The Power of ‘Oxi’

Yesterday a decisive 61.3% of Greek voters chose to reject the draconian terms offered to their government after fraught negotiations over bailout funds. They had been asked by Eurozone leaders to meekly accept further raids on their pensions, the only income keeping many households going after the destruction of the welfare system. They had been asked to to accept further erosion of protections for those lucky enough to stay in a job. They were told that failure to do so would lead to their expulsion from the Eurozone and the stability that the currency union is supposed to offer.

In another country, any other European country, there would have been a ‘Yes’ vote. (I expected Greece to vote yes.) Or more likely, the people would have never been offered a referendum at all. The Syriza-led government should not be criticised for consulting its people about its economic future. Greece has tried technocratic government and for obvious reasons decided that accountability was too important to suspend in times of financial difficulty.

Some in positions of power were no doubt hoping the past week would scare the Greeks of a ‘No’ vote. The country became insolvent. Capital controls were imposed, with withdrawal limits of just €60 a day from bank accounts. At the moment in Greece, you cannot buy music on iTunes because purchases count as money leaving the country. The message from ‘Yes’ supporters was clear: this is just the beginning. That message would have cut through anywhere else, but not in Greece.

As alarming as the past week has been, and the threat of effective expulsion from the Eurozone is, five years of the emaciation of Greek society has created more than enough people with nothing left to lose, particularly the young. They couldn’t be blackmailed. Voting ‘No’ offered them hopes of a better deal or at the least the prospect of economic recovery after conversion to a devalued New Drachma- a long shot at a brighter future, but at least some chance. And of course a chance to damage those who have inflicted austerity on them. Voting ‘Yes’ offered them more pain and an assurance that the Eurogroup would maybe think about relieving the country of some of its crushing €300 billion debt burden. But probably by too little and conditional on even more cuts. Who can blame them for voting no?

The resignation of the controversial Greek finance minister should be seen as a chance to reopen talks between Greece and its creditors. I hope the latter, especially the German government, will act reasonably. They know that Greece’s banks need a cash injection urgently, and they might try to demand capitulation on pain of allowing Greece’s financial system to crash. But the government now has a watertight mandate, and such a strategy will backfire as its people will not bear any cost to remain in the Eurozone. Such a Grexit would cause another financial wobble throughout the European economy and might well bring down the German government.

The best course of action is to negotiate a new bailout deal for Greece that works with the country to grow its economy and brings its debt down to a manageable level. The Greek people need to see that there is hope and a future for them within the Eurozone.

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This Is Why You CAN’T Shut Down a Government

The United States has entered the tenth day of its federal government’s partial shutdown. Over half of its 800,000 employees, those who have been deemed non-essential, continue to be on unpaid leave. As with most workers, missing a few days’ pay is survivable, but the prospect of losing a whole month’s wages is a very unhappy one. But it is not the effect of this political wrangling in Washington DC on half a million temporarily unemployed workers that is my main concern, it is the human cost on various people who should be able to rely on their government and the economic cost on the rest of the world that troubles me.

It isn’t just National Parks and museums which are closed off: federal research institutions, various military departments, and half of the Treasury is closed for business. A salmonella outbreak has, well, broken, and been allowed to spread because the information-sharing network between public health laboratories had just one of its eight staff monitoring it. Fortunately, it would seem that there have been no deaths as a result of the outbreak, but it could have unfolded very differently.

Then there is the case of the four soldiers who died earlier this week. Their families have been denied the $100,000 payouts, funding for the funerals, and assistance in meeting the bodies when they touch down on US soil that they are all entitled to. The failure to support the families of military casualties is perhaps the most shameful failure of the government to meet its obligations.

But if all this- and there are many more such stories- seems scandalous, just imagine what would happen if the Debt Ceiling is not raised when it is met in 7 days’ time. Many are warning that the US government will default on its debts for the first time. The global economic implications would be catastrophic: we’d certainly be plunged into a financial crisis worse than 2008. Others say that debt repayments will be prioritised, but other essential government services will stop. Things will be dismal, in any case. But will that scare politicians away from this?

No.

The Democrats and the Republicans know that whichever side makes concessions will be politically undermined for years to come. They are both firmly entrenched in their positions: the Democrats are rightly determined not to be blackmailed into delaying or further weakening Obamacare- legislation for which they have a full mandate. The Republicans appear to be on a political suicide mission: they are going to block Obamacare at all costs, and will drag the nation to the brink if needs be. But the finger of blame will point clearly to the GOP if they don’t control the Tea Party extremists and concede that they do not have the right to block Obamacare.

