COUP D’ETAT IN GREECE

The euro crisis has taken a most sinister turn and is not being reported properly.

Since the Papandreou governnment was elected in the autumn of 2009 it has enacted a  succession of ever more draconian austerity plans decided for it by the German and French governments and by the European Central Bank and the European Commission.  The Greek people have never been consulted about these plans, which have caused the economy to collapse and living standards to decline.  The government of Greece has never been involved in deciding these plans, which have been agreed in negotiations between the French and German governments and the central European institutions in which the Greek government has been barely involved.  The Greek government’s only role  has been to put these plans into effect after being told what they are, which is what up to now it has loyally attempted to do.

Not surprisingly the authority of the Greek government as a result has collapsed.   Papandreou has come to be seen by many people in Greece not as the democratically elected Prime Minister of Greece but as the errand boy of Germany and France and of the European Union.  That perception is actually correct because up to a few days ago that is precisely what he was.  A Greek MP complained bitterly but quite accurately to the BBC’s Newsnight programme that the true Prime Minister of Greece is not George Papandreou but Angela Merkel. 

Faced with this crisis of legitimacy and authority Papandreou as Prime Minister took the entirely appropriate step in a democracy of announcing a referendum on the latest bailout and austerity plan.  This would for the first time have given the Greek people a say in the decisions that are being made about them.  In what is supposed to be a democracy that is no more than their right.

The Greek people are being denied this right.  From the moment the referendum plan was announced the French and German governments and the central European institutions working together with senior politicians in Greece have acted to reduce it to nought.  Not only has the referendum been called off but there is also pressure to prevent elections from being held until after the austerity and bailout plan is approved.  Instead the French and German governments and the central European institutions have been leaning hard on Greek opposition parties to agree with what is left of the government a new government “of national unity”.  Its sole purpose, whether it is headed  by Papandreou or not, will be to force upon Greece the latest bailout and austerity plan without the Greek people being consulted about it and before any new elections can take place.  

If the European Union collapses as a result of this crisis this will be the moment when that collapse begins.  The European Union is supposed to be a union of democracies yet faced by the greatest crisis in its history its response is to impose its decisions by arranging the removal of the government that is supposed to be accountable to the people affected by those decisions whilst denying those same people a say.  Moreover it seems that Greece is only the start.  Steps are apparently already underway to engineer through the Italian Presidency the overthrow of the democratically elected government of Italy so that it can be replaced with a new government that is more amenable to the wishes of the French and German governments and to those of the central European institutions.

Acting in a democracy to deny the people the right to a say in the way they are governed amounts to a coup d’etat.  This is so regardless of whether this coup is carried out legally or not.  The political crisis in Germany in the early 1930s was precipitated by the perfectly legal and constitutional step of forming technocratic governments that had not been elected and which were not accountable to the German parliament the Reichstag, which sought to use Presidential powers to impose by decree austerity measures the German people had not voted for.  The result was a crisis of legitimacy that ended in dictatorship. 

I do not think that this time things will go this far but no one should be under any illusions about the momentous nature of the events that are now starting to unfold.  Europe is on the brink and its crisis has just stopped being only economic.

14 thoughts on “COUP D’ETAT IN GREECE

  1. What I don’t understand – and I suppose it’s just pure laziness, I could look it up, but I’d be interested to hear your explanation – is how the situation got as horrible as it is now with an extended period of austerity. Surely to God the Greek people must notice how the economy is performing when they’re already dissatisfied with it? Did nobody notice that the austerity measures were having no beneficial effect, and that things were steadily getting worse despite all the effort to limit the damage? Where did all the money go? What is Greece spending it all on if this is (will be, if it happens) their second bailout? Why is this just coming to a head now?

  2. A good question!

    The first thing to say is that is a very strong emotional commitment in Greece to the European Union. People were prepared to put up with a great deal in order to stay in the European Union. When the first bailout package was agreed in May 2010 there was a widespread belief that the adjustment would be temporary and that the country would come through. There was also a lot of goodwill to Papandreou personally. He was widely seen as a decent and honest man who was not responsible for the corruption and over borrowing that was the work of the previous government.

