“What’s a Grecian urn? About 20,000 euros a year plus another 30,000 in EU subsidy scams.” – The Catholic Orangemen of Togo, p.7
Amazing the gems of wisdom you find scattered through my books! That variation on an old joke reflects an important truth. Most of the EU, including us, have been subsidising Greece ever since it joined the EU, through regional funds and the CAP, but mostly through the cost of massive scams and fraud perpetrated in Greece on those and indeed all other EU budgets, not to mention VAT fraud. The euro bailout is only an extension of the EU’s continuing and expensive commitment to drag Greece along with it.
The world likes a narrative of goodies and baddies. The current narrative popular with left-leaning people is that the Greeks are plucky little Keynseans being hammered to disaster by evil governments and bankers led by the IMF and EU. That is simplistic nonsense. There are no goodies in the power players on any side. Ordinary Greek people are indeed the victims, but so are ordinary German people and ordinary British people.
Greece, just like Italy (and quite probably the other Club Med countries, though on them I don’t want to claim more knowledge than I have) never actually met the EMS and euro convergence criteria. Everyone is suddenly astonished that Italy has a national debt of 140% of GDP – it was that level when I was working on the European economies in 1985, and it has never really changed. Redefinition of terms allowed a fudge to let Italy enter the Euro (that particular criteria being 40%). Greece has never produced any vaguely credible national statistics anyway. Lawlessness, tax evasion, money laundering and systematic corruption are the warp and weft of the Greek economy – it is difficult to capture that in a statistical yearbook.
These countries were brought into the Euro because of the political dynamic of European Union, which was bought into by political elites across the continent, (and which I would say has a lot of very good aspects, but that is a long argument for another day). The idea was that momentum was extremely important; that it was OK in this context to ignore reality, because the beneficial influence of the European Union would enable reality to catch up quickly to fit the framework.
Therefore Greece and Italy were allowed into the Euro even though they plainly did not meet the convergence criteria, exactly as Romania and Bulgaria were allowed into the EU even though they plainly did not meet the acquis communitaire –
reality was suspended in the interests of ever greater union. The effects of that in the Eurozone are coming home to roost now. The effects of Bulgarian and Romanian EU entry haven’t really worked through yet, but I predict tremendous problems in five years time.
I write as a supporter both of the Euro and of EU expansion – but not of the crazy decisions to abandon genuine adherence to the criteria required to make them work. I also write with the humility of knowing I have been wrong on these things in the past. Around 1995 I wrote a paper for the Cabinet Office strongly supporting Polish EU membership, in which I argued strongly that we should not join Germany in seeking a delay on the right of Poles to come to the UK. In it I predicted that at most 200,000 Poles would want to come. I was wrong by a factor of over four! That paper was very influential on UK policy.
I do not regret it in the least – I am delighted so many Poles have come. They make Britain a much better place and are a huge boost to the economy. Germany will lose out from having given us the chance to host them first.
The Euro has always been a system of subsidy from Germany to Greece; the bailout only makes that more obvious. Greeks have been paying themselves much more than they earn for a great many years. That is not stopping or starting now. Levels of public spending are a tiny bit of the problem. The Euro is a massively overvalued currency as related to the Greek domestic economy. Greece’s economic problems are much more related to lack of rule of law, massive corruption, an elite super rich paying no tax, and a gigantic black economy, than they are related to public spending.
Greece’s total debt will actually be reduced under this bailout package, plus payments delayed and maturity dates postponed. Do not be too impressed by the news that the banks are taking a haircut, variously reported at 20% or between 30 billion and 50 billion Euros. Look at it this way. These banks have lent money to Greece, at interest rates of over 10% higher than those they can charge elsewhere. If you are making 10% extra interest a year over ten years, and you have to lose 20% of your total to secure that, you are still coming out way, way ahead.
Actually the net effect of this bailout is not European taxpayers paying more to help Greeks, it is European taxpayers paying more to secure super-profits for the banks. What a surprise!
