Give Greece A Chance

One week ago, Greece’s left-wing Syriza swept away the ‘pro-austerity’ establishment, riding a surge in popularity to office. Greece, Europe and the wider world are still trying to comprehend the implications of Syriza’s transition from a fringe party to a (radical) party of government. It fell just one seat short of an overall majority (parliamentary majorities have long since become a thing of the past). The new prime mininister, Alexis Tsipras (pictured) built a coalition not with the hardline Communist Party, which refuses to co-operate with any capitalist government; not with the so-called ‘centre left’ establishment of PASOK or its more successful splinter party, The River; but with the Independent Greeks. They can be best described as a party of the populist right, not dissimilar from UKIP. The new coalition could hardly be described as a natural marriage, but it seems that Syriza gets a free reign in domestic policy in exchange for handing the defence ministry to their junior partners. Appointing a redneck to run the military is not the most reassuring of moves.

Within days of taking office, Syriza has reversed savaged cuts in the minimum wage, reinstated numerous sacked public sector workers, cancelled IMF-imposed privatisations, abolished fees for prescriptions and hospital visits and restored pensions. It has also made powerful symbolic gestures, sweeping away the ministerial cars and barricades that separated the Greek people from their government. Syriza feels that if a government needs protection from the public, it is doing something badly wrong.

And as if talk of nationalisation (such as of banks and hospitals); a 75% marginal income tax band; corporate tax hikes and an emergency expansion of the welfare system were not enough, Syriza is demanding reflief on Greece’s national debt, now an eye-watering 175% of GDP. (See Syriza’s 40-point manifesto here)

The markets are having a fit.

The European Union is having a fit.

The Greek public are, for once, hopeful about the future.

Angela Merkel and the cabal of neo-liberal governments who have provided, through the ‘troika’- European Union, the European Central Bank and the International Monetary Fund, bailouts totaling hundreds of billions of euros, have categorically ruled out any renegotiation of the terms of the loans. They are, rightly, fearful than any let up in the harsh terms imposed on Greece would lead to demands from other victims debt-burdened countries. On the other hand, Greece is aware that Europe’s big threat to Greece- that the country could be forced out of the Eurozone- would be almost impossible to implement and would destabilise Europe’s (and by extension the world’s) banking system. Similarly, if the troika cancels the latest installment of loans to Greece, and the country is forced to default, the troika is hurt as much as Greece. The situation is akin to a Cold-war style pose of mutually assured destruction.

Any disruption to the convention of debt-stricken countries being asset stripped by international bankers and the costs being passed on to the weakest through the wholesale dismantling of public services and welfare systems is going to be fiercely resisted. On the other hand, Greece simply cannot pay its debts. There will be a renegotiation of sorts. Greece’s first bailout was agreed amid talk of setting interest rates to ‘punish the Greeks’. The obscenity of such talk is clear to see now, when every basis point added to the interest rate of Greek debt is a thousand homeless pensioners. It was not long before the interest rate was reduced to 3.5%.

It is a pity that the troika cannot see that intelligently designed debt relief would get the weaker EU economies back on their feet so much faster and cost lenders much less in the long run.When the internal politics of the European bloc are concerned, concepts like ‘logic’ and ‘reality’ become much harder to pin down. The EU would not survive if two countries with directly opposing interests could not both emerge from negotiations brandishing a compromise that they describe as a resounding victory for their side. This is has been called  ‘Eurofudge’ , and its made the EU into what it is today.

The talks that Greece’s new government has opened now will result in an epic Eurofudge. I think another extension of the repayment period on its loans and a reduction in the interest rate to, say 2% would be the minimum concession needed. That’s what Greece will get, provided its creditors can leave talks saying that it will still repay every penny of the bailout loan.

Syriza is not waiting for a debt deal to begin rebuilding Greece. In a week, Syriza has achieved a lot more than a left government would be proud to accomplish in a year. However, only the financial certainty that a deal will allow will give Greece the space it needs to grow.

