How to wake Britain from sleepwalking to the EU exit

How to wake Britain from sleepwalking to the EU exit

How to wake Britain from sleepwalking to the EU exit

Written by Charles Grant, 07 March 2012
From Europe's world


Download: grant_europesworld_march12.pdf
 

Hollande takes campaign to London

Hollande takes campaign to London

Hollande takes campaign to London

By Charles Grant, 29 February 2012
From Financial Times

Pressure and tact are the right response to Victor Orban

Pressure and tact are the right response to Victor Orban

Pressure and tact are the right response to Victor Orban

Written by Balázs Jarábik, 23 February 2012

Viktor Orban's FIDESZ party won a constitutional majority in the Hungarian parliament two years ago on a promise of purging the country’s politics of the remnants of communism. The prime minister had a point: unlike neighbouring Central European states, Hungary had moved from communism through compromise, not revolution, so many of the old system’s worst traits including rampant tax evasion and addiction to debt have been preserved or worsened. When Orban promised to “complete regime change”, he had the backing of most Hungarians, even if many suspected the prime minister’s political instincts, and worried that he lacked a clear programme and a team with the expertise to reform the country.

Two years later, Orban is in open conflict with his country’s opposition and much of the West. Critics hold him responsible for a series of confusing, counterproductive and sometimes contradictory economic measures, such as the de facto nationalisation of the private pension system. They also suspect him of trying to build a one-party state. The EU, too, is alarmed, and the European Commission initiated court proceedings against Hungary, chiefly over measures that curb the powers of the country’s central bank. But the West should resist the urge to isolate Viktor Orban, as it does with Belarus’ Alexander Lukashenko. Orban has genuine support from the majority of Hungarians, who believe that the country is on the wrong track and needs deep reforms. While many of the prime minister’s steps have been undemocratic, Orban has proven to be a pragmatist, capable of adjusting course. The EU’s goal in Hungary should be to steer his government away from damaging undemocratic ideas towards needed reforms.

Orban inherited a country in terrible economic and political shape. The brief period of reforms of the 1990s improved living standards, brought in foreign investment and generated some growth, but not enough to repair the country’s finances. The Socialist government that immediately preceded Orban's increased debt from 53 per cent to 80 per cent of GDP during eight years in power – this was before the economic crisis, so the growth in debt cannot be attributed to Keynesian measures to stimulate the economy. Shortly after Orban had assumed power, the global economic crisis hit Hungary hard, eroding the value of the forint and plunging thousands of holders of foreign-denominated mortgages into insolvency.

Orban's response, similar to that of other governments west of Hungary, has been to protect the middle classes from the effects of the economic crisis, and to find a better economic model for Hungary. He sees that Europe is in a profound crisis, and is trying to make the economy more 'national', less dependent on outside investment (that is why the prime minister imposed one-off taxes on mostly foreign-owned big banks). In foreign policy terms, Orban sees Hungary as firmly within the EU and the West; he is no Vladimir Putin. The prime minister simply thinks that Hungary needs to be more self-reliant, as the West is facing tremendous challenges. Orban assumes that the EU’s influence – and possibly its borders too – will be shrinking for the foreseeable future, so he is trying to position Hungary for existence in a buffer zone, outside Europe’s core and close to its eastern fringe. He would like to have a stronger Central Europe, but the Poles reserve their time and attention for the Germans and the French and ignore Hungary. Orban, for his part, ignores Slovakia, another natural would-be partner, preferring to act as spokesman to the latter country’s large Hungarian minority rather than a partner to the Slovak government.

The trouble with Orban’s reforms is that, good intentions notwithstanding, many have been wrong-headed. Economic measures such as the de facto nationalisation of private pension funds or ‘windfall’ taxes on banks have scared foreign investors without renewing economic growth or reducing the country’s large debt. Given that the Hungarian economy greatly relies on exports to the rest of the EU, Orban is bound to fail to completely insulate it, and it is probably fruitless to try. Moreover, the prime minister is deliberately shirking from taking the necessary measures, which would be required to make Hungary truly self-reliant. He should be making serious budget cuts to reduce dependence on foreign lenders. But while Orban has made some savings by reducing the number of public servants and the defence budget, most of his energy is spent elsewhere, such as on forcing the banks to allow the middle classes to repay foreign currency-denominate mortgages at rates below market ones.

