Tuesday, June 21, 2016

Unbiased pros and cons of EU membership 2 : Are the EU's actions towards Greece undemocratic? Would the UK leaving the EU help or harm Greeks?

Is the EU’s treatment of Greece democratic or not though? Unelected officials from the ‘Troika’ (European Commission, European Central Bank and International Monetary Fund) were sent to oversee Greek government departments’ spending , with the stipulation thatNo unilateral fiscal or other policy actions will be taken by the [Greek] authorities. All measures, legislative or otherwise, taken during the programme period, which may have an impact on banks’ operations, solvency, liquidity or asset quality should be taken in close consultation [with the troika]” (1)

The Greek electorate voted in a party – Syriza – whose manifesto included scrapping EU imposed austerity. Then they were told this would not change the agreements made with the Troika by previous Greek governments.

German and Hungarian government politicians argue that they were representing the electorate of their own countries who were paying for financial support to Greece.

The reality is a lot more complicated than that as Germany benefited most from a free trade zone and single currency with weaker economies like Greece.

Despite myths of Greeks being lazy and tax avoiders, they in fact worked longer average hours than any other country in Europe even before the crisis , with Germans working considerably less hours on average(2) – (3).

And tax avoidance by the very wealthy is hardly something unique to Greece with e.g Switzerland, Luzembourg and the British Channel Islands being notorious tax havens, and many British companies, banks and billionaires avoiding tax in tax havens.

Greeks also had the options of defaulting on their debts and dropping the Euro as a currency and going back to their own currency, so they could issue money themselves, rather than having to ask the European Central Bank to issue them with Euros.

The Syriza Finance minister Yanis Varoufakis favoured at the least threatening to do this, and if necessary, doing. However the Greek government did not do it as the majority of Greeks in polls were against it, fearing that if done during a crisis it would lead to more panic and hyper-inflation.

This is still an option for the Greek government though, if it believes the damage done by EU imposed austerity policies is so bad that the other risks couldn’t be worse.

What there can be no doubt about is that the refusal of the same 50% debt forgiveness that Greece approved for Germany after World War Two, and the austerity policies imposed on Greece are both unfair and completely counter-productive.

Severe austerity cuts on the scale imposed on Greece reduce the size of the economy as a whole by reducing demand for private sector goods and services, reduce growth, and so make paying off any of the debt impossible.

From 2008 on during protests and riots against austerity measures Greek riot police have killed dozens of protesters and rioters, starting with what seems to have been the unprovoked murder of a 15 year old boy by armed police in December 2008 (4).

The EU have demanded that Greece run a budget surplus of 3.5% of GDP by 2018, which is over five times as large as the largest budget surplus that Germany, the strongest economy in the EU has ever had, at 0.6% of GDP in 2015 (5) – (6).

Even the IMF – one part of the Troika – has now said this ridiculous and argues that debt forgiveness and a relaxation of austerity are required for Greece (7).

What they don’t say is that, as Syriza have pointed out, some of the 1 trillion euros of Quantitative Easing money which have been created by the European Central Bank to hand to private banks could be used to pay off much of Greece and Spain’s debt (8) – (9).

Some people would argue that the UK leaving the EU could lead to the collapse of the EU and that this would free Greece from EU austerity policies.

However some Greeks, like Yanis Varoufakis,  a leading critic of EU austerity policies, want the UK to stay in as an ally for reform , arguing that if the EU splits up the result will be chaos and panic, which will be even worse for Greece (10).

He has launched an EU wide movement for democracy and against austerity policies called Diem25.

And the majority of Greeks , while they are angry and unhappy at what the EU has imposed on them, believe they are not in a position to leave the EU or go back to their own currency at the moment.

(1) = Open Democracy 14 aug 2015 ‘Greece has become the EU’s third protectorate’, https://www.opendemocracy.net/can-europe-make-it/jan-zielonka/greece-has-become-eu%E2%80%99s-third-protectorate

(2) = BBC News 26 Feb 2012 ‘Are Greeks the hardest workers in Europe?’,

(3) = OECD Stat Extracts ‘Average annual hours actually worked per worker’, http://stats.oecd.org/index.aspx?DataSetCode=ANHRS

(4) = BBC News 05 May 2010 ‘Three dead as Greece protest turns violent’,

(5) = BBC News 22 Jun 2015 ‘Greece spells out terms for debt crisis 'breakthrough'’,
http://www.bbc.co.uk/news/world-europe-33228119 (scroll down to subheading  ‘Greece debt talks : main sticking points’ ‘EU officials say Greece has agreed to budget surplus targets of 1% of GDP this year, followed by 2% in 2016 and 3.5% by 2018; Greece says nothing is agreed until everything is agreed’ )

(6) = AFP 23 Feb 2016 ‘Germany notches up record budget surplus in 2015: stats office’, http://www.newvision.co.ug/new_vision/news/1417803/germany-notches-record-budget-surplus-2015-stats-office

(7) = www.guardian.co.uk 23 May 2016 ‘IMF tells EU it must give Greece unconditional debt relief’, https://www.theguardian.com/business/2016/may/23/imf-warns-eu-bailout-greece-debt-relief

(8) = Greek Reporter 28 Jan 2015 ‘Greece: This is SYRIZA’s New Government Plan in Detail - See more at: http://greece.greekreporter.com/2015/01/28/greece-this-is-syrizas-new-government-plan-in-detail/#sthash.ahNA2k1R.dpuf’, http://greece.greekreporter.com/2015/01/28/greece-this-is-syrizas-new-government-plan-in-detail/

(9) = BBC News 22 Jan 2015 ‘ECB unveils massive QE boost for eurozone’, http://www.bbc.co.uk/news/business-30933515

(10) = www.guardian.com 05 Apr 2016 ‘Yanis Varoufakis: Why we must save the EU’,

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