The Latest Act of the Greek Tragedy: Public Broadcasters and European Democracy

Last Tuesday I went to see Before Midnight in the cinema. I loved the fact that it was filmed in the Southern Peloponnese, and when I come back home, I realize that ERT - the Greek television and radio broadcaster - is closed. Some times ago we were saying here in this blog that the crisis is not over despite what the head of the Greek government was saying. Once again events are proving us right.

As shocked as many other people, I immediately reacted on the spot to share my disagreement. The comment caused some of my Facebook friends to point out that I should get myself informed about the wages of the people in ERT and how ERT has been continually wasting Greek state funds. I have many feelings on this event that I will try to share here as clearly as possible. On the one side you need to understand that I am part of the Greek diaspora, being born and raised in Brussels and that I therefore have a particularly emotional attachment to ERT. I will thus argue why it is important to for Greece to have a public broadcaster.

Fired ERT employees

Today I am a 25 year old greek who has lived all her life outside Greece. However, when I go to Greece no one can tell. I speak, read and write Greek fluently and I understand all Greek cultural references. Why is that? My parents of course, we spoke Greek at home and they also insisted on the fact that my brother and I go to Greek school as kids. Like all kids we hated it, but at the end of the day I am so grateful to my parents for forcing us to go, because Greek school was an important factor in the construction of my Greek identity. But there would have been no Greek school without the Greek state which funds Greek teachers in countries where there is a big Greek community. Without this service, me and my brother would not consider ourselves Greek today.

The same happens for the Greek broadcaster ERT. I remember the first time we watched Greek TV in Belgium: I was so exited that I was gonna be able to watch TV in Greek like I did during my holidays. Of course I was quickly disappointed because the series I used to watch were broadcasted by private channels. But as I grew up I became more and more interested in Greek public life and ERT was definitely a part of it. Without it I would not have been able to follow the debates that were going on in Greece, as in my house we did not get a computer until I was 17. So as a part of the Greek diaspora, ERT has been for years the link between me and Greece, a link that has now come to disappear. Of course internet is here and I have the possibility to get informed through it. But don’t forget that I am fluent in Greek, which is not the case for the entire Greek diaspora, and all those people who sometimes are further away than I am from Greece, won’t have the possibility to perpetuate their link with Greece. But this is not the first case where the Greek state has completely ignored its immigrant communities. Greeks who leave abroad cannot vote in Greek national elections, they have pay money to take a plane and go to Greece if they want to vote.

What shocked me the most in all this story is the lack of public debate on the issue, not even in the Greek Parliament. The whole thing was decided though a ministerial ruling that did not need to go through the Greek Parliament. I am not an expert on Greek public law, but when I was studying Belgian public law they taught us that a ministerial ruling is supposed to help the implementation of a law that was passed through the Parliament. I still struggle to understand the logic behind shutting down ERT. I doubt that the government would close the Greek public electricity provider (ΔΕΗ) or the water provider (ΕΥΔΑΠ) so abruptly - it would create chaos in Greece. So on Tuesday the Greek government decided that the right to information was a secondary right of Greek citizens at the moment, thereby de facto bringing the country 30 years back. The governments leaves the right to information to private interests because what is left today in Greece are private channel and radios whose main aim is entertainment.

From the reactions in the international media, but also by Greeks in Greece and abroad it looks like the government underestimated the importance of its public broadcaster. In fact, I believe that every democratic country should have a public broadcaster that reflects the public interests. The Lisbon Treaty agrees with me, stating that “the system of public broadcasting in the Member States is directly related to the democratic, social and cultural needs of each society and to the need to preserve media pluralism.” But I will make a small clarification because I read somewhere that shutting down ERT is against the Lisbon Treaty. It is not. What the Lisbon Treaty says is that the Member States have the right to finance a public broadcaster as long as it does not go against the rules of trade and competition of the EU. Basically what it means is that the European Commission did not have the right to ask the Greek government to close ERT. That is why yesterday the spokesperson of the Commission made clear that the EC never asked such a thing from the Greek government. That would have been against the Treaties.

