Of the Eurozone countries, Italy and Greece had elected governments cast down due to their national debt unsettling their place within the Single Currency, with politicians replaced with unelected technocrats. Other Eurozone countries, including Ireland, Portugal, Spain, Finland and Slovakia, have seen governments pay the price at the polls. Even political parties in in non-Eurozone Romania, Denmark and Hungary have all hit the buffers on the back of forced cuts arising from hurried deficit management plans.
Greece is the most infamous case, but not the only weak point. It just happens to be the clear-cut example of the Eurocrats cooking the books where the kitchen first caught fire. It could have been any one of a number of other pots. There is, however, a certain sorry symmetry in the tale of which Alcibiades would have approved.
Back when the books were being checked before being toasted, part of the figures that related to defence expenditure - a big deal in the Aegean since the time of the Persian Empire - went for a bit of a wander. A slice of the defence procurement budget, worth perhaps 4% of GDP, was just one item that was allowed to remain off books (along with other items such as backdoor state funding of the railways). Come the consequent Greek bailouts, a reported £1 billion of the newly-lent money then went into arms payments, predominantly with donor countries such as for a German submarine, rather than supporting the economy. These weren’t all old arms deals that had slipped over several years, but included purchases of new French aircraft. As MEP Martin Callanan neatly noted at the time, “The Greeks need a life-raft, not another U boat”.
The state of the country is terrible. Homelessness is a visible condition. A tenth of the population of Athens is reportedly using what amount to soup kitchens. Unemployment exceeds 20%, and youth unemployment for the under 25’s is at 50%. Documented suicides have doubled since 2010. The state of affairs is even worse now than in 1893, when the country went bankrupt after borrowing to pay off the debts on its debts from the War of Independence – a declaration that the country was effectively forced to rescind seventy years later, having by that stage lived as a state in default for two thirds of its existence. With a back history of serial default, the prospects never looked rosy.
Measures that are being taken to halt the financial decline today are not proving sufficient. The trouble is in membership of the Eurozone itself, which locks uncompetitive economies into fixed rates with their trading competitors. Until this is accepted by the Eurozone’s political leaders, these economies are condemned. The problem is, however, just the same today as it was when the Single Currency was being set up: as a political project, politics trumps economic common sense. Too many careers are also wrapped up in this massive skewed gamble. The price for choosing to quit the currency area will still be high, even if less than the price of staying in. The debt ballast on the ship has dropped the old vessel well over the Plimsoll Line. At some point, however, even the most determined of the crew manning the pumps will see the ship floundering and dash to get out.
from "A Fate Worse than Debt" by Dr Lee Rotherham
Buy your copy at Amazon or a bookshop