European Union: Democratic or Despotic?

Today, sometime tonight in fact, the democratically elected majority government of Greece will be dissolved and replaced by a 'national unity coalition' .... the reason for this change is that the EU rescue package terms are so opposed by the Greek public, that the Greek government had called for a 'referendum' to get a public endorsement of the bail out terms.

Now the referendum is off the table, and the Greeks were told to either take the money and implement the plan in full, or leave the Euro-zone (or even the EU itself if Pres. Sarkozy of France had his way) .... they vote tonight to create a 'stable' government, and then to fulfil all the bail out plan terms laid down by Germany and France. Italy, is in much the same boat with their government have to agree to EU inspectors looking at the state books, even though it has had no bail out funds so far. Of course in Greece this 'national unity coalition' isn't likely to last more than a few weeks at best, so this could all be just another sticking plaster, and Greece just leaves the Euro-zone after the new year (as most people expect).

So, this raises the question of whether this is actually the first stage of the death of national independent democratic governments in Europe, with the small Euro-zone countries being forced to do what the big two Euro-zone economies want inside a federal straight jacket? There are many in Greece who believe that they are being sacrificed to bring in a 'Federal Europe', which their political leaders will benefit from, but they will suffer for.


Will this be how the EU enforces the bail out in Greece?

Interestingly, late on Tuesday the Greek government  replaced the heads of the army, navy and air force and the chief of joint chiefs of staff in what officials described as a long-planned move largely unrelated to political turmoil ..... this has raised fears that they were preempting a coup attempt. Memories of the rule of 'The Colonels' in a military junta between 1967 and 1974 still run deep in the Greek psyche.

As the imaginary Chinese adage can be said .... "we live in interesting times".

Update: The BBC has just run an article on the 9th November, which includes the lines:

"These are disturbing days for European democracy. The euro-zone crisis is driving out elected leaders. European officials are telling elected governments what to do".

They agree with the idea that there's now a risk that democracy is being replaced by a EU unelected technocracy, it just takes them three days longer than us to reach that conclusion.

Greeks Beware Germans Baring Teeth

There was an old Roman saying stating that we should "Beware Greeks bearing gifts". Well from the Greek perspective that saying has been reversed, and its they who have cause to beware friends offering help.

The EU and IMF have finally come up with a rescue package for the Greek economy, which finally collapsed, after a decade of spending money it doesn't have. However the price of this money isn't cheap, and the Greeks will be expected to make major austerity cuts. According to the various reports the Greeks:

• Are tax dodging on a massive scale and estimated as about €22bn pa (about half of the annual deficit).
• Retiring at 53
• Getting 'allowances' which include simply being an unmarried daughter of deceased parents, in the public sector - estimated annual costs €550 Million for this alone.

In the public sector pay allowances are given for - knowing how to operate a computer - knowing a foreign language - punctuality - working on the open air for the working in the forestry workers .... you get the idea.

Now in all fairness, no Greek likes the system of low pay topped up by 'allowances', which were brought in to give pay rises without adding to the pension bill, which was already blown. However if they are cut, forget it, you will have almost all the civil servants unable to live and simply ceasing to turn into work, as these 'allowances' can make up as much as 70% of total pay in some cases. So whether the Greeks can actually impose these cuts is extremely doubtful.

When I was in Italy a couple of years ago there was a mention of the fact that the EU had given Italy billions to rehouse people after an earthquake, but a decade later they were still in 'temporary' housing and the billions had simply disappeared. There must be great fears the this money loaned to the Greeks will simply 'disappear' in much the same manner as the Italian funds.

As an example of the scale of the problems in Greece. In the wealthy suburbs of Athens only 324 tax returns show ownership of a pool, satellite photos show 16,974 pools, one of many indicators of tax evasion.

In the UK we actually face very similar problems, but not one of the parties is prepared to spell out the bill we face, so just hold your breath until Thursday, when we will find out how much pain the Labour Party has gathered for us all in the last 13 yrs.

As Margaret Thatcher said "The problem with socialism is that you eventually run out of other people's money".

Greece Drags The Euro To Hades

I was once chastised by a passing reader about my post on Greece's problems both on the economy and as a nice holiday resort with the words "Never heard so much Rubbish. Simply not true" ..... well I hope that the anonymous reader picks up on the recent news from Greece.

