This is the man who tried to kill democracy this week:
That's German finance minster Wolfgang Schauble.
Our hope must be that he fails.
If he doesn't we have to admit that we live in a neo-feudal world.
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Explain how he is killing democracy?
Yes a Greek electorate has voted szriza with an anti austerity mandate. However, the mandate is binding only on the Greek government not the German or any other nation providing finance!
If I raise corporate loan finance and the bank issues a set of debt covenants that I need to comply with. If I fail I either need to re-negotiate, raise new finance or face the consequences of the withdrawal of finance. I cannot unilaterally impose terms on the financing bank. What is the difference?
The reasons have been long explained in discussion on this blog
I am not repeating them just for you
Martin,
I can’t blame Richard for his response – there’s only so much one can take, especially when a case has already been made in exhaustive detail.
However, this might assist:
http://www.theautomaticearth.com/2015/02/how-germany-is-blowing-up-the-european-union/
This doesn’t explain the killing democracy meme at all.
Why can’t RM or yourself just explain why Greek democracy is sacrosanct but German democracy must be ignored?
There is not a hint of risk to German democracy on this issue
And not a single politician did, I am quite sure, make it a plank of their election platform
So shall we get real here and address the fact that this is actually about Germany dictating terms to the ECB which is then dictating them to Greece? That is the real issue
That and the fact that the terms dictated have very obviously failed and can only fail and yet are being dictated again. Why is that? Did Germans vote to destroy the Greek economy?
The current phase of the Greek crisis has been where Greece has said to the Germans “The Eurozone was set up with a political fudge that left the Euro without a mechanism for investing internal trade surpluses into trade deficit areas. Now either you can sit and crow pompously like an idiot winning at Monopoly (a deliberately rigged game), or you can start thinking about what is to be done to get this sorted”. Schauble refused to consider the validity of this argument, despite knowing its truth, because the German government has been elected on the lie that Germany did not pool its sovereignty when it went into the Euro. The only way to uphold this lie is to deny democratic rights to losers from the Euro system. The Greeks want the Euro to work more than the Germans do, but in the end, either Germany will lead a real reform, or the Greeks will have to leave. Sadly the only way to leave involves defaults and so it is unlikely the crisis will stop at Greece. Bye Bye the European dream.
Spot on in my opinion
Well, I’ll have a go if it helps…………
Put simply, the current Greek government was voted in on a mandate to end or at least modify the austerity measures being endured by the Greek populace.
The voting was in a democratic election. The new Government said they would try to sort this out.
On the other hand, the aforementioned German Finance minister had (or still has) a stance that insisted that Greece retained its austerity measures.
Schauble is really representing the ECB which as far as I know is a very powerful and opaque organisation that is not as accountable as some of us would like. It is meant to be ‘independent’ of politicians but it remains to be seen if it is independent of politics itself – especially the politics of debt.
So you have THOUSANDS of Greek people using the supposed power of their vote wanting an alternative to austerity and a FEW people in the ECB get together and decide that austerity is to stay.
It is successive Greek governments that have let its people down – not the people themselves.
The people have spoken – and there are many of them – but the ECB wants to pursue its austerity agenda. I agree with Richard that this is a threat to the democracy.
Some will see this as a simple money and debt problem and apply those rules; others (like me) see it as having a much deeper significance.
As the late Tony Benn used to say ‘Where does the power really lie’?
What happens next is likely to polarise the answer to that question.
Finally, allow me to show my anger here – when it comes to the fact that a sovereign nation can be threatened with having its money supply cut off, yet the finance sector was actually bailed out by sovereign governments at huge tax-payer expense in the Euro and other zones from 2008 (and no-one has gone to prison for that mis-management either except perhaps in Iceland maybe) you realise that something is extremely wrong with the balance of power in the world as it stands now. And there is NOTHING democratic about that at all, believe you me.
There you go Martin – I did my best…………..