    The mood changed in the spring of this year when it became increasingly clear that the situation was not getting better but was getting worse and that the austerity instead of helping the country through its problems was making them worse. Since then the political situation has deteriorated culminating in the crisis we have now.

    As to where the money has gone the short is most of it has gone to pay Greece’s international debts ie. it has been paid straight to the banks to whom Greece owes money. Some has also been used to pay government salaries and doubtless to cover import costs. Greece’s deficit problems (both fiscal and external) are longstanding and the reason it has borrowed to the extent that it has is precisely because it has only been able to cover both deficits by borrowing.

    This leads me to my last point, which is that no one except the totally self interested in Greece can deny the need for a serious reform of the country’s tax and economic system. Due to widespread tax evasion by the rich the tax take is absurdly low whilst the country’s industrial base has atrophied. What Greece needs is an economic plan to get it back on its feet and to build up an export sector so that it can bring its trade back into balance. Once upon a time a team of managers and economists would have been sent to Greece to examine its economy and to prepare such a plan. That roughly speaking is what happened in countries like Germany, Japan and South Korea in the 1950s and 1960s. There is no sign of anything like that today.

    • “Once upon a time a team of managers and economists would have been sent to Greece to examine its economy and to prepare such a plan. That roughly speaking is what happened in countries like Germany, Japan and South Korea in the 1950s and 1960s. There is no sign of anything like that today.”

      It definitely should be a condition of any bailout – anything less is just carelessness with other people’s money. But that’s a good point – I’m very curious now if any such action applied to Ukraine on the occasion of their huge loan.

      • Have you a link to that Financial Times story about the EU pressuring Georgia to settle with Russia, so as to get the deal done before the Russian government changes? I’d be interested to see it.

  3. Can you sketch out for us what you think might happen if Greece defaulted and withdrew from the Euro and (as you say would then have to follow) the EU? Would it become robber-barron territory, somewhat like modern Albania? Would it form new alliances outside of the EU, and if so which? Would any other current EU countries be more likely to follow it? What, in other words, do you project as the best and worst case scenarios? Thank you.

  4. Hi Alexander,

    I came to your website after reading many of your interesting comment’s in Mark’s blog.
    You are definitely very knowledgeable about the political situation in Europe.
    You said:
    “Steps are apparently already underway to engineer through the Italian Presidency the overthrow of the democratically elected government of Italy so that it can be replaced with a new government that is more amenable to the wishes of the French and German governments and to those of the central European institutions.”
    If I may ask(and I’d apologize in advance if my questions appear ignorant), do you think that the Germans and the French(being the main ‘architects’ of the EU) are using the Greek crisis to ‘mold’ an EU with the Franco-German alliance as the main hegemenon? In other words, a ‘United States of Europe’ in which peripheral European states lose even more national sovereignty to central EU institutions with the Germans(especially) and the French calling all the shots?

    I have always thought that the EU ‘project’ is a modern rehash of the PanEuropean dreams of Charlemagne, Napoleon and Hitler – ‘United Europe’. Not too long ago, I remember reading an article stating that the EU incorporated Germany to ‘contain’ that nation in the light of Germany’s role in the two world wars. Interestingly, Germany managed to break free from that ‘containment’ and now is poised to dominate the EU. Is this historical irony?

    sinotibetan

  5. Dear Sinotibetan,

    There is nothing “ignorant” about your question.

    The short answer to your question is yes, the French and the Germans are using the crisis in the way that you say. That is to say they are using the crisis as a means to interfere more actively in the internal politics of other countries in ways that will reinforce their hegemony.

