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Greece Loses, EU Wins

The first round of the battle for the euro is over, and Germany has won. The whole European Union won, really, but the Germans set the strategy. Technically, everybody just kicked the can down the road four months by extending the existing bail-out arrangements for Greece, but what was really revealed in the past week is that the Greeks can’t win. Not now, not later.

The left-wing Syriza Party stormed to power in Greece last month promising to ditch the austerity that has plunge a third of the population below the poverty line and to renegotiate the country’s massive $270 billion bail-out with the EU and the International Monetary Fund. Exhausted Greek voters just wanted an end to six years of pain and privation, and Syriza offered them hope. But it has been in retreat ever since.

In the election campaign, Syriza promised 300,000 new jobs and a big boost in the monthly minimum wage (from $658 to $853). After last week’s talks with the EU and the IMF, all that’s left is a promise to expand an existing programme that provides temporary work for the unemployed, and an “ambition” to raise the minimum wage “over time”.

Its promise to provide free electricity and subsidised food for families without incomes remains in place, but Prime Minister Alexis Tsipras’s government has promised the EU and the IMF that its “fight against the humanitarian crisis (will have) no negative fiscal effect.” In other words, it won’t spend extra money on these projects unless it makes equal cuts somewhere else.

Above all, its promise not to extend the bail-out programme had to be dropped. Instead, it got a four-month “bridging loan” that came with effectively the same harsh restrictions on Greek government spending (although Syriza was allowed to rewrite them in its own words). And that loan will expire at the end of June, just before Greece has to redeem $7 billion in bonds.

So there will be four months of attritional warfare and then another crisis – which Greece will once again lose. It will lose partly because it hasn’t actually got a very good case for special treatment, and partly because the European Union doesn’t really believe it will pull out of the euro common currency.

Greece’s debt burden is staggering – about $30,000 per capita. It can never be repaid, and some of it will eventually have to be cancelled or “rescheduled” into the indefinite future. But not now, when other euro members like Spain, Portugal and Ireland are struggling with some success to pay down their heavy but smaller debts. If Greece got such a sweet deal, everybody else would demand debt relief too.

The cause of the debt was the same in every case: the euro was a stable, low-interest currency that banks were happy to lend in, even to relatively low-income European countries that were in the midst of clearly unsustainable, debt-fuelled booms. So all the southern European EU members (and Ireland) piled in – but nobody else did it on the same scale as the Greeks.

The boom lasted for the best part of a decade after the euro currency launched in 1999. Ordinary Greeks happily bought imported German cars, French wines, Italian luxury goods and much else, while the rich and politically well connected raked off far larger sums and paid as little tax as possible. Greek governments ended up lying about the size of the country’s debts.

No less an authority than Syriza’s finance minister, Yanis Varoufakis, described the atmosphere of the time like this: “The average Greek had convinced herself that Greece was superb. A cut above the rest….Due to our exceptional ‘cunning’, Greece was managing to combine fun, sun, xenychti (late nights) and the highest GDP growth in Europe.”

Then the roof fell in after the 2008 crash, and “self-immolation followed self-congratulation, but left self-importance in the driving seat,” as Varoufakis put it.

That is why the sympathy for Greece’s plight in other EU members is limited. Moreover, the EU, and especially the Germans, have managed to convince themselves that “grexit” (Greek exit from the euro) would not be a limitless disaster.

The other PIGS (Portugal, Ireland and Spain) are in much better shape financially, and Brussels no longer fears that the Greek “contagion” will spread irresistibly to them as well. Neither does it think that a Greek departure from the euro would bring the whole edifice of the single currency tumbling down. And it knows that the vast majority of Greeks don’t want to leave either the euro or the EU – so it’s playing hardball.

When the interim deal was made public on Tuesday, Prime Minister Alexis Tsipras put the best possible face on it, saying that Greece had “won a battle, but not the war.” In fact he lost the first battle, as he was bound to. It will take him longer to lose the whole war, but that will probably happen too.
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To shorten to 725 words, omit paragraphs 9, 10 and 11 (“The boom…put it”).

Hungary’s Viktator

When I first interviewed Viktor Orban 25 years ago, he was an anti-Communist student firebrand whose whole purpose in life was to free Hungary from Soviet rule. But you can travel a long way in 25 years.

