Greece Capitulates, And The Euro Project Claims Its First Victim

 

Much of what Guy Verhofstadt shouted at Greek prime minister Alexis Tsipras in the European Parliament the other day – captured in the video above, which has since gone viral – is perfectly true.

Yes, Greece has dragged its feet making necessary pro-market economic reforms, not just over the past five years but since that country joined the European Union in 1981. Yes, tax collection is not what it should be in a modern western economy. Yes, there remain too many closed industries, stifling competition with their restrictive practices and deliberately insurmountable barriers to entry. Yes, corruption is still a real problem in some cases. And yes, the Greeks voted in a left-wing Syriza government well endowed with socialist rhetoric but less so with reforming zeal.

And yet when you watch a democratically elected leader – the prime minister of one of the EU’s own member states – being lectured and belittled in view of the whole world by a European parliamentarian, something does not sit right in the stomach. Unlike Britain, Greece is an enthusiastic EU member, viewing their membership of the organisation and the single currency as a marker of national progress and development. But must this be the price of their ongoing membership, their leaders summoned to Brussels for public rebuke and their ministries thrown open to clipboard-wielding EU technocrats?

As was perhaps inevitable, Greece has largely capitulated in the ongoing standoff with their creditors and the European Union. Austerity measures, even more than were demanded before the “Oxi” vote in the Greek referendum – which itself tells you a lot about the real motivations behind the EU’s negotiating strategy, not seeking a sustainable deal but wanting to punish a small member state for not immediately doing what it was told – are now being willingly accepted in the latest Greek proposal.

From the Telegraph:

The Greek government submitted its reform proposals to Brussels late on Thursday night, amid signs that the two sides in the negotiations were moving closer towards one another.

The proposals appear to go further than the austerity demands rejected by the Greeks in last Sunday’s referendum. Quick calculations show they amount to around €13bn in fiscal measures in return for what could be a three-year loan worth €50bn-70bn.

Many of these measures are necessary economic reforms. Some have more than a whiff of punitive payback from big egos in the eurozone group who did not like being contradicted or publicly humiliated by Greece. None of the measures are going to have a positive impact on growth and GDP in the immediate future – so long as the Greek economy is at a virtual standstill and highly vulnerable, even fiscal conservatives such as this blog cannot in good conscience demand further depressive actions to be taken. Fortunately, Greece’s negotiating partners are not encumbered with good consciences, and they do make such demands.

Since Greece is determined to both keep the euro and stay within the EU – despite Nigel Farage’s encouragement to Alexis Tsipras to have the courage to quit the EU with his head held high – this was probably as good a deal as it was ever going to get for Greece. But at least the issue of Greece’s debt sustainability is now firmly on the table:

Germany is at last bowing to pressure as a chorus of countries and key institutions demand debt relief for Greece, a shift that could break the five-month stalemate and avert a potentially disastrous rupture of monetary union at this Sunday’s last-ditch summit.

In a highly significant move, the European Council has called on both sides to make major concessions, insisting that the creditor powers must do their part as the radical Syriza government puts forward a new raft of proposals on economic reforms before a deadline expires tonight.

The significance of this cannot be overstated. Recall that – putting Jean-Claude Juncker’s untruths aside – there was no hint of acknowledgement that Greece’s debt is unsustainable until Alexis Tsipras walked away from negotiations and called a referendum. Though the IMF had reached the same conclusion independently and shamefully chose to sit on it rather than allow it to inform the negotiations as they progressed, there was absolutely no chance that the EU might consider debt restructuring or forgiveness until the Greeks started to play hardball. Yet everyone with a brain and no vested interests knows that this is the only sustainable path back to growth.

Look what the European Union does to democratic countries. Single-mindedly obsessed with defending the single currency, stamping down on recalcitrant member states and looking legitimate to the rest of the world, the EU was willing to tolerate systemic bank failures, medicine shortages and a full-blown humanitarian crisis in Greece in order to force the Greek government to continue making unsustainable payments to banks, institutions and countries which should never have been lending to Greece in the first place.

For all their faults – and Alexis Tsipras and his Syriza party have many – at least it looks as though the Greek government might just come away with something, more than a token form of debt restructuring, to give their people in exchange for the past month and years of crushing economic decline and national hopelessness.

But shame on the EU for ever letting it come to this.

 

Greek Flag - EU Flag - Greece - Surrender - 2

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