Gove Plots Sale of Our Schools

If there was any doubt that our u-turn prone Education Secretary had covert plans to use the roll out of academies and free schools to privatise the last wholly state-owned public service- the schools system- they were quashed yesterday evening with the leaking of explosive Department for Education document. It is understood that Gove wants to turbocharge his academies and free schools programme by allowing banks, hedge funds and specialist consortia to buy out council-run schools and run them as purely commercial entities. Furthermore, privatised schools will be able to secure loans against school buildings, and they will be able to sell ‘ surplus’ land on the edges of their sites to developers. And if that doesn’t sound like a recipe for a capitalist free for all, I don’t know what does.

Needless to say, teaching unions have condemned the secret plans. Strangely, the line has been adopted that commercial operators would be likely to cut corners and deliver a lower quality education. I cannot imagine where they got that idea from(!) The Swedish free schools system, upon which the policies are modeled, was subject to intensive asset stripping by for-profit groups, to the point that one operator has collapsed as Southern Cross (a care home operator which sold its buildings, rented them back, and buckled when increases were higher than expected) did in the UK. Inevitably, playgrounds will be chipped away at when there is little economic benefit to school owners (and the term ‘school owners’ is a very peculiar one to type) to maintain large empty fields. My metaphor is that if you are given £50, then there is little reason not to deposit it in the bank (or building society or credit union). And yet that is what Gove imagines will not happen.

Not only would physical education suffer (I’m still too badly hurt by my experiences of PE to be very concerned by that threat) but expensive, resource-heavy subjects such as the Sciences and Music will be cut back. And as the predictable union-busting, pennypinching and efficiency drives occur, the teaching profession will slowly deteriorate together with student attainment rates. The Government’s ability to correct the situation within the system is limited as it has surrendered most of its controls over schools when academy status is awarded.
Eduction is the key to a thriving society and economy. Despite inhospitable conditions, this country enjoys a large, talented community of teachers and other education professionals. On the whole, we’ve good school buildings. There are problems, particularly with the poor schooling environments in the inner cities, the effect of tiny catchment areas and religious segregation, and above all ridiculous rules which prevent schools properly tackling bad behaviour. But these are not unsolvable, by any means. What would be unsolvable is the problem of a deregulated, privatised and fragmented system of edubusinesses which are allowed to deteriorate and be asset-stripped.

Thank goodness this policy is merely under consideration. But beware it might just reach the statute books, unless the Liberal Democrats stick to their current position on free schools and academies. We’re relying on Nick Clegg.

A Case for SYRIZA?

March 25 - Greece Independence Day

The Greek coalition government was shaken yesterday by the withdrawal of the Democratic Left from its ranks, leaving a centre-right alliance of PASOK and New Democracy clinging on to power with a majority of three seats out of 300 in the beleaguered nation’s parliament. Democratic Left took the move in response to the Prime Minister, Antonis Samaras, failing to consult his coalition partners before shutting down the national public service broadcaster, ERT, in an attempt to save public money. The immediate shutdown of ERT and firing of its 2,700 employees two weeks ago has triggered the greatest public outcry of any austerity measure yet, and has resulted in journalists occupying the broadcaster’s studios to run a TV station online. Now the state has to implement a court ruling that ERT must be re-established, but public fury remains.

With the government facing such a severe public backlash, it is questionable whether its tiny parliamentary majority can be retained for long enough to prevent a general election before the end of the year- the third general election in just two years. Such a prospect is likely to worry Greece’s creditors, who are aware that the fascist Golden Dawn party is likely to make further gains, and the hard left SYRIZA coalition may well win the largest number of seats (possibly able to build a coalition with the Communists and Democratic Left). Should these gains render pro-austerity parties to be in a minority, there will be little scope to continue the IMF/EU designed programme of spending cuts that are intended to secure returns for international investors.

The problems that we are witnessing should concern us all: this is what happens when both political and economic freedoms are curtailed: the painful decline of a developed nation to middle-income status, and the rise of crime, prejudice and generalised discord to the point where it becomes virtually ungovernable. Indeed, at a time in which foreign powers hold greater sway over a nation’s government than the citizenry does, it is difficult to think of an action so toxic for the democratic process than closing the only explicitly impartial news outlet. No wonder that it is considered unacceptable: from the Greek perspective, one could view it as further digression from the functions of a liberal and democratic society.

The current government should ask itself if its austerity programme- which is in essence the movement of resources from the general public to bankers who made a bad investment- is still politically tenable. Their country has almost reached where something has to give: austerity, the economy, or democracy. For if SYRIZA doesn’t make it into office, desperation and poverty is such that Golden Dawn will. Perhaps there is an economic case to be made for defaulting on all foreign debt and exiting the Eurozone. For it looks like these huge sacrifices made in the name of continued Eurozone membership are no better than the pain that conversion to a devalued new currency would cause. The differences are that the former is a way of maintaining the illusion that Greece is an upper-tier economy, and the latter would allow the country to get back on its feet sooner after an explicit admission of ‘failure’.