Thanks
Appreciated
Martin ,the banks lent recklessly. They are supposed to be the experts in assessing risk. They did so knowing that they would supported by the French and German taxpayers. The ECB forecast a dip in Greek GDP of about 5% followed by a rise surpassing 2010 by this year. The Greek GDP fell but over 20% and little hope of recovery.
The banks had to be bailed out in Ireland, UK and Spain -a country which had a slight surplus and low debt to GDP ratios. From this I deduce that the basis on which the pro-austerity people are working is a flawed theory and cannot be reduced to analogies about what an individual would be able to do with his bank. Furthermore, this is a problem which goes beyond Greek indebtedness-which former Greek governments have done much to create, as is admitted on all sides.
From what i understand-and I may be corrected on this-much of the debt has now been transferred from the private banks to the ECB. There are ways this problem could solved or mitigated but they need new thinking which better matches reality. Whether Schauble is unable to think outside the box or is a prisoner of vested interests, i have no idea. What I object to is the probability of the lives of millions of people in Europe-outissde of Greece as well- being blighted and life chances destroyed because a few people wish to preserve their flawed concepts and the shareholders of banks which have contributed to the problem.
The banks did take a cut
But have now passed their risk on
Martin
In order to understand circumstances Greece is now in it is crucial to know the history of the EU bail-out package.
The first measures were imposed in 2010 (without mandate) by the incumbent PASOK Party under George Papandreou, who promised his electorate that a referendum would be held before any further agreements with the EU and ECB. Every opinion poll showed a clear majority against the austerity/bail-out package and realising that a referendum would be lost the Government reneged on its promise.
So unpopular were the conditions of the bail-out that several PASOK MP’s resigned, and several others who refused to vote with the Government were expelled, their places being taken by pro-austerity outsiders.
In the end the passage of the Troika’s reforms became so unmanageable Papandreou was forced to resign.
In what was to all intents and purposes a coup d’etat by the ECB the PASOK Government was replaced with an unelected ‘Government of National Unity’ led by former ECB Vice President Lucas Papademos, whose stated aim was to ratify the agreement with the Troika (again without mandate).
By the time Greece returned (in 2012) to a democratically elected government it was already locked in to the austerity package, without any citizen ever having given their assent.
And then there’s Mr Schäuble…
Wolfgang Schaüble is the son of a German tax advisor, who together with Helmut Kohl was one of the chief architects of a European financial system that benefitted Germany at the cost of all others. Germany’s position of primus inter pares has allowed them to set the rules on European membership. This of course includes the condition that every Nation State must be a member of the single currency, an economic device that in one fell swoop made German exports more competitive, and everyone else’s less. Schäubles intransigence and intractability is based purely on a desire for German supremacy, regardless of the cost to other member states.
Unfortunately, as the unfolding events of the last thirty days have shown it is the ECB (an institution that should operate in the interests of all members) that dances to Schäuble’s tune, not the other way round.
And bear in mind that no matter how ruinous Eurozone membership may prove for an individual member state, no matter if it is plunged into bankruptcy, civil war or anarchy, there is no mechanism for exit (or even the discussion of exit). Germany will simply not allow it.
So what price democracy?
Much the same in Italy, remember
Many thanks to those who have offered explanations.
It looks like Richard does not want to promote new readers to his blog who have not read preciously published material. Richard also seems to be overly aggressive with those who are either new readers or have a different opinion.
I recently heard Richard debating tax avoidance on Radio 5 and I sensed a similar aggression when listening.
As a new reader to Richard’s blog I feel that to maintain influence you need to welcome all and engage with all rather than taking an aggressive stance.
The tone on Radio 5 was indignation at being faced with a man who openly said he was happy with tax evasion
What would you expect me to do? Say “that’s OK then?”
And I do not offer a personalised back reading service
Martin, Richard is one of the most welcoming and benign of all bloggers, particularly on the subject of finance and economics, where he tolerates the stumbling starters and strugglers, along with the opinionated know-it-alls, and he does it with good humour and civility. If you don’t believe me, just go through the archive. You will find a really positive, delightful place.
