Tag Archives: Greeks

In Dangerous Times

Most of you (not too busy watching “Dance Your Ass Off” every night) has probably picked up on the notion among more and more experts that the financial crisis, currently residential of Europe, may result in  something far more serious than a long-time recession. At the moment some of us are sitting back  while we are watching the scenarios we have predicted for a long time unfolding before our eyes like a day-time soap opera. And we wonder…

“If we know anything from history, it is that long periods of economic crisis tend to lead not to more progressive politics but rather to its opposite; the right-wing politics of xenophobia.”

George Irvin

The most obvious parallel is the Great Depression of the 30’s and the run-up to World War II. Logical thinking tells us, however, that this is a so well-known story that our political leaders will simply not allow something similar to happen again. But does logic even matter in times like this? Well, that’s not the only  fundamental question that arise from this insecure  situation. Professor George Irvin points points out a few more.

Like: Is the financial market about to kill democracy? Or is it the other way around?

Honorary professor George Irvin at the Univerity of London argues that – for time being – it is the politicians who have failed, not the financial system. And he fear they will make even more and bigger mistakes.

This article was posted last month on professor Irvin’s blog at the EUobserver.com:

Politics and the EU financial crisis

The other day, I was asked in an interview whether finance was killing democracy. Judged over the post-war period, the answer must be a qualified “no”. But things at present are not looking good.

Finance has not killed politics – if anything, the ongoing financial crisis is lading to a reawakening of politics on a scale we have not seen in many years, particularly a re-awakening amongst young people. If the young are out on the streets demonstrating, it is for quite understandable reasons.

Most obviously, the crisis has illuminated the weaknesses of neo-liberal capitalism in a way many though inconceivable a decade ago.

Not only is neo-liberal ideology deeply misleading – the idea that ‘free markets are infallible and don’t require regulation—but the economics it has produced is disastrous.

Inequality is growing everywhere, particularly in the main Anglo-Saxon countries where it is higher today than in the 1930’s.Youth unemployment in the most of Europe ranges between 20- 40%, and we are at risk of producing an entire generation which is locked out of decent work and income.

European “austerity” is destroying the cornerstone of the post-war social settlement; ie, our welfare state.

As for democracy, we have recently witnessed the toppling of two governments by the bond markets, and doubtless there will be more. This is largely the fault of a political elite dominated by bankers which designed a Eurozone where each member- state’s borrowing was vulnerable to attack.

This “fragility” of the Euro zone – the lack of a common fiscal policy and a genuine Central Bank able to act as lender of the last resort – is leading to growing national antagonisms, the most obvious being between Greeks and Germans (a proxy for north v south Europe).

What is truly dangerous is that the financial markets’ notion of ‘common governance’ is all about “greater fiscal discipline,” by which is meant stringent enforcement of the 3% budget deficit limit, the 60% indebtedness rule and, most recently, the notion that all Eurozone countries should follow Germany in adopting a constitutionally binding ‘balanced budget’ (debt brake) provision.

Such views are based on the simple-minded premise that a national economy can be run like a corner shop, the ‘handbag economics’ preached by Maggie Thatcher and more recently by the Schwabian housewife, Angela Merkel.

Not only are such views wrong (they ignore basic national accounting definitions), but they can lead Europe into even deeper economic gloom.

As credit dries up, Europe is on the verge of a new financial crisis which will almost certainly lead to renewed economic depression.

Moreover, the costs of all this is being borne once more by ordinary workers, and increasingly by the middle class. Like markets in the general, the financial market can be a good servant… but it is proving to be a very poor master.

If we know anything from history, it is that long periods of economic crisis tend to lead not to more progressive politics but rather to its opposite; the right-wing politics of xenophobia.

Witness the German depression of 1932 under Chancellor Brüning which saw the extreme right rise from virtually nothing in 1929 to assume power in 1933. I am hardly the first to say it, but we are living in dangerous times.

By George Irvin

George Irvin is a retired professor of economics and for many years was at ISS in The Hague. He is now (honorary) Professorial Research Fellow in Development Studies at the University of London, SOAS.

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Call For Independent Audit of Greek Debt – Get Rate Cut Instead

A group of some 200 academics, economists, MEPs and other notables have issued a call for an audit of Greek debt, a demand that may be raised in the Greek parliament in the coming days and which has also been quickly embraced by Irish trade unions and development NGOs regarding Dublin’s public borrowing. Last night Greece was granted a 1% rate cut on its EUR 110 billion loan – Ireland was not.

“Such an audit would throw up some interesting questions regarding the legality – banks may have been lending in contravention of public debt rules of European debts.”