Besides a dubious list of priorities, Orban also has a profoundly undemocratic tendency to equate his own government and party with the state. FIDESZ thinks and acts like a clan; it is suspicious of other parties and opinions and seeks to minimise the opposition’s input into law-making, using expedited procedures to pass laws even though FIDESZ holds a comfortable two-third majority in parliament. The EU has rightly criticised him for curbing the freedom of media and packing government institutions with party cronies. Critics worry that in addition to finishing the ‘revolution’ by reforming the economy, Orban has also chosen to cement the power of his party, where his control is unquestioned, over democratic institutions.

But the EU and Orban’s domestic opponents need to tread delicately. FIDESZ’s policies are deeply rooted in the Hungarian society, and Orban remains one of the few Hungarian politicians with a vision of how to reform the state, even if it is in parts dangerous. Indeed, while voters have grown dissatisfied with Orban’s conduct, support for the opposition has barely increased. Hungarians are unhappy with the prime minister’s implementation of policies rather than his broad goals. They want Orban to do better, not necessarily to go.

The European Union’s best response to Orban’s excesses is to ‘play the ball, not the man’: to make a principled argument against those policies that deserve criticism, not to attack the prime minister personally. Orban is fundamentally a pragmatist. Behind the bluster hides a man capable of adjusting course, even if he never states so openly. Upon heavy European criticism, Hungary’s constitutional court annulled some provisions of the media and criminal procedure laws, because “certain passages in the laws contravened the constitution and international agreements”. The government also withdrew its controversial law on religion before the Constitutional Court could decide on its legality. The constitution will almost certainly be amended again to avoid a showdown with the European Commission over independence of the Hungarian central bank. Although the FIDESZ public relations machine hailed these changes as great victories, they were above all retreats. And they suggest that Orban will respond to pressure, as long as he is given the possibility and time to ‘save face’. The reverse is also true: the more the EU attacks Orban personally, the more each policy change looks to the Hungarians as a defeat for the prime minister, and the less incentive Orban has to compromise.

EU countries must also take care not to overstate their case lest they fuel nationalism and euro-scepticism in Hungary. The policy of giving passports to Hungarians living outside the country is a good example: some EU countries such as Slovakia (though not the EU institutions) criticised it. They should reconsider. The policy is not necessarily against European law; Romania practices it and Poland has introduced the Polish card for its minority. Until 2005, Slovakia too gave passports to people even if they did not reside in the country.

The EU governments and institutions are right to devote so much time and energy to Hungary: of all EU countries, Hungarian democracy seems most imperilled. The EU’s best way to check Victor Orban’s undemocratic tendencies is through principled and well informed pressure. But it needs to handle Hungary with care: if it attacks Orban personally, the EU risks losing influence over the prime minister, with Hungary sliding into certain isolation and possible poverty. That would be a terrible outcome for the country, its neighbours and the European Union as such.

Balázs Jarábik is associate fellow at FRIDE; he also heads the Kiev office of Pact, Inc., an NGO supporting civil society and media projects in Eastern Europe.

Comments

Added on 24 Feb 2012 at 12:50 by Anonymous

When Fidesz won the elections in 2010 I reluctantly supported Viktor Orban's bid for power as he seemed the only credible alternative. Moreover his eight years spent in opposition and as vice-chairman of the EPP heightened my hopes that he understands how the EU (and the world) as well as capitalism works.
I was telling my more doubtful friends that all Orban needs to do is "not to f...k up his economic policies".
Well, he did exactly this.

1) State debt could have been reduced through a balanced budget and lower CDS won by a more credible/trusted government. There was no need to reach for pension savings for this.

2) I would have nevertheless supported nationalisation of private pension savings if the proceeds would have gone to finance the one-off costs of much needed (and well thought-through) structural reforms.

