Point of no return

Last week, the Greek elections were at the centre of international attention. The first reason was that the election results saw a neo-nazi (yes, not far-right, neo-nazi) party, Goldn Dawn, entering the parliament. The second reason was the rise of SYRIZA, or the Coalition of the Radical Left. SYRIZA, which traditionally received 3-4% of the vote, reached 17% and became second party, following New Democracy with 19% (full elections results here).

For those who are not familiar with the Greek political system, here is some background information: The country has been ruled by centre-left PASOK (Panhellenic Socialist Party) and centre-right New Democracy parties alternating in power since 1974 – the year when democracy was established in Greece, after the end of the dictatorship 1967-1974.

New Democarcy		1974	1977
New Democarcy		1977	1981
PASOK		1981	1985
PASOK		1985	1989
New Democracy-KKE coalition		1989	1990
New Democracy		1990	1993
PASOK		1993	1996
PASOK		1996	2000
PASOK		2000	2004
New Democracy		2004	2007
New Democracy		2007	2009
PASOK		2009	2012

The two mainstream parties have set the internal agenda for almost 40 years. They are the ones responsible for hiring public servants based on party politics, of not using EU funds efficiently and feeding them to their voters, of excessive borrowing in the decade which followed the introduction of the euro. The two large parties are the ones that have left their stamp on Greece’s political scene.

The latest elections were viewed by many spectators in Greece and abroad as surprising and many tried to understand the”angry” vote or the way voters shifted across the political spectrum. (here is a good analysis by BBC’s Paul Mason)

While the international media are trying to make sense of Greek politics and Greek politicians are trying to shuffle a new government of “personalities” which will lead the country out of the state of un-governability (and chaos) (e.g. see here), the anger of Greeks is rising. This anger is reflected in the rise of SYRIZA. And this anger consists of three elements:

1. anger and despair by the economic reality that has hit most Greeks, which includes income reduction by 40%, abolishing labour laws, reducing pensions, unemployment at 21%.

2. cumulative anger at the bashing Greeks have received by foreign and domestic commentators over the past two years about the Greek statistics, working hours, laziness, spending more than producing etc.

3. a cumulative anger at the political system and the mainstream parties‘ politicians who have been repeatedly lied to citizens and have brought the country where it is today. All politicians lie and Greeks like their tales. But in the past two years the hypocrisy of the Greek mainstream parties has reached new levels, as PASOK has basically become a right-wing party and New Democracy is tiptoeing around it awkwardly (e.g. New Democracy voted in favour of the 1st Memorandum of Understanding (MoU) and opposed the 2nd).

With every political tactic followed by the mainstream political parties, with every article published by the Spiegel, with every comment expressed as a threat by Angela Merkel, these feelings of anger and despair are increasing.

Many Greeks no longer care for the country’s stability, Greece’s image abroad, the critique by international media and Europe’s politicians but instead want their lost dignity. SYRIZA seems to have realized this and expresses a new narrative and hope.

Increasingly, Greeks are reaching a point of no return.The sooner Europe’s political elites (and Greece’s pro-austerity political elites) realize this, the better for everyone.

How short is the “short-term”?

Today European Central Bank (ECB) chief Mario Draghi speaking at a hearing in the European Parliament urged the Eurozone to continue supporting austerity and “fiscal adjustment”. His comments come after the first round of French presidential elections, where Socialist leader Francois Hollande came first and ahead of the second round of the French elections and the Greek parliamentary elections on 6 May .

One of the arguments Draghi used – and supporters of austerity measures generally reproduce – is that the recession and high unemployment levels that Greece, Portugal, Spain and Ireland to name a few are experiencing, are the “necessary steps” on the way to growth. More importantly, this “necessary pain”, the adverse, contractionary effects, which are only to be felt in the short/ medium term.

Let’s clarify a few things about the short-term: In economics and finance, the short-term is defined as a short period of time, usually 12 months. In fact, in some fast-moving business sectors, the short-term is 6 months, but let’s be generous and round it up to 12 months.