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Germany Looks To The Right

The centre-right Christian Democratic Union has won a resounding 41.5% of the vote in Germany’s federal elections. Under the system of proportional representation (although parties winning under 5% of the vote are not represented in the German parliament), this leaves the CDU just five seats short of an overall majority- a landslide victory in German terms. It is widely felt that Chancellor Angela Merkel’s consensual political approach and personal popularity are, together with Germany’s strong economy, responsible for the surprisingly emphatic electoral swing.

The three other parties represented in the parliament are the Social Democrats (historically the leaders of any centre-left government), the Greens and the former-communist Left Party. Typically for the left, these groups are able to unite and defeat the right, but are too divided to do so. The Social Democrats (SPD) made cast-iron guarantees to the electorate that it would not share power with the Left Party, calculating that any ambiguity on that point would cost the broad left ‘bloc’ more seats than it would gain by adding the Left Party. That is unfortunate, given that in many other European states, communists have propped up social democratic governments almost unconditionally. However, the SPD has burnt that particular bridge, and should respect the promise they made to the German people. Thus they commit themselves to Opposition until at least 2017.

Or do they? Given that Merkel lacks a majority, she will need the support of either the SPD in a ‘Grand Coalition’ or the Greens in a Surreal Alternative Universe. The Greens, much like their American, Australian or British equivalents, would never contemplate working with a rightwing government, so that isn’t an option. Yet the ‘Grand Coalition’ idea is a uniquely Continental one which might be unthinkable to us: can you imagine a Democrat-Republican or Labour-Conservative pact? They’d be absolute disasters. Unfortunately, there is growing public pressure on the SPD to bury their ideology and their identity in a conservative-dominated coalition.

The SPD would be in a weak position in coalition talks, and would be unable to gain significant concessions on matters of investment in public services, social liberalism or the national future. While they are accountable for the actions of a government they can barely influence, the country would have to look to the Greens for anything resembling opposition. In other words, there’s little reason for the SPD to support the CDU. They should not enter any coalition.

The best outcome would be for the CDU to form a minority government, free to decide on its own legislative programme but dependent on a small group of outside supporters for every bill on a case-by-case basis. This allows the left to force through progressive legislation of a kind whilst honouring the wishes of the electorate. Sadly, I think the outcome will not be this equitable.

Footnote:

The centre-right Free Democrats, who until now have governed in coalition with the CDU, have lost their place in parliament for the first time in its history. I doubt many will mourn the loss of the most useless, uninspiring and fruitless political movements in history.

How will the EU budget impact upon the UK?

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With the recent EU budget being agreed across all EU member states, how will this affect the UK and EU relations as a whole?

“I didn’t quite get a thank you!” as the PM mocked Ed Miliband when addressing MPs on the EU Budget Summit. The Tories knew the political impact of not delivering a cut in the EU budget. Labour’s political move to vote with the rebellious Tory MPs against the Government to demand a cut in the budget; a move Disraeli would be proud of. With UKIP’s support rising, and eurosceptic MPs having the potential to cause issues for the Government, Cameron needed to secure a cut in the EU budget for not just economic reasons, but political reasons for his party too.

Although the EU budget negotiations began before Cameron’s big speech on the UK’s future in the EU (by promising a referendum in 2017 after a fresh settlement,) divisions between the eurosceptics and the more EU friendly Tory MPs were still bubbling under the surface at the time. Considering, UKIP is still strong in the polls, as long as Cameron can show himself as defending against the EU in favour of British interests,the UKIP support could burst away in a General Election campaign as the infamous wasted vote syndrome plays on people’s mind. Although the General Election is still 2 years away, events such as the EU budget negotiations can play a key part in how in particular UKIP and eurosceptic supporters will vote.