Please don’t pick on him here, just because he is vehement in his condemnation of tax avoidance and those who promote it. He’s been on this campaign trail for years and years. If you’ve only just arrived here, it would be a courtesy to all his readers, as well as to him, if you were to familiarise yourself with the tone and content of the blog before jumping in with a hatchet.
I hope you stay and join the discussions, but they may not be for you.
Thanks
Appreciated
But it is also true that I am not very tolerant of cheats
Err, only Neo? Our present feudal system would have been the envy of the Plantagenets and their magnate cousins.
I agree with you. Except that I think the current talks between Greece and the EU institutions are indicative of a kind of Runnymede. The very fact that the terminology has changed, from ‘Troika’ to ‘EU’s institutions’ and from vilifying the Greeks as representatives of some kind of bad debtor nutjob (see Emily Maitlis on Newsnight) to the more dignified titles of the elected representatives of a sovereign state, makes me think that this confrontation is yielding more to the Greeks’ point of view than the official channels are letting on. If Varoufakis can maintain the progress, tiny step by tiny step as it might be, there may be hope of turning back the hellish tide before we are completely sunk.
Maybe
But I also think my option is running in the background and it almost makes capital flight welcome right now
Interesting. Am I right to think that the Greeks can’t lose on that? If they’re pushed out, what you say is true. If they’re not, the capital will return, visibly boosting their credibility and vindicating their stance.
Beware Greeks, even with gifts, eh! (Translates poorly into German)
‘ Did Germans vote to destroy the Greek economy? ‘
No, of course not. Did Germans vote for parties that required balanced budgets etc? Yes. did any German party say ‘ if a Eurozone member defaults we’ll pay for it’? No
Did Greeks vote to borrow money they couldn’t repay? Not explicitly, but by supporting governments that did, it could be argued they did.
I’m not supporting Germany in the issue at all, they have benefited most from the single currency. In fact, they should leave and then the Mark’ and the Euro should find their own levels.
In a currency area funds are transferred from rich areas (e.g. London) to poorer areas (e.g. Liverpool) by way of taxes & benefits. Germans didn’t vote for that.
No one in 2005 in the UK voted for a bank bail out
It was necessary though
And Germany balances its budget precisely because Greece and others don’t
Don’t you realise that?
‘Germany balances it’s budget because others don’t?
What? Where is this stated, and by whom in Germany?
In essence everyone could, technically, balance their budgets
But broadly speaking government has little control over whether it balances a budget, or not
Amy government’s budget is the residual of consumption and investmwnt decisions internally in the economy and net trade
So there’s a very strong chance if one government is in surplus another will be in deficit
That’s the way macro economics works, pretty much
And the German idea of everyone in trade and government budget surplus is just not sustainable, ever, for the same reason
“poverty in Germany is at its highest since the reunification of the country in 1990, with 12.5 million residents now classified as ‘poor'”
http://www.zerohedge.com/news/2015-02-22/european-nations-poverty-rate-just-hit-record-high-spoiler-alert-not-greece
On the other hand, they now have a balanced budget, the first for 40 years.
I guess someone has to pay the price of no-debt?
Note that rising [German] pensioner poverty as well…..and after the next election, whichever right-wing party wins (blue-right or red/pink right) (UK) things are going to get tight[er] for state pensioners with the next attack-dogs let loose on pension credit and also on pension[er] housing/council-tax credit.
Or maybe people do not realise that a basic state pension (about £113) is topped-up with pension credit (guarantee or savings) to around £155/165 a week.
I find it difficult to understand and follow the fiscal arguments concerning Greece and the wider European union, but it appears as I see it that Germany benefited greatly from Greece and other smaller European nations racking up huge debts because they bought German goods. So to move on, Greece has been punished for it’s indulgence, now it’s time for rehabilitation, led by Germany and the rest of the e.u, we are whether we like it or not, in it together
They won’t be buying German (or French et-al) goods if they depart the eurozone….devaluation and high cost of imported goods will deter any of that!