Now what the Greek government has been saying all this time is that ERT did not reflect the public interest and was a nod of clientelism and corruption, which drained the state finance. Well with that definition in mind I can think of some other Greek institutions that need to be shut down. For example today the Greek Parliament has 300 parliamentarians; for a country of 10 million people it is way too much. Why not cut their number in half??

Anyway, once again it seems that this 'euro crisis' has set a bad precedent in European politics that undermines the supposedly democratic features of Greece and of the European Union. But what also pisses me off the most is that now international media are shocked by what is happening in Greece. This 360 degree turn of discourse in the media, comes a bit late. Well, but better late than never...

EUtopia Lost? Thoughts on Austerity

I am truly worried about Europe. I am currently marking essays on the effects of austerity on the eurozone. Perhaps two out of 250 students wrote that deeper integration of the EU would be a way out of the crisis. As a Europeanist, I had always placed my hopes in my generation: a generation of travellers and exchange students, a generation that loves to learn new languages, a generation that experiences the achievements of European integration every day when they use the euro. I read today that particularly the youth of the European south is losing confidence in the European institutions. In France the majority believes that European integration has harmed the French economy. Austerity is devouring the backbone of this Union.

Europe's youth is becoming disillusioned

One would think that the idea of austerity as a means to resolve economic crises had been abandoned ages ago. John Maynard Keynes understood in the 1930s that times of crisis require programmes to boost the economy, and that do not suffocate it. Nevertheless, Europe has chosen the path of austerity. When Germany’s unemployment surpassed reached nearly 5 million in 2005 (11,4%), the Schröder-government introduced austerity measures to fight unemployment. Unemployment benefits were controversially cut quite radically, and the German welfare system received a serious blow. Nevertheless, the policy was afterwards justified by its success. Germany today has one of the lowest unemployment rates in the EU, and it is among the few countries that have survived the crisis relatively unscathed. Following the German example of the 2000s, countries lacking an industrial base embraced austerity, thereby fulfilled conditions that allowed them to receive bail-outs from the IMF and the eurozone. Germany is competing with China over the title of being the world’s largest exporter. Its entire economy is built around exports. A policy that keeps wages low has the same effect as the devaluation of one’s currency. However, such policies only make sense if the economy is based on exports. The economies of the European south are based on domestic consumptions – austerity is bound to fail. The current German dominance in Europe is encouraging the application of a model that is not applicable to economies like those of Spain or Greece.

At the same time, unemployment skyrockets. Europe is largely a post-industrial region with the lowest fertility rate in the word. Never has there been a generation that is proportionally as tiny as mine. While 35% of the population were below 20 in 1950, today merely 20% are below 20. I am part of a small generation, but youth unemployment is higher than ever. Austerity has caused youth unemployment in Spain to skyrocket from 17% in 2007 to over 50% in 2013. Greece, Portugal, Italy and Ireland have experienced similar developments. The blame for this is inevitably and rightly directed at European leaders. Instead of regulating a banking industry that has caused the crisis in the first place, it was decided in the European Council to implement austerity measures that have crippled half the continent. The European Council is an intergovernmental institution that it dominated by the strongest member states, and most Europeans have no say about who leads those member states. There is a time for any emotion, and if you understand what is going on here, you have every right to feel frustration, helplessness, and also anger, against the incompetence, coldness and supposed hyper-rationality of the politicians of our time.

Youth unemployment in the EU

In the the Bible says that a people without vision are doomed. I had always thought that the unification of Europe could provide this vision - I see it not only as a vision for Europeans, but for all of humanity, because it proves that people can work together, and that national divisions are insignificant. This EU has no chance to survive unless its institutions are fundamentally reformed, allowing for a European government that is democratically elected by all Europeans. Austerity is not the choice of Europeans – democracy in the EU is also in crisis. Austerity turning the tides against European integration, and if you believe that the crisis is over, think again.