“These banks have lent money to Greece, at interest rates of over 10% higher than those available elswhere.”
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Can you explain why the Greek govt took these loans if much cheaper ones were available? Or do you mean that borrowers with a decent economy were offered better terms while the banks continued to lend money with bad terms to the Greeks when they knew the troubles of the Greek economy?
As I get older I get more cynical, but it would not be surprising if the Greece bailout was a reward for impounding the flotilla of humanitarian aid to Gaza.
OT:
Sorry about the off topic post, but the Murdoch posts are getting buried and I thought some people may be interested in this. Add-ons have been created for both Firefox and Chrome notifying users when they are visiting a website owned by the Murdoch family.
newsjunkiepost.com/2011/07/21/new-firefox-add-on-warns-you-about-the-dangers-of-the-murdoch-propaganda-machine/
John you might wel be right to a certain degree, but I don#’t think that Israel, the most unsustainable and indebted country in the world at present, could have the clout to direct German bankers to cough up.
The Euro is now in open competition with the dollar. It is China’s opinion that Europe is worth saving, whilst they eshew buyiong any more US Government bonds, in favour of Gold. China has at present 1452 tons of gold, but their aim is for 8000 tons, an indication as to how long and sustained the march of gold could become.
Again, people at the working end of the producer chain will feel the pain, in primitive mines in Brazil and Africa, crime will rise in those areas and people wil be knocked square for a pityfull amount of the metal.
I agree with Craig that the course of Greece and Portugal were mapped well in advance. I worked in Greece in 1982, clearing my mind of the military men of eight years previous, and the greeks were excited about their entry, but the older people had their reservations, they knew of the papandreou dynasty and the military which has a great influence, in Greece as much as in Turkey. They knew that germany would catch them if they fall long ago.
I predict that this is the end of merkel and her party, the next elections will make this issue no.1, Germany, although having many Med.projects that are still in the pipeline, will clamp up, I can envisage some demo’s against this move.
The EU was held up at every step of the way, the Anglo US axis did not want a new strong currency next to the dollar, they made sure that british objections to the project won over the cooing noise smade by France and germany then.
Moneytary union without common tax bands was always to fail. It was impossible to establish as ‘sovereign’ Governments did not want to let go of their schemes and tax regimes, they wanted to keep their hand on the tiller and rightly so.
I was part of the Green move to reform the EU into a more sustainable entity, but it failed to persudae larger blocks within the EU, the appointed Commissioners had it, all the way.
The books of the EU must look awefull, not once passed by auditors they are manifest to large fraud within the CAP, some 68 billion at one time, with the mediterranian countries featuring prominently.
Now the show is coming to a sad end, without having reached the aims and objectives of the Rom treaty.
The Euro is fundamentally flawed. Forcing countries like Greece and Germany to have the same exchange rate is ridiculous. The German economy, possibly the most successful in the world, benefits from a much lower exchange rate thanks to the membership of all the Mediterranean countries. Was there ever any chance from the outset that the Greek economy could have caught up and competed with Germany? Also, forcing governments to borrow from private commercial banks rather than their own central banks is crazy.
Greece was only able to enter the Euro because it hid the extent of its debt – with the help of the great vampire squid of capitalism Goldman Sacks. The media loves racists cliches about lazy ouzo-drenched Greeks. Fraud part of the weft of the economy? Much like the US and the UK.
The fundamental problem is with the system itself. It’s perfectly possible to have increased cooperation and harmonisation without a currency union. The ‘conditions’ now imposed on the bailout will now ensure that any remaining productive assets in Greece will be privatised and snapped up by the banks at firesale prices, a feat which used to require an invasion. I bet there will be a few hedge fund managers bidding on Greek islands when they’re put on ebay. Austerity will drive the economy deeper into recession as it has anywhere else it has been applied. Greek should do an Iceland, default and tell the banks to get stuffed.
“The current narrative popular with left-leaning people is that the Greeks are plucky little Keynseans being hammered to disaster by evil governments and bankers led by the IMF and EU.”