Now let’s review some data. Greece has been in a recession since 2008 [A recession is defined as 6 months of negative growth rate. Negative growth is when the country produces less than the year/ month before. A good, healthy growth rate is usually considered to be between 3-6%]. Greece’s recession is expected to become worse in 2012. Greece’s recorded unemployment is 22%.

Ireland has been in a recession since 2008. It moved to a growth rate of 0.7% in 2011, and is to grow by 0.5% in 2012.  Unemployment is at 15%.

Portugal had  zero growth in 2008, recession in 2009, and really low growth in 2010, before moving back into recession in 2011. The recession is expected to become worse in 2012. Unemployment levels are at 15%.

Spain had a marginally growth rate in 2008, before plunging into recession in 2009 and 2010. It rebounded slightly in 2011 and is moving back into a recession for 2012. Unemployment is 25%.

These are all countries that are implementing austerity measures either because they are forced to through their Memorandum of Agreement with the IMF, or through political pressures EU or nationally driven.

Draghi’s and European leaders’ remarks about the short-term are not only unfounded economically but also socially provocative.

People don’t wait for the long-term to live, gentlemen. People actually try to “live” in your “short-term”. They lose their jobs, they can’t pay their bills and taxes, they can’t afford buying basic products. They fall below the poverty lines and leave their country to find work.

It is the short-term that matters. Besides, as Keynes said, in the long-term we are all dead. But then again, his economics actually made sense.

1. People in crisis, Greece http://www.theatlantic.com/infocus/2012/04/portraits-of-greece-in-crisis/100285/

2. All the economic data can be found here

Greece and the Shock Doctrine

In the weekend leading to Sunday 12 February 2012, Greek politicians were debating the necessity of the latest austerity package. The austerity plan was to be approved, as a condition for Greece to receive a second-bailout package by the IMF-EU of €130 billion and to a debt restructuring. The majority of the Greek people are against further austerity measures, which come on top of previous tax increases and public spending cuts. The government knows this and is defying the will of the people.

According the Greek government, represented by appointed and unelected Prime Minister Lucas Papademos and its ministers:

•  The dilemma facing Greece is “austerity package” versus “leaving the eurozone” – no middle ground exists
• “Leaving the Eurozone” would entail social and economic disaster, which would see Greece’s standard of living reduced to that of thirty, forty, fifty years (number vary, depending on the emotional state of minister/speaker)
• As a result, the austerity measures are the “only alternative” to a catastrophic default (more about this here) and should be approved, as it is the only way for the country’s growth and prosperity.

The facts:

• The bailout package is a loan  and most of its funds will be used to pay previous loans.
• In line with the neo-liberal agenda of the previous memorandum, the austerity plan foresees: reductions by 22% of the national minimum wage to €600 per month (before social security payments); Employees made easier to be fired (these two measures are known in neo-liberal-speak “reform of the labour market”; Reduction in the supplementary pensions; Reduction in public health expenditure
• Greece is now in the 5^th year of recession, starting in 2008. Its unemployment levels have reached 21%, with youth unemployment at 48%.

During the ten-hour debate in parliament, there was a large demonstration in Athens and other cities of Greece. In Athens, the riot police kept trying to push protestors outside Syntagma Square (where the Greek Parliament stands) and was throwing tear-gas, unprovoked, to  peaceful demonstrators. At some point, riots erupted which ended up in looting and fires across Athens during the night.

In the early hours of Monday 13 February 2012, the Greek parliament approved the austerity plan, with 199 out of 283 votes.

The mainstream media in Greece focused on the destructions that followed the demonstration; the violence; the fire in a historic theatre “Attikon” in Athens; the fact that the Greek government needs to implement harsher measures to gain its lenders’ credibility; the reactions of European officials to the result of the vote.