Nick Dearden


The group, which includes former UN assistant secretary general Denis Halliday, and ten left-wing and Green MEPs, on Thursday (3 March) argued for the creation of a debt audit commission similar to that established in 2008 by the Ecuadorean government that ultimately led to a repudiation of ‘illegitimate’ debt. The concept has since been embraced by Irish campaign groups and organisers hope similar pressure to launch forensic investigations will also be mounted in Spain and Portugal and other heavily indebted European states.


The idea comes from European debt and development NGOs, including Jubilee Debt Campaign, a UK-based Christian charity, and Eurodad, the European Network on Debt and Development, who have long campaigned for Western countries to cancel the debt of developing countries and are now turning their attention to the debt of peripheral euro zone states.

On Friday, Irish development organisation Afri, author Fintan O’Toole, a series of Irish economists and leading trade unionists backed the creation of a similar commission in their country.

An audit commission, composed of public auditors, economists, lawyers and other specialists, as well as representatives of civil society and organised labour, would look into why public debt was incurred, the terms under which it was contracted, what the borrowed money was spent on and seek to establish who was responsible for problematic debt agreements.

“Such an audit would throw up some interesting questions regarding the legality – banks may have been lending in contravention of public debt rules of European debts,” Jubilee Debt Campaign director Nick Dearden says.

The group of signatories, which also include British director Ken Loach, American linguist Noam Chomsky, Slovenian philosopher Slavoj Zizek and Indian economist CP Chandrasekhar, say that the commission should have full access to public debt agreements and documentation for the last four decades, including bond issues, bilateral, multilateral, and other forms of debt and state liabilities.

The commission would also have the power to summon public officials to give evidence and examine Greek and foreign bank accounts.

Should proof emerge of portions of Greek borrowing incurred for wasteful or corrupt purposes, such findings could then be used as the basis for a repudiation, or default, of “odious debt”.

Debts defined as illegitimate, odious or illegal could then be declared null and void and Greece could refuse to repay.

Odious debt a legal theory that posits that the national debt incurred by a despotic regime for purposes that do not serve the best interests of the nation do not have to be paid back.

The concept then began to be used in the late 1990s by development charities to argue that whether a government had been despotic or not, the debt burden forced on third world nations, particularly in Africa, was trapping countries in underdevelopment.

Core euro zone banks and Berlin and Paris would likely be against such a move, as, according to the latest government budget,

Greek public debt is expected to rise from €299 billion, or 127 percent of GDP, in 2009 to €362 billion, or 159 percent of GDP, in 2011. Any substantial repudiation of this debt would punch massive holes in the balance sheets of the banks in the core of the euro zone that performed much of the lending, mainly German and French institutions.

Similar effects would be felt by UK banks in the case of Irish lending.

Such a development could also precipitate a fresh revival of market contagion were it believed that international lenders could be forced to incur significant losses.

Initially promoted by leftist groups in Greece, the concept is now steadily gaining a wider hearing as a growing number of voices in the country begin to make the argument that the cost of paying back “illegitimate” debt should not be borne by the Greek people. Instead, they say, the burden should be shared by “predatory lenders”.

I hereby introduce the term : “Too Stressed To Test” as a substitute for “Too Big To Fail”

 

Greece Gets Rate Cut

What's taxes got to do with it?

In spite of the growing scepticism towards the Greek debt, the King of the PIIGS, was granted a 1% rate cut last night by the EU commission and an extension of the payment period from the current three and a half years to seven and a half.

Ireland was offered a similar reduction, but the country’s new prime minister says he could not accept the terms demanded.

“It was impossible to reach a deal for Ireland this evening,” Taoiseach Enda Kenny told reporters after an acrimonious seven-hour meeting of euro zone premiers and presidents in Brussels on Friday, according to the EUobserver.com.

“I wasn’t prepared to contemplate a common euro zone tax base,” he continued, adding that Ireland still intends to be “constructive” about discussions about EU tax policy as contained in a ‘euro pact’ agreed by leaders early Saturday morning, but that was as far as Dublin was willing to go.

He said that Ireland had been asked “to make a reference to our corporate tax rate.”

Referring to an angry confrontation between Kenny and French President Nicolas Sarkozy over corporate taxes, he said: “France has had very strong views on corporate tax rates for quite some time, but then so do I.”

Saying that Ireland unlike Greece had not asked for a loan extension,  insisting: “This country wants to pay its way. We seek no evasion of our responsibilities.”

“It will be difficult” to continue the discussions, he adds, “but I am convinced we can find a way.”

Sarkozy for his part noted that the issue is “very sensitive for our Irish friends.”

“There is a discussion that is progressing in one way or another … but there is no certainty,” he continues, asking for “at least a gesture.”

In return for Greece’s concessions, Athens has committed to a detailed fire-sale privatisation programme worth some €50 billion.

A nice Greek island, anyone?

(Real cheep, too!)

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