Opinion

Who is really to blame?

August 22, 2018

Eurocrats in Brussels and the European Central Bank in Frankfurt are congratulating themselves on the bailout of debt-burdened Greece which, in their terms at least, “officially ended” on Monday.

In three successive tranches since 2010, when the Greek crisis broke, the EU, along with the ECB and the International Monetary Fund provided $332 billion to keep the country from bankruptcy. This was not done out of the kindness of their hearts. Greece’s financial collapse endangered the credibility of the whole European single currency project. Although the Greek economy was insignificant measured against larger EU states, as part of the eurozone its financial failure would have impacted upon all other users of the single currency.

And there was another important reason for EU action. The Greek financial catastrophe had a great deal to do with the way in which Brussels made visionary policy based on hope rather than reality. The whole eurozone bloc, now of 17 of the 27 EU states, came into being on Jan. 1 1991 thanks to the readiness of its members, from the very outset, to ignore its own rules. Thus Belgium’s debt to GDP ratio was almost twice the 60 percent laid down but it became one of the original eurozone members because this ratio was “declining”. In 2007 it had actually reached 84 percent but last year this figure had ballooned to 103 percent. France also managed to meet the required three percent budget deficit by fiddling its figures and counting pension contributions. Given these and similar fudges, it was perhaps surprising that Brussels decided that Greece could not join at the start. Yet two years later Athens was admitted and thus entered the magic circle of markedly lower interest rates. The resulting Greek spending spree was mirrored by a further flow of EU funding for all manner of projects, not all of them particularly sensible.

It must be wondered how the EU analysts who decided that Greece was not fit to join the eurozone in 1999 decided it could make the cut after all two years later. Proper due diligence would have shown the Greek budget deficit was structural because successive governments poured money into state industries that employed way too many people and made heavy losses. At the other end of this fault line was the scandalous inability of the authorities to collect more than a fraction of the taxes due to the treasury, thanks to widespread corruption and the popular belief that only a fool paid tax.

Greece may have been the instrument of its own disaster but the original culprits were the politicians and officials who had dedicated themselves to a united Europe, with a single government, a single treasury and a single identity. The single currency has been the most obvious route by which this vision can be driven. The disparate member economies would ultimately be made to fall into line and acknowledge the discipline of Brussels. The fact that the Greeks fell on their faces rather than into line is doubtless seen as a mere hiccup in the slow but relentless thrust toward an eventual United States of Europe. That hiccup has cost ordinary Greeks dearly and the price in terms of continued austerity must be paid for at least another decade. In the light of rising populist discontent with Brussels throughout the EU, will they stand for it?


August 22, 2018
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