Greece set to sail on a new odyssey
All eyes will be on the referendum in Greece on Sunday, assuming it’s still on, when voters are to say yes or no to the terms set by Europe and the International Monetary Fund for continuing financial support. The implicit question, which no members of the European single currency are allowed to ask, is whether Greece stays in the eurozone.
The Greeks went down to the wire on Tuesday night when the left-wing government of Prime Minister Alexis Tsipras failed to make a €1.6 billion repayment due to the IMF, a default that in theory could trigger demands for immediate repayment of the €240 billion in bailout loans Athens has received since 2008, after the global financial crisis revealed the government had been fudging its national accounts for years. A further deadline comes up on July 20, when €3.46 billion is due to the European Central Bank.
It’s come to this after Tsipras baulked at the demands by the Europeans and IMF for further economic stringency. The demands include a heavier value-added tax, raising the pension age to 67 by 2022, and cutting out a top-up payment to many existing pensioners.
Since accepting the bailout, the Greeks have already got their budget into a narrow primary surplus, a positive balance before debt service. But the price has been a 25 per cent contraction in the size of their economy, and 26 per cent unemployment. This has helped push the €323 billion public debt to some 177 per cent of gross domestic product. The terms for continuing bailout aim at creating a 4 per cent of GDP surplus to pay down this debt over 30 years.
Not surprisingly, a lot of Greeks wonder what will be left of their economy and society after three decades of austerity, given what has happened in the past five years. But with banks shut this week, they’ve had a taste of the immediate prospect of saying “no” and Tsipras himself has wavered. The alternative is that the purist econocrats of the ECB and the IMF accept a restructuring of the Greek debt, essentially to give Athens a long repayment holiday if not formally writing off some of the loans. The Germans hate the idea, and many clearly want the Greeks to vote themselves out of the eurozone. But debt relief has been the obvious solution for many months, urged by economists such as Nobel prize winners Joseph Stiglitz and Paul Krugman, though opposed by the lenders on the usual moral hazard and contagion grounds.
Krugman for one is urging a “no” vote in the referendum and arguing that a Greek exit from the eurozone would not be a bad thing, allowing Greece to restore economic growth through a floating drachma instead of staying in the “straitjacket” of the euro. As he points out, the euro was a bad idea from the start and countries such as Britain and Denmark have done well by staying out. It was a political-strategic step rather than an economic one.
That may be what keeps Greece in the eurozone, even with a “no” vote in the referendum. As Tuesday’s deadline passed, French President François Hollande was canvassing a new compromise proposal to include new money to stimulate investment in Greece and boost economic activity, and − yes − debt restructuring. Barack Obama has been urging on Hollande in phone calls this week.
Strategy is behind this effort to shore up the dubious euro project. Obama and Hollande are worried about the widening scope for Russia’s Vladimir Putin to stir up disunity in Europe and splinter resistance to his push
to re-create a zone of influence in Eastern Europe and the Eastern Mediterranean.
Tsipras has been a frequent visitor to Moscow and Leningrad and his Syriza party has received Russian funding. It’s not its left-wing ideology that attracts Putin, just its potential to take Greece out of the European mainstream and make it open to influence.
Indeed, Putin’s Russia has more in common with the far right of European politics, and is developing connections at the other end of the Greek political spectrum.
The neo-fascist Golden Dawn movement was among seven European extremist parties represented at the International Russian Conservative Forum hosted by the right-wing Russian party Rodina (Motherland) in St Petersburg in March, guarded by whip-wielding Cossacks at the door.
The current deputy prime minister, Dmitry Rogozin, was a founder of Rodina. The organisers said the forum was to unite European and Russian conservative forces “in the context of European sanctions against Russia and the United States’ pressure on European countries and Russia”. As several commentators note, it’s a cast of “useful idiots” for the heirs of Lenin.
In France, Marine Le Pen’s National Front got a €9 million loan from the Moscow-based First Czech-Russian Bank last November. According to the French news website Mediapart, which got hold of about 1100 pages of text messages by Le Pen, this was the first instalment of €40 million in total to be provided to the anti-European Union candidate ahead of the 2017 presidential election. Le Pen said it was insane to conclude this was the reason she endorsed the results of last year’s referendum in Crimea that backed Putin’s annexation.
Tony Abbott got his bachelor of economics from Sydney University long before the Greek finance minister Yanis Varoufakis lectured in economics there, but he’s steadily reverting to the Menzies-era nation-building mentality of his mentor B. A. Santamaria that some of his drier colleagues would be inclined to call socialism if it showed anywhere else.
He was in Singapore this week in large part to drum up investment in his $6 billion scheme to unlock development in northern Australia by building transport links, a traditional focus of nation-builders for decades and sink for billions of dollars in loss-making projects.
At least Julie Bishop has got in quickly to push ahead another national-interest project on the back of this revived “develop the north” enthusiasm. She’s used it to widen the scope of the seasonal worker program, which brings people from the Pacific islands and Timor-Leste into Australia to fill labour shortages in fruit-picking. Canberra will now remove the annual cap on places in the program, expand to the broader agriculture industry, include the hotel sector, and trial placements in other tourism operations in the north.
Though fraught with danger of exploitation from the many spivs involved in contracting rural labour, the scheme is a valuable way of channelling cash earnings to otherwise subsistence households in the islands, without it being siphoned off by inefficient or corrupt governments. For the most part it is used for education, building cyclone-proof housing and opening small businesses. Bishop has really “got” the Pacific, it seems. •
This article was first published in the print edition of The Saturday Paper on Jul 4, 2015 as "Greece set to sail on a new odyssey". Subscribe here.