In 1991 Orban celebrated the collapse of the Soviet Union, but now he says: “We Europeans need Russia. We need sooner or later – rather sooner than later – a strategic alliance with Russia.” Prime Minister Viktor Orban has become the odd man out in the European Union, putting a close relationship with Russia well ahead of any concerns about what is happening to Ukraine.

When Russia’s President Vladimir Putin came to Budapest last week to sign a new contract for supplying gas to Hungary, Orban said: “We are convinced that locking Russia out of Europe is not rational. Whoever thinks that Europe can be competitive…without economic cooperation with Russia…is chasing ghosts.” And Putin, standing next to Orban, said that the war in Ukraine was all the Ukrainian government’s fault.

But it’s not just a pragmatic decision by Orban to keep the country’s main energy supplier sweet. (Hungary has also ordered new nuclear reactors from Russia.) Other members of the European Union and NATO that also depend heavily on Russian gas have nevertheless condemned Putin’s actions in Ukraine. Viktor Orban has been on a philosophical journey, and it has delivered him to a strange place.

In a speech last July, he declared the western democratic model dead and argued that authoritarian regimes like those in Russia, China and Turkey pointed the way to the future. “We have to abandon liberal methods and principles of organising a society,” he said. “The new state we are building is an illiberal state, a non-liberal state, because liberal values (in the West) today incorporate corruption, sex and violence.”

Orban is not just talking. Since the 2010 election he has had a two-thirds “super-majority” in parliament that lets him amend the constitution as he likes. (Theoretically the supreme court might overrule him, but he has also chosen eleven of the fifteen supreme court judges.) New media laws have turned public television into a government mouthpiece, and he has ruthlessly gerrymandered electoral boundaries to guarantee victory for his Fidesz Party.

Other familiar elements of authoritarian nationalist regimes have also begun to appear in Hungary. Non-governmental organisations are under attack as foreign agents, and foreign-owned banks are to be partly nationalised. Land leased by foreigners any time in the past 20 years must be returned to its Hungarian owners. Every one of these arbitrary changes creates opportunities for corruption that rarely go unexploited by those close to the regime.

The problem has grown so severe that last year the US government, in an initiative unprecedented against an EU member country, blacklisted ten Hungarian officials, banning them from entering the United States on the grounds of corruption. And President Barack Obama, discussing corrupt, authoritarian governments, bracketed Hungary with Azerbaijan, Russia and Venezuela.

Victoria Nuland, the US assistant secretary of state for European affairs, went further, asking Orban “How can you sleep under your NATO blanket at night while pushing “illiberal democracy” by day, whipping up nationalism, restricting free press, or demonising civil society?” But she asked him from a safe distance (Washington: about 7,000 km.), and he didn’t bother to reply. And the Hungarians went on voting for him.

Yet in last April’s parliamentary election, Orban’s “big tent” Fidesz Party won two-thirds of the seats in parliament again (though only by one seat this time). In the European elections in June they won 12 of Hungary’s 21 seats. And in local elections in October, they won 19 of Hungary’s 21 larger towns and cities, including the capital, Budapest. Why do a majority of Hungary’s ten million people go on voting for him?

Well, actually, they don’t. In the April parliamentary elections, 2.8 million people voted for other parties, and only 2.3 million for Fidesz. But the opposition parties are weak and divided (except for the neo-fascist Jobbik movement, which has 14 percent popular support). Fidesz wins partly by gerrymandering, and partly by default – but that’s good enough for Orban, who enjoys his position as an illiberal yet democratically elected strongman.

Orban is a skilled demagogue, and Hungarians are as susceptible to nationalist rabble-rousing as any other people. But he cannot be completely secure so long as the democratic electoral system survives: a big enough swing of public opinion against him would win even despite the gerrymandering.

He has no immediate worries: the next parliamentary election is not due until 2018. But last Sunday Fidesz lost a single by-election, and suddenly its “super-majority” in parliament vanished. Viktor Orban said it didn’t matter, since he had already pushed through all the constitutional changes he wanted, and for the moment that’s probably true.

However, if dissatisfaction with his rule continues to grow (he’s now being called the “Viktator”), he may one day wish he had it back. Just in case he needs to change the constitution again.
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To shorten to 725 words, omit paragraphs 8 and 9. (“The problem…for him”)

Greek Election

“I wouldn’t like extreme forces to come to power. I would prefer if known faces show up,” said European Commission President Jean-Claude Juncker, talking about Greece’s election. But his hopes for a quiet life will be dashed. Syriza, the radical left-wing party that leapt to prominence in the 2012 election with 27 percent of the vote, is going to win this time.

