GREECE᾽ S TURMOIL FROM EURO᾽S INHERITANCE

Greece’s Turmoil from Euro’s Inheritance

by
Dr. Ioannis N. Kallianiotis[1]
Economics/Finance Department
The Arthur J. Kania School of Management
University of Scranton
Scranton, PA  18510-4602
U.S.A.
Tel. (570) 941-7577
Fax (570) 941-4825
E-Mail:  ioannis.kallianiotis@scranton.edu 

«Τῶν πολιτῶν ἔργόν ἐστιν ἡ σωτηρία τῆς κοινωνίας» (Ἀριστοτέλης)

June 2012

.          Greek history with its unique direction because the country occupies an incomparable position in the South-East Europe, connecting three continents, with its people, who have transferred the Hellenic civilization and paideia to the East (Ancient Greek colonies, Alexander the Great, and Byzantine Empire) and to the West (Greek colonies, contribution to European Renaissance by Greeks, who survived from the conquest of Constantinople, and up to now with Greeks’ international mobility), and always with one particular objective, to offer some possibilities to all humans to become persons (perfect personalities). This country civilized Europe and gave even the Greek name “Ευρωπη” for the entire Continent.[2] A few years ago, some “Greek” politicians, without referendum, decided to join the European Union, which is not so disastrous for a small country like Greece and because of her exclusiveness, as the founder of European civilization. But, putting Greece, with a completely different socio-economic structure, compared with the industrial nations of North Europe to Euro-zone is anti-economic, anti-democratic, unethical, and against the Greek citizens’ decisions and their future welfare. Greece does not deserve this turmoil and these pseudo-politicians do not deserve to be in power. The responsibility of the voters is also enormous towards their country and the future generations.
.          Countries abandoned the gold exchange standard in 1973 because a fixed exchange rate does not work for all nations. Even a large economy, like the U.S. one, suffered because it lost almost its entire gold reserves. Instead of keeping the EU member-nations independent with their domestic currencies, their fiscal, momentary, and trade policies, depending on the domestic social needs of the countries; they imposed on these nations and their citizens a common currency and are in control of the countries, their governments, and their sovereignty. Then, it came the American financial crisis (2007) and the European debt crisis (2009). Greece led by its indescribable politicians, after 1974 to a very severe debt problem, to increases of the inefficient public sector, to the Euro-zone without referendum, and unfortunately, to a lot of corruption. Politicians, who do not know their history, culture, civilization, paideia, language, uniqueness of their people, cannot run for office, as it was proven, lately; they can cause enormous social cost, not only for the current generation, but to the future generations and to the future politicians, too. And these failed politicians have the impudence to claim the vote from the downtrodden Greek proud citizens.
.            Greece is in a severe recession (actually, depression)[3] the last five years with an unemployment over 22% and in some regions over 40%. These conditions are disastrous for the country, its citizens, its future, and a proof that this system and this union do not work. Its debt is large (165% of GDP) and its deficit (9.1% of GDP), too; but, during periods of recession you do not use anti-growth measures to reduce deficits, as Troika has imposed on Greece because the results will be the opposite. You use expansionary public policies to stimulate growth and reduce unemployment. After the recession, you start, gradually, correcting the inefficient public sector and all the other deficiencies. Greece experienced many difficulties, conflicts, and invasions by barbarians and other neighboring or even non-neighboring countries, but she resisted with all her means and has to do the same, during the current economico-political “invasion” from EU.
.            After World War II, the nation and its citizens enjoyed a huge growth, a zero unemployment, a stable development, a multiple improvement, and a preservation of their traditional social values. Lately, the European integration has destroyed the sovereign nation-states and it is ruling undemocratically an entire continent and unfortunately, Greece, due to her weak politicians. European Union’s economic and social policies cannot satisfy any welfare function for the Europeans, like justice, fairness, allocation, equity, stability, distribution, efficiency, full employment, homogeneity, security, sovereignty, independence, self-sufficiency, certainty, and democracy. Unfortunately, it became an oppressor for the poor Greeks and most of the Europeans. Greece has to leave the Euro-zone; otherwise the country is in serious danger. The entire Europe would be better off without the euro.
.           European Union tried to equalize 27 heterogeneous countries, with different value systems, work ethics, factor endowments, economic abilities, cost of production, incomes, dogmas, languages, and objective in life. Of course, nothing of this has happened and the cost of integration has exceeded the benefits for the Europeans. Citizens have lost their jobs (the suicide rate has exceeded any historic records)[4] and businesses have gone bankrupt, due to competition from the other country-members and from other foreign nations (Asians), with which EU has signed a foolish free trade agreement. Prices have increased because of the common market, goods are moving to markets with higher income and prices, and to attract them you have to pay the same high prices, which is impossible for Greece because her income is lower compared to the wealthy manufacturing EU members of the North. An overvalued euro has equalized prices (upward), but not incomes. A coffee from 100 Drs. (€0.293) has reached €5.5 (1,874.125 Drs.), an increase by 1,774.125% of its price since the introduction of euro.
.           Further, this overvalued common currency (the euro) has destroyed exports, foreign investments, tourism, shipping, and many other activities. The worst social problems are illegal immigrants, drug dealers, terrorists, anarchists, international mafia, every corrupted person and every kind of criminality moves freely from one nation to the other because borders have been abolished and Greek borders are extensive and the country’s islands are in thousands and are staying unprotected. The current imposed “structural changes” [increases in taxes, raise of the value-added tax, reductions in wages, salaries, and pensions, weakening of the power of labor unions, reductions of EU subsidies, shifting some of the burden of health insurance from employers to households, increasing the number of years for work, privatization of state owned enterprises (SOEs), and layoffs of public workers], the tremendous austerity, and many other measures that are coming soon (after the second ineffective elections in June), are against the “poor” Greek (and the other European) citizens. Then, the answer for the inheritance from the euro is obvious. We cannot insist for a mistake that EU did in 2002 and imposed it to Europeans.
.             In fall 2008, the Greek government gave to the Greek banks €28 billion (taxpayers’ money) for their economic support, to increase the liquidity in the financial institutions and to increase their lending towards businesses, but it received back a big nothing (banks do not share their benefits, they share only their bailout cost). This is a serious problem with financial institutions after 30 years of deregulations. It seems that all the big political parties in Greece became neo-liberals (market oriented and acting against the social interest of the country and its citizens) and very corrupted, some of them. The worst for Greece were the two inhumane memoranda (“μνημονια”) that Troika imposed on Greeks (two political parties, PASOK and N.D., ratified them with their signatures in absentia of the citizens) and because the county has no independent public policy to stimulate her economy and improve growth through an expansionary monetary and fiscal policy and through devaluation of her currency (trade policy), it has been led to a serious economic distress (a social collapse).
