German and EU hypocrisy and short memories on Greece : Syriza aren't extremists - they're asking for the same debt relief deal Greece gave Germany in 1953. The EU is handing the banks almost ten times the amount of money Greece is asking written off in debts

Syriza extremists or unrealistic? No, moderates, asking for deal Germany got in 1953

The deal Syriza are looking for is a reasonable one. For their creditors to forgive 50% of their debts, for debt repayments to only have to be made once the Greek economy is growing again, for the EU to stop privatising Greek government assets and services by selling them off for buttons at the bottom of the market, and an end to austerity policies which prevent growth (1).

This is a plan based on the 1953 London Agreement under which Germany was forgiven 50% of its debts incurred during two world wars and from Marshall Plan aid from the US after them. The creditors forgiving half of those debts included the governments of Greece, Ireland and Spain, three of the four countries much derided as ‘PIGS’ over the debt crisis. The London Agreement also included Germany only having to pay back debts out of 3% of its export earnings, so that its creditors imported German products (2).

While saying there will be no more debt reductions for Greece, Angela Merkel and other EU government leaders have approved issuing 1.1 trillion (one thousand one hundred billion) euros of “quantitative easing” money to be handed straight to private banks (3).

How is it that there is infinite money available to the banks, but none to keep ordinary people in work? Or even on benefits while there are more unemployed people than job vacancies?

How is it that one thousand, one hundred, billion euros can be created and handed to the banks, but none of it can be used to reduce Greece’s debt of around 300 billion euros by half (150 billion)? (4)

Syriza’s proposal is that some of the QE money should be used by the European Central Bank to buy bonds not just from private banks, but from governments suffering debt crises, like Greece and Spain’s.

Some Greek and American economists are saying the only problem with Syriza’s proposals are that they’re not radical enough (5) – (6).

While many have tried to paint Syriza as being left wing extremists, mirroring the neo-nazi Golden Dawn party’s right wing extremism, in fact Syriza’s leadership are moderate left wingers. Even the Telegraph newspaper, which favours the right wing of a Conservative party whose centre is right of Thatcher, considers Yanis Varoufakis, Syriza’s Finance Minister, to be a moderate (7).

Far from being ideologically opposed to EU or Euro membership, Syriza leader Alexis Tspiras preferred a coalition with the right wing but anti-austerity Independent Greeks party to one with the radical left KKE party which wants to leave the Euro and the EU (8).

Lazy Greeks? Nope – they work the longest hours in Europe

The supposedly “lazy” Greeks work, on average, the longest hours of any nationality in the EU according to OECD figures, over 2,000 hours per year, and did so even before the crisis. The “hard working” Germans rank 33^rd at under 1400 hours a year .The average employed person in the UK works 1,600 hours a year, 400 less than the average Greek. (9) – (10)

Other studies found that Greeks work on average 38 hours a week, compared to 35 in the UK and Germany (11).

And Germans take  more days of holidays per year than Greeks too (12).

Greece allowed more tax avoidance and corruption?
There are tax havens and corruption in UK dependencies and across Europe

Tax avoidance by Greeks is also often raised to try to justify the conditions imposed by the EU. Tax avoidance is certainly a serious problem in Greece, but the idea that other EU countries have done anything to prevent it is laughable. The UK allows offshore ones in the Channel Islands and in the UK dependencies of Bermuda and Belize, as well as the main party in government in the UK getting more than half its donations to party funds from the financial sector. Both Luxembourg and Switzerland are renowned tax havens.

It’s highly likely that much of the tax money avoided by wealthier Greeks is in those tax havens in other EU countries and territories they control. Since they’re demanding a crack down on tax avoidance and evasion by the Greek government, perhaps they could help out at the other end by closing down their own tax havens?

Mark Field, the Conservative MP for the City of London & Westminster, Mark Field, boasted in 2010 about all the foreign money coming into UK tax havens (13).

Government minister Francis Maude said in 2012 that turning the UK into a tax haven is “exactly what we are trying to do” (14).

