‘aGreekment’: Facts and Implications

Alphen, Netherlands. 14 July. Bastille Day. This day back in 1789 the French people rose up and toppled the ancien regime.  Two hundred and twenty-six years on and it is the day after an attempt by another populist movement to challenge elite orthodoxy was firmly put in its place by Europe’s ancien regime.  In a ‘masterstroke’ of elite linguistic clunkiness European Council President Donald Tusk called the accord an “aGreekment’. It was certainly an abasement – of both debtor and creditors – and reflected the many contradictions of both the Greeks and the Euro itself.  What are the facts and the implications of this latest Euro-mess? 

The facts. Greece will receive a third massive bailout of my Dutch tax money worth some €85bn over three years to prevent state bankruptcy in return for first agreeing (this week) and then implementing (under imposed supervision) massive (and I mean massive) reforms. Indeed, wholesale change is demanded to the Greek tax base, legal system, levels and system of pensions, labour markets, public sector, public administration, financial sector and economy.

There will be an ‘independent asset fund’ established via the sell-off of Greek public assets such as ports and airports which it is hoped will raise €50bn and which will be overseen by the creditor institutions – the European Commission, European Central Bank (ECB), and International Monetary Fund (IMF).  Thereafter, €25bn will be used to recapitalise the Greek banks, €12.5bn will be invested in reducing the Greek debt-to-GDP ratio, and a further €12.5bn committed to investments in Greece itself.

There is as yet no agreement to offer Greece relief on its enormous €320bn debt. However, given that Greece can never escape from the debt trap without debt relief the latest bailout only makes sense if relief is eventually offered. In practical terms that will mean all of my money the Dutch Government pretended it was loaning to the Greeks in bailouts 1 and 2 (and now this new ‘loan’) will at some point be turned into gifts.  Money that was also used to indemnify German, French and other banks and which I am also paying for through the low interest on my savings, high taxes and the debasing of the Euro through so-called quantitative easing – printing money.

Greek debt management will be undertaken by extending the democratic deficit.  Critically, under the ‘aGreekment’ the Greek government must agree proposals with the ECB, Commission and the IMF BEFORE they are submitted to Parliament.  This structure effectively renders the democratic process irrelevant as the deal will be done before it ever reaches Parliament. This is probably just as well as it merely brings the ‘aGreekment’ into line with most other European legislation.

The implications?  First, the short-term.  If one strips away all the ridiculous talk of coups and German takeovers the bottom-line is that the Greeks by voting ‘no’ to austerity but ‘yes’ to Eurozone membership were effectively (almost childishly) inviting me the Dutch taxpayer to go on indefinitely paying for a clientelistic political and economic system that was not fit for the twenty-first century world.  Such a system would have collapsed sooner or later under the weight of its own corrupt inertia and had to be reformed.

In the longer-term the implications are profound and not just for Greece.  The Eurozone is at a crossroads because the current crisis reveals yet again the sheer lunacy of creating a political project that is not grounded in sound fiscal and monetary policy.  This crisis was forged back in 1991 and the establishment of the Maastricht Convergence Criteria and the rules governing the single currency.  In the absence of true political and fiscal union and enforcing institutions it was hoped that the member-states would adhere to the rules.  They did not – including France and Germany. 

However, with EU-scepticism growing there is little or no appetite for a European super-state or anything like it, not least because such an entity would kill off democracy once and for all in Europe.  Nor is there agreement between Eurozone members about future direction. It is clear from the wording of the ‘aGreekment’ that German conservatives drove the process far more than French socialists. This means the entire debate over ‘governance’ will stumble on for another decade or so, as will the euro itself.  Growth will be stymied, jobs will go uncreated, and savings will be raided.  Worse, the Eurozone will go on obsessing with itself as Europe’s relative decline accelerates precisely because of the Euro’s dangerous structural flaws and contradictions. This will render not just Europe but the wider world a very much more dangerous place.

EU founding father Jean Monnet said, “Europe will be forged in crises, and will be the sum of the solutions adopted for each crisis”.  In fact with each crisis the European project has become more elitist, ever more rigid and progressively weaker as the high priests and priestesses of Euroland crash hard against the battered redoubts of national politics.   And, for all of Greece’s child-like behaviour the Greeks have at least swept away the hubris covering an important and dangerous principle of ‘ever closer union’. When the technical requirements of European economic cohesion clash with politics and democracy it is and always will be the latter that loses.  That is why ‘Europe’ is an elite project and more Europe will mean ever more elite fiat and less democracy.

Julian Lindley-French