It’s interesting to see how the tables have turned. Until now it was the eurozone putting all the pressure on Greece. Eurozone bigwigs wagged their fingers at the spendthrift state, shocked by its massive budget deficit and fiddling of the statistics. European Commission and ECB officials as well as German Chancellor Angela Merkel (upon whom the other side of this saga rests) demanded austerity measures. And then more of them.
“Greece must understand that taxpayers in Germany, Belgium and the Netherlands are not prepared to correct Greek fiscal policy mistakes,” said eurozone chief Jean-Claude Juncker at one point.
The game of promised, but not yet given, support appears to have paid off. The Greek austerity plan unveiled on Wednesday went further than had been expected (although some Greek papers note that more structural reforms are needed for longterm growth). European Commission president Jose Manuel Barroso said the Athens programme to correct its fiscal imbalances “is now on track.” Juncker said much the same thing.
But having been forced into three budgets in as many months, prime minister George Panandreou, (a socialist who came to power last October on the back of promises of wages increases and high social spending) has shifted the weight of expectation back onto the eurozone, and specifically Berlin.
He has said he will go to the IMF if he doesn’t get the financial support he is looking for. “We have shown we can take difficult decisions. We are waiting for European support – the other side of the agreement.”
The IMF route is widely seen as the least desirable option, a reinforcement of the impression that the 16-member eurozone cannot deal with its own problems.
Papandreou is obviously expecting an answer soon. He will visit Berlin on Friday, Paris on Sunday and Washington early next week.
While the Greek prime minister faces popular unrest for the harsh measures he has taken without much support from his eurozone partners, Merkel faces a domestic backlash for any aid given to Greece.
Several politicians in her own party have focused on the pension ages in the different countries, incensed that German taxpayers will fund an earlier retirement age for Greeks. Others have demanded that Greece sell off a range of assets, such as uninhabited islands, to cut its debt. A poll in the mass-selling tabloid Bild on Monday showed that 4 out 5 were against a rescue for Greece.
So far Merkel has remained tight-lipped. She has let it be known that the meeting won’t be about “aid commitments.” However, several newspapers have reported that discussions within the German cabinet on how financial assistance would look have intensified.
The Wall Street Journal on Thursday quoted some hardnosed officials. “We can only justify a bailout if it’s about protecting Germany, not Greece,” said an aide to Merkel. Another senior official is quoted as saying: “We aren’t interested in bailing out Greece’s interest-rate spreads—only in preventing Greek insolvency.”
But the answer has to come soon. Greece has to service debts to the tune of around 23 billion in April and May. Whether it will manage is the immediate question.
The longer term question is whether the eurozone can survive without a political and economic union behind it, without some sort of tax raising power and ability to make transfers to poorer eurozone members. And, of course, whether citizens, let alone governments want to make this huge political step.
#1 by Marcel on March 5, 2010 - 2:06 pm
[quote]The longer term question is whether the eurozone can survive without a political and economic union behind it, without some sort of tax raising power and ability to make transfers to poorer eurozone members. And, of course, whether citizens, let alone governments want to make this huge political step.[/quote]
The eurozone can’t survive without more integration. And we the peoples do not want more integration, so the only solution is eurozone dissolution. We never wanted it in the first place.
EU taxes? When hell freezes over. Try telling the dutch people that, when we are overtaxed already with also a deficit that is on the increase.
The main reason for the opposition is that the EU is undemocratic. With a faux-parliament (that doesn’t even have legislative initiative) and government ministers of the national governments who can go ‘via Brussels’ and bypass democratic national parliaments. And of course, who can forget the unelected and unaccountable politburo (commission). Sounds like a broken record? Well, the facts haven’t changed so the criticism also doesn’t change. Lisbon has only made it worse by scrapping more vetos. Vetos represent national sovereignty and national parliamentary democracy. Take them away, and you take away sovereignty and democracy. Democracy of course, belongs on the level where the ‘demos’ is, in other words the national level.
In the EU, the net recipients can always outvote the net contributors (and not by coincidence, this was deliberately set up like this). And a bunch of countries voting, is not democracy.