?
The answer to this tantalising for many of us question is twofold and lies in the little
advertised offer of Germany to the Greek government in mid-summer this year which
promised it a bonus in case it would quit the Eurozone unilaterally. Greece
has turned it down but it became clear to all what the true intentions at the
time were. The Eurozone – despite numerous declarations to the contrary –
would be happier to see Greece leaving it out of its own consent. Refusal of
this offer meant that the situation in the zone continued to be precarious. The German government felt it
had to protect the Euro as it has been really worried about the impact of a possible
accident on its value and acceptability. The Euro is highly valued in Germany
as it has been designed to suit its own requirements from the outset, unlike in
other Eurozone members which have mixed feelings about its usefulness. Through
the Euro and the European Central Bank, Germany indirectly controls all other
EU members – and ultimately Europe’s economy - and the loss of such a tool
would not be an option.
Secondly, Greece should continue
to be publicly defamed and flogged as a bad example of a Eurozone member to
pass the message on to other members to stick to the rules, or else they could
receive similar treatment. Cyprus is not such a distant example while French
and Italian pressures to devalue the Euro have been continuous. It is evident that if one of
the major Eurozone economies failed, the Eurozone itself would fail something
that would put the existence of the entire EU on question. Why would that be
such a big problem for Germany? Because it would bring it back to its humble
pre-unification status and negate its present wish to be a major player in
world politics is one possibility, there may be other.
Let me recap. The austerity policies on Greece have nothing to do
with economic theory, these are simply vehicles to political ends. As long as diverting interests exist within the Eurozone, Germany will always insist on punitive treatment of Greece and possibly
others for the reasons just explained. Therefore, austerity will be endless for
the Greeks. There are side benefits for other EU members as Greeks
under the combined pressure from poverty and taxation are expected to start
selling private and public property at ridiculously low prices. Homes, holiday
houses, hotels, banks, infrastructure, oil deposits etc. will soon be up for
grubs. In short, the Greek austerity
saga is multiply useful to Germany and it also holds promises to others through
acquisition opportunities. This is how the European dream of many of us fourty
years ago has turned into a nightmare.
Now a few words on the minor question about the impact
of capital controls on Greek shipping companies. After a few months of application most problems have
in one way or another been addressed and the only major question that persists
is the "country risk" factor.
- Uncertainty about bail-ins and account confiscation.
- Uncertainty about changes in fiscal treatment.
- Uncertainty about future bank restrictions to payments abroad, and so on.
There are currently open offers
from many places abroad inviting Greek shipping companies to relocate. Although
such a move is technically easy to execute, in reality it is a much more
complex decision to make and thus difficult to make predictions. The response
of Greek ship owners to such invitations will possibly depend on careful day to
day monitoring of the situation.
Alkis J. Corres, Executive Advisor on European Affairs to the Hellenic Shortsea Shipowners' Association
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