Lord Fink, Treasurer of the Conservative party, and director of three firms with subsidiaries in tax havens (the Cayman Island,s Luxembourg and Guernsey) called for the same (15).

And progress has been made towards making the mainland UK a tax haven, with many US firms now relocating their headquarters for tax purposes here (16).

Ireland’s economic “miracle” and then collapse were, like Britain’s , largely down to deregulation (though worse for Ireland as it didn’t have it’s own currency). This included Ireland slashing its corporation taxes to the lowest in Europe in order to get companies to relocate there for tax purposes (17).

That’s why Ireland was able to recover relatively fast from the crisis. But, as Greek government ministers point out, there is not room for every country in the EU to have the lowest taxes, and competition to reduce taxes results in crises for government funding in all of them.

As the firms and banks benefiting most from tax havens also tend to be big donors to party funds for the biggest parties in countries across the EU, corruption is as much a problem in the UK as in Greece, it’s just done in a more formalised way and at a higher level in Britain.
Cash in brown envelopes is for amateurs. Donations to party funds, and jobs as advisers or directors for retiring ministers for favours done in office, are preferred.

Does Greece have any choice but to do what the EU and Germany say?

Yes. It could drop the Euro as a currency and return to the drachma, or adopt another currency, such as the dollar. This would likely cause another crisis and considerable hardship, but with the austerity imposed by the EU having seen average incomes cut 40% and unemployment over 25%, most Greeks are already suffering plenty of hardship and might decide that having control of their own government and economic and welfare policy and budgets again was worth a bit more.

This would likely lead to a run on the Euro, which might well lead to Portugal, Spain and maybe even Italy also dropping the Euro as currencies. The Eurozone benefits Germany most of all. Countries leaving the Eurozone would reduce German export earnings, which have been greatly increased by the Eurozone effectively reducing the price of German exports in countries using the Euro (18).

Sources

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

(2) = EU Observer 07 Jan 2015 ‘Europe's debt revolution: Can Syriza's plan work?’, https://euobserver.com/news/127115

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

(4) Washington Post 30 January2015 ‘Greece really might leave the euro’ =
http://www.washingtonpost.com/blogs/wonkblog/wp/2015/01/30/greece-really-might-leave-the-euro/

(5) = Truthout 22 Jan 2015 ‘Economist Leonidas Vatikiotis: Syriza's Proposals Don't Go Far Enough for Greece’, http://www.truth-out.org/news/item/28661-economist-leonidas-vatikiotis-syriza-s-proposals-don-t-go-far-enough-for-greece

(6) = NYT 26 Jan 2015 ‘Ending Greece’s Nightmare’,  by Paul Krugman, http://www.nytimes.com/2015/01/26/opinion/paul-krugman-ending-greeces-nightmare.html

(7) = Telegraph 26 Jan 2015 ‘Yanis Varoufakis: Greece’s future finance minister is no extremist’, http://www.telegraph.co.uk/finance/economics/11369851/Yanis-Varoufakis-Greeces-future-finance-minister-is-no-extremist.html

(8) = Guardian 26 Jan 2015 ‘Greece: claims of a far-left victory are nonsense’,
http://www.theguardian.com/world/2015/jan/26/greece-claims-of-far-left-victory-are-nonsense

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

(10) = BBC News 26 Feb 2012 ‘Are Greeks the hardest workers in Europe?’,
http://www.bbc.co.uk/news/magazine-17155304

(11) = Busting the myth of France’s 35-hour workweek, http://www.bbc.com/capital/story/20140312-frances-mythic-35-hour-week

(12) = See (10) above

(13) = Bloomberg 03 Nov 2010 ‘Tax Havens Send ‘Massive Capital’ to London, Lawmaker Says’, http://www.bloomberg.com/news/articles/2010-11-03/tax-havens-send-massive-capital-to-london-lawmaker-says

(14) = This IS Money 07 Apr 2012 ‘Francis Maude in new row after saying it would be a compliment if Britain were seen as a 'tax haven' under coalition’, http://www.thisismoney.co.uk/money/news/article-2126452/Francis-Maude-new-row-saying-compliment-Britain-seen-tax-haven-coalition.html