3) Banks can and should be taxed. But this should not cut excessively into returns on invested capital (less capital owners will shut the tap).

4) Fidesz and Viktor Orban had a huge momentum in 2010 to build bridges within the Hungarian society as they not only won the elections but also managed to destroy every other political force. The vacuum could have indeed been wisely filled by the constructive extension of a friendly hand. Instead he went into a authoritarian attack against perceived enemies, which raised an anarchist opposition from all sides of society 8effectively loosing the once-in-a-lifetime opportunity to unite).

5) Rejecting constructive critics (even from the right), such as Gyorgy Kopits, Tamas Mellar, Attila Chikan, Akos Peter Bod, Peter Heim, Laszlo Csaba and many more, not to mention those well meaning and experienced, yet admittedly not rightist people like Laszlo Bekesi, Andras Vertes, Peter Rona. Locking out criticism means also that the frequency of the only (talk)radio station providing space to voices criticising the government, Klubradio, was re-advertised as a music-radio.

6) Removed thousands of civil servants from their jobs to be replaced by people, who have never proven themselves; samples w/o a desire to be exhaustive: Pal Volner, Laszlone Nemeth, Gyorgy Matolcsy, Laszlo Csefalvay, the four appointed to the Monetary Council...
I refrain from naming those individuals, who work in lesser positions and are not considered public figures, but believe me I could name quite a few.
These personnel choices are even more difficult to understand as the intellectual elite of Hungary stood behind Fidesz to the greatest proportions, hence Viktor Orban had a unique chance to really choose the best of the best for every position.

I just hope that the article is right and Viktor Orban will (i) prove to be as flexible as suggested, while (ii) continuing to command a majority support among the electorate to implement what he must.
I am very afraid that the inadequate qualities of his team and the lack of feed-back (constructive criticism) will cause his demise and the rise of Jobbik, much like that of Ferenc Szalasi in 1944.

Added on 23 Feb 2012 at 18:06 by Elle Dale

Mr Jarábik’s remarks are certainly more balanced than the media-hoopla flood of Hungarian Government-hating articles has been. But then, this writer preserves the mainstays of that hoopla:

1. economic management: ‘Economic measures such as the de facto nationalisation of private pension funds or windfall taxes on banks have scared foreign investors without renewing economic growth or reducing the country's large debt.’

- In fact, these measures did reduce the country’s large debt significantly. Then, there was a massive, unexplainable attack on Hungary’s currency, which wiped out that reduction. Since that attack stopped, the debt-reduction is again showing. But, as we all know, the currency attack will come again, with the naked purpose of showing that debt must be increased, not reduced, on the IMF credo. Unfortunately, the Orbán Government cannot control that.

- ‘the defacto nationalisation of private pension funds’: Are you sure, Mr Jarábik, that this move did not forestall the disappearance into black holes of private pension funds? (That is not an uncommon event in Western economies, is it?)

- ‘windfall taxes on banks’: Is that really bad? Can banks not be taxed? Why?

- ‘forcing the banks to allow the middle classes to repay foreign currency-denominate mortgages at rates below market ones’: What would the alternative have been: allowing foreclosures by banks in which they repossess people’s homes? As it is, banks are being required to take their share of responsibility for the foreign-currency mortgage packages they peddled to the public. And a new legislation that will prevent the evictions of below-middle-class income people who cannot meet their mortgage payments is in the offing. In other words, banks in Hungary will not benefit from the sub-prime mortgages trick, nor will people suffer for it. Is that bad?


2. The ‘undemocratic’ hoopla: ‘FIDESZ … is suspicious of other parties and opinions and seeks to minimise the opposition's input into law-making …’. You surely know, Mr Jarábik, that all parliamentary opposition parties other than Jobbik refused to participate in the committee discussions that preceded the acceptance by parliament of the Constitution? So how is it that Fidesz is seeking ‘to minimise the opposition's input’?

- ‘using expedited procedures to pass laws’: I have not seen any procedures other than the regular parliamentary ones. Have you?