    Having said this, it is a sword that will break in their hands. The French and the Germans did not begin with this intention. They created the euro as the price Germany paid to get French agreement for the unification of East and West Germany. The French were concerned when Germany reunified that the new united Germany would be both stronger than before and would reposition itself as a central European power (closer to Russia) and less connected to the west. The French having fought three great wars against the Germans were alarmed at this possibility and saw the euro as a way of locking Germany into a permanent partnership with them. The Germans agreed to this in order to get French support for their reunification project just as they also agreed to the Anglo American project of EU expansion into the east. The assumption everybody made was that Germany would pay the bills for reunification, for the euro and for EU expansion (the latter through the EU’s so called structural funds). Typically in the euphoria of the 1990s nobody considered how high these bills would be and no proper studies were made.

    The French and the Germans now find themselves in a situation where the bills are escalating beyond what Germany can realistically afford to pay. The Germans as a result are coming under pressure from the French and the British and the US to agree to a full fiscal union within the eurozone and to agree to quantitative easing (printing money) by the European Central Bank, which effectively amounts to telling the Germans to pay unlimited amounts of money to keep the eurozone going. The Germans are responding by trying with the help of the French to control and reduce the payments they have to make by engineering the removal of governments within the eurozone who refuse to follow austerity policies decided for them in Berlin. In effect this would make the eurozone in effect a quasi political union controlled from Berlin. It is a little known fact that as part of the bailout package EU officials ultimately accountable to Berlin will be present in all Greek ministries supervising every payment.

    Neither the full fiscal union demanded by the French, the US and the British nor the type of control over peripheral governments sought by the Germans are in the end sustainable policies. Germany quite rightly will never agree to a fiscal union in which it will effectively be expected to pay for spending in foreign countries over which it has no control. At the same time the kind of policies we have seen imposed on Greece and shortly in Italy (where it has just been announced that Berlusconi is going to resign) are bound to provoke a reaction if only because they are counterproductive and do not work.

  6. Dear Catherine,

    There is a good article by Misha Glenny in today’s Financial Times that discusses what would happen to Greece in the event of a default. Unfortunately it is behind a pay wall. However briefly it says that the Greek oligarchy has been transferring money out of Greece for the past year (I have had independently heard that this has been happening at a rate of $2 billion a month) in the expectation that when Greece crashes out of the eurozone they will be able to buy up Greek assets at knock down prices. In other words there would be a massive transfer of wealth from the poor to the rich with the beneficiaries being precisely that oligarchical class, which by its corruption and tax evasion created the crisis in the first place.

    I have to say I am if anything even more pessimistic for Greece than Misha Glenny is. The first effect of a Greek default would be the collapse of the Greek banking system. The Greek government would presumably be forced to nationalise the banks at the same time as it reintroduced the drachma. The Greek government would then be forced to look for ways to pay for essential imports, such as food and fuel. The reason Greece is in the crisis in which it is, is because it runs a very large trade deficit and has to borrow heavily to pay for essential imports. No one is going to accept payment in drachmas whilst if Greece defaults it will be frozen out of financial markets and will be unable to borrow. I simply do not know how the country would in that case pay for its imports and though I do not want to appear alarmist I think there is a real possibility of hyperinflation and a humanitarian crisis. I suspect that all this is well understood in government circles in Greece, which is one reason why the Greek government has so far been willing to go along with every demand that has been made of it.

    As for the EU, a Greek default and expulsion from the EU and the eurozone would in my opinion create a very real possibility that both would be thrown into a possibly terminal crisis. Lenders to eurozone states would know that the assumption that there is a German guarantee behind their loans is false and that a eurozone state can default on its debts. It is difficult to believe that in that case heavily indebted EU states such as Spain, Portugal and Italy and indeed Belgium and France would be able to raise more loans as they need to do just to service their debts. Unless the Germans at that point stepped in with an unlimited guarantee and a commitment to a full fiscal union, which they might not have the resources to do and against which there are also legal and constitutional barriers, there would be a serious risk of a cascade of further defaults leading to the collapse of the eurozone. Were that to happen then the future of the whole EU would be bleak. Obviously everything possible will be done to prevent this happening and let us hope that these attempts will be successful.