Not a word was said in the Greek mainstream media about the size of the demonstration, not a word about the fact that demonstrators were shouting “We are not leaving” amidst clouds of tear gas. Not one commentator questioned the legitimacy of the government or even bothered to wonder aloud whether this demonstration was any different from previous ones.

Over the past two years, the Greek people are being bombarded by mainstream media with falsified information that Greece is on the “brink of disaster”, scare-mongering speeches by their politicians about the future of the country, insulting comments from foreign commentators and politicians about Greeks and their “overspending”. Over the past two years, the Greek parliament passes law after law, entailing cuts, tax increases, and anti-social measures at great speed, before it has any time to recover.

Sunday’s events were no exception to this pattern. Is there anyone who still thinks Greece is not under the Shock Doctrine?

Europe’s democracy

European integration has always been an elite affair. From the signing of the Treaty of Paris in 1951, which established the European Coal and Steel Community (ECSC) to the negotiation of the Treaty of Lisbon in 2009, the governments of the European Union member states have been clear in their message: European integration is a process to be nourished and protected by national governments and not to be endangered by grass-root politics and citizens’ unpredictable voting in referendums.

As European integration was primarily controlled by member states’ governments, their role has been empowered. Over the past thirty years, the ministers’ council meetings multiplied, the Heads of State gathered more often than not, in scheduled (four times a year) and extraordinary meetings (see recent Eurozone meetings) and effectively, national parliaments were gradually by-sided. At the same time, as interdependence between countries increases in a globalized world, European cooperation is strengthened and nowadays, more often than not, the important decisions are taken at European level rather than the national level, despite what the British political class and media insist on telling the Brits.

These developments combined have ultimately led to a situation whereby governments are empowered vis-à-vis national parliamentary procedures, and ultimately vis-à-vis their voters.[1] This means that the extent to which  European voters’ policy preferences (or part of them) reaches the final policy outcomes at European level effectively lies first, in the ability of the citizens to transmit their interests to governments and second, in the ability of the governments to negotiate these effectively in Europe. However, what happens if a government decides to U-turn on the political platform it was elected on, does not heed public opinion at home, and has a weak negotiating position among its European counterparts? Well, in a nutshell this country’s voters are in a gutter.

This is no other than the case of Greece at the moment. The current Socialist government (PASOK) came to power on an anti-corruption and economic reform platform, claiming that it would fight tax evasion and thus regain lost government revenues to implement reforms in the economy. It would promote transparency and public deliberation. Two years later, the government’s policies are so right-wing, that even the centre-right opposition party is reluctant to support them: under the EU-IMF bail-out package auspices, PASOK has implemented harsh austerity measures, has not fought tax evasion and has thrown the economy into a -5% recession. The debt is higher than it used to be in October 2009 when PASOK came to power, while the country’s target year for reaching a debt of 120% of GDP is 2020. It should be noted that the target is close to the original debt levels in October 2009, which was 128%.

In addition, over the past two years, the government gradually lost all of its negotiating cards (e.g. instead of threatening it would leave the euro two years ago, if no assistance was provided by Brussels, it is now being threatened by the EU that Greece will be thrown out of the eurozone), it missed the opportunity to be viewed as a reliable partner by its European counterparts (many measures of the first bail-out package have not yet been implemented) and in the end lost all of its credibility in Brussels. What is worse, at the moment, the Prime Minister is negotiating a “national unity” government, demanded by the EU to ensure that the second bail-out package (which includes a 50% haircut of the Greek debt) will be approved by Greece’s politicians.

The Greek people have been demonstrating since June (see Athens’ Indignant) and the polls show that the majority of Greeks are against a second bail-out, which in effect will plunge the country into a deeper recession with an uncertain end date. Unemployment is currently 15%, reaching 20% in the 18-30 age group, and as rich Greeks buy houses in London, the country’s youth migrates to greener pastures abroad.

Politics is a game and all parties involved realize this to a certain degree. All political parties tend to exaggerate their platforms prior to elections to some extent and often promise more than they deliver; all politicians change their positions following the elections, even if it is simply because of changes around them; Just like politicians change their policies after being elected, so will citizens bash them for doing so, even if they realize that a government cannot lower taxes and increase welfare benefits and improve the economy, all at the same.