3. The Media Law curbs media freedom: ‘The EU has rightly criticised him for curbing the freedom of media …’. Neither the EU, nor you, Mr Jarábik, has ever given a single instance of what freedoms are supposedly curbed. You a certainly aware that the government was free, under the old media law, to shut down any arm of the media it chose, without explanation. Now, that did work robustly as a kerb on the freedom of the media. The new Media Law is administered by the Media Authority, an independent statutory body of which the members are appointed by parliament, not by the government. The Media Authority cannot, by law, take it upon itself to censure an arm of the media. Its power is restricted to investigating complaints from the public about a media outlet’s breach of the Media Law. Should it find a breach, it can refer the matter to a court of law. There is not a whiff of media freedom curbed by this arrangement of the law. The very opposite is true.

4. ‘…and packing government institutions with party cronies’: Now, this is a scurrilous accusation that you back as ‘rightly criticised’ by the EU. Both you and the EU should point to at least a few government institutions where a ‘crony’, and not a competent person, is in charge. Your accusations hold bile, not water, otherwise.

But you are right that the EU will have to tread more delicately, for the sake of its own survival. The buffoonery that has been in evidence there lately sounds very much like its own death rattle.

Added on 23 Feb 2012 at 12:04 by Liz

I disagree. Orban is doing not backing down. He is making the smallest changes to a series of outrageously anti-democratic laws, doing the bare minimum to make the EU think that he is playing ball.

The list of moves to reverse the democratisation of the past twenty years is long. These have been catalogued in the blogs of Kim Lane Scheppele hosted by Krugman. I won't repeat the content of those here. But she does nothing more than state the facts. And the facts are outrageous. Orban has ridden completely roughshod over the rather sound Hungarian constitution and democratic order that was put in place at the beginning of transition. The opposition has been completely excluded from the parliamentary process. The most obvious evidence of this was the late December change to parliamentary procedure so that it is no longer necessary to debate new laws. Orban can wake up in the morning with a new wacky idea and it is passed by the evening.

It is not clear to me that he has the support of the majority of Hungarians. People have reactivated their communist-era instincts and are afraid to talk politics at work. So many people have been purged from their jobs that there is a real fear that to do anything other than toe the line in public will have immediate consequences.

I agree that the opposition is weak and lacks credibility. But it is becoming impossible for a new opposition to emerge because FIdesz controls everything that might be a check on its power. Fundamentally, it is now extremely difficult to throw Orban out. That is in my view a complete perversion of democracy. And allowing him to save face over minor retreats simply legitimises his mission.

Austria far right leader hurt by "new Jews" comment

Austria

Austria far right leader hurt by "new Jews" comment

06 February 2012
From Reuters

Link to press quote:
http://www.reuters.com/article/2012/02/06/us-europe-austria-strache-idUSTRE8150UD20120206

Greece's real challenge

Greece's real challenge

Greece's real challenge

Written by Katinka Barysch, 03 February 2012

The German idea of sending Athens a ‘budget commissioner’ was daft. Berlin itself could not tolerate such interference in its fiscal sovereignty (the constitutional court would never allow it). But to restrict such budgetary oversight to Greece alone would be disdainful and a political non-starter. The idea predictably caused outrage in Greece. Chancellor Angela Merkel has quietly dropped the proposal but the underlying problem persists: Greece’s donors – not only Germany but also other EU governments and the IMF, no longer trust Greek politicians to turn their country around.

Greece desperately needs a deal on a new bail-out package before March 20th when €14.4 billion in debt repayments are due. The IMF and eurozone governments insist that new money will only be forthcoming if there is a realistic prospect of Greek debt becoming sustainable in the foreseeable future. The IMF says that ‘sustainable’ would mean a debt level of 120 per cent of GDP by 2020 – although most economists think that 60-80 per cent is the most that a weak economy like Greece could cope with.

