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At the mercy of creditors

 MPost |  2015-07-11 22:38:16.0  |  New Delhi

The full text of the Greek government’s proposal to its European creditors is now publicly available. The Greek government is almost completely capitulating. Looking at the remaining areas of disagreement simply reveals how extremely far Greece has moved in the direction of the creditors’ previous demands.The latest Greek proposal looks a lot like the one Greek voters just rejected.The implosion of the Greek economy, the rise of Syriza and the implicit blaming of Greece’s creditors for the country’s woes present important lessons that should be drawn upon.Greece got itself into a mess by not taxing sufficiently its richest elites, and by overspending on a bloated, overpaid and <g data-gr-id="42">under <g data-gr-id="38">worked</g></g> public sector. Poor choices by politicians for decades, fully supported by a complicit populace that was only too happy to condone the perpetual postponement of serious structural reform, have finally caught up. 


Despite the massive and <g data-gr-id="43">heart rending</g> current suffering of ordinary Greeks, the foregoing is the sorry story of the saga which is unfolding in southern Europe.Shipping magnates, some of the wealthiest individuals in the world, enjoyed tax exemptions, concessions and <g data-gr-id="32">waivers ,</g> on the one hand, and state support on the other. Some of the glitziest properties, with Olympic-sized swimming pools, had owners and residents who did not appear on the country’s register of taxpaying citizens.When the Greek authorities launched the now-famous tax survey of 2010, satellite photos of wealthy Athens suburbs revealed 16,974 swimming pools — against 324 claimed in tax filings. In a survey of the top 150 doctors with clinics in the trendy neighbourhood of Kolonaki, more than half claimed income levels below the average monthly rent.To deny the historical parallels to the postwar period would be wrong. Let’s think about the financial crisis of 2008/2009. This wasn’t just any crisis. 

It was the biggest financial crisis since 1929. So the comparison is quite valid. This is equally true for the Greek economy: between 2009 and 2015, its GDP has fallen by 25%. This is comparable to the recessions in Germany and France between 1929 and 1935.A new European institution would be required to determine the maximum allowable budget deficit in order to prevent the regrowth of debt. For example, this could be a committee in the European Parliament consisting of legislators from national parliaments. Budgetary decisions should not be off-limits to legislatures. To undermine European democracy, which is what Germany is doing today by insisting that states remain in penury under mechanisms that Berlin itself is muscling through, is a grievous mistake.

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