The EU serves a
double whammy to Greece
Nicholas
Fourikis
Abstract. The austerity measures imposed on Greece by the European bankers
increased unemployment in Greece to such an extent, it led many Greek
professionals to migrate to other EU countries, and Greek businesses to
Bulgaria. This double whammy effectively cripples the Greek economy. Greece’s
tragedy is further intensified because only few EU members care about Greece’s
fate. A case is therefore made for Greece to exit the ‘EU paradise’. As Greece has several allies outside the EU derived
from its history and its geopolitical position, Greece’s exit will not be
economically traumatic.
·
Northern European banks
lent excessive amounts of money to Portugal, Italy, Ireland, Greece, and
Spain, the group that is euphemistically abbreviated as PIIGS. As the governments of the PIIGS countries could not
service their excessive loans, the banks imposed strict austerity measures on
the citizens of the PIIGS countries.
While the
bankers continue to support austerity measures, Paul Krugman1, the 2008 Nobel laureate for Economics, argued
that prosperity through pain is a fantasy. And
Noam Chomsky2
declared that austerity is just class war.
The austerity
measures imposed on Greece led many Greeks to migrate to Northern European
countries to escape the miseries resulting from sky high unemployment3&4.
Over 200,000 Greeks left the country since the financial crisis began in 20103
and many4 of the 200,000 Greeks who left Greece for Germany and
Britain were university graduates. Overall 10% of the total university educated
workforce migrated. That portion of university graduates represents the best
graduates in Greece. Furthermore an estimated 35,000 medical doctors are
believed to have left Greece5. Assuming that it takes doctors 6-8
years of study to complete a medical degree that is a humongous loss of human
capital!
In a parallel development, 11,000 Greek businesses moved to Bulgaria,
the poorest member of the EU6.While many commentators focus their
attention on money matters, the issues related to the human capital leaving
Greece are just as important.
How could Greece improve its world competitiveness and repay its loan if
it loses its human capital, year after year while the austerity measures are in
place?
The European Union is supposed to be a union of European countries and
yet Greece seems to be isolated from the rest of the EU members7.
In a recent development the EU is about to introduce more stringent
austerity measures on Greece even though 61% of the Greek people voted against
the existing austerity measures.
“Secret documents show
creditors’ baseline estimate puts debt at 118% of GDP in 2030, even if it (
Greece) signs up to all tax and spending reforms demanded by troika8”.
In less technical language Greece would face
an unsustainable level of debt by 2030 even if it signs up to the full package
of tax and spending reforms demanded of it, according to unpublished documents
compiled by its three main creditors.
Strauss-Kahn offers us a broader picture of an
ideal EU as an organization9:
“In counting our
billions instead of using them to build, in refusing to accept an albeit
obvious loss by constantly postponing any commitment on reducing the debt, in
preferring to humiliate a people because they are unable to reform, and putting
resentments – however justified – before projects for the future, we are
turning our backs on what Europe should be, we are turning our backs on
Habermas’* citizen solidarity. We are expending all our energies on infighting
and running the risk of triggering a break-up. This is where we are. A eurozone, in which
you, my German friends, would lay down your law with a few Baltic and Nordic
states in tow, is unacceptable for all the rest.”
* Jürgen Habermas German philosopher/
sociologist
The EU as an organization can change but it will
take a long time for any changes to take place. The pious hope is that if few PIIGS
countries prosper after departing from the ‘EU
family’, the changes that Straus-Levy sketched will be adopted sooner.
Can
Greece afford to lose its human capital year after year over the next ten,
twenty, or thirty years? If not, what are the prospects for Greece if it leaves
the EU? In that event Greece would need to
import the items shown in Table 110 .
Table 1 – Typical Imports to Greece10
Oil [$21.5 billion]
Pharmaceuticals [$3.5 billion]
Machines, engines, pumps [$3.4 billion]
Electronic equipment [$2.8 billion]
Ships, boats [$2.5 billion]
Vehicles [$2.6 billion]
Plastics [$2.6 billion]
Meat [$1.3 billion]
Dairy, eggs and honey [$1.1 billion]
Iron, steel [$1.1billion]
With
Greece out of the EU several scenarios are possible. Closer Greek- Russia
relations11 must come on top of the list because of the existing
cultural links between the two countries. While Russia cannot afford to lend
money to Greece it can offer energy – oil /gas - to Greece. More creatively one
could propose that Russia could gain access to a Greek Mediterranean port, in
exchange for commercial benefits for Greece.
Would Europe and the US
accept such a move? That is doubtful from the strategic point of view. Can
Greece use the close Greek-Russian relations to gain a better deal while it
remains in the EU? Of course it can but there is no evidence that the newly
elected Greek government used such a ploy during their negotiations with the
EU.
