Greek ‘compromise’ exposes European leaders’ contempt for democracy

European institutions are fully aware that Greece cannot pay these debts.


The deal between Greece and its creditors as it’s currently written, struck supposedly on equal terms, is indefensible and destined to fail.

Not only will it make life harder for Greeks, it exposes European leaders’ contempt for democracy.

First, for pensioners: if this is what a compromise looks like then I need to remind myself of its dictionary definition. Athens will have to raise €8bn through tax hikes, and part of the plan is to increase pensions contributions and phase out early retirement.

But look at it this way: forced austerity shrank the Greek economy by 25 per cent, meaning it was impossible for it to grow its way out of debt.

Who now pays? Older workers, who are already struggling and are now being told they’ll struggle until the end of their lives.

The second way of raising the €8bn is through a VAT rise. As the protests in Athens suggest, many people are unhappy that costs to goods will make up a large part of the country’s financial shortfall: to the extent that higher VAT rates will provide the equivalent 0.74 per cent of GDP.

Concessions with Syriza fingerprints on them include: a reduced rate of 13 per cent on energy, basic foods, catering and hotels; a reduced rate for medical supplies and books; and the tax increase on luxury yachts over 10 metres from 10 per cent to 13 per cent.

For anyone following the news it comes as no surprise that the International Monetary Fund (IMF) is pushing hardest. During talks it has been by far the most hardline, not bending at the prospect of a debt write-down.

The Enikos newspaper in Greece has recently confirmed that the IMF has suggested counter-proposals to the Greek government that focus heavily on pension reform, VAT changes, and a small increase to corporation tax.

The heavy-handedness of the IMF in particular, but the troika more broadly (composed of the IMF, the European Central Bank, and the European Commission), is the reason why there are a number of protests being held outside the Greek government’s offices.

While the majority of Greek people want to stay within the Eurozone and work out a deal that suits them as members, there is a gradual alignment of what the wider public want and what the left flank of Syriza (who support a Grexit) are fighting for.

Syriza achieved a very convincing victory in the last election. On their platform they reminded voters that the last government and the European leaders made a financial pact that has ultimately been the ruin of the nation’s economy.

The debts that have resulted, Syriza will argue, are illegitimate.

Indeed as my colleague Fanny Malinen has said in another article:

“The European Central Bank over-stepped its mandate by imposing political conditions on its loans. Other EU countries’ bilateral loans did not benefit the Greek people but instead European financial institutions.”

I couldn’t have put this better myself, though my only additional comment would be to say that ‘overstepping its mandate’ has become the troika’s weapon of choice.

European institutions are fully aware that Greece cannot pay these debts. They are fully aware that the deals made with the last government were done contrary to the good of the Greek people, who are now overburdened by them – the dictionary definition of odious debt.

The European institutions also know the will of the Greek people in the last election, but are choosing to ignore it. In doing so it is proving that the word ‘union’ in European Union is a lie; and that whatever the EU is, it’s not democratic.

As Malinen also puts in her article:

“The Debt Truth Committee published its first findings this week: ‘Greece not only does not have the ability to pay this debt, but also should not pay this debt, first and foremost because the debt emerging from the Troika’s arrangements is a direct infringement on the fundamental human rights of the residents of Greece.'”

Leaving aside these principles for a moment, economists should see that when Greece is not working because investment is slow, or Greeks are not spending because prices are too high, the country cannot grow.

Yet these are the demands of the country’s creditors.

Carl Packman is a contributing editor to Left Foot Forward and the author of Loansharks: The rise and rise of payday lending

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23 Responses to “Greek ‘compromise’ exposes European leaders’ contempt for democracy”

  1. democracy?

    No democracy with 50 out of 300 seats as bonus to the first party. Energy is already at 13% and they moved basic foods to 23%. The oligarchs, the tax dodging companies and individuals will pay 0% tax, again. You are not contributing much…

  2. Matty

    Good article. The austerians should realise that their plan will shrink the Greek economy and hence its abilty to repay its debts. The IMF predicted back in 2010 that its package would shrink the Greek economy by 6%. Instead it went down by 25%.

  3. Selohesra

    Who’d have thought it – EU leaders prefer to put their beloved political project ahead of member states interests – time for UK to get out before its too late

  4. stevep

    It`s all part of the planned global shift to the right. The banks` collapsing was no accident, they knew they could do what they liked and would have to be bailed out by hapless nations that had bought into capitalism lock, stock and barrel. Countries like the UK, Ireland, Greece, Spain etc. chose to impose various degrees of austerity and “measures” on their citizens instead of sanctioning the banks and their owners.
    It has left citizens in these countries far worse off economically, with reduced rights, powers and civil liberties and has weakened democracy itself.
    It all sounds like a wish list of the far- right global elite. Which of course, it was.

