Monday, July 13, 2015

If You Don't Know What to Call It, Try "Blitzkrieg"

It's the same old problem - once you get the panzers rolling, how in heaven do you stop them?

Writing in Foreign Policy, Philippe LeGrain laments the sack of Athens by the Berlin Bulldozer and asks who's next?  He now casts the EuroZone as a "glorified debtors' prison."

Greece’s submission to the conditions that Germany demanded, merely to start negotiations about further funding to refinance its unsustainable debts, may stave off the prospect of imminent bank collapse and Greece’s exit from the Eurozone. But far from solving the Greek problem, doubling down on the creditors’ disastrous strategy of the past five years will only further depress the economy, increase the unbearable debt burden, and trample on democracy. Even Deutsche Bank, one of the German banks bailed out by European taxpayers’ forced loans to the Greek government in 2010, says Greece is now tantamount to a vassal state.

But this is much bigger than Greece. It is clearer than ever that Europe’s dysfunctional monetary union has a German problem, too. As creditor-in-chief in a monetary union bereft of common political institutions, Germany is proving to be a calamitous hegemon. Paris may have tempered Berlin’s petulant threat to force Greece out of the euro, but German Chancellor Angela Merkel undoubtedly calls the shots. The deal that Greek Prime Minister Alexis Tsipras capitulated to mirrored German demands, not the proposals he drafted with French help last week. By pointing out the futility of resistance if Greece wished to remain in the euro, Paris has, in a sense, acted as Berlin’s agent in securing Athens’ acquiescence.

Let’s be clear. What Berlin and Frankfurt have done to Greece, they can — and will — do to others. In 2010, they blackmailed the Irish government into imposing 64 billion euros in bank debt on Irish taxpayers. In 2011, they forced out the elected prime minister of Italy, Silvio Berlusconi. They would surely hammer a future Portuguese government, itself flirting with insolvency. And yes, they’d bully Slovakia and the others currently cheering them on.

That’s the point of brutalizing Greece: to deter anyone else from getting out of line. Why vote for parties that challenge the Berlin Consensus if they will be beaten into submission, too? Created to bring Europeans closer together, the Eurozone is now held together by little except fear.

...By this Wednesday and next, the Greek parliament must approve controversial reforms to value-added tax, pensions, and many other measures. These include an economically insane fiscal ratchet that would impose “quasi-automatic spending cuts” when fiscal targets are missed — as they inevitably will be, since the creditors systematically underestimate the harmful impact that both excessive austerity and the government’s insolvency have on economic growth. The hated Troika will return to Athens as colonial masters who can rewrite and veto Greek laws they dislike. All the measures enacted by the Greek parliament since its election in January need to be undone.

...Greeks ought to use their extended stay in debtors’ prison to better plan their escape. To default safely within the Eurozone, Greece needs to secure its banks. On prudential grounds, of course, Athens ought to force them to keep their holdings of bonds guaranteed by the Greek government to a minimum and recapitalize them with assets more tangible than tax credits on future profits. That way the ECB cannot shut them down again.

The Eurozone as a whole remains an economic basket case and a democratic disgrace. It is trapped in a nightmarish limbo where politics precludes the creation of common institutions that would cage German power and put the ECB in its place, while fear prevents its victims from leaving. So much for the European dream.


Steve said...

You cant as the Germans will soon realize get blood from a stone. Greece will default sooner than later.

The Mound of Sound said...

No question, Steve. The conditions that prescribe default are at the heart of Merkel's demands. Radicals, such as Golden Dawn, won't pass up the opportunity Merkel has laid at their feet. I wonder how long before the generals return to rule Greece.

Kirby Evans said...

I can't help but think that, given the strange history of these events in the past few weeks, that the Greek president has attempted to set up a failure. I can think of no other reason for holding the referendum and then promptly capitulating this way. He really had nothing to lose so why else let Germany dictate these terms? We used to call it revolutionary defeatism. If the Greek let this stand in the long run then the left really has little to complain about. It is now in the hands of Greeks to stand up and refuse to let their country be sold off. And perhaps Tsipras is hoping for a genuine leftist rebellion.

Dana said...

Angela's just finishing off what Adolf began in April of '41. These things take time.

Maybe the Berlin wall wasn't a bad idea after all.

Purple library guy said...

I've heard it suggested that Tsipras was actually expecting the Greek people to be successfully intimidated and vote "Yes". Then he could have resigned over it and the coming debacle, which he saw no way out of, wouldn't be his fault.

Anonymous said...

You have forgotten to mention the Greek Government will also have to deal with a Neo-Nazi Opposition. That was mentioned on BBC late last evening. The EU is a war zone. Germans will never be whipped as far as they are concerned. Submitted.....Anyong

The Mound of Sound said...

@ Kirby & PLG - there's no end of speculation as to what Tsipras was expecting out of the referendum and whether he was caught unprepared by the decisive "no" vote. Who can say? I haven't seen anything to support these theories?

@ Anyong - no, I haven't forgotten Golden Dawn. I've written about them in these posts arguing that, to them, Angela Merkel might be manna from heaven. Greece has a fairly recent history of radicalism and unrest which, I suspect, could lead to yet another military government for Athens. How many countries can endure this degree of subjugation and humiliation without some radical faction arising in response? The Troika, especially Merkel, overplayed their hand. Their goal was to compel and thereby safeguard European unity against the perceived threat posed by Greece, Spain, Portugal, Ireland and Italy yet the tactics they've chosen to implement could easily prove counter-productive, self-defeating.

Greece will leave the Eurozone because the Troika has imposed on it a deal so draconian Athens will never be able to afford to stay in.

Anonymous said...

I agree.