Harald Köpping

Cyprus and the Failed Placebo

The euro crisis is back. It’s not like Alex or I ever believed that it was gone of course. The news from Alex’s family in Greece was anything but promising, and the numbers seem to speak for themselves. At the same time Europe’s policy-makers seem to have adhered to a new strategy: talk the crisis away. The idea was simple. If we say that the worst part is over, we will restore confidence in the credit-worthiness of the eurozone. That’s how it is with crises in the capitalist system: Keynes showed us that there is inherent instability, that crises are inevitable, but that each crisis will eventually subside. The ‘placebo’-rhetoric that Schäuble and Barroso engaged in seems to have failed though. This crisis will not just subside. In fact, it cannot subside, as long as the disparity in the political economy of the eurozone has not been tackled. In fact, the crisis has caused the different member states to drift further apart. While German unemployment is at a record-low, some areas of the region struggle with 25% unemployment, not to mention the millions of youths who struggle to find work.

Since the weekend, you cannot take out money from
a Cypriot bank

The euro crisis has entered a new phase. Merkel announced a few years back that “your savings are safe” – I guess that is another phrase that has vanished somewhere on the landfills of the crisis. Cypriot savings are no longer safe. Every single costumer of Cypriot banks will be charged at least 6.5% of their savings to save the Cypriot banking sector. Those who have over €100,000 on their bank accounts will lose 10%. Obviously those who are affected by this measure are shocked. A precedent is set for the expropriation of the people. No government has fallen, no revolution has broken out. It is likely that this was merely a first in a number of similar events. Bullion traders, rejoice! The important question is though: is this is good idea, and, perhaps more importantly, is it fair?

I think the answer to both questions in yes. Government policy has rendered saving up money redundant. Inflation rates are higher than interest rates, so if you still have a savings account with a significant amount of money on it, it is perhaps time to get rid of it and invest in a house or some other physical commodity. Low interest rates are intended to boost domestic consumption, because money is made cheaper. At the same time, inflation acts as a hidden tax. I would rather prevent the devaluation of money by means of the Cypriot policy, than to flood the money supply with more or less interest free loans from the ESM.

Nevertheless, I don’t think Cyprus went far enough. Rather than submit to EU/IMF hegemony for the time being, and to surrender its economy to a structural readjustment programme, Cyprus should have covered their entire budget deficit using people’s savings. However, the 6.5/10% rule is overly simplistic, and the percentage should have increased gradually from 1% for €10,000 to 20% for over €200,000. Everyone with savings under €10,000 shouldn’t have had to pay at all. Using this scheme, the €18bn that Cyprus apparently required could have been collected using the domestic money supply. I believe that should this policy have to be repeated, this will be the way to go. If you argue that the government shouldn’t take money from people just like that, perhaps you should consider that this is really just an emergency tax.

Whether or not this policy will work out is another question. If I lived in a country affected by such measures, I would immediately withdraw all my money from my bank account. This is probably what will happen in much of the European south, if it has not already taken place (like in Greece). I don’t know what’s going to happen in the next few weeks, although it seems increasingly apparent that Italy’s problems are far from over. A stable money supply does not solve problems of mass unemployment, corruption, and, most importantly, economic dependency. Germany has done nothing about its low-wage policy, and continues to be the manufacturing engine of the continent. This causes money to flow into Germany, and out of the south. Without a solidarity mechanism in place, problems can only worsen.

Harald Köpping

An Endless Ebb – Update on the Situation in Greece

After three weeks in Greece, and after the previous posts of the refugee crisis, I feel the need to write down what I’ve seen and heard in that country. The media in Germany are what I am exposed to the most, and while it is doubtless that they have had a certain amount of influence on me, I still think that I have done my best to view things critically, and to not swallow every bit of slander that the infamous BILD has attempted to spread about the Greeks. Anger at those false portrayals of a lazy people and at the reckless lies that worsen the crisis are what got this blog started in the first place, so let’s get back to that, and talk about what Greece was like through the eyes of a guest from Leipzig.

While German media was consensually identified laziness, foul play and corruption as the ultimate origin of the Greek tragedy, the Greek media have on their part seemingly pointed out the true roots the mess. Anger at past and present Greek governments is only matched and possibly surpassed by anger at Germany and its politicians. For reasons that are quite unclear to me, both Greek TV stations and newspapers see Germany as the chief villain of Europe, and thus also as a main cause of the current impoverishment of the population, ignoring that the demands of the conservative government are not very different from those of the Commission. I was often asked where I was from, and every time my stomach started twisting before I said ‘Germany’, knowing what would go through people’s minds as soon as they heard the answer. One taxi driver hit the nail on its head, when he (albeit jokingly) responded, “Ah, so you are the enemy!”