However one wants to characterise “the Greeks”, it doesn’t change the fact that the IMF/EU policy being imposed is probably making a bad situation worse.
I agree with you that the seeds of the current Eurozone disaster were probably sown years ago, but what’s happening now, with this manic, no-holds-barred effort to preserve the single currency, is a textbook case of buring down a village to save it.
Cheeba Cow
I mean the banks are getting higher interest rates than they can get elsewhere (than from the Greeks), not that the Greek government can get cheaper loans elsewhere. Have made a slight change to make that plain.
Cheers, thanks for clarifying that.
Mr Murray,
Not to reproach you but it seems that you have been ‘avoiding’ to give your opinion on the famine problem in East Africa at present. It is believed that over 20.000 people have died of starvation in Somalia alone and this is in times when Greece is receiving billions of Euros to keep it afloat.
Is this not a clear evidence of neo-colonial negligence when hundreds of thousands can be left to die of starvation while those belonging to elite club of former colonisers are allowed to continue to live in debts.
Uzbek, with respect, I think Craig pointed out yesterday that he doesn’t do requests.
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That said, I think it’s worth a mention that the highly emotional appeal on Channel 4 news last night was delivered by none other than the ex-President of Ghana, Flight Lieutant Jerry Rawlings (a former acquaintance of Craig’s).
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http://www.channel4.com/news/rawlings-pleads-for-aid-to-ease-somalia-famine
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Jon Snow was visibly moved – you could see his eyes welling up. Extraordinary!
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The economic troubles of the Euro are sidelining this humanitarian crisis, but it’s not being ignored. I think Rawlings’ performance may push it further up the agenda.
Jon –
Annoyingly that clip doesn’t include what from the reports were the most affecting and emotional bits of his interview.
Not mentioned by the meedja on the Somalia story.
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http://www.thenewamerican.com/usnews/foreign-policy/8276-shh-theres-a-secret-cia-prison-in-somalia
Thanks for that nextus, I’ve seen a far more corpulent Rawlings than I remembered seeing last, but it was a good call.
A problem which is forseeable in the aid effort are the well armed militias and their interference for cash, so I believe, it is a serious obstacle to delivering aid fast.
Britain’s public, not its Government mind, has responded well, as usual, leaving the US and Germany limping behind, but this will change soon the more attention is given to the suffering which was known to happen for over a year, its a late effort.
Uzbek, you wrote
“Is this not a clear evidence of neo-colonial negligence when hundreds of thousands can be left to die of starvation while those belonging to elite club of former colonisers are allowed to continue to live in debts.”
No, at first, it is evidence of a reoccuring severe drought, of
geothermal global cycles warming ocean waters and currents which in turn drive two natural phenomenas called la ninia and el nino, which, with global warming becoming a more certain and accepted fact, are giving rise to more exacerbated and chaotic weather patterns that can kill, slowly with famines, or fast with long downpours and mudlsides in shanty towns all over the world.
Somalian miltias can’t eat their arms, but they can steal, kill, or rape with impunity from those who are fleeing these conditions. Furthermore, the rift valley is changing dramatically, immense forces are at work underneath and a split opening up the continent is not an impossibility within our lifetime.
Colonial pressure still exist, powerplayers have been backed and will be backed anywhere. Look at your own country, the EU’s favourable cotton rates are keeping Karimov alive, foreign proxies supporting torture, rape and murders, another massive issue that involves child slave labour and extrajudicial beatings and sometimes murder, one can only report one thing at the time.
Craig has other stuff to do, at least finish his book, his publisher must be sitting on hot coals.
good link Mary, thanks.
Well, Nextus if you put it this way.
However, for me personally death of thousands and potential death of hundreds of thousands if not millions is more important rather than few corrupt Met officers. I believe that such urgent matters like famine and death of starvation in Africa should be given a degree of priority over UK internal problems that would seem like something very unimportant to dying children in Somalia. There is one proverb in Uzbek that says “Those whose stomach is full will never understand those who are hungry”.