Even to reduce the debt level to 120 per cent from the current 160 would require a deep cut in existing debt, more fiscal austerity, lots of further outside help and a return to economic growth. Media attention has focused on the debt restructuring talks between Athens and it private creditors. But for Greece’s future prospects, the question of whether bond holders get 3.8 per cent or 4 per cent interest on their restructured portfolios is insignificant compared with the much bigger question of whether and when Greece emerges from its devastating recession.

There is now broad agreement among eurozone donors and the IMF that Greece will not be able to squeeze more revenue out of an economy that is in its fourth year of recession. The IMF forecasts GDP to fall by a further 3 per cent this year but private sector forecasters, such as the Economist Intelligence Unit, think that the economy may contract at twice this rate. In 2010, Greece went through the most savage austerity programme ever implemented by an OECD country. Yet the budget deficit at the end of 2011 stood at around 10 per cent of GDP, so adding to the already unsustainable level of debt.

The emphasis of Greece’s negotiations with the troika (IMF, ECB and European Commission) has shifted to structural reforms designed to boost growth. The good news is that there is lots of room for improvement: by many measures, Greece is the EU’s least efficient economy. The National Bank of Greece has calculated that a comprehensive reform package could boost the annual growth rate by 1.5 per cent over the medium term, although the OCED thinks an additional 0.5 per cent is more realistic.

The previous government of George Papandreou started making headway in various areas, for example by removing some of the protection enjoyed by truckers, lawyers, pharmacists and 140 other ‘closed shop professions’, by simplifying licensing procedures, making life easier for small businesses or giving workers and their bosses more wiggle room to set pay and conditions in Greece’s over-regulated and union-dominated labour market. Papandreou’s technocrat successor, Lukas Papademos, has continued along those lines.

The bad news is that most of these reforms so far only exist on paper – and even here they are often timid and riddled with loopholes. In many cases, the biggest obstacle to real progress is Greece’s bloated and inefficient state administration. According to an OECD analysis published in December, the central government is simply not capable of designing and implementing the growth-boosting reforms that Greece so desperately needs.

The ILO counts 390,000 civil servants in Greece. But add the 660,000 working for public corporations and other semi-state entities and the number swells to over 1 million – more than one-fifth of the workforce. Even that number may be too low since there are all manner of quasi-civil servants on outsourced or temporary contracts who enjoy similar pay levels and perks as full civil servants.

For many years, public sector salaries had outstripped those in the private sector; before the crisis they were on average 60-70 per cent higher. Public sector workers also enjoyed plenty of extra benefits, in addition to job security. Since the onset of the crisis, labour costs in the public administration, defence and social security have fallen by about 6 per cent, according to Greece's National Institute of Labour. In some parts of the private economy, such as hotels and restaurants, labour costs have fallen by 30 per cent. And unemployment has predominantly hit the private sector, too. “The real conflict is not between Greece and its donors. It is between the public sector and the rest of the population”, says one Athens think-tanker.

The troika demanded early on that Greece shrink the public sector by only replacing one of five of those retiring. But between early 2010 and mid-2011, the government added 20,000 people to the public sector payroll (which still amounts to 13 per cent of GDP). Now the troika insists that the government get serious about cutting the headcount by up to 150,000 over the next three years.

The December OECD report found that the main problem with Greece's state administration was not its size but the fact that it adds too little value. There is little sensible policy-making because ministerial bureaucracies do not collect or use data on which to base their policy designs. Moreover, ministries communicate badly with each other, if at all. And even within ministries most departments work in “silos” – they produce rules and regulations without much of an idea how they fit into any broader policy plans. The average Greek ministry has 440 different departments or administrative units. One in five of these do not have any staff other than the head of department and only one in ten have 20 staff or more. The central government alone is spread over 1,500 different buildings.

The OECD also found that civil servants care little if new rules and policies are implemented, monitored and enforced. The result is a state administration that is top-heavy, inflexible, obsessed with process and is basically busy having “a conversation with itself”, as the OECD puts it. Having watched the government’s laboured efforts to improve matters, the OECD now thinks that only a “big bang” reform could give Greece a public administration capable of planning and implementing meaningful change.