However, what happens when a government departs so greatly from its original pre-election positions that legitimacy issues are raised? In any other part of the world, the answer would be, elections. However, what happens when this country is part of a European monetary system, like the Eurozone, that in effect blackmails the current government to a “government of national unity”, in return for a second bail-out, in an unprecedented breach of national sovereignty? And what happens when in addition, this second bail-out will force a whole nation to implement harsh measures imposed by elites, to remedy a grave economic situation that was created by the national elites’ decisions over the past thirty years? What are the options of such a people in this kind of Europe?

The European project was about peace and prosperity. In a divided Europe, it was about the freedom of the West, juxtaposed against the oppression of the East. In the post-communist Europe, and as East European countries joined the club, it became about political and economic freedom, about free-market economies and liberal democracies. When did democracy stop being part of the equation?

 

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[1] This power shift from parliaments to governments in the national level would have been tolerable, were it matched by a respective power shift from governments to the European Parliament (EP) at the European level. However, despite MEPs’ laborious efforts, the EP remains often by-passed (see recent Eurozone deliberations), while citizens view European Parliaments as secondary.

Democracy is dead, long live economics!

Last night, the Greek Prime Minister George Papandreou gained a vote of confidence for his newly appointed cabinet. The majority was 155 out of a total of 300 MPs, which is all of the MPs of the Socialist Party. Mr. Papandreou was successful in consolidating his party after last week’s internal revolt and his back-and-forth politics into forming a government of “national unity” with the opposition party leader Mr. Antonis Samaras.

The approval of the cabinet means now that Mr. Papandreou can now more safely ask the parliament to approve the medium-term austerity programme which is demanded by the EU-IMF as a condition for releasing more funds to Greece. The austerity programme is to introduce huge spending cuts, tax inreases and a long list of privatizations. People will lose their jobs, families will be driven below poverty lines, retired people (who have worked all their lives and have been paying their welfare contributions) will see their pensions being reduced, employees will not be paid overtime or will see wage reductions, graduates will take jobs with fewer or no skill requirements, as these will be the only ones available, social and workers’ rights will be demolished and the country’s younger generation will flee to greener pastures abroad.

But it does not matter! Because Greece’s debt may be slightly reduced in five years’ time. And then, there will also be some kind of growth as well, say 0,6% of GDP. And the government’s deficit will possibly be reduced. And this is all that matters. Economic indicators are not here to serve society, they have a value of their own!. It does not matter if a whole country is experiencing de-development and going backwards and a generation is lost. It does not matter if the Greeks have been protesting against these cuts since 25 May. Because the people do not understand economics and Euro-politics and what matter is that the economic indicators are right. And in today’s world of neoliberal economics and coalitions of governments and bankers, this is all that matters. And if governments use their power to bypass people’s opposition, if they spray citizens with tear gas instead of protecting their right to work, if democracy get stumped in the way of economics, well that ‘s just a casualty.

A three-level play

The Greek debts crisis is now unravelling in three different levels. The national level, the European level and the citizen level.

At the moment of writing, the Greek parliament is in its first day of a three-day debate, at the end of which the Prime Minister George Papandreou will ask for a vote of confidence of the new cabinet. The new cabinet was announced on 17 June, following two days of drama politics. One of the key changes was replacing the current Finance Minister Giorgos Papaconstantinou, with Evangelos Venizelos, which the Guardian described as “physically imposing presence”  (this apparently is a prerequisite for being Deputy Prime Minister, judging from the equally imposing Mr. Evangelos Pangalos). Mr. Venizelos is Mr. Papandreou’s longtime rival. He come from the Socialists’ “old guard” and was Mr. Papandreou’s opponent in the 2007 race for the party leadership. According some analysts, Mr. Papandreou forged an alliance with his “chief enemy”, with the aim of appeasing some members of his party who were opposing the new austerity programme. This reshuffle will presumably consolidate the Socialist party and will lead to greater support for the tough austerity measures. The hope is that the new government will win the vote of confidence (which is due on 21 June), and the new austerity programme will pass through parliament the week after.