Not saying that I reproach Mr Murray I just wanted to hear his opinion on this matter as well as yours, and others who usually provide valuable information in their comments.
Ingo,
Well, all famines to some extend have environmental reasoning but if you look carefully there is also a very clear social and political reason. I am not sure if you are familiar with ‘Poverty and Famines’ essay but reading it might explain something on the matter. Clearly while we are arguing here and there hundreds have already died. The reason? Miscalculation, wrong directions, indecisiveness of government and governments, carelessness etc. Somalia has been known for a long time as failed state. Not the only one in the world but one of those former colonies that were not able for some objective and subjective reasons establish any type of stable government. Famine did not come out of the blue. It has long been predicted and now when it finally happened we are facing debates of how/when to deliver aid instead of rushing to help to those who are dying. Time comes and dead will be buried and only few will remember indecisiveness of the powerful nations. It just clearly demonstrates that West still treats others (non West) like they are their colonies. When they need help they are ignored, when West need their service West intervene, cause death and victoriously celebrate.
This is what it is really about.
‘The agreement sparked a surge in Greek bonds even after it opened the door to a potential default through the involvement of private investors. The yield on Greek two-year debt plunged almost 800 basis points to ++26 percent++ after rising ++above 40 percent++ yesterday.’
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Goldman Sachs and Citigroup are mentioned in the text. Filling their boots with the other gangsters-in-charge.
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http://www.bloomberg.com/news/2011-07-22/european-leaders-try-to-persuade-investors-on-accord-to-halt-debt-turmoil.html
OT (sort of): Attention academically-inclined Greeks & others interested in top-of-the-range free offers. Who is not? CUP has made online access to all Cambridge Journals (2009 & 2010 content) free of charge until August 30. Can otherwise cost £20 just to download a book review. Covers vast range of subject matter — including, for what it’s worth, Greece ancient & otherwise. No need even to register. Access instructions here:
http://bit.ly/r5565y
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The income tax situation in Greece is indeed shocking. The tax office released some figures a while back of the number of Greeks paying over a certain amount of income tax. I can’t remember the exact figures, but let’s just say it was even worse than some people thougnt it would be. Aside from high interest rates the main ‘evil agenda’ I see for Greece is privatisation.
I think a European Economic Union is fine, but I don’t see the euro working at all. Not without more political union anyway and I think political union is completely insane. Some sort of working alliance would do us fine in relation to military and security matters. We could remain part of a loose political framework as well. There is no need whatsoever for us to give away our sovereignty to Brussels.
Call me old fashioned but I find it very big B…LL SH…T excuse when governments in countries like US, UK and institutions like UN are hiding behind militia in Somalia that prevents them from supplying the relief. The lessons from this can be learnt that any government is better than none and that any advise and recommendations from the West should be treated like something that will echo with huge problems in future.
Waht do you propose, Uzbek, paying them loads of cash to keep calm so they can buy more arms? cash in two installments? should we arm ourselfs and go and deliver the aid? what do you propose in this situation to keep aid workers safe?
I’ve found economist Michael Hudson explanation of the Greek crisis the most straight forward.
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He says the ”3 per cent Maastricht limit on budget deficits refused to count capital spending by government as capital formation, on the ideological assumption that all government spending is deadweight waste and only private investment is productive.”
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”The path of least resistance was to engage in fiscal deception. Wall Street bankers helped the “conservative” (that is, fiscally regressive and financially profligate) parties conceal the extent of the public debt with the kind of junk accounting that financial engineers had pioneered for Enron. And as usual when financial deception in search of fees and profits is concerned, Goldman Sachs was in the middle. In February 2010, the German magazine Der Spiegel exposed how the firm had helped Greece conceal the rise in public debt, by mortgaging assets in a convoluted derivatives deal – legal but with the covert intent of circumventing the Maastricht limitation on deficits. “Eurostat’s reporting rules don’t comprehensively record transactions involving financial derivatives,” so Greece’s obligation appeared as a cross-currency swap rather than as a debt. The government used off-balance-sheet entities and derivatives similar to what Icelandic and Irish banks later would use to indulge in fictitious debt disappearance and an illusion of financial solvency.