The fact is, there are some things which cannot be cut or privatised. It seems that New Democracy and PASOK, the two parties who are responsible for the debt crisis in the first place, do not realise this. That is why many consider the end of their reign to be a change that is just a matter of months away. And to be honest, that might be the best chance for Greece.

 

Cyprus Cannot Declare Victory Yet

I prefer to cover a broad range of news topics on this website from week to week, so it is with a mildly apologetic tone that I return to the fast-changing crisis situation in Cyprus, and anticipate multiple articles on the Budget. It is also evident that I bored readers with my dwelling on Britain’s nuclear deterrent. I therefore apologise and pledge not to reopen the issue for… a little while.

The Parliament of Cyprus has voted decisively against the emergency levy on all bank deposits, which was a precondition of the loan from the EU. Now that the island’s financial system has been weakened by futile withdrawals by savers wishing to avoid the levy, the nation’s finances are in even more urgent need of repair. The EU have developed a reputation for being very inflexible lenders, and so Cyprus appears to be in a near-impossible situation.

If Cyprus defaults on its debts, even if only in the form of a “haircut”, observers say the country will be expected to leave the eurozone- a damaging blow to a broken economy.

However, there is a rival lender available to the former British colony. It isn’t the IMF, and it isn’t the World Bank (both are institutions capable of what has been emotively described as ‘evil’). In an unusual move, the Russian Federation, which is already a major creditor of Cyprus, has asked to begin formal talks for an alternative bailout. The motives behind the offer are not as selfless as they initially appear, obviously. The fact that affluent Russians and businesses, attracted by lower tax rates, have deposited over €30 billion in Cypriot banks.

That said, Russia has not lost interest in lending now that their savings are not at threat. However, a cynic would point out that the viability of the country’s financial system remains in question, and so Putin will throw  however many billions of whichever currency you care to name to protect the Russian elite. It remains unlikely that either lender will offer an alternative course to the rigid austerity which is now damaging most of the western world. Iceland is perhaps the only country which has recovered fully from an IMF intervention in recent times. This is because they were allowed to invest and grow their way out of the problem, without absurd privatisations and tax cuts, exactly as Cyprus should be allowed to.

Oh, and next time, could the government consider increasing Corporation Tax to a more realistic level (i.e. not 12.5%) before grabbing pensioners’ savings?

The Real Consequences of Austerity

Today, the Spanish Red Cross is launching its ‘ Now More Than Ever’ appeal. The charity has concluded that impoverished Spanish families are now in as urgent need of assistance as third world nations devastated by natural disasters and famine. You know what: they’re absolutely right. Things have got that bad.

In a country with an appalling 25% unemployment rate, and a government left with little option but to slash welfare spending, millions have fallen below the poverty income level of £6,000 per annum. Obviously, Greece is in an even worse situation, with the (what can only be described as cruel, heartless and short-sighted) IMF practically writing their budget, and rates of malnutrition and homelessness growing to such levels that two non-governmental organisations are stepping into the breach. They are the relatively harmless Church, and the ominous Golden Dawn party. In the unlikely event that you haven’t heard of them, I shall enlighten you.

Golden Dawn are an openly neo-Nazi group, which won 7% of the vote in the last election. They openly talk of expelling Jews and Muslims from the country if elected. When holding press conferences, they demand that journalists salute their leader (who recently went on the run for a few days after hitting a rival MP on television) or “step outside”. So far, it’s possible to write them off as irrelevant. But they have a small army of thugs in some areas, used to intimidate foreigners while offering food and “protection” to native Geeeks. Is there anyone else who sees disturbing parallels with an impoverished, humiliated European democracy retreating into fascism as its impoverished population struggles to pay a vast debt to foreign powers?

This is what happens. If we keep on pressurising these Mediterranean states into abandoning the poor, the disabled and the vulnerable, we’re creating prime conditions for the resurrection of extremism. The children of poor parents who spend their formative years in crumbling schools, crime-ridden communities and spend hours worrying about the source of their next meals are going to be seriously affected by such a childhood. Yes, these are extreme circumstances that the majority will not suffer. It is a significant minority, though; should that be happening to millions of people in Europe in 2012?

Iceland had a terrible financial situation when it asked for an IMF bailout in 2008. But for once, they were given the facility to pursue stimulus rather than false austerity, and guess what happened? Yes, they’ve got a thriving economy, they’re dealing with the debt, and poverty rates remain low. Why can’t we follow this example? If we continue to fail to do so, the legacy of our mistakes will haunt Europe for decades to come.

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.