Apart from the initial shock [to Greece], I think the long-term result of leaving the euro will be better for Greece than staying-in as a pauper. Plus, all the German tourists having cheap Greek holidays will bring plenty of Euros!
You are probably right that for Greece to leave would benefit them in the long term. But that’s allot of pain for the people of Greece To endure. We should right off the debt follow Richards ideas on fair tax, this would balance the books.
The idea that Greek citizens will suddenly become lawful taxpayers is almost as good as the idea that UK citizens will suddenly not register their companies in the BV islands, or site their family trust funds in Cambridge rather than Luxembourg.
Whatever happens; the average Greek citizen is in for a world of grief. Their choice is an everlasting load of grief, or a shorter, heavier, load that gets lighter faster.
Hopefully, having a ¨chancellor¨ who has studied economics may lead to a reasonable resolution, other than the ¨starve the peasants¨ attitude of our non-economically-literate chancellor !!
So the Greeks are good and the Germans are bad!
The failure of the Greeks to clamp down on the black economy and the Greek population buying high end German products with their untaxed income is all a German conspiracy to control Europe!
http://blogs.telegraph.co.uk/finance/ianmcowie/100012894/fast-cars-and-loose-fiscal-morals-there-are-more-porsches-in-greece-than-taxpayers-declaring-50000-euro-incomes/
Mean while the Greek population were retiring on full pensions at 55 while other countries including Germany had a much higher state retirement age.
The Greeks were joined the EU in 1981 almost 20 years prior to the Euro so Greece willingly joined the Euro and was never forced to join as a condition of entry. Yes the criteria for entry were relaxed for Greece but they were wiling participants so please explain why:
1) the Germans should underwrite and subsidise the Porsche cars mentioned in The Telegraph
2) Take responsibility for the Greek government making errors of judgement
3) subsidise early retirement for Greek citizens!
No in saying Greece does not need radical reform
Your claims are, with respect, infantile
No one is saying the Greeks are without blame
Your are making that suggestion up and it’s infantile to do so
Martin,
I would suggest that if you wish to make a case you check your facts first.
Firstly, yes, Greece did accede to the EU in 1981. But the Euro was not even on the horizon at that stage, nor was membership of the currency as a precursor of European membership, or the terms and conditions that were to prove disastrous for Greece.
The ‘Porsche’ story carried by (inter alia) the Telegraph actually stemmed from a comment by Professor Herakles Polemarchakis, lecturer in economics at Warwick University (and a former advisor to the Greek Government), which he subsequently admitted was nothing more than a figure of speech, and had absolutely no basis in fact.
The claim made in the mainstream press that ‘there are more Porsche Cayennes in Greece than taxpayers with registered incomes above €50,000)’ is nothing more than spurious Right wing drivel, and you do yourself a disservice by regurgitating it here.
There are in fact almost a third of a million registered taxpayers in Greece in that bracket. The sales director of Porsche in Greece has since confirmed that total sales of that vehicle in the nine years since its launch have been less than 15000.
As Richard rightly points out the Greek economic model requires urgent reform (what do you imagine SYRIZA are attempting to do?).
But the Austerity forced down their throats is far from reform, it is simply a shrunken form of the same broken system.
Taxation, for instance has been for many reasons a perennial problem for the Greeks. The inherent tax problems of a service based economy are amplified in Greece by the geographical nature of a country that is 80% mountainous with many isolated regions and nearly 230 inhabited islands. But austerity is making the problem worse.
Professor Friedrich Schneider, one of Europe’s foremost authorities on shadow economies, at the University of Linz, Austria, has demonstrated how the fiscal contraction, falling wages and rising unemployment that characterise Austerity create the environment in which ‘under the radar’ economic activity flourishes. In other words, Austerity causes the shadow economy to grow, thus reducing tax take further.
And, discredit where discredit is due, the actions and attitudes of many European nations have been less than helpful in stemming the tide of cross border tax evasion.