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”The reality, of course, was a virtual debt. The government was obligated to pay Wall Street billions of euros out of future airport landing fees and the national lottery as “the so-called cross currency swaps … mature, and swell the country’s already bloated deficit.” (Beat Balzli, “How Goldman Sachs Helped Greece to Mask its True Debt,” Der Spiegel). The report adds: “One time, gigantic military expenditures were left out, and another time billions in hospital debt.”
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”Translated into straightforward terms, the deal left Greece’s public-sector budget deficit at 12 percent of GDP, four times the Maastricht limit.
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”Using derivatives to engineer Enron-style accounting enabled Greece to mask a debt as a market swap based on foreign currency options, to be unwound over ten to fifteen years. Goldman was paid some $300 million in fees and commissions for its aid orchestrating the 2001 scheme. “A similar deal in 2000 called Ariadne devoured the revenue that the government collected from its national lottery. Greece, however, classified those transactions as sales, not loans.”[1] JP Morgan Chase and other banks helped orchestrate similar deals ”across Europe, providing “cash upfront in return for government payments in the future, with those liabilities then left off the books.” ”
http://michael-hudson.com/2011/06/how-financial-oligarchy-replaces-democracy/
And I beleive military spending on French and German arms were off the books.
The majority of Greeks are victims. How could they have known 9 or 10 years ago what their government was up to?
The unedited Jerry Rawlings interview is now up at:
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http://www.channel4.com/news/catch-up/display/playlistref/200711/clipid/200711_CUP_RAWLINGS_20
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Rawlings begins with typical bombast, but starts choking back the tears about 1:20 as he tries to describe what he has seen. He was obviously deeply humbled by it, and you can see Jon Snow’s eyes welling up in sympathy. Watch and weep.
I’ve posted Mary’s first link onto my Facebook account to see how long it takes before they disable it.
Uzbek in the UK
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”It is believed that over 20.000 people have died of starvation in Somalia alone and this is in times when Greece is receiving billions of Euros to keep it afloat. ”
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I think the ‘bailout’ money is to prevent French, German banks(I’m sure others) that lent to Greece from going bust.
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It’s really another bank bailout. That’s what I can gather. Please I’m no expert.
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I posted a link to this yesterday on another thread, but it is particularly relevant here too.
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Lies and Truths on Greek Public Debt
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It is unconscionable to force the responsibility for unpayable debt (for that’s what we’re talking about here) onto a population that saw little benefit from most of it. The same applies to Ireland and others. Make no mistake, it is Western private banking interests that are being ‘bailed out’ here – by ordinary people. “Socialisation of losses and privatisation of profits” as Geoff Boycott said.
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Let’s not lose sight of that.
Before anyone knows anything about the Oslo bombing, Bridget Kendall has used the word ‘Islamists’ for those responsible. She did go on to say that it could be an internal group with unknown motives but she has done her work for the day with this smear against Muslims.
The US is up to it’s neck in Somalia.
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It backed, along with the UK, the Ethiopian 2007 invasion to overthrow the Islamic Courts. And it’s recently reported by Jeremy Scahill that there is a CIA (not run by them, not) torture prison in Mogadishu. And they have a large compound at the airport. http://www.thenation.com/article/161936/cias-secret-sites-somalia
Any relation John? Only joking.
…..Porter Goss, who recently resigned as CIA director…..
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http://www.nytimes.com/2006/06/08/world/americas/08iht-somalia.1930502.html
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CIA failed in Somalia, officials say – Americas – International Herald Tribune
By Mark Mazzetti
Published: Thursday, June 8, 2006
So did I John, what a coincidence, FB will clamp up the moment the US goes to war in the middle east, I’m sure that Zuckermann has been told to.