  7. I would just add one last point to this discussion.

    The EU has been much derided for seeking external financing for its bailout fund from China and Russia. In reality from the EU’s point of view this policy makes complete sense. The single biggest error commentators and foreign policy makers make about this crisis is that they all seem to assume that Germany’s resources are somehow limitless. In reality Germany has a well managed and successful economy precisely because it has up to now limited the commitments it has taken on. Even then its debt to GDP ratio is around 60% (much higher than China’s and Russia’s) and given that it is a country of no more than 80 million people without natural resources talk of Germany as some sort of economic superpower is misplaced. Demanding of Germany that it take on unlimited commitments to bail out other eurozone states would quickly undermine the whole basis of Germany’s economic success, which is why the Germans very understandably balk at the idea. In my opinion they made a major mistake in the 1990s when because of the grandiose ambitions of Helmut Kohl they took on commitments to support the euro and to fund EU expansion through the structural funds at the same time as they were having to pay the costs of German unification.

    Unfortunately if Germany cannot meet these funding demands it is difficult to see from where within the EU the necessary funds would come. Most EU governments are also heavily indebted whilst the European banking system is apparently teetering on the brink of insolvency. Once the US would have stepped in but now it has problems of its own and is unable to help. Turning to China and Russia is therefore logical though whether it would be wise for these countries to lend the Europeans the money is another matter.

  8. Dear Alexander,

    Thanks for your very interesting reply.
    Just a few questions and viewpoints for the purpose of discussion.

    1.) I view the EU as a ‘half-baked’ ‘supercountry’ – its bureaucratic structure is like mid-way between an alliance of independent nations and a confederation of non-independent states(such as the USA) and I think that’s one of the reasons the EU is in this mess: it’s neither here nor there! The European nations are ‘similar enough’ to form an alliance but each nation had their own , sometimes antagonistic national interests that makes a tighter ‘political alliance'(like the current EU)a very troubled and inefficient ‘union’ – more so when there are powerful nations(who don’t always see eye to eye: eg Germany, France, the UK) of almost equal ‘strength’ jostling for greater influence within the ‘union’. This political disunity leads to a lot of meetings but no decisive actions to stem any form of crisis like the present one. The EU also seems to be like an uncomfortable ‘truce’ of Paneuropeanists, Euroskeptics and those with ‘no position on the One Europe issue’ – each looking at each other with distrust with an external facade of ‘solidarity’. I think the issue of whether EU should truly become a United States of Europe(like the USA where all nations lose their national sovereignty but with a clause in such a Union Treaty that allows any ‘state’ to secede)or merely a close alliance of European states should be decided once and for all. I feel that no European politician(especially the paneuropeanists) will come out open regarding this issue due to the sensitive nature on any discussion of loss of national sovereignty – but isn’t that the ultimate aim of the EU? Instead, in my opinion, the bureaucrats in Brussels try to achieve this aim by a gradual process of politically and economically binding treaties while not being clear about their aims of a total loss of national sovereignty. However, I think such a method is bound to lead to grave problems. For example a common currency like the Euro but no complete political union and fiscal union is unsustainable in my opinion….and that happens when one hopes a common currency will ‘force’ nations to ultimately come to complete political union. I think political union and fiscal union must come first – i.e. European nations must agree to lose their national sovereignty and give power to a Federal Government in Brussels – then followed by a common currency. Not the other way round: a common currency and hope it ‘forces’ an evolution to a true European Federal Government. I think those politicians and Europeans in favour of such a complete integration should make that idea clear to everyone. European nations then should have referendums and decide for themselves regarding this grand Federalism- to join or not to join. Actually I think a close alliance of nations is better than a Federation of Europe.

