Greeks say ‘NO’ to an open lab­o­ra­tory for vi­o­la­tion of hu­man rights

The Diplomatic Insight - - News - The for­eign bank cards are ex­empted from this daily limit. By Kavaljit Singh eco­nomic power in the post-war pe­riod.

The Greek debt cri­sis saga con­tin­ues with no res­o­lu­tion in sight. As ex­pected, the Euro­pean lead­ers re­jected a last-minute pro­posal by Alexis Tsipras, Prime Min­is­ter of Greece, re­quest­ing an ex­ten­sion of the bailout pro­gram that ex­pired on 30th June and seek­ing a new €29.1 bil­lion bailout pack­age that could have cov­ered coun­try’s debt obli­ga­tions over the next two years. The rejection led the coun­try to de­fault on its €1.6 bil­lion loan re­pay­ment to the In­ter­na­tional Mon­e­tary Fund. Greece to the IMF. Even though the IMF does not use the term de­fault, it will now clas­sify Greece as be­ing “in ar­rears” and the coun­try will only re­ceive funds in fu­ture once the ar­rears are cleared. Af­ter sev­eral rounds of pro­tracted ne­go­ti­a­tions in Brus­sels, Greece had re­jected the anti-aus­ter­ity con­di­tions con­tained in the bailout pack­age pre­pared by the troika (Euro­pean Com­mis­sion, Euro­pean Cen­tral Bank and the IMF). The troika de­manded sub­stan­tial cuts in pen­sion and wages be­sides over­haul­ing value-added tax as a pre­con­di­tion for re­leas­ing the re­main­ing funds from the bailout pack­age which ex­pired on 30th June. Dis­ap­pointed over the rigid stand taken by troika, on 27th June, Mr. Tsipras an­nounced a ref­er­en­dum to de­cide whether or not Greece should ac­cept the bailout con­di­tions. The ref­er­en­dum will take place on 5th July. By an­nounc­ing a ref­er­en­dum, the Greek gov­ern­ment has put the ball in peo­ple’s court. It is hard to pre­dict the out­come of forth­com­ing ref­er­en­dum. It is likely that a No vote would strengthen the bar­gain­ing power of the cur­rent gov­ern­ment which came to power on anti-aus­ter­ity plat­form in Jan­uary 2015. While a Yes vote would make the gov­ern­ment’s po­si­tion un­ten­able and prob­a­bly lead to gen­eral elec­tions.

Cap­i­tal Con­trols

On 28th June, the Greek gov­ern­ment im­posed cap­i­tal con­trols and other reg­u­la­tory mea­sures to main­tain liq­uid­ity and sta­bil­ity in the bank­ing sys­tem. These in­clude: All banks in the coun­try will re­main closed for a week (June 29- July 6, 2015). An in­di­vid­ual can with­draw up to €60 per card a day from ATM. The trans­fer of money to out­side Greece will re­quire ap­proval from A spe­cial­ized agency will deal with ur­gent pay­ments that can­not be met through cash with­drawals or elec­tronic trans­ac­tions.