Similarly, a white paper that came out of a brainstorming at London Business School last year suggests that in some government areas a completely new start is needed. The most urgent is probably the tax administration. The authors of the white paper (Michael Jacobides , Richard Portes and Dimitri Vayanos) are sceptical whether the cronyism and corruption that pervades local tax offices can ever be tackled. Although the government has told its tax collectors to get tough on evaders (some €60 billion in taxes are outstanding), many have simply failed to heed orders to, for example, conduct audits on big tax debtors. Even former finance ministry officials admit that Greece would probably be better off to abolish the 300 local tax offices because they cost more than they collect. Instead, Greece should set up an independent central tax and social security collection agency.

The white paper suggests similar independent bodies in other areas: buying medicines and equipment for the healthcare sector (here, Greece’s spending per head has been the highest in Europe for many years); public procurement more generally (public contracts amount to 11 per cent of GDP but it takes on average 230 days to award such a contract); a corruption watchdog (although graft appears to be declining, according to Transparency International, one in ten Greeks said they paid a bribe in 2010, with public hospitals and tax inspectors being the most greedy); and a central steering group to supervise structural reform – a proposal also dear to the OECD’s experts.

Such independent bodies could potentially be established quickly and make a noticeable difference. However, the few new bodies that the government has so far set up, such as the privatisation agency and the parliamentary budget office, have been woefully understaffed. And they have encountered much political resistance when trying to carry out their assigned tasks.

Greece’s donors know that there are no quick fixes for the country’s deep-seated malaise. But they no longer trust the political class to carry out a sustained reform programme. Both big parties, Papandreou’s social-democrats (Pasok) and the conservative New Democracy, draw much of their support from public sector workers and other molly-coddled groups that resist change.

The new ‘technocrat’ government will hardly make a difference: Papademos has been given only five months before the next election is due. And unlike Mario Monti in Italy, who was free to fill ministerial posts with experts and other non-political types, Papademos is lumbered with 45 cabinet ministers, most of whom are career politicians from Pasok and New Democracy.

EU politicians now insist that all party leaders must commit to the new troika reform programme beyond the April election. But both Pasok leader Papandreou and New Democracy’s Antonis Samaras are opposing chunks of the troika programme while suggesting that there is an easier way out of the crisis than radical reform.

The negotiations for the new support programme are a good opportunity for a new deal: the troika eases demands for rapid fiscal consolidation and finds additional money for growth-boosting investments, for example from Greece’s €15 billion unspent EU funds or the EIB; Greek political leaders, in turn, get serious about public sector reform and opening up the economy. Ultimately, only the Greek people – not any kind of outside watchdog – can hold the country’s often self-serving politicians to account. To help the Greek people, Greece’s donors must make a bigger effort to improve their image in Greece and explain to the Greeks what needs to be done to put the country on a sustainable growth path.

Katinka Barysch is deputy director of the Centre for European Reform.

Comments

Added on 23 Feb 2012 at 00:21 by Artemis G.

(cont.)

While detailed, your analysis does not appear to consider that with unemployment already over 21% and over 350,000 expected to add to that figure, the state will have to either honour its obligation to pay out unemployment benefits or let those people starve. What’s more, these figures exclude the self-employed (most of whom are not entitled to benefits and thus never appear on the Greek jobcentres' registers), so the real blow to the economy is probably far worse.

These data (which will become far bleaker when/if Greece defaults) suggest to me that even an ideally organised taxation system will have far fewer taxes to collect, either from (the non-existent) salaries or from business transactions and VAT. And that’s nothing to do with inefficiency, it’s to do with recession.

There's a lot of preaching, especially from some German quarters, about the evils of tax evasion and how these led to Greece's plight single-handedly. Again, while tax evasion has always been a major domestic problem, it is ridiculous for anyone to suggest that the crisis would have been averted if only the estimated 30-40% of the shadow economy (as a % of GDP; source: Hellenic Foundation of Enterprises
http://www.sev.org.gr/Uploads/News/PR_forologiki_pragmatikotita_041109.pdf) had been brought down to the European average. If the shadow economy alone is an indicator of the kind of nightmare Greece is experiencing, Europe ought to brace itself for a deluge of crises: if you check OECD figures, they show at least another 9 European countries with higher levels of shadow economy than Greece (and not exactly commendable levels of debt).

