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 33rd 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
5 comments:
Germany was destroyed, no infrastructure, the place were I lived, Hamburg was in ruins, as were many other Cities bombed to smithereens. The Marshall plan was tinged with anti Soviet sentiments, i.e Germany was see as the 'bulwark towards the Commies who are gonna come and eat our children'....
Greece under papandreou and his top echelon of non tax paying establishment shipping magnates wetre all up for joining the lucrative EU market, so were a minority of large farmers, but the vast majority understood that Greece was not ready for it.
Greece is not destroyed, but bust. Its rich tax evading rich have enough money sloshing around, not that anyone should mention this, to pay off the debt and still live comfortably.
So why should Greece, Italy,Spain and Portugal be allowed to have their debts cancelled halved or postponed until never? Why is this on the back of one nation alone? when the world bank and ECB are both in it? why would one compare this to a humanitarian postwar situation which was tainted by cold war considerations? just asking
It's not on the back of one nation alone - every EU country pays into EU funds. And why, if the German government can approve the ECB issuing 1,100 billion euros for private banks, can't it issue 150 billion of those to Greece in debt forgiveness instead?
I agree that the richest in Greece have mostly got off fine - some have likely even benefited by buying up Greek government assets that the EU forced Greece to privatise on the cheap.
However the majority in Greece are suffering massively for the actions of a minority which they were not responsible for. Why should the majority of ordinary people be punished for the actions of the banks, while the banks get another massive payout from governments?
And Germany has benefited from every country that joins the EU and every country that joined the Euro. With none of them able to protect their industries from German (or British or French) imports and with German and French etc exports made effectively cheaper by the end of currency exchange for exports/imports the wealthier countries benefited most during the times of economic boom, and so should pay most during the bust (though the banks should be the ones paying the most, instead of being allowed to avoid tax more and get more public money).
On top of that why were the wealthiest in Greece able to move their money out of the country and avoid tax so easily? Partly because of all the tax havens allowed in other EU countries - Luxembourg, Switzerland, UK dependencies like the Channel Islands, etc. So if the EU wants Germany to crack down on tax avoidance, it could help out by closing down the tax havens in other EU countries that rich Greeks (and British and every other nationality) and the banks and big firms use to avoid tax.
And if Greece wasn't ready for EU membership why did the French, German etc governments approve their membership rather than reject it?
I compare it to the 1953 agreement because when Greece was in the position of strength (creditor) and Germany in the position of weakness( debtor) the Greeks approved debt write-off, despite the German occupation of Greece during WWII. I agree, there was also power politics involved. Is there no big money politics involved in the current situation in which there is apparently infinite money available from the ECB for private banks (1,100 billion euros) but not enough for 50% debt write-off for Greece (150 billion)?
Should also say it was unfair to put the entire costs of WWI onto Germany as if it was solely responsible when this was far from the case, or to hold all Germans responsible for paying for what the Nazis did.
Equally it's unfair to make all Greeks pay for debts run up by some corrupt politicians and businessmen.
Thanks for that calgacus, I agree that its the tax evasions of EU rich that is a problem, money that does not work causes problems over time.
I would understand if Greece would ask for their 476 million Reichsmark loan back they received in 1942, most likely worth between 8.5-11 billion dollars today, but to create a separate ruling for Greece today would set the EU alight and open to money market sharks who'd love nothing better than chaos to inject their ideas of a TTIP.
I agree that the EU needs a bottom up reform which must sort out our fisheries, offshore havens, many under British jurisdiction, but Tziprias three two finger responses do not encourage a right wing politicians such as Merkel to act. The ECB is not under German control, but I agree that what they wish for, is mostly accepted. As to why? I have no idea.
I think Greek citizens will suffer under whoever runs their regime, unless they themselves tackle the massive tax evasion in their country, then no outside baksheesh will change the equation.
nice article, thanks for posting this here
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