Therefore once the negotiations were underway, certain alliances and the tactics of individual countries became very clear, France and Germany in particular. In the first summit in November, the tactics of Merkel was stark, as she was “determined not to isolate David Cameron” at the summit. [1] This can be judged for tactical reasons as the German Chancellor did not wish to potentially provoke further euroscepticism in the UK if it seen that the EU was ganging up on the UK like a little kid in the playpen, taking its candy with seemingly no benefits to the UK. Merkel had the tenacity to avoid that issue by supporting Cameron’s wishes for a cut in the EU budget. However, this support also benefited German self-interests, as Merkel supported austerity, just like Cameron, as they are both from Conservative parties.

This German interest to support the UK also included other nations to voice their support in cutting the EU budget, such as the Netherlands, Sweden and other Northern European countries who pay more into the EU than they receive. Although this is a significant amount of support to Cameron, and shows that he is not isolated in the EU, it is highly likely that any EU budget cut would not of came if the Germans did not give their support and in particular Merkel’s tactics of ensuring Cameron would not be isolated against the aggressive moves of Barroso and Van Rompuy in trying to push the British into a corner.

Furthermore, the negotiations in the EU budget highlighted the key divisions in the increasingly strained Anglo-French relations, with Hollande threatening the UK rebate, with demands for a £3bn cut in return for any agreement in a EU budget cut [2] Hollande even went to the extent of staying away from a meeting with Cameron and Merkel in forging a compromise a couple of weeks ago. [3] We can therefore see a potential new Anglo-German friendship based on similar ideological beliefs (Conservatism, austerity) and quite possibly alienating the Socialist French leader if it benefits both the UK and Germany.

Although the economy, NHS and Welfare and more likely to be more important in the 2015 General Election, the EU will still play a crucial part in regard to how many votes UKIP receives. If The Tories are too eurosceptic they could alienate possible centre-ground voters, and if they’re not eurosceptic enough UKIP’s vote could soar and ensure Ed Miliband waddles into 10 Downing Street as the new PM.

 

Written by Lily Jayne Summers.

[1] – http://www.guardian.co.uk/politics/wintour-and-watt/2012/nov/23/eu-davidcameron
[2] – http://www.telegraph.co.uk/news/worldnews/europe/eu/9699877/French-threat-to-UK-rebate-as-EU-budget-talks-collapse.html
[3] – http://www.guardian.co.uk/world/2013/feb/08/david-cameron-hollande-merkel-negotiations

We Must Give Greece Time

European Government Debt Infographic

European Government Debt Infographic (Photo credit: EuroCrisisExplained.co.uk)

As we speak, the crisis of the Greek Government struggling to meet its debt repayment schedule and the terms of the “bail out” from the Troika continues. The Greek Prime Minister has asked for more time to meet the required cuts, as hs nation’s economy struggles to break free from the recessionary cycle that has been created. His German paymasters are, as I write, making ominous mutterings about withdrawing financial support.

This is the last thing that they should do. It is unrealistic to expect Greece to meet the costs of its uncontrollable (and still growing) national debt. Instead, as nation after nation requires larger and larger emergency loans, we should consider the possibility that we’d be better off allowing them to suspend a percentage of repayments for 10 years. Not a default, not a loan, but a means of allowing countries to focus on securing economic growth while not undermining the financial markets. Once the “repayment holiday” reaches its end, it will be phased out in steps in order to avoid a second panic.

We cannot afford to continue throwing good money after bad. And yet we must be able to fuel growth across Europe and we must have strong bond markets and financial institutions to fund this. The International Monetary Fund’s mantra of ruthless cuts, deregulation and privatisation leaves behind it social devastation. Indeed, in George Monbiot’s book Bring On The Apocalypse, he points to an example of the IMF demanding that a certain African nation sold off its grain reserve, despite warnings about the riskiness of such a move. What do you think happened next harvest? Obviously, a crop failure and a famine ensued. This group of soulless bankers do not have the slightest concern about helping ordinary citizens. They care about blackmailing nations into cannibalising their economies into one that place the wealthy elite in positions of power, at the expense of democracy and ordinary citizens. The fewer people who have to suffer because of this odious institution, the better.