  5. jd

    Greece can pay its debts, stay in the EU and have a rising standard of living if they adopt a long term plan of economic liberalization, dump the crony capitalism and start to grow their economy. The creditors would be more than happy to partner on this project. The problem is the radical-left wing government is incapable of seeing this vision and perhaps the Greek people, made dependent on government spending, cannot see this also. The result will unfortunately be the most vulnerable in society are going to suffer when the whole scheme collapses.

  6. Selohesra

    And the moon landings were faked too!

  7. stevep

    You may choose to believe or disbelieve, but please don`t try to discredit me with glib one-liners. Try visiting Noam Chomsky`s website and reading some of his articles before you go any further. He is one of the most respected political commentators on the planet. You might learn something.

  8. Faerieson

    This is entirely the glib response of someone who is bankrupt of ideas. Much about the justification for current ‘austerity’ measures is certainly the result of slight of hand.

    The growing volumes of evidence and counter-opinion are now so plentiful as to demonstrate that debt is now being almost openly exploited as a means to shift European politics significantly to the right. But, should the Greek government succeed in encouraging other Euro-nations to question current ‘austerity’ measures, we might begin to see a more honest approach to resolving the current debt.

  9. Torybushhug

    Greece’s inability to collect tax sufficient to cover its vast spending is passed like a hot potatoe onto German tax payers to fund them. Democracy for who? I dealt with the london Greek community 25 years ago and was taken aback by the endemic tax evasion. It was they that kicked off the whole buy to let endeavour as it was easy to hide the rental income from the tax man.

  10. Torybushhug

    I thought like this when I was an impressionable 16 y/o. Act Japanese or S Korean and your fortunes will turn around. Any prat can spend state money, it’s the dim witted populist way of being. Chomsky is the architype hipocrite charlatan millionaire lefty and fools like you keep him rich.

  11. Matt M

    So much here, so I’ll quickly pick a point that others haven’t made. Bailouts are anti-capitalist. They socialise losses. Bailouts are corporatist.

  12. Matt M

    Contempt for democracy?
    So if the Greeks voted themselves €100bn of additional pensions spending, the other EU members would have to pay for it? That would only work if all EU citizens got a vote on Greek policy too.

    If Greece could pay for these social measures themselves, then of course no one could have an opinion on it. But that isn’t the situation. They are asking poorer taxpayers from CEE to pay for benefits they themselves do not enjoy.

    You can’t vote yourselves out of debt. If they can’t pay, they should default.

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  14. Mike Stallard

    If you borrow, sooner or later it is only fair to return what you have borrowed.
    Loan Sharks have always been there – Islam did not ban usury for nothing! But people find a way of getting round it.
    Getting a country into debt like Mr Brown and Mr Blair deliberately did is silly. It just benefits the rich. Mr Osborne is all hot air: he has no intention of paying off the debt.
    Sooner or later people (that’s us) who live beyond their means find the brokers’ men arriving on their front doorstep.
    If I were lending the Greeks money, I should want it back: wouldn’t you?

  15. Mike Stallard

    Well written!

  16. Mike Stallard

    Which is exactly why it was insane to lend them money in the first place, and to let Germany kick off by breaking the EMU rules too.
    What a farce!

  17. stevep

    Hear! Hear!

  18. stevep

    Typical Tory Troll reply. Trolls like you infest this site with the aim of diverting attention from real debate. The average 16-year old is probably way more thoughtful and intelligent than you`ll ever be. By all means sit in your SunMail Troll cave throwing insults and comments around that were old hat in the stone age, but leave serious debate to others.

  19. stevep

    Bailout, Schmailout. The point is the banks, their owners and their financers knew they could be as financially reckless as they chose and get away with it (they did) because entire economies would have collapsed if they weren’t “saved”.
    It was purely a hostage/ransom situation and the countries taken hostage paid up. The citizens of those countries have been paying for it ever since.
    Isn`t Capitalism wonderful!

  20. Matt M

    Yes they did know that. Major moral hazard problem. Caused by implicit and explicit government guarantees. And your solution is more government?

  21. stevep

    At this moment in time I think globally we`re still sailing in uncharted waters with further “collapses” possible and more draconian restrictions placed on public spending which, in effect, would weaken democracy even further.
    It would suit banks, corporations and private organisations handsomely as they are the antithesis of true democracy.
    If great thinkers, doer`s and forward-thinking countries with a vestige of democracy left in them do not come forward and create an alternative to unfettered Capitalism and reign in the forces of wealth and power then I see a form of Oligarchy emerging again which will create a neo-feudalism.
    When in doubt about any given situation, always ask yourself, “Cui Bono”? – Who benefits?

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