(15) = Guardian 21 Sep 2012 ‘Tory treasurer wants UK to become more like a tax haven’,  http://www.theguardian.com/business/2012/sep/20/tory-treasurer-make-uk-tax-haven

(16) = Reuters 09 Jun 2014 ‘Britain becomes haven for U.S. companies keen to cut tax bills’, http://uk.reuters.com/article/2014/06/09/uk-britain-usa-tax-insight-idUKKBN0EK0BA20140609

(17) = Forbes Magazine 06 Nov 2013 ‘If Ireland Is Not A Tax Haven, What Is It?’, http://www.forbes.com/sites/taxanalysts/2013/11/06/if-ireland-is-not-a-tax-haven-what-is-it/

(18) = Business Insider 20 Nov 2011 ‘Why German Taxpayers Should Be Forced To Bail Out Italians And Greeks’, http://www.businessinsider.com/why-germany-should-bail-out-italy-and-greece-2011-11#ixzz3QRQBjDjw

There is a magic money tree for governments with their own currency - and Cameron has already used it in quantitative easing for the banks - so why not for things that benefit everyone?

Prime Minister David Cameron is completely wrong when he says there is “no magic money tree” – there is for any government that has it’s own currency which it can issue in any quantity it likes; and for private banks which can create money – but only create it as debt. Cameron’s government, like the last government, has used it’s “magic money tree” repeatedly in “quantitative easing” to pad the banks’ reserves. There is no reason he can’t use it to create money for more worthwhile causes that benefit everyone.

Vince Cable is right that we need stimulus spending, but why should we borrow it from banks and hedge funds, increasing our debts, when the government can print it or issue it digitally instead? It’s created out of thin air either way. The financial crisis was the result of most money being created as debt - loans and mortgages - by the banks, combined with deregulation, as Australian economics professor Steve Keen points out (1).

The government should print money and spend it on green energy research, investment in infrastructure (transport, education etc), plus grants and zero or low interest loans to small and medium sized businesses. If that creates a little inflation, that's not so bad, as devaluation of the pound will also reduce the size of our debts denominated in pounds.

The British government’s 2% inflation target and reliance on borrowing rather than printing money are the result of over-sized banks that can donate to much to party funds. Nobel prize winning economist Ha Joon Chang points out that even IMF studies suggest inflation doesn't negatively affect growth till it reaches 8% - other studies say 20%. (2)

Some will immediately cry hyperinflation, but in actual cases of hyperinflation, like Weimar Germany or Zimbabwe, the causes were French military occupation and control of the steel and coal output of the Rhur valley, and international sanctions, respectively, combined with political crises, not printing money (3). The bank executives and hedge fund managers would like people to believe otherwise because they profit from other peoples’ debts and don’t want those debts shrunk by moderate inflation.

If the government won’t do that we still have one other option – set up lots of small local or regional savings and loans companies like the “Bank of Dave” (Burnley savings and loans) set up by businessman Dave Fishwick (4) – (5).

This also has implications for the debate on whether Scotland should become independent. One potential advantage of independence would be that Scotland could print it’s own currency and spend it how it chose whatever the City of London financial sector said.

(1) Steve Keen (2011) ‘Debunking Economics’, Zed Books, 2011

(2) = Ha Joon Chang (2010) ‘23 Things They Don’t Tell You About Capitalism’, Penguin / Allen Lane, London, 2010, ‘Thing 6’, page 55 of Allen Lane hardback edition

(3) = Ha Joon Chang (2010) ‘23 Things They Don’t Tell You About Capitalism’, Penguin / Allen Lane, London, 2010, ‘Thing 6’, pages 51-62 of Allen Lane hardback edition

(4) = Burnley Savings and Loans, http://www.burnleysavingsandloans.co.uk/

(5) = Guardian 01 Mar 2013 ‘Bank of Dave: Fighting the Fat Cats; The Wedding Shop – TV review’, http://www.guardian.co.uk/tv-and-radio/2013/mar/01/bank-of-dave-fighting-fat-cats