.            Greece has suffered since 1824 (during the War of Independence from Turks) with her Western creditors (actually, usurers). Greece lives for 188 years with foreign loans, extreme exploitations by her lenders, and has experienced bankruptcies, too. But, the past politicians were acting in favor of Greeks and not in favor of their unfair lenders. In 2010, Greece received a conditional loan of €110 billion ($161 billion) in installments to be able to pay the previous loans and the enormous interest cost, with an interest rate on her bonds of 24%. European leaders (actually, Germany and France; it seems the new President of France, Francois Hollande, will follow Angela Merkel) tried to bailout Greece with wrong means and to prevent the Euro-area’s first sovereign default, which might cause a series of bankruptcies to the peripheral members and a serious strike on euro. In March 2012, a new bailout loan of €173 billion ($220 billion) was announced, which will be offered in installments again, if Greece keeps her obligations towards the lenders (referenda); also, an insignificant cut of some of Greece debt by 53.5%, and a new memorandum with 20 new mandates is changing everything in labor market and in the daily life of Greek citizens. Of course, one major fiscal problem of the country is the tax evasion by the wealthy people, professionals, and businesses. And because of this low government revenue, the minister of finance imposed unexpectedly and unfairly property taxes on homes, for the first time in Greece’s economic history. Thus, Greeks are losing ownership of their homes.
.           Greece was borrowing and was rolling over her maturing debt obligations without any problem, as the rest of the West is doing; and of course, a lot of these loans were spending to buy weapons and other military “goods” from Germany, France, England, and elsewhere. During this crisis, Greece was unable to roll over her maturing debt obligations (bonds) and it is closed to default. Domestically, the country has suffered from ignorant leaders, enormous government spending and inefficiency, over-consumption, low savings, huge borrowing, destruction of agriculture, abandonment of villages and country sides, non-use of domestic natural resources (oil, gas, many minerals, etc.), tax evasion, corruption, and other evils. Greek industry (manufacturing) is suffering from abandonment by the government, from low productivity, and from declining in its competitiveness. Its exports were declining and imports were growing very fast. Greek industry and shipyards need protection from the government because of the unfair competition that faces from the surrounding countries and China. In the past, tourism and the shipping industry (the Greek maritime fleet is the largest in the world, it has approximately 18% of the world’s maritime fleet) have been the Greek economy’s stronger sectors; now, are suffering from the global recession and the overvalued euro. Greece has no monetary policy because it is pursued by the ECB, she has no fiscal policy because of Troika’s constraints, and she has no trade policy because she cannot devaluate the common currency; but she has only to reduce the cost of production (salaries and wages, which are relatively low, compared with the other EMU members) and the citizens welfare fell to zero. These destructive politics for this historic nation have to be stopped by the citizens on June 17, 2012. Social justice must be satisfied.
.          If Greek politicians had taken some measures earlier, since 1980s, there would be no need for the current austerity measures and the anti-social reforms or the sale off of Greece’s public wealth by putting it as collateral to foreign lenders. A nation has to give the first priority to its citizens’ welfare and not to its creditors’. Lenders know that there is always risk in our free-market economies, for this reason they charge a risk premium of over 20%. This is the reason that citizens voted against the big parties (PASOK and N.D., who had signed the new memorandum in March 2012), during the recent elections on May 6, 2012 and it was impossible for them to have a democratic elected government in their country. The country is going to new elections in June 17, 2012, but the outcome from them is not expected to be beneficial at all for the country because the same bad politicians of the past must never be in power again. Politicians have to anticipate and prevent crises and not to correct them because it is too late and the disaster has been accomplished to the current and future generations of the country. The G-8 leaders met at a weekend summit at Camp David on May 19, 2012 and urged Greece to stay within the euro area and momentum gathered for the idea of issuing euro bonds to ease Europe’s debt crisis.[5] The economies of the EU are being gripped by political confusion, as policy makers failed to develop solutions to address Greece’s and the rest of the peripheral nations’ financial crises. The euro has lost 6.56% against the U.S. dollar in May 2012 (4/27/2012: 1.3229 $/€ and 5/31/2012: 1.2361 $/€) and $4 trillion have been wiped from equity markets, due to fear that this turmoil in Greece might spread to other members of the Euro-zone.
.          Finally, the measures imposed by Troika will deteriorate the economy further; the deficit will increase, the unemployment will go up, the recession will become deeper, and the country will face other external (safety and security) issues.  Troika forces Greece to privatize the entire public sector; now, that the prices have fallen so much, it is selling them for free. Those sale offs of the national wealth is a crime against the nation and its citizens and Greek politicians have to say “NO” or to go home (some must go to prison). During periods of economic crises, the government has to nationalize private firms to improve confidence among citizens and stability for the country (a temporary nationalization of the big private banks at the moment will help them and will reduce the run on banks). The “old” (with bad past) politicians cannot lead with the same politics this kind of historic country. These austerity measures are absolutely wrong and the Greek politicians are responsible for signing the referenda. Greece has to leave the EMU right now, to stop payment on any loans (Germany did not pay two of its loans after WWI and WWII; the same has been done by many other nations) until it will recover and pay only a moderate, similar to the other sovereign nations, interest rate on loans, to go back to the drachma (at an initial exchange rate 1 Dr/€) and to become an independent sovereign nation, which will use its public policies and its factors of production to exit from the recession, relatively soon. If Greece will make the mistake to stay in Euro-zone, she will have no future. Greek citizens cannot undertake the cost of adopting the euro and should not be liable for their governments’ debts and mistakes. Greece has to leave the Euro-zone and become gradually a self-sufficient, sovereign, and advanced nation, as it was in the past, for the benefits of its own citizens and for the global civilization. Euro’s inheritance is not needed for Greece because it is inferior of the existing Hellenic-Orthodox inheritance.