And, yes, the Greek pension system is unsustainable in its current form. As is our own. And yet I do not see any political party who would have the temerity (or for that matter, the inhumanity) to suggest the sort of cuts to pensions the Greeks have had to make.
I would caution you in this, as elsewhere, to treat the figures that are produced on Greek pension statistics which, amongst other things, make no distinction about citizens taking early retirement due to ill health, injury or disability.
It is also important to note that, in the period since 2011 the pensions of former government workers have been slashed by almost half, leaving many retirees destitute and (in some cases) homeless as a result, as the Red Cross and Oxfam have testified.
Eurostat now give a median figure of €753 per month (or £123 per week) for Greek pension payments. And that, remember, is the median figure. Many Greek pensioners are now reduced to scavenging in rubbish bins for food.
Further pressure has been brought to bear on pensioners who are now forced (due to the nearly 60% youth unemployment) to support their children and grandchildren from their pensions.
The fiscal contraction caused by Austerity is only set to make things worse. Greece already faces a major demographic problem (in common with its European partners) in its aging population. Unlike the projected European average of 2:1 (workers/retirees) projections show a ratio of 1:1, in Greece, by 2050. This is perilous enough in itself. But the situation will be made so much worse by the widespread unemployment, the exodus of Greek youth, and the growth of the shadow economy caused by Herr Schäuble’s beloved Austerity.
I would also remind you that pension spending is an abstract and largely meaningless figure. Its only relevance is in its relationship to GDP, which under Austerity in Greece, has collapsed.
I would finish by pointing out that no one but yourself is conflating German policy with German citizens or Greek citizens with their Government.
I think your key point is austerity simply shrinks the existing system
Like everything to do with economics, the truth depends upon your point [place] of view:
¨Thanks in part to this back-door rescue, the banks have also been able to raise some capital. As a result, they are in much better shape to withstand a Greek disaster. As of September 2014, their claims on Greece, Italy, Portugal and Spain had declined to about €216 billion, or 46% of capital. The upshot: Greece is left with more debt than it can pay, and Germany — with its banks effectively bailed out — has one less pressing reason to give Greece a break. Hardly the right incentives for a happy ending¨
http://www.theautomaticearth.com/2015/02/throw-your-grandma-under-the-bus/
¨Merkel and Schäuble decided to save Wall Street mogul and derivatives behemoth Deutsche Bank at the cost of the Greek people. Not for economic reasons, but because Deutsche has much more political power inside the European Union than the entire Greek nation. Now you know what’s so inherently wrong in that union. Same story for France, where BNP, SocGen and Crédit Agricole had humongous amounts of debt outstanding in Athens. Where’s all that debt now, where’s it gone? Well, ***check your wallet***¨
Nicely illustrated, John.
Looks like democracy in Greece is alive:
http://www.keeptalkinggreece.com/2015/02/22/poll-81-of-greeks-support-syriza-in-negotiations-with-lenders/
greed has built such a structure that it has become almost impossibe to find a solution to the Greek debt crisis. So if we have to work within this structure we must find a way to make greed have ethics and morals.
¨we must find a way to make greed have ethics and morals¨
Greed:
intense and selfish desire for something, especially wealth, power, or food.
Ethics:
sometimes known as moral philosophy, is a branch of philosophy that involves systematizing, defending and recommending concepts of right and wrong conduct.
Moral:
of, relating to, or concerned with the principles or rules of right conduct or the distinction between right and wrong; ethical: moral attitudes.
So we can get rid of moral/s, since ethics encompasses both.
Greed remains…unfortunately, greed will always overrule ethics. It always has.
We must find a way to get rid of greed, morals and ethics. And just have honesty. Which means banking is out in the wild again !!
I think that’s why we have a democratically elected government to balance the interests of business the state, society and the individual. Successive governments whether right or left have failed to get the balance right. We need a written constitution, that will bind together the interests of society and business. With a constitution you would not have the likes of Mrs Thatcher and Tony Blair, all powerful and had huge agendas that were not holistic