It won’t win more votes than before. It got 27 percent in last summer’s elections for the European parliament, and it’s still polling 27 percent today. But that will make Syriza the biggest party after Sunday’s election, because three more years of grinding austerity have shredded the support of the “mainstream” New Democracy (centre-right) and Pasok (centre-left) parties that formed a coalition government in 2012.

Austerity is too weak a word for what has happened to Greece. The country’s foreign debt is 319 billion euros ($368 billion), or almost twice (177 percent) its entire Gross Domestic Product. More than three-quarters of that debt is bailout loans from the European Union, the European Central Bank, and the International Monetary Fund. And the price of those emergency loans was cuts that have reduced millions of Greeks to poverty.

Greece’s economy has shrunk by a quarter in the past five years. Unemployment is 25 percent, youth unemployment is nearly 50 percent. Three million of the eleven million Greeks are living on or below the poverty line, and there has been a huge brain drain as hundreds of thousands of young professionals migrated elsewhere in the EU to find jobs.

That explains the rise of Syriza (the Greek acronym for Coalition of the Radical Left). It’s an ideological grab-bag of democratic socialists, Eurocommunists, Greens, Maoists, Trotskyists and assorted populists, but in Alexis Tsipras it has a young (40), charismatic leader who has harnessed them together and presented an alternative political vision to the endless austerity that is all the traditional parties have to offer.

27 percent of the vote is not enough to form a government even though the biggest party gets a bonus of fifty extra seats. But Syriza will probably be able to build a coalition government with other fast-growing non-traditional parties like the centrist To Potami (founded just last year) – and then we shall see what Tsipras actually does with his power.

Only five years ago he was saying that it wouldn’t bother him if Greece left the euro, or even the European Union. Now, as the prospect of real power nears, he speaks more carefully – but he still scares both the European Union and the Greek establishment.

He would start by demanding that Greece’s creditors write off at least half its foreign debt, but he no longer talks about leaving the euro. He would raise the minimum wage, stop the job cuts in the swollen public service, raise pensions, increase the salaries of public employees, and reduce taxes for most people. But rich Greeks (most of whom pay little or no tax) would face both higher taxes and very tough tax collectors.

The Greek establishment has been described by the US government (in a secret diplomatic cable revealed by WikiLeaks) as “a small group of people who have made or inherited fortunes – and who are related by blood, marriage or adultery to political and government officials and/or other media and business magnates.” few people in Greece will mind if Tsipras squeezes them until they squeak.

The real question is how the EU and the international banks will react when Tsipras demands a big write-down on the debt and ditches the extreme austerity that previous Greek governments accepted in order to get the loans. He has a good case, but they may not listen.

Greece originally got into trouble because it borrowed too much. Once Greece joined the euro in 2001, lenders assumed that the whole EU was effectively guaranteeing the loans and the money poured in. They wouldn’t have lent so much just to Greece on its own – and the Greek government even hid how big its foreign debt was getting.

Then came the crash of 2008, and it all came out. Greece couldn’t pay, but the EU dared not let a “eurozone” country default on its loans for fear that the infection would spread to other highly indebted EU countries. Besides, the loans were mostly from European (and especially German) banks that would be in deep trouble if they went bad. So the EU lent Athens another 220 billion euros ($254 billion) to keep those loans alive.

That emergency money has overwhelmingly gone to capital and interest payments on the debt (especially to German banks), not to investment or consumption in Greece. Yet there is literally no hope that the country could ever repay the loans in full: Greek foreign debt has actually grown by half in the past five years. Meanwhile, ordinary Greeks are the new poor.

Tsipras is saying that the European banks will have to “forgive” a lot of the loans so that the remaining debt is manageable and the Greek economy can begin to recover. There will be months of delicate negotiations about this once he takes office, and they could fail (in which case Greece crashes out of the euro). But Greece cannot go on like this; it has to be done.
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To shorten to 700 words, omit paragraphs 2, 6 and 9. (“It won’t…2012”; “27 percent…power”; and “The Greek…squeak”.