Abandoned shops in the old city of Nafplio

Another thing that struck me was a nationalist sentiment that I, as a German, am probably particularly sensitive to. The national flag hanging from every lamp post, every kiosk, and lots of balconies was something that Europeans found so disturbing when the US suffered its own wave of ultra-patriotism after 9/11. I was under the impression that Greece is experiencing the same syndrome, a country where the presence of a Greek flag on a product is a marketing mechanism. Of course, I understand that in times of crisis people want to buy products made in their own country, probably I would do the same, but is it really a good idea to put a sticker on your shop that proudly proclaims, ‘We only sell Greek products’? Apart from the nationalism there is something else that bothers me about the idea that a slightly altered shopping behaviour can make a difference. This idea delivers the message that responsibility for the crisis ultimately lies with the ordinary people who go to the bakery to buy tiropites. Responsibility lies with people who have brought 4 billion euros outside the country every month since 2009 – the people who did that hate their country, and their money could have done so much to help the situation. Responsibility lies with the banks who have given Greece cheap credit in the first place, and responsibility lies with corrupt governments.

The crisis in Greece is certainly visible to the naked eye, particularly in the tourist destinations. We spoke with the owner of a restaurant in the main city of Naxos, who told us that since 2009 there has been a steady decline in tourists, and that in 2012 their income has plummeted particularly. I saw the once-crowded city centre of Piraeus derelict and abandoned, stickers reading ‘ΕΝΟΙΚΙΑΖΕΤΑΙ’(which means ‘for rent’) everywhere, nearly empty cafés and the boarded windows and doors of closed shops. Last time I went to beautiful Nafplio in 2008, I found a small town bustling with life, while this year’s visit showed Nafplio as a depressingly empty place. With petrol prizes competing with Scandinavia, and with incomes having plunged, things that used to be normal have become luxuries in a matter of a few years.

So, I want to end this post with an appeal: if you are reading this planning to go on a last-minute holiday in September, I urge you to go to Greece (I can confirm that Naxos as an amazing island, with golden beaches and great, hospitable people), and to help people who have become victims of financial speculators. Tourism is one of the main sources of income for Greece, and there is absolutely no reason not to visit its hundreds of beautiful islands.

Harald Köpping

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A Tale of Two Crises - Myths of the Crisis Part II

While news reports indicate that Greece’s bankruptcy is becoming inevitably, and while the value of the euro is once again reaching a low point, let us think back to the good old days, when you could still buy £10 with €10, and when analysts still expected the euro to become the new reserve currency. That was three and a half years ago. Europe was in a deep recession, but acted determinedly, providing €3.63 trillion for potential bank bail-outs. Shortly afterwards the Greek tragedy began to unfold, and the financial crisis turned into the euro crisis. A myth erupted, telling a tale of two crises that have nothing to do with one another. This myth served the purpose of conveying the impression that there was no fault of responsibility with the banks or the economic system itself. If one claims, that the desolate condition of South European budgets is due to corruption and general laziness, the banking system was off the hook, and core-Europe could continue to rely on its exports – for a while, anyway.

Greek public debt 

Empirically the situation looks very differently. While Greece’s budget public debt level constantly remained at the level of about 100% from 2002 to 2008, it began to skyrocket in 2009, having now reached 170%. Until 2007, Greece’s economy grewby 3.5-4.0% every year, and only with the recession during the financial crisis the Greek debt level rose. On top of that, Greece had to support its own banks with huge rescue packages. The second EFSF-candidate was Ireland, the Member State with the highest annual growth rates; the role model of an economic boom caused by European integration. Particularly in Ireland disastrous budget deficits were caused by the nationalisation of Irish banks, for whose decadent practices the state finally had to pay. Spain does not form an exception. Its banking sector still hasn’t recovered from the turmoil of the financial crisis, which was visibly demonstrated by the recent EU/IMF rescue package for Spanish banks. There is no doubt about the obvious link between the euro crisis and the financial crisis, but media and governments still pretend as though the true culprits aren’t the banks, but the lazy South Europeans who sleep until 11am while the German taxpayers are plodding for Europe.

