Greece: The Eurozone on the wrong track

, by Andrew Kilpatrick, Georgia McKinson

All the versions of this article: [Deutsch] [English]

Greece: The Eurozone on the wrong track
Do we want a repeat of the crisis? For the eurozone’s long term stability we need new institutions. Photo: © Images Money / Flickr/ CC BY 2.0-Lizenz

The Euro crisis seems overcome. However how is the situation of the Eurozone really? In reality there is a need to overcome the national state. The institutions of the Eurozone require further competencies.

Our opinion leaders portray the Greece-Eurozone crisis completely one-eyed. To understand them properly, we must carefully examine Greece and the Eurozone. Both look rather bad. In Greece wealth is focused in only a few hands. Those few rich and the Orthodox Church pay barely any tax. The armed forces are oversized and too expensive. It lacks an industrial core. There is real poverty in the country.

The accession to the Eurozone and its consequences

In 2001 influential EU-politicians and the “rich Greeks” wanted Greece to be included in the Eurozone. Therefore the Greek government provided false numbers to prove Greece’s Euro-capability. Eurostat realised this and pointed towards it, but was ignored - so that Greece is nevertheless a Euro-member state. Until 2010 the debt of the Greek household budget and establishments rose to 111% of Greek gross domestic product (GDP) – in 2001 it was only 44%: The effect of a “Eurozone = Land of milk and honey”- atmosphere. As in the USA the new debts flowed into consumption.

Parallel to this the expenses of the public hand for social matters increased from about 15% of GDP (2001) to 23% (2011), of which 10 % was on health. The health sector is a wonderful example with which to illustrate how sick the “Greek system” has become. In 1990, for every 1000 Greek residents there was the same amount of doctors as nurses, respectively 3.4. In 2009 there were still 3.4 nurses- but 5.56 doctors (the OECD- average is 3.16). Also the proportional amount of pharmacies to the population was and is suspiciously high. Through sham prescriptions doctors and pharmacists deceived the state without supervision of a lot of money. Therefore with the many doctors and pharmacists; the nurses could not profit. Hence their quantity remained constant.

Excesses as in the health sector occurred before the background of too little state income (because the rich hid their Euros abroad) and too high state spending (amongst other things for arms). The state deficit rose - and gradually the investors realised that the Greek government bonds were different than assumed, not low-risk. The consequential risk surcharge called into question if the Greek state’s house was in order.

The approach of the Troika

With around 2% of the European economy, Greece is a dwarf within the Eurozone. The country is economically heavily ill. The disease has not only to do with Greece. Since the outbreak of the crises from 2010 on the one hand deadline deferrals and interest rate reductions were negotiated and on the other hand budget measures to rehabilitate the Greek state household. But what remained unmentioned? Nothing about cuts by the military budget. Nothing about including Greek Euro-assets abroad via a taxation convention with Switzerland and other bunker-countries. Nothing about measures which would revive the Greek economy. The Troika insisted (with the exception of the International Monetary Fund until today) on increasing taxation and on classical reduction of spending like pensions cuts, in the illusory hope that the Greek state household would become balanced.

Apart from Ireland this course has worked nowhere - not in Spain, not in Portugal and not in Cyprus. As long as short-term budget goals are at the centre of attention (instead of employment and investment goals), Greece will stay in a downward spiral of economic diminution and be caught in completely avoidable hardship. The astonishing thing is that the respective Greek government (Syriza too) topics such as military spending and bank accounts abroad have always been left aside.

The inglorious role of the Euro-mighty

After the invention of the Euro it would have been consequent to harmonise and transfer the fiscal politics and emit state liabilities. Then the economic would coincide with the political frame, with the individual Euro-member states giving competencies to a central authority, which still needs to be created. But meanwhile we experience something completely different: the political elites of the individual Euro-member states are not thinking about giving competencies to a central authority, instead they are keeping a lot for themselves: there are 19 different fiscal policies and 19 different emits of state liabilities. And internationally operating businesses and bigger investors are exploiting this.

In the frame of the Euro the insistence on the primacy of the national state leads inevitably to a “downwards tax spiral” and to speculation against the state bonds of the as vulnerable perceived Euro-member states. The Eurozone thus shows grave construction mistakes – and as long as these are not removed, inequalities due to the system between the economic “victorious powers” Germany, Netherlands and maybe Austria on the one side and the economic vulnerable national economies within the Euro-zone on the other hand are unavoidable. The worst thing though:

The Euro-mighty set the inequalities as a conflict between virtue and vice and conceal that particularly German salary politics since 1999 contributed significantly to the economic difficulties inter alia in Italy and France.

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