When will Greece’s creditors face up to their own mistakes?


Eurozone_Crisis_Saves_Germany_Tens_of_Billions
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When I awoke a week ago today, to the that the Greeks had voted no to the Bail Out deal they were being offered by the EU, the first thing I thought was ‘Good for them’.  My response I know was not shared by everyone. Many, led by Angela Merkel, EU and Eurozone officials, blame Greece for their spendthrift extravagance over the last decade. The sea of debt they now drown in is a just price for their financial sins. Many expected them to humbly accept the terms of the bailout deal they were originally offered – as those who recognise their guilt ought to, what other choice do they have?

What the referendum, and the ensuing events of the last week have illuminated, however, is that Greece does have a choice, albeit a limited one, and it does have a voice. Some might say the newly agreed bailout deal today is testament to this.  Greece’s creditor institutions in Europe, over the past four years, by lambasting and condemning the Greeks, punishing them with a gruelling regime of austerity and projecting an image to the rest of the world of Greece as a rogue child gone off the rails,  is missing the bigger picture.

For what no one seems to be pointing out, is that it was the adoption of the single currency in 2002, in Greece, and other countries which have followed similar economic paths: Spain, Italy, Portugal, which provided the means for governments and people to borrow at unprecedented levels. The shiny new currency brought with it dazzlingly low interest rates, and perhaps inevitably, a fiesta which is now turning into the worst hangover in history. Other EU countries did not express disapproval, but on the contrary were more than happy to oblige bigger and bigger loans. By June 2009, Greece owed the French banks 76 billion euros and the German banks 38 billion.

Sure, it is true that countries like Greece, and indeed Italy and Spain, generally ‘southern economies’ on the whole have much higher incidences of tax avoidance. Political patronage is oiled by low interest rates and the relationship between politics and money can sometimes be less ‘PG’ than a lot of northern European states. This is what many have used to criticise and condemn Greece. But Eurozone officials knew this before they developed the Eurozone and allowed Greece and similar nations into the currency union. Greece was already in a financially bad way as early as 1993. With debt at 114% of GDP,  its economy was sliding downwards. And yet, blinded by the romanticism of the ‘European Dream’, a single currency which would provide the economic glue to solidify and strengthen the glorious political union that is the EU, Greece was welcomed with open arms.

What is missing from the crisis conversation, and negotiations in the last week in the wake of Greece’s ‘OXI’ vote, indeed the deal that has been struck today, is an acknowledgement that the origins of this crisis go far deeper than one country’s greedy financial misjudgement. An acknowledgement that Greece’s creditors: Germany, France, the EU, European Central Bank (ECB), indeed the architects of the Eurozone itself, got it wrong.  That they got it wrong, by lending so freely and unquestioningly to countries like Greece, and they got it wrong, to a degree, with whole Euro project itself.

Central to this crisis is the reality that the Euro, though an economic measure, was politically motivated. EU officials wanted a single currency, to bind together an ‘ever closer political union’, and they would get it at whatever cost. Credit ratings of countries like Greece were brushed aside, considerations of the vast political and practical differences between how southern and northern economies run, barely considered, and now the union is reaping the consequences of its misjudgement. And yet, there is a distinct unwillingness to admit any of this. Instead, Greece is scapegoated and it is up to Greece to come up with a solution to this mess. Though a less brutal deal between Greece and its creditors has been agreed in the early hours of this morning it still runs along this same narrative, failing to acknowledge these basic truths about the Eurozone. Furthermore, whilst Greece may be ‘saved’ for the uncertain future, no one is under any illusion that the Eurozone is stable. Indeed, another crisis in Ireland, Spain, Italy or another nation could well be just around the corner. Until Greece’s creditors can openly and honestly accept and shoulder their portion of the blame for the crisis, instead of forcing the spotlight on Greece, whilst piling on austerity, the situation is unlikely to improve in the long term.

 

Picture: Wikimedia Commons

 

 

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