The Ac­cu­mu­la­tion of Public Debt

No dis­cus­sion on Greek debt cri­sis would be com­plete with­out an­a­lyz­ing how the coun­try’s public debt got ac­cu­mu­lated over the years. In 2004, the coun­try’s public debt was €183.2 bil­lion. By 2009, it reached as high as €299.5 bil­lion, or 127 per­cent of coun­try’s GDP. Cur­rently, Greece’s public debt stands at €323 bil­lion, nearly 175 per­cent of coun­try’s gross do­mes­tic prod­uct. Both the crit­ics and sup­port­ers of Greek’s gov­ern­ment ad­mit that such a high debtGDP ra­tio is un­sus­tain­able. The cur­rent gov­ern­ment is seek­ing sub­stan­tial write-off of coun­try’s debt so as to put the coun­try back on a growth tra­jec­tory. While seek­ing debt re­lief for Greece, sev­eral econ­o­mists and le­gal ex­perts have re­ferred to Lon­don Agree­ment in 1953 which gave gen­er­ous debt re­lief to West Ger­many by writ­ing off its 50 per­cent of debt, ac­cu­mu­lated af­ter world wars. This debt re­lief was one of the key fac­tors which en­abled the reemer­gence of Ger­many as a world In 2015, the Greek Par­lia­ment set up a Truth Com­mit­tee about the Public Debt to in­ves­ti­gate how coun­try’s for­eign debt got ac­cu­mu­lated from 1980 to 2014. The Com­mit­tee has re­cently re­leased a pre­lim­i­nary re­port which states that Greek public debt is largely il­le­git­i­mate and odi­ous. I would earnestly re­quest read­ers to read this re­port as it con­fronts sev­eral pop­u­lar myths as­so­ci­ated with the Greek public debt. Ac­cord­ing to the re­port, the in­crease in debt be­fore 2010 was not due to ex­ces­sive public spend­ing but rather due to the pay­ment of ex­tremely high rates of in­ter­est to cred­i­tors and loss of tax rev­enues due to il­licit cap­i­tal also took place be­fore 2010. More im­por­tantly, the re­port re­veals was used to res­cue the Greek and other Euro­pean (es­pe­cially Ger­man and French) pri­vate banks. The loan agree­ments of 2010 (and 2012) helped their risky bonds is­sued by the Greek gov­ern­ment. In sim­ple words, the debt of the pri­vate banks was trans­formed into public sec­tor debt via bail-outs. As pointed out by Tim Jones of Ju­bilee Debt Cam­paign, it is not the peo­ple of loans from the troika but the Euro­pean and Greek banks which reck­lessly lent money to the Greek gov­ern­ment in the Out of €254 bil­lion lent to the Greek gov­ern­ment by troika since 2010, only 11 per­cent have been spent to meet gov­ern­ment’s cur­rent ex­pen­di­ture. Of course, pre­vi­ous gov­ern­ments of Greece are equally re­spon­si­ble for spend­ing be­yond its means and fal­si­fy­ing its public ac­counts. Who owns Greece’s public debt? Cur­rently, close to 80 per­cent of Greece’s public debt is owned by public in­sti­tu­tions — pri­mar­ily from the EU

(mem­ber-states, ECB and EFSF) and the IMF (see chart be­low) The rest is owned by pri­vate cred­i­tors.

Aus­ter­ity Caused a Hu­man­i­tar­ian Cri­sis

The so­cial and eco­nomic con­se­quences of aus­ter­ity mea­sures im­posed by troika on Greece have been dev­as­tat­ing. Since 2010, Greece’s GDP has fallen by 25 per­cent and un­em­ploy­ment rate is 26 per­cent. The youth un­em­ploy­ment rates are at an alarm­ingly high level. Cur­rently, over 56 per­cent of young peo­ple in Greece are with­out a job and there are more than 450,000 fam­i­lies hard­ship un­der the aus­ter­ity pro­gram, Greece’s ma­jor in­di­ca­tors (in­clud­ing GDP, em­ploy­ment and in­comes lev­els) are still far be­low the pre-cri­sis lev­els. The wel­fare spend­ing cuts proved to be counter-pro­duc­tive. As pointed out by Ozlem Onaran of Univer­sity of Green­wich: “The wage and pen­sion lower GDP, tax losses, and higher public debt. Our es­ti­mates show that the fall in the wage share alone has led to a loss in GDP by 4.5%, and a 7.80% point in­crease in the public debt/GDP ra­tio. The fall in wages alone ex­plains more than a quar­ter (27%) of the rise in the public debt/GDP ra­tio in this pe­riod. The con­di­tion­al­i­ties of the mem­o­randa have not only been coun­ter­pro­duc­tive in terms of its aims re­gard­ing debt sus­tain­abil­ity, but also en­gi­neered a hu­man­i­tar­ian cri­sis.” Many le­gal ex­perts ar­gue that the harsh aus­ter­ity pro­gram im­posed by troika could po­ten­tially pose a vi­o­la­tion of hu­man rights. Ac­cord­ing to Ilias Ban­tekas, Pro­fes­sor of In­ter­na­tional Law at Brunel Univer­sity Law School, “The mea­sures im­posed against the Greek peo­ple were wholly an­ti­thet­i­cal to fun­da­men­tal hu­man rights as these stem from cus­tom­ary in­ter­na­tional law, mul­ti­lat­eral treaties and the Greek con­sti­tu­tion. Con­se­quently, these ‘loans’ were held to be odi­ous, illegal or il­le­git­i­mate.” It is per­ti­nent to note that not just in Greece, the aus­ter­ity pro­grams also failed to yield pos­i­tive re­sults in Cyprus, Spain and Ire­land.