At the same time, the Eurozone finance ministers are meeting in Luxembourg to discuss releasing a loan of up to €12 billion to Greece. This is the late payment of the €110billion EU-IMF aid package that was agreed in May 2010, without which Greece will not be able to pay forthcoming debt repayments. On 16 June, EU Commissioner Oli Rehn urged  Eurozone Finance Ministers to come to a “responsible agreement” on Greece’s bail-out. He also said that the Greek government should endorse the economic measures agreed.  On 17 June, the French President Nicholas Sarkozy and German Chancellor Angela Merkel agreed on principle that any extension of the maturities of the Greek bonds will be purely voluntary (the point of disagreement was the private banks’ contribution to the new aid package). Ms Merkel conceded to the demands of France and the ECB that the private banks’ contribution in the new bail-out package for Greece should be voluntary, she insists that it is “substantial” . However, while European frets, the financial markets jolt every time news were coming from Athens and Brussels. There are fears of a Greek default which could jeopardize the stability of the Eurozone. At the moment of writing, the next Eurozone meeting is 19-20 June is taking place, where it is expected that this agreement will be sealed off. The hope is that there will be an agreement and the new loan will be given to Greece.

Meanwhile, according to the latest poll, 47% of the Greeks are against the new austerity programme, which includes tax increases, cuts in civil servants’ wages and a long list of privatization. Since the bail-out, 400,000 have lost their jobs. Total unemployment is now 16%. Greece’s “indignant citizens” have been camping out in Athens’ central square (Constitution Square) since 25 May in protest against the government’s new measures. For some Greeks the hope is that their pension or their wage will not be reduced any further, that there will not be asked by their employer to work longer hours on the same wage, or that they will still have a job in a few months’ time. For the younger generation, there is no hope.

The politics of blame shifting

Governments are known to use tactics in order to circumvent public opposition. It is often the case that politics elites withhold important information from the public or delay the release of information to the media, with the aim of manipulating public opinion and tone down opposition and reactions. This manipulation of public information by elites is sometimes well-intentioned. It is not always the case that the public knows best, and citizens can be emotional about issues, where a rational approach is needed (see foreign policy). However, more often than not, governments exploit their strategic position as agenda-setters and regulators of information, and tamper with it to promote their own political agenda. This is exactly the game which  Deputy Prime Minister of Greece, Theodoros Pangalos had been playing for past eighteen months.

Ever since the magnitude of the Greek debt was revealed in October 2009, Mr. Pangalos has been making increasingly provocative public statements, referring to the Greek citizens’ responsibility for Greece’s debt crisis and current state of the economy. In a very characteristic statement, which has become an anecdote in the Greek media and blogs, he said “We ate it together”, where “it” refers to public money and “ate” is  slang for “spent”. The message which Mr. Pangalos is trying to convey is that Greek citizens have greatly benefited from a corrupt state and have thus contributed to the geometrical increase of Greece’s public debt. As he mentioned in the beginning of this week, if you can “find me a Greek public servant citizen who did not receive undeserved wages, benefits, and pay increases or a Greek who asked for a receipt each time he bought a product or used a service, I will make him a statue”.

What is infuriating about Mr. Pangalos’s public statements is not only his sarcastic tone and the fact that he completely dismisses the public and media outcry his comments provoke. It is that he systematically attempts to place the Greek citizen and the politician on an equal footing, vis-a-vis Greece’s present debt crisis. And as it seems, this motto is now being taken on by others who talk about the need of Greeks to accept some “responsibility for the causes of the crisis”.

