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 that “No 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?’,
http://www.bbc.co.uk/news/magazine-17155304

(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’,
http://news.bbc.co.uk/1/hi/8661385.stm

(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’,
https://www.theguardian.com/world/2016/apr/05/yanis-varoufakis-why-we-must-save-the-eu

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