Grexit: Pain and Gain

What would hap­pen if Greece aban­dons or is forced to exit the euro? In the short­term, it would cer­tainly en­tail greater un­cer­tainty and eco­nomic hard­ship. A with col­lapse of banks and busi­nesses which have bor­rowed in eu­ros can­not be ruled out. The pay­ments of salaries and pen­sions could also be de­layed for months. The so­cial and eco­nomic con­se­quences could be dis­as­trous for Greek econ­omy and its peo­ple if the tran­si­tion from the euro to a new na­tional cur­rency (pos­si­bly drachma – its old cur­rency) is badly man­aged. Hence, the tran­si­tion should be well-planned and prop­erly im­ple­mented with pop­u­lar sup­port. There is a grow­ing con­sen­sus that a mas­sive de­val­u­a­tion of drachma would help in in­creas­ing do­mes­tic de­mand and im­prov­ing the prospects of eco­nomic re­cov­ery. A weak drachma would make Greek ex­ports more com­pet­i­tive and its tourism more at­trac­tive and there­fore would open up new op­por­tu­ni­ties to en­hance ex­ports and en­cour­age more tourism over the long-term. Ex­ports ac­count for nearly 30 per­cent of its GDP. Be­cause of a weak new drachma, the de­mand for do­mes­tic goods would in­crease as im­ports will be­come more ex­pen­sive thereby boost­ing the do­mes­tic de­mand which, in turn, would also en­cour­age greater do­mes­tic pro­duc­tion and cre­ate more jobs for Greek peo­ple. In ad­di­tion, Greece will also re­gain its space to set poli­cies in tune with its own eco­nomic needs in­stead of those of Eu­ro­zone economies. Need­less to say, a small coun­try like Greece (rep­re­sent­ing less than 2 per­cent of EU’s GDP) should

Greece leav­ing the euro will have the rest of Europe. If Greece leaves con­ta­gion to other weak Eu­ro­zone economies (such as Por­tu­gal, Ire­land, Spain and Italy) looms large and sub­se­quently these economies may as well exit the euro. Not only such a move would weaken the Eu­ro­zone but,

more im­por­tantly, it would spell the end of the sin­gle cur­rency experiment and the larger Euro­pean pro­ject to­wards greater eco­nomic in­te­gra­tion. Be­sides, one can­not ig­nore the fact that the euro may face mas­sive de­val­u­a­tion if in­ter­na­tional in­vestors liq­ui­dates their Euro­pean as­sets and in­vest­ments en masse. Fur­ther­more, there are hu­man and geo lead­ers. How will the EU cope with the who en­ter Europe (via Mediter­ranean route) with­out the ac­tive co­op­er­a­tion of Greek gov­ern­ment? Tech­ni­cally speak­ing, an exit from euro does not mean an exit from the EU. A Greek veto on ex­tend­ing sanc­tions against Rus­sia over Ukraine would fur­ther weaken the Euro­pean strat­egy to iso­late Rus­sia. The ob­ser­va­tion made by many com­men­ta­tors that Grexit would iso­late the coun­try from the world econ­omy is highly mis­placed. Greece can ex­plore new eco­nomic part­ner­ships and build strate­gic al­liances with Rus­sia, China and other de­vel­op­ing world. Given its favourable geo-eco­nomic lo­ca­tion in South­ern Europe, Greece can emerge as an im­por­tant re­gional energy dis­tri­bu­tion hub. Greece has al­ready launched dis­cus­sions with Rus­sia to build a gas pipeline to Greece via Tur­key and then to Europe. This to Greece’s econ­omy in terms of new in­vest­ments and jobs. Greece is cur­rently con­sid­er­ing join­ing the New De­vel­op­ment Bank (NDB) which was set up in 2014 by BRICS. Be­com­ing a mem­ber of Asian In­fra­struc­ture In­vest­ment Bank is another pos­si­bil­ity. Need­less to say, the Euro­pean lead­ers need to act more like states­men as the Euro­pean Union is founded on the val­ues of re­spect for democ­racy, equal­ity, hu­man rights and sol­i­dar­ity.