[1] A different and shorter version of this article was published in the U.S. News & World Report, Debate Club, May 16, 2012. I would like to acknowledge the assistance (word process) provided by Nicholas J. Kallianiotis. Financial support (professional travel expenses, submission fees, etc.) was provided by Provost’s Office (FRAP Funds), University of Scranton. The usual disclaimer applies. Then, all remaining errors are mine.

[2] See, some of Greece civilization in this video: Ἡ Ἑλλάδα ἀπό ψηλά (Ὑψηλή Ανάλυση). http://www.youtube.com/embed/GZeQjbmqX_w?rel=0

[3] Average GDP growth in Greece by era was as following: (1) Before EU integration: 1961-1970 it was 8.44%, 1971-1980 it was 4.70%. (2) After the EU integration: 1981-1990 it was 0.70%, 1991-2000 (period of enormous borrowing) it was 2.36%, 2001-2007 (again period of large borrowing) it was 4.11%, 2008-2011 it was -3.45%, (3) In 2011:Q4, it was -7.5% and 2012:Q1 the growth was -6.2%.

[4] So far, 2,000 people have committed suicide in Greece, due to the financial crisis, the imposed austerities, and the recession that the country faces the last three years. (TV News ALPHA, May 30, 2012).

[5] See, The Wall Street Journal, May 21, 2012, pp. A1, A7, and A9.

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