While we're at the shadow economy, I see no mention of the roughly 700,000 immigrants (source: http://www.oecd.org/dataoecd/6/34/45627967.pdf), of whom at least 200,000 are estimated to be illegal, while 50% of the lot, whether legal or illegal, are estimated to be illegally employed.

Leaving humanitarian issues (of which there are many), as well as the question of whether employing immigrants is an act of exploitation or compassion aside (it depends entirely on the circumstances, and you'll find both extremes), the fact is that there's another big chunk of the population who contribute nothing to the state coffers and who, out of necessity, accept work for far less than the standard rate for a job – rates that most Greeks found disgraceful, and rightly so. A tricky subject: employers who reject immigrants and prefer the more ‘expensive’ Greeks are likely to be accused of racism; employers who hire immigrants for less, thus barring Greeks (unless the latter are prepared to work for much less than what they used to), clearly contribute to the problem.

I’ll agree with everything you rightly brand as negative and anachronistic. But none of it explains why the influx of so many billions in the form of bailouts plunged Greece into a far worse crisis than before. If tax evasion, state incompetence and half-baked reforms were indeed the chief causes, the cash in those bailout packages should have at least slowed down the pace of the recession. But it hasn’t.

I don’t see how the same old cronyism, sluggish state mechanisms etc., plus several billions of euro equal a far deeper recession. There’s a factor missing from that equation, and, judging from the data and the pattern so far, the factor that made the crucial negative difference must lie in the design of the austerity measures, and the inflexible insistence of the Troika that more of the same will not only stop, but reverse the Greek crisis.

If this assessment is fair, the only thing that could halt the crisis is a radically different approach, with the emphasis on money invested in infrastructure, not in bailouts for bankers; with incentives and means for growth and, yes, with practical support in the shape of reliable, experienced advisers and auditors (German, Irish, Greek; nationality shouldn’t matter) who can help supervise the implementation of projects, not watchdogs imposed by the Troika to police Greece.

Added on 08 Feb 2012 at 09:54 by Nicolas Véron

Thanks for this excellent piece. The irony of it is that you start by calling the German “Komissar” proposal daft, and then go on explaining why it is utterly relevant – the Greek state needs restructuring and the Greeks themselves cannot do it, so the lenders must take the lead. You may stop short of endorsing the Komissar concept but you eloquently give the rationale for it. Or is there something I misunderstood?

Kind regards,
Nicolas

Added on 06 Feb 2012 at 13:15 by Anonymous

I would sign and confirm ANY of Anastasia's words....
The clue is that the EU has given so much money to these hotel owners and tourist agencies while the employees are treated and paid very bad - not to speak of the many illigal workers from Bulgaria, Romania or Albania in these hotels ....

Alexia

Added on 06 Feb 2012 at 13:12 by Anonymous

Having lived and worked in Greece for a while I have realized what a mess it it. That mayors, public servants and bankoffice staff consider normal citizen and normal employes a inferior. Many people still have a "humble" approach towards civil servants, they do not question anything. Furthermore there is no will to unite or stand up against the currupt circles nor to get engaged in united groups like in other countries. Ignorance is huge - the word "ti na kano?" (What can I do?) was and still is common. The owners and renters of properties, hoteliers, business keepers like lawyers, doctors, architects, the orthodox church with it's riches, the yacht-owners, the Greeks who got rich in Australia or America - they do not want to know have what really is going on politically and socially.
It is pure chaos, disaster and to live from one day to the next - with no actions taken to change the misery. Only words and trashing the European money lenders!