The Broader Mean­ings of ‘No’ Vote

Fi­nally, the Greek cit­i­zens have de­liv­ered a re­sound­ing ‘No’ to bailout con­di­tions de­manded by cred­i­tors in a ref­er­en­dum held on 5th July. The ref­er­en­dum was an­nounced by Greece’s Prime Min­is­ter, Alexis Tsipras, on 27th June af­ter bailout talks with the cred­i­tors failed. The ref­er­en­dum asked vot­ers to de­cide “whether to ac­cept the out­line of the agree­ment sub­mit­ted by the Euro­pean Union, the Euro­pean Cen­tral Bank and the In­ter­na­tional Mon­e­tary Fund at the Eurogroup of 25/06/15.” The gov­ern­ment-backed ‘No’ side won with 61.31 per­cent of votes, while ‘Yes’ got the re­main­ing 38.69 per­cent. Fur­ther, not a sin­gle elec­toral dis­trict of Greece voted for ‘Yes’. No one in Greece had pre­dicted such a mas­sive vic­tory for ‘No’ vote. Most opin­ion polls had pre­dicted a tight con­test with ‘No’ side win­ning by a slim mar­gin. Does a ‘No’ vic­tory mean Greece leav­ing the euro and the EU? Not ex­actly. As pointed out by PM Tsipras, “This is not a man­date of rup­ture with Europe, but a man­date that bol­sters our ne­go­ti­at­ing strength to achieve a vi­able deal.” Un­doubt­edly, the land­slide vic­tory in the ref­er­en­dum has greatly strength­ened the bar­gain­ing power of the cur­rent gov­ern­ment with cred­i­tors. The im­pacts of the aus­ter­ity mea­sures im­posed by the in­ter­na­tional cred­i­tors have been cat­a­strophic. The Syriza­led gov­ern­ment, which came into power on an anti-aus­ter­ity plat­form in Jan­uary 2015, has re­sisted pres­sure to im­ple­ment harsh aus­ter­ity pro­grams that af­fect the el­derly and the poor. Another pos­i­tive out­come of the ref­er­en­dum is that the op­po­si­tion par­ties have also given sup­port to the Syriza­led gov­ern­ment to ne­go­ti­ate a new deal with cred­i­tors. In many im­por­tant ways, the decisive ref­er­en­dum has brought po­lit­i­cal sta­bil­ity in Greece which has

A New Deal for Greece

In the cur­rent cir­cum­stances, a new deal is chal­leng­ing but still fea­si­ble. Both sides need to re­al­ize the sense of ur­gency to pur­sue a re­al­is­tic agenda. The ne­go­ti­a­tions be­tween Athens and Brus­sels should re­sume im­me­di­ately On their part, the lead­ers of Eu­ro­zone should ac­cept a com­pro­mised deal to end the im­passe. They should not in­sist that any spe­cial priv­i­leges to Greece would en­cour­age other po­ten­tial rule­break­ing eu­ro­zone coun­tries. The costs of a Grexit are high not only for Greece but also the en­tire Europe in terms of wider eco­nomic and geo-po­lit­i­cal im­pli­ca­tions. It is im­por­tant to note that the IMF in its pre­lim­i­nary draft debt sus­tain­abil­ity anal­y­sis (dated June 26, 2015) has sought sub­stan­tial debt re­duc­tion along with ex­tended con­ces­sional for in­stance, full write-off of the stock out­stand­ing in the GLF fa­cil­ity (€53.1 bil­lion) or any other sim­i­lar op­er­a­tion.” The Greek Loan Fa­cil­ity (GLF) con­sists of bi­lat­eral loans pooled by the Euro­pean Com­mis­sion. A new deal is fea­si­ble if the Euro­pean lead­ers re­al­ize the true im­por­tance of ‘No’ vote. The mes­sage of Greek ref­er­en­dum is loud and clear: harsh aus­ter­ity mea­sures im­posed by the EU lack demo­cratic le­git­i­macy. And the debt re­lief should not be treated as a taboo. Hence, keep­ing the wider in­ter­ests of the Euro­pean pro­ject in mind, its po­lit­i­cal lead­er­ship should adopt a more on the prin­ci­ples of democ­racy, hu­man rights, co­op­er­a­tion and sol­i­dar­ity. Af­ter the peo­ple, not the other way around. In re­turn, Greece should also un­der­take pol­icy mea­sures to check mas­sive tax eva­sion by oli­garchs and stream­line the Greek gov­ern­ment should be given a fair chance to put its house in or­der. This en­tails pa­tience on the part of

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