Let’s make one thing clear: Greek citizens are not to be blamed for the state of the Greek economy and the magnitude of the debt. Not because they are model citizens. Far from it. Many Greeks have received overblown public wages, by virtue of being a member of the Socialist or the New Democracy party, rather than their merit and their qualifications. And as many, if not more, do ask for receipts and do not offer one when they provide their professional services. However, the Greek civic culture and the behaviour of the Greeks is not at trial here. It is government policy. Citizens do not issue government bonds. Citizens do not decide how many job vacancies will open in the public sector. The Greeks did not decide on the level of defence expenditure and the number of submarines and war planes to be bought from France and Germany. They did not contract companies in the name of the Greek state to build roads five times up the cost of European highways. Politicians did.

Of course, the aim of this blame-shifting, scare campaign is to spread fear and guilt to the majority of the population, so that austerity measures are accepted. However, when a quarter of civil servants have seen their salaries being reduced by 20% and may lose their jobs, when the number of Greeks out of work has increased by 40% from a year earlier (16% in total), while the political elite remains unpunished for well-known cases of corruption, these are dangerous games. Very dangerous indeed.

Mr. Papandreou’s next step

For the past twenty-four hours, the Greek political arena was the scene for a soap-opera. It all started yesterday with Mr. George Papandreou’s effort to create a “national unity” government, his offer to even step down if needed, and his change of heart later on that evening. The drama continued today with the emergency convention of the Socialist MPs, who were reported to challenge the leadership of Mr. Papandreou. Sure, there were two resignations (George Floridis and Hector Nasiokas), but as the two Socialist MPs also stepped down from parliament, the Socialists’ majority in parliament was not jeopardized. However, the rumours went as far as to predict party elections for a new Socialist leader on the same day.

Meanwhile, the opposition party was holding its own emergency meeting, while the smaller parties (Greek Communist Party – KKE,  Coalition of the Radical Left – SYRIZA, People’s Orthodox Rally – LAOS) were criticizing the two large parties for lack of initiative and leadership. Naturally, the Greek media – not really known for their sober and analytical news reporting – were magnifying every little statement made by Greek politicians, while frequently referring to the “disaster” which was looming for the “ungoverned ship” (Greece, that is).

By late afternoon, the ship had not sunk (at least not in political terms) and Mr. Papandreou reiterated his will to form a new cabinet. Was Mr. Papandreou playing some kind of poker game with his European partners? Maybe, given that on Tuesday the Eurozone ministers had not decided on the details of Greece’s next bail-out, while the path seems (more) clear this afternoon (See BBC news). Was he orchestrating some sort of communication show to increase pressures on his party to accept the austerity package? Maybe, given that by this morning there were talks of elections within the socialist party, while by this afternoon he was announcing the new cabinet and the government’s leading ministers were giving him their support. Was he just doing bad politics? Probably. The answers to these questions are unclear but also unimportant.

Greece’s debt problems are not only present but urgent. The medium-term programme which foresees privatizations and public spending cuts remains a condition for the next IMF-EU payment, which is due on 29 June. And the protesting Greeks are still on Constitution Square opposing it. They may be fewer today, after the riots which took place yesterday, but there will definitely be more over the weekend.

Mr. Papandreou could attempt to go to Brussels and try to renegotiate the terms of the austerity package. However, it is highly unlikely that the IMF-EU will accept anything less that was has already been agreed upon, especially given the IMF’s bias in favour of liberal economics and the EU’s recent obsession with fiscal discipline.

What he could try to do, is get the Greek citizens on his side. And there is only one way to do this: to stop the discrimination between Greece’s political elites, their surrounding journalists and businessmen (the “mainstream”) and average citizens vis-a-vis the rule of law and the burden of the austerity package. He should prosecute ministers and members of his party who have abused their position and used public funds for their own personal gain, press charges against all those businessmen and professionals who systematically evade taxes, freeze their Swiss bank accounts, and confiscate their assets.

Then maybe, he will have some chance of going through the austerity programme without further alienating the Greeks and increasing the chasm between Greece’s political elites and citizens.