Allexia

Added on 06 Feb 2012 at 12:43 by Antaeus

This is basically a collection of good samples of the information out there on the web, with a very strong analytic focus. Keep the pressure on, there is no way the Greek government can malign your institution as biased! We got so annoyed with Greek government inaction that we started a site last summer, called Reform Watch Greece. Google it if interested. Our main question though, is why the Troika allows this kind of deception re true reform to continue while the funding flows....

Added on 03 Feb 2012 at 15:03 by Istanbul academic

I read your "Greece" paper. I greatly enjoyed and learned from it. It was very informative but also scary. The Greeks have really painted themselves into an impossible corner economically and financially. Yet, more and more I feel that the Sultan's Turkey though might be doing better economically and financially is fast painting itself into a most undemocratic and repressive corner in a supposedly democratic room. This morning in Radikal I read how students are getting penalized by university administrations heavily for the simplist things like putting up a poster for a film festival of Yilmaz Guney films, if university students are fast losing their freedom of expression imagine where the rest of the society will heading for. I sometimes wonder where one is better off, in a Greece where the Greeks have long enjoyed their freedom of expression but suffer financially or in a country where freedom of expression is fast fizzling away but the economy is doing Okish but just OKish...

Added on 03 Feb 2012 at 14:58 by K Bledowski

This is a sobering account.

The author is right that "ultimately, only the Greek people – not any kind of outside watchdog – can hold the country's often self-serving politicians to account."

The snag is how to do it. How can the Greek people hold the politicians to account when their political survival depends on the status quo - and that status quo appears to be the top priority of the strongest of the corporatist interests? In other words, what incentives would move both sides to adopt the painful reforms? Clearly the implied threat of a default has not concentrated minds, yet.

Added on 03 Feb 2012 at 11:12 by Anastasia

Everything you say is right and pretty much accurate.These problems are well-known for decades.The only thing everyone seems to only mention in passing is the outrageous conditions for private sector employees in Greece.As you mention in your article,the public sector offered a much better quality of life to its employees when private sector workers enjoyed little and sometimes were obliged to support whole familes with salaries not exceeding 1000 EUR/month in a country that has become too expensive particularly after it joined the eurozone.
What I'm saying is that a way to "restructure" Greek economy is to create and enforce a legal framework obliging big private sectors employers to offer decent salaries and benefits to their employees.It is well-known for example that while the tourism industry is doing relatively well even in times of crises,people employed therein earn very little and there have even been cases where they were not paid for six months!Meanwhile,the owners of big hotel chains were enjoying their profits,only paying big slaries to their own,aka friends and relatives employed in positions they have neither the qualifications nor the skills to perform.

Added on 03 Feb 2012 at 10:52 by Georgios

Congrats! A pragmatic overview of the Greek case!

Merkel and Sarkozy forge unlikely - and unequal - partnership

Merkel and Sarkozy forge unlikely - and unequal - partnership

Merkel and Sarkozy forge unlikely - and unequal - partnership

By Charles Grant, 27 January 2012
From Deutsche Welle

Link to press quote:
http://www.dw-world.de/dw/article/0,,15665746,00.html

Nicolas Sarkozy – the view from Britain

Nicolas Sarkozy – the view from Britain

Nicolas Sarkozy – the view from Britain

By Charles Grant, 25 January 2012
From The Guardian

Link to press quote:
http://www.guardian.co.uk/world/2012/jan/25/nicolas-sarkozy-view-britain-profile

Breakfast on 'Europe's future, and Italy's role in it'

Breakfast with Giuliano Amato on 'Europe's future, and Italy's role in it'

Breakfast on 'Europe's future, and Italy's role in it'

24 January 2012

With Giuliano Amato

Location info

London

Event Gallery

Nicolas Sarkozy, au-delà du bling-bling, vu par "The Guardian"

Nicolas Sarkozy, au-delà du bling-bling, vu par "The Guardian"

Nicolas Sarkozy, au-delà du bling-bling, vu par "The Guardian"

By Charles Grant, 25 January 2012
From Le Monde

Link to press quote:
http://www.lemonde.fr/europe/article/2012/01/25/nicolas-sarkozy-au-dela-du-bling-bling_1634163_3214.html

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