My blog listed all the problems about Greece's spiralling public debts pointing out that Greece was:

• Not as cheap as it used to be
• That 'tourists have looked for cheaper, but equally sunny holiday destinations' elsewhere.
• Greece's economy after many years of strong and uninterrupted growth is today at a critical crossroads
• Its public debt was almost equal to its national output
• Youth unemployment stood at about 19% and overall joblessness at 7.2%

and whilst I can't claim to be a a Nostradamus, if anyone from the German or French finance ministries had read my comments, they might have just been able to tackle to crisis that has affected the Euro currency 15 months later.

Now Greece is in turmoil, as it finally admitted to effectively cooking the books for years (including those used to enter the Euro Zone in the first place) .... could all have been avoided if anyone had looked closely at Greece's finances and social indicators. They didn't match then, and they don't match now.

Here's some interesting facts:

• In the last completed tax year in Greece, and with a population of nearly 12 million, only six (yes 6) people declared that they earned more than €250,000 pa ... I repeat, only 6 people in the land of shipping millionaires and surgeons on 700,000 pa, were even that honest (and these 6 are all likely to have earned 10 times that amount).
• Greece's black economy is estimated at 30% of official gross domestic product.
• The European Commission says it will take Greece to the EU's top court to recover state aid, which it says violated EU single market rules.

Finally the Greeks have resorted to the politics of the scoundrel i.e. Nationalism .... The Prime Minister Mr Pangalos has accused Italy of being more inaccurate with its financial statistics (probably with some element of truth), and said that Germany should not criticise Athens now because of its own actions during the Nazi occupation of Greece.

"They took away the gold that was in the Bank of Greece, they took away Greek money, and they never gave it back. This is an issue that has to be faced sometime in the future," he said.

Not All Ruins In Greece Were Germany's Fault

Germany paid Greece about 115m Deutschemarks in 1960 to compensate victims of Nazi persecution, but has refused more recent demands for more money .....after it closed the matter in 1990 when it signed the Two Plus Four Agreement with the former Allied countries of the United States, United Kingdom, France, and the Soviet Union, but not Greece.

As someone once said "Greece is a poor country, full of rich people." 

UPDATE JUNE 2019:

I have taken a brief re-look at this story and can add this update: Alexis Tsipras, leader of the Syriza party claimed in January 2015, that he was going to ignore the austerity program imposed by the “troika” (the European Commission, the European Central Bank and the International Monetary Fund), but in fact the Greek government was forced to accept even harsher terms from its creditors after he assumed power.

Now 4 years later Greeece has been in primary fiscal budget surplus for the last 4 years, and is predicted to remain so for the next foreseeable years. The economy also returned to growth in 2017 and has remained so since ..... but the cost has been huge.

GDP fell 26 per cent in the crisis, and is still 20 per cent smaller than at the beginning of the crisis of 12 years ago. It is not predicted to return to its pre-crisis size until the early 2030s, and that assumes the economy growing at 2 per cent a year, which isn't by any means certain. So the Greeks have lost at least a quarter of a century or more of growth.

They may not have brought down the euro, but they damn near ruined Greece ..... At one time Greek real GDP per head was about 80 per cent of German levels (at purchasing power parity), and it was this, living like Germans but working like Greeks, that nearly destroyed them. Now real Greek GDP per head runs at about 55 per cent of those levels.

Of course this being Greece the threat of backsliding is huge. For instance the planned 11 per cent jump in the statutory minimum wage, combined with the abolition of the sub-minimum wage for young people, plus the reversal of reforms to collective bargaining agreements dont augur well. The government has also cancelled the pre-legislated 2019 pension reform, while the courts are threatening to reverse the pension reforms of 2012 and 2016.

So this could all re-emerge in the near future, especially if there is another recession .... or if the UK tourists stop going following Brexit.

A Greek Tragedy II

Greece has been beset by street protests and troubles for the last week, the nature of which are reminiscent of the Paris troubles of 1968.

Greek Unrest

The cause of this unrest is ostensibly the death of a teen boy, shot by police after a disturbance but the trouble quickly spread and now seems aimed at the ills of Greek political society.

Laying the seeds, for the next European war.

There is speculation that for political reasons the US and EU are going to allow the Serbian province of Kosovo to declare independence ...

 

Kosovo Flag

 

..... simply because in the last fifty years it has developed a Muslim majority.