    2.)”The French and the Germans did not begin with this intention.”
    “The assumption everybody made was that Germany would pay the bills for reunification, for the euro and for EU expansion (the latter through the EU’s so called structural funds)”
    I think the aim of a final ‘United States of Europe’ was already in the minds of founders of the precursors of the EU such as Robert Schuman in the aftermath of WW2. If I am not mistaken, he and others such as Jean Monnet came up with the ‘step by step’ idea of European integration. So, even though perhaps originally the intention of the French and Germans were to live up to the idea of ‘step by step’ European integration – the lack of Central control over fiscal policies of member states and (I suspect) French and German quests for more power and influence on other member states led to the current situation.
    I am actually quite surprised why European politicians think they can ‘milk’ the Germans indefinitely for the EU project. It’s my belief that EU expansion after the fall of the USSR is no longer ‘for the sake of peace’ as articulated by Robert Schuman et al but an exercise of hegemony on the part of the Franco-German alliance.

    3.)”However briefly it says that the Greek oligarchy has been transferring money out of Greece for the past year (I have had independently heard that this has been happening at a rate of $2 billion a month) in the expectation that when Greece crashes out of the eurozone they will be able to buy up Greek assets at knock down prices.”
    It boggles the mind how such massive daylight robbery goes on unchecked within the nose of those higher-ups in the EU!! How could that happen?

    4.)”Turning to China and Russia is therefore logical though whether it would be wise for these countries to lend the Europeans the money is another matter.”
    I think neither of those two nations would be willing to ‘help’ the EU – especially taking on bad debts that may not be repaid by bankrupting nations! The only point in time that ‘help’ would come from China and Russia would be when the world economy comes to the brink of a bad recession or even depression because such would derail their economies as well. By that time, it would be too late to stop the economic fallout. For the time being, I think both China and Russia want the Europeans to sort out their own mess.

    sinotibetan

  9. I am sorry if my comments are wordy and convoluted. “Manglish”(Malaysian English) is my ‘mother tongue’ with all its inherent syntax and grammatical errors. Thanks for your patience!

    sinotibetan

  10. Some very punchy stuff here, from everyone – it’s a hell of a lot more interesting than reading the newspaper! It was unusual to see the EU startled from its smug complacency – as it was when Papandreou refused the terms of the bailout – not once but three times; later when Greece went ahead with the referendum idea despite reassuring happy talk that everything was under control, and yet again when the government collapsed.

    This is hugely embarrassing for the EU, especially – from an Eastern European standpoint – in front of Russia and Ukraine, the one of whom has suggested for a long time that the Eurozone was unstable and leaky, and the other of whom aspires to membership. It also casts the “Union” part in a very doubtful light.

    Excellent and illuminating discussion of the Greek oligarchy banking the people’s money for a clearance sale soon to come of Greek assets. I wonder where they learned that (cough, Yeltsin, cough)? That certainly has been kept on the down-low, this is the first I’ve heard of it. I think quite a few of the EU’s ordinary citizens might be first disappointed, then very angry if they knew what their tax money is enabling.

  11. Dear Sinotibetan,

    There is nothing difficult or convoluted about the way you write.

    Following your numbering I would say this:

    1. Basically I agree with you. This is a big subject so if you do not mind I will write another blog about it.

    2. There is no doubt at all that right from the outset there was an agenda on the part of some people to develop the European Union into a federal superstate. I recently read an article by Peter Jay, whose father was the British ambassador to France in the 1950s, who recalled a conversation his father had with Jean Monnet, one of the original founders of the European Union, who openly described as a project to create a European superstate under French leadership. The Germans went along with this project because it served their own political and economic interests, which were to seek rehabilitation after the Second World War and to open the European economy to German goods. It was for the same reason that the Germans agreed to the French idea for a single currency in return for French support for German unification. However the point is that neither the French nor the Germans at the time the single currency was created wanted a fiscal union since such a union would have been dominated by Germany, which would have upset the French, and would have meant the Germans paying taxes to cover spending in other countries, which would have upset the Germans.

    3. The mind does indeed boggle but then the French and the Germans and the central European institutions were repeatedly warned about the corruption of the previous Greek government and of its cooking the books (I have inside knowledge of this) but did nothing.

    4. We are totally in agreement about this.

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