The FINANCIAL -- For months now, we have seen Greece teetering on the edge of collapse where everything will remain paralysed and unworkable.
With a determined Angela Merkel defying the odds and wanting to keep the Euro zone alive and kicking, and even more, to keep the European unity intact, much of the efforts were to keep Greece “propped” up with bailout funds. A significant portion of the bail-out funds went back to Europe to keep debt payments on schedule.
For a nation which was in recession for much of the last 5 years, and where worker morale is at its lowest, unemployment at its highest, and where a lukewarm “sucker” mentality has gradually crept in, it all seems that the final blow to the nation and its people has already been made at the May 6th elections. Greece is unable to form a government, next elections are on the card, and, if a unity government is not formed, Greece’s anti-austerity votes will put an end to its membership in the Euro zone. The fact of the matter is that majority of the Greeks want to be out of the Euro zone and be allowed to reformat their own economy and lifestyles. They are also convinced that the financial crisis was not of their making, but that of the big time lenders and big time borrowers which included an incompetent government.
In the lips of everyone in Greece, the simple question is: “where are we heading?. The ensuing chaos from the elections results was not really expected to be this bizarre, with neo-Nazis with an agenda to kick every non-Greek out of the country gaining seats in the new parliament. The stunning verdict however came from Syriza party which stands for abolition of all austerity measures and resuscitating Greece through home-grown economic measures. It has declared that it will tear out the bailout agreement with Europe. To the surprise of many, Syriza is expected to gain some 128 seats in a 300 member parliament if the next elections are held, and lead a coalition government. If that happens, one may rest assured that Greece will most likely be out of the Euro Zone.
I have often argued for a new financial and economic model which can save nations from disaster and which can embed a number of rules and regulations aimed at safeguarding smaller and economically weaker nations. The current set of rules and the accepted behaviour of big business and big money do not make any sense as the same rules of the game come back to haunt big business and big money as we have seen during the last three years. Despite all the meetings in Brussels, Paris and Berlin on how to deal with the euro crisis, all that we have seen are pledges of platitudes to rein-in spending, cut back on a number of benefits for the common man, and protect the banks which have demonstrated a highly aggressive and irresponsible attitude to the common good of real economies. The world had allowed the financial system to move away from backing development to making money from a number of dubious financial instruments, with contrived “derivatives” being at the forefront.
Greece, a mighty land of civilisation, of art, of philosophy, of sports and of greatness is now in the grip of a financial slaughter house. It has no money, it is bankrupt and its people are on a rudderless boat, humbled and humiliated. It is entirely likely that no one will give a golden parachute to Greece to bail out of its problems. The trillion dollar question is: what next for Greece.
A somewhat disturbing scenario for European unity is that German public itself, already disenchanted with the need to pocket out bailout funds, will probably tell Angela Merkel to forget Greece. They may also say: forget Spain, Portugal, Italy, Ireland and any others getting into trouble. This voter public would get much support from the French anti-austerity vote which elected Francois Hollande and from the Dutch who toppled their government weeks ago. What all this means is that the word “austerity” and sacrifice must go out the vocabulary of solution-finders. After all, if free market capitalism is founded on the theory that profit and greater happiness is the fundamental thrust of capitalist societies, why talk about austerity?
Could the Chinese, quiet and focussed for the last years in the global financial scene, suddenly spring a well orchestrated financial and investment offensive on a global basis. They have a strong foothold in Africa in the resources sector, mainly in minerals, oil and gas. Three of their major banks have now been given permission by the Federal Reserve in the United States to expand their operations in that country. They are actively talking to Greece about buying the port facilities, enlarging port and shipping operations. The crisis has also exposed Chinese investments in the money market both in the US and in Europe. The only way they can hammer out some level of advantage is to use the same crisis in their favour and start buying high quality, undervalued assets and build a strong asset class for China.
The European response to the euro zone crisis thus far has been mainly unilateral, attempting to resolve the problem of the banks by pumping mostly printed money into the system, just as what the US has been doing. Any deep structural change in how money and economy should work together has not been thought out or prescribed, because of a certain political paranoia that any form of compromise from the stated and aggressive principles of an unbridled and wild financial regimes would be tantamount to stepping back into the abyss of socialism and communism. The thinkers and planners at the European Central Bank and the rest of the major banking community are wary of allowing development thinkers and planners taking the upper hand. They see their own profits down and their own capacity to rake up massive bonuses being challenged.
I have painfully watched the myriads of meetings and solutions during the last three years and mentally documented the political stances, “we-shall-find a solution” slogans, the wrangling at the top echelons of power and all that we have seen as outcomes is a pathetic, ill-devised strategy for bailouts through printed money and a European paper commitment to curb spending and borrowing. Monetary and fiscal policies of the greater Europe or indeed any single member of the European Union were not subject to sharper scrutiny.
Greece epitomises a European, US and indeed a global tragedy, arising from a disconnect that has existed and continues to exist between those who manipulate a world economic order and those who helplessly stand and watch crisis evolve and gather storms. Austerity, as I often say, is a punishment metered out to 95 percent of the people by 5 per cent who are able to dictate the course of economies. Mainly on account of this imbalance, austerity measures, will never be an answer. We need to find them elsewhere.