The crisis that is haunting Europe and the world is nothing other than a systemic crisis of capitalism and its institutions. As we described in our last post, even the foundation of our economic structures is prone to crises, and we have to stop pretending as though it is the Greeks or the Germans who are to blame for everything. The UK refuses to introduce a financial transaction tax assuming that the financial ‘industry’ has nothing to do with the current global debt crisis. The recognition of the link between the euro crisis and the financial crisis is thus an essential step towards taming a reckless banking system. The regulation of banks is a cornerstone in the fight against the crisis, which has caused mostly the innocent to bring sacrifices. Debunking myths that deceive the public, inveigle politicians and obfuscate the facts is an important task of the blogging community, if it wants to contribute to preventing more harm from occurring.

Harald Köpping

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We Couldn't Have Known! - Myths of the Crisis Part I: The World Was Caught By Surprise

The purpose of this series of posts is to debunk some of the myths of the crisis that have been fed to us by media and governments. The first such myth is the idea that the crisis was unexpected and caught the world by surprise. We do not distinguish here between the euro crisis and the financial crisis, which, as we will argue in the next post, form part of the same overarching crisis. The purpose of this myth is to remove any kind of responsibility from policy-makers and bankers – no one is really to blame, the crisis just happened, like that, and no one could have known. Right.

Before discussing the specificities of the contemporary crisis, let us explore how the thing that the crisis is all about was created in the first place, because this will give us some clues why crises in the capitalist system are endemic and inevitable. Money is created by the central bank, which in our case is the ECB, and which in the American case is the Federal Reserve. States go to the central bank, and hand the bank a piece of the state that’s called a government bond. If the state wants to create, let’s say, €1 billion, it has to give the central bank government bonds worth €1 billion. The state will then go on to deposit those €1 billion into a bank account with one of the numerous commercial banks that exist. This is how money is created; it is now possible to take out loans from those commercial banks, making the money available to the general public. When a state receives money from the central bank in exchange for government bonds, the state promised to pay back that amount – in other words, all existing money is debt. And not only do states have to pay back that money, but they also have to pay interest, which is why the amount that needs to be paid back is always larger than the amount of money in existence. States always have to take out new loans from the central bank to pay their interest, which constantly increases the existing money supply, and which is commonly referred to as inflation: an increase in the money supply causes money to be devalued. The existing money in circulation is thus always slightly less than the current debt level, causing an exponential increase in money supply as well as in the debt level. A default (i.e. someone stops paying the money back) is therefore at some point inevitable. The subprime was about ‘toxic’ loans which were sold from one bank to the next, causing a systemic toxicity build-up – once house owners were unable to service their loans, some banks went bankrupt, while others were saved by national governments. In the euro crisis states are unable to service their loans, potentially leading to the same development. All this is indeed well known, and there were numerous economists who predicted these developments (e.g. Bernd Senf, Heiner Flassbeck, the documentary Maxed Out, as well as mainstream economists like Dean Baker, Fred Harrison, Kurt Richebächer… This list is very long).

Eurozone: absolute debt level in million euros

I recently came across a paper by Gernot Köhler called Global Keynesianism and Beyond from 1999. In that paper, there is a section titled ‘Controlling Global Financial Capital’, where Köhler calls for the introduction of a “frequently quoted proposal” known at the “‘Tobin tax’, namely, a tax on international financial capital transactions.” This proposal is now being discussed, but it is undeniable that it was well-known that an uncontrolled banking system is extremely dangerous. It is all the more tragic that this kind of system has brought unemployment and poverty on tens of thousands of people in Southern Europe.

The money system is the systemic root of the crisis, and the introduction of a financial transaction tax is an essential step towards controlling the financial ‘industry’. Everybody knew that the system we have makes crises inevitable, which is why the idea that the crisis caught everyone by surprise is a myth. 

Harald Köpping

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