Asylum-Seekers: The Limits of Tolerance

The language of the immigration debate in Germany has got harsh and extreme. German Chancellor Angela Merkel attacked the anti-immigration movement in her New Year speech, saying its leaders have “prejudice, coldness, even hatred in their hearts.”

The “anti-Islamisation” protests all across Germany on Monday fizzled out in the end. 18,000 people showed up at one rally in Dresden, where the weekly protests by the Patriotic Europeans against the Islamisation of the West (Pegida) began last October, but that hardly counted because there are few Muslims – indeed few immigrants of any sort – in Dresden.

Anti-immigrant sentiment in Western countries is always highest where there are few or no immigrants. In big German cities like Hamburg, Berlin and Stuttgart that do have large immigrant populations, the counter-demonstrators outnumbered the Pegida protesters ten-to-one. But the debate is not over.

Germany is taking in more immigrants that ever before: some 600,000 this year. That’s not an intolerable number for a country of 82 million, but it does mean that if current trends persist, the number of foreign-born residents will almost double to 15 million in just ten years. That will take some getting used to – and there’s another thing. A high proportion of the new arrivals in Germany are Muslim refugees.

Two-thirds of those 600,000 newcomers in 2014 were people from other countries of the European Union where work is scarce or living standards are lower. They have the legal right to come under EU rules, and there’s really nothing Germany can do about it. Besides, few of the EU immigrants are Muslims.

The other 200,000, however, are almost all refugees who are seeking asylum in Germany. The number has almost doubled in the past year, and will certainly grow even larger this year. And the great majority of the asylum-seekers are Muslims.

This is not a Muslim plot to colonise Europe. It’s just that a large majority of the refugees in the world are Muslims. At least three-quarters of the world’s larger wars are civil wars in Muslim countries like Syria (by far the biggest source of new refugees), Iraq, Yemen, Somalia, Afghanistan and Libya.

Many of these refugees end up in other predominantly Muslim countries (like Lebanon, where between a quarter and a third of the population is now Syrian refugees.) But Europe is relatively close, and a much better place to be if you can get there: each asylum-seeker who is accepted by Germany gets free accommodation, food, medical care and clothing. Adults also get $160 a month. Moreover, if they make it to Europe, the war cannot follow them.
Every country has an obligation to accept and protect legitimate refugees seeking asylum, but in practice some dodge their responsibilities. Last year the United Kingdom, which has 65 million people, accepted less than half as many refugees as Sweden, which has 10 million people. But even the best-intentioned countries, like Germany, are starting to show the strain.

It’s easy to mock the fears of Germany’s “Patriotic Europeans against the Islamisation of the West”- only 5 percent of Germany’s population is Muslim. But 9 percent of the children born in Germany in recent years have Muslim parents because of the higher birth rates of Middle Eastern immigrants.

If the current wave of asylum-seekers continues – and there is no particular reason to believe that the Syrian civil war will end soon – then Germany will add another two million Muslim immigrants to its population in the next decade. And they too will have higher birth rates than the locals.

With its current asylum policy, Germany could be 10 percent Muslim ten years from now. You might reasonably ask: what’s wrong with having a 10 percent Muslim population? But it’s hard to think of a Muslim country that would welcome the relatively sudden arrival of a 10 percent Christian minority with equanimity.

And special thanks to the Islamist thugs who committed the massacre at “Charlie Hebdo” in Paris on Wednesday for making it even harder for Europeans to see the difference between terrorist fanatics and ordinary Muslims. Most Europeans still try to see things in proportion and not judge all Muslims by the acts of a few, but they are failing more frequently. People are people, and their tolerance has limits.

Even in Sweden, the most heroically open country in Europe, where they are expecting more than 100,000 asylum applications this year, former prime minister Fredrik Reinfeldt said just before last September’s election: “I’m now pleading with the Swedish people to have patience, to open your hearts, to see people in high distress whose lives are being threatened. Show them that openness, show them tolerance.”

Once more, the Swedes did that. The mainstream parties, all of which share that vision of Sweden, have formed a coalition government that is pledged not to slam the gates shut on asylum-seekers. But the anti-immigration party, the Sweden Democrats, more than doubled its vote and became the third-largest party. Even in Sweden, time is running out on tolerance.
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To shorten to 725 words, omit paragraphs 8 and 9. (“Many…strain”)