Greece; Part of an Empire
We discussed in a previous post, how Greece has lost its sovereignty. Whether it succumbs to the rule of the Persian empire, or to the rule of the European Union, does not matter. The fact is, Greece no longer controls its own faith. Now, some of the readers will consider that as far-fetched. After all, the EU is a supposedly democratic organization. The EU, we believe, has the interest of the people in mind.
Yet, actions speak louder than words. From how the EU behaves, can we deduct what values the institution truly holds? How did the EU behave when Greece got into deep troubles after the crash of 2008? Whose interests did they serve? Those of the people of Greece? Or were the people of Greece sacrificed and made to suffer, for a higher purpose? Let’s take a look.
In 2008 the crisis started. Greece had joined the euro with the help of Goldman Sachs. The infamous American investment bank had helped the country hide some debt. In other words, Greece had used the aid of some bankers to trick the EU to get into the Eurozone. Now, it is questionable whether the EU really did not know, or if they simply pretended not to know. One means incompetence, the other means a relentless thirst for expansion, even if it means rules are broken. Neither option puts the EU in a positive light.
Anyway, as the crisis broke out, Greece got into trouble. Basically, the worldwide financial calamity, combined with Greece’s fraud, prevented it from being able to borrow money from the markets. Greece needed to be rescued, and the Troika was established. The Troika was a cooperation between the European Central Bank (ECB), the International Monetary Fund (IMF, and the European Commission (EC). This dreamteam of technocrats would help to fix Greece.
There is No Democracy
The Troika would come up with proposals, after which negotiations would follow with the Greek government. In reality, if Greece wanted the money, they would have to simply accept the proposal. So in essence, they weren’t as much proposals as they were demands. Let’s be clear here, democracy had evaporated in the homeland of democracy. Greece was to do as it was told, and any reluctance to comply was mostly a show to the wider public. In the end, Greece would have to submit.
Lacking jobs and democracy, people are voting with their feet and looking for opportunities abroad.
Here Comes Austerity
The demands came down to; increase tax revenue, decrease expenses. That way, the Greek government would be able to run a surplus instead of a deficit. Its revenue would be more than its expenses, and it would be able to use the surplus to pay off the debt. Now, austerity during a crisis, that is not an economically sound move to make. Many blame the Great Depression on the American government contracting the money supply during this period, thereby deepening the crash. The same happened in Greece.
Unemployment in Greece rose to over 25%. One in four Greeks was unemployed. Their GDP shrank by a quarter in five years time. And their GDP continues to suffer. Despite rosy projections by the Troika, the Greek economy continues to be weak. It is hardly a surprise that Greek voters moved to the extreme left, and to a lesser extent, the extreme right. The euro definitely did not help Greece, as it could no longer devalue its currency.
The demands made by the Troika destroyed the Greek economy. But, there is more.
What Kind of Demands are These?
The tax free income level was lowered from 12.000 to 5.000. A measure that impacts everyone, but mostly those that are already earning the lowest incomes. The Value Added Tax increases from 19% to 23%, a significant increase. Those working in the public sector will receive a 20% paycut immediately. Moreover, only one in ten of those retiring in the public sector will be replaced. All those with temporary contracts in the public sector are terminated immediately.
We have only selected a few of the demands, but we can see that these measures severely impact the Greek people. We may claim that the wages were too high initially regardless, but still, that is the wages the people were promised. It was not their fault, and they planned their lives according to the income they were making. Protecting the people was clearly not the incentive of the Troika.
We see incomes across all segments of Greek society take a nosedive. The richest, the poorest, and everyone in between. The chart below shows incomes indexed to 1974 and how they develop over time. Starting after in 2009, they dive downwards. The lowest groups have seen their wages return to almost the level of 1974.
The Special Interests
Admittedly, many policies in Greece were economically poorly designed. They severely limited competition and drove up prices. One example is the rule that pharmacies had to be owned by pharmacists. This led to Greece have an insanely high number of pharmacists, but it also led to a very decentralized network of pharmacies. Prices of the drugs would be higher overall, but profits went to locals.
The Troika demanded the opening up of the pharmacy market, and a lot of other regulated markets along with it. In effect, this leads to big chain-stores being able to out-compete the local pharmacies on price. And, in turn, forcing these local pharmacies out of business. Although opening the market is in general a good economic policy to adhere to, the timing is more than questionable.
Yes, it works to increase competitiveness, under normal circumstances. However, in these circumstances, with an unemployment rate of 25%, these pharmacists won’t easily find other jobs. Moreover, you make it look to the people as if you are moving the profits from local shops, to international chains.
In his book ‘The Euro’, Stiglitz describes how the Troika did the same with standards for bread and milk. They ended the practice of only being allowed to sell loaves of bread in quantities of 500 gram, a kilo, 1.5 kilo or two kilo. This opened up the market to large bakeries. Similarly with milk, they forced shops to stop labeling milk as ‘fresh’. This way, farmers from abroad could sell their ‘not so fresh’ milk with more ease and for lower prices than the fresh Greek milk. In both cases it is highly questionable how it helps the Greek economy, or why the Troika bothers to care about such details.
Privatization is another tool that under normal circumstances will increase competitiveness. However, this may not be the case if, after it is privatized, it is still a monopoly. Or, if it moves into the hands of a different, foreign, government. Hellenic Telekom, saw its shares sold to Deutsche Telekom. Which raises the question of how coincidental it is that it went to Deutsche.
Yet, how much sense does it make to sell the biggest Greek port to a Chinese state-owned company? Will another government run it more efficiently? Or is it a way of short-term thinking? Grab the money from the sale now to pay off debt, and who cares about giving up the revenues from the port for decades to come? The deal makes sense if you position yourself in the role of the Troika, who clearly only focuses on short-term gains in order to receive payments on its loans.
The Greek state sells critical elements of its infrastructure, only to acquire some easy, fast money to pay its creditors. In what kind of position will that place Greece in a few decades from now?
Now, we can talk in endless more detail on the topic, or fill a whole book with it. Yet, two things are clear. The Troika is not concerned with the long-term prospects of Greece, nor is it concerned with the well-being of the people of Greece. It is, on the other hand, concerned with Greece paying its debts. Greece is sacrificed and ripped apart, in order to satisfy the creditors. Moreover, Greece is served on a silver platter to multinational interests that see an opportunity to expand their business.
In which way, does this resemble the ‘solidarity’ the European leaders like to talk about? Again, actions speak louder than words. The actions of the European Union in this instance, are very clear. The interests of the banks and multinational corporations lobbying for special interests are served, the frustrated, protesting Greek people are ridiculed and ignored.
This is what happens when sovereignty is surrendered. When problems arise, the interests of the people are moved aside. Greece is treated not as a proud, independent country, but as a colony that needs to submit to the demands of its European overlords.