Turkey
and Greece developed close links after the Izmit earthquakes12 –
August 17 and 22, 1999 - when Greek rescue teams rushed to the scene to help
Turkey manage the disaster. Less
than a month after the Turkish disaster, on September 7, 1999, at 2:56 pm local
time, it was Athens' turn to be hit by a powerful, magnitude 5.9
earthquake. This was the most devastating and costly natural disaster to hit
the country in 20 years12, and Turkish teams came over to Greece to
help.
The deep friendship forged between
Greece and Turkey is reflected in recent times by the many offers of help Turkey
extended to Greece13&14.
In
the past the Greeks of diaspora15 – 7 million Greeks residing in the
Americas, Africa, Australia and Asia - helped Greece get over the devastations
created by natural disasters e. g. earthquakes, floods and forest fires. Their
help was partly material but the Greeks of diaspora often supported Greek
interests in various world forums.
“Diaspora Greeks have proved time and again that they love
Greece more than its inhabitants, they are anxious about its fate, and are
ready to help16.
Assuming that
Greece exits the EU and prospers, other PIIGS countries will follow and the
resulting negative publicity will be substantial. It is not hard to imagine the
following newspaper headlines:
Germany introduces
harsher austerity measures in Greece after
61% of
Greeks voted against the existing austerity measures.
OR
Germany puts the boot in . . .
Considering all these factors, the EU managers might
decide to offer substantial “loan haircuts” to the PIIGS countries or better
still abolish the payments of all loans so that the PIIGS countries would have
enough capital to introduce and adopt world competitive practices.
“Germany has shown no common sense regarding
the European economy, nor compassion,” Stiglitz, a Nobel prize winner in
economics, stressed, disapproving the measures imposed to Greece by European
forces, and suggested a “brave” haircut to the Greek debt.
Concluding Remarks
All
indications point to a grim economic future if Greece remains in the ‘EU family’. A case is therefore made for Greece to exit the ‘EU paradise’. As Greece has several allies outside the EU derived
from its history and its geopolitical position, Greece’s exit will not be
economically traumatic.
Considering all these factors, the EU managers might decide
to offer substantial “loan haircuts” to the PIIGS countries or better still
abolish the payments of all loans so that the PIIGS countries would have enough
capital to introduce and adopt world competitive practices.
The
EU has to adopt the vision that Strauss-Kahn outlined to survive in the twenty
first century for Germany’s stewardship so far has alienated many member
countries.
The
newly elected Greek government did not use its close relations with Russia to
derive better outcomes while the country is still a member of the EU community.
Similarly the close links between Greece and the Greeks of diaspora were not
used as leverage to derive useful outcomes for the Greeks residing in Greece.
References
[1]
P. Krugman. “Right now we need expansion.”
Der Spiegel interview. 23 May 2012.
[2] Noam Chomsky.
“Austerity is just class war.” Alternet, July 2, 2015
[3] Kimberley DeRose.
“Young Greeks flee abroad as crisis deepens.” CYFI Youth Newsletter, July 2.
2015.
[4] Christina Lamb.
“Unemployment forces young into their own personal Gexit.” The Australian
Newspaper, July 20, 2015.
[5] Helena Smith. The Guardian. 20
Jan 2015. “Young, gifted and Greek:
Generation G – the...”
http://www.businessinsider.com/afp-greek-business-exodus-to-safe-haven-bulgaria-2015-7Jul
24, 2015.
[7 ] Heidi Moore.
“With friends like the European Union, does Greece...
[8] Albero Nardelli. “IMF: austerity measures
would still leave Greece with unsustainable debt. “The Guardian”. 1 July 2015.
http://yanisvaroufakis.eu/2015/07/20/dominique-strauss-kahn-addressing-geTop
[10] Top Greece Imports - World's Richest Countries
http://www.worldsrichestcountries.com/top_greece_imports.html
http://www.cnbc.com/2015/07/13/russia-may-win-politically-if-a-greek-deal-falls-through.html
[12] Greek– Turkish earthquake diplomacy - Wikipedia,...
en.wikipedia.org/wiki/Greek%E2%80%93Turkish_earthquake_diplomacy.
[13]
ekathimerini, News, 30/06/2015 “Turkey says 'ready to help' Greece out of...http://www.ekathimerini.com/198722/article/ekathimerini/news/turkey-says-ready-to-help-greece-out-of-economic-crisis
2015
[14] Tyler Durden. “NATO member Turkey Breaks ranks : Slams EU Austerity, Offers Greek Aid.” 06/30/2015.
[15] Greek diaspora - Wikipedia, the free encyclopedia. en.wikipedia.org/wiki/Greek_diaspora
[16] Tom
Ellis. Ekathimerini.com. 12/05/2015 “Engaging the Greek diaspora | Comment”
[17] Katerina Papathanasiou. “Nobel prize winning
economist Stiglitz meets with Greek government officials.” ECOS Jul 12, 2015.
