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Tuesday, 16 June 2015

‘Canary in a Coalmine’ Greece in 2011 and 2015. Many things changed, but not for the better. A Grexit is looming even more than it did in 2011

First to fall over when the atmosphere
is less than perfect
Your sensibilities are shaken by the slightest defect
You live you life like a canary in a coalmine

Yesterday, I developed the idea to write an article about Greece, in which I treated the country as the proverbial ‘Canary in a Coalmine’: a manifest warning signal of when things seriously start to go wrong as a consequence of underlying, less obvious causes.

Of course, I wanted to use the first verse of the hilarious, namesake Police song about such a canary at the beginning of my article, but I knew that I had used it before, some time ago.

(Not so much) to my surprise, I found out that I used it earlier in an article about… Greece.

What made this old article particularly interesting to read back, is that it originated from September 2011: almost four years ago. In those days, the Greek crisis was still in its early stages and the solutions seemed still quite obvious to me, albeit very hard to achieve in the political snakepit, called the EU.

Since then many things regarding Greece changed, but too many things didn't! 

Therefore I wanted to use some quotes from this four year old article to find out where we stand today; what has changed and what has stayed the same about the Greek conundrum. Here are the most important quotes from this article, accompanied by my comments, regarding the current situation.

Quote: During the last three years, Greece had the dubious honour to be ‘the canary in the coalmine’ for the Euro-zone. And darn it; what an interesting story this ‘bird’ had to tell

My comments: Greek still is the canary in the coalmine; perhaps now more than ever. Perhaps it is the first domino in a row to tumble, followed by other countries from the Eurozone. In my opinion, the Eurozone is to blame for that.

The Eurozone and the EU have merely kicked the can down the road for almost four years now, while forcing brutal austerity arrangements upon the Greek population, through the so-called troika of EU, IMF and ECB.

Even though the Greek economy started to reluctantly grow in 2014 – after three years in which the Greek lower and middles classes were economically starved to death – the population was utterly sick and tired of the enduring crisis, as well as the insensitive and insulting taunts coming from the so-called ‘sensible” and creditworthy Euro-zone members Germany, The Netherlands and Finland.

Especially the first two had partly shipwrecked the Greek agricultural and manufacturing industry with their relatively cheap exports of agricultural produce and commodities and goods. These products could be produced very efficiently and cheap, due to years of wage restraint that artificially suppressed the production expenses. Yet, both countries Germany and The Netherlands fully blamed the economic misfortune upon the Greeks themselves, without looking at their own part in this drama.

The Greek citizens became also totally fed up with the corrupted and untouchable upper classes in their own country with their black money, their government protection and their hidden bank accounts. People, who refused to pay their fair share of taxes and who did not want to be citizens with sensitivity regarding the interests of their countries and their fellow-countrymen. They rather chose for their own egocentric interests and not for the economic health of their country.

As a matter of fact, the Greek population was so sick and tired of the corruption and tax evasion of the Greek elites, the enduring austerity and the financial undressing of the Greek social framework, that during the last national elections in Greece they gave their votes to two parties at the outer rim of the political spectrum: Syriza at the left wing and ANEL at the right wing. Exactly these two parties form a government since January 2015; very different, but bound by their hatred for the corrupted upper classes in Greece and their disliking of the troika and the current political direction of the Euro-zone.

And while democracy had thus spoken out loudly in Greece, the tone of voice of it was so not to the liking of the current leaders of the Eurozone, that the Eurozone itself totally ignored the democratic turn-around happening in Greece: "resistance is futile!"

The Eurozone continued with its fiscal austerity programs for Greece and with its amortization schedules for the Greek debt, as if nothing dramatical had happened: 'Democracy and elections are fine, as long as the results suit the interests of the Eurozone. If they don't, they will be ignored'

Consequently, the Eurozone leaders refused to really negotiate with the new Greek leaders PM Alexis Tsipras and Finance Minister Yanis Varoufakis about a new deal for Greece. And these new leaders, on their behalf, did very little to improve the situation of their own country as well.

The result after the Greek elections has been an enduring farce about miscommunication, misunderstanding, misplaced pride and arrogance and a dash of failed bluff poker, as well as an almost suicidal desire at both parties to not come to a mutual understanding and viable solutions:
  • Eurogroup chairman Jeroen Dijsselbloem and German Finance Minister Wolfgang Schäuble maintain their conceited stance towards Greece, as insulted wallflowers at a school prom.
  • The former PIIGS countries Portugal, Spain and Italy are seemingly under the influence of the Stockholm Syndrome. These three countries want the Greeks to suffer even more from the austerity measures than they already did.
    • Obviously, Spain, Portugal and Italy have also suffered very much from the actions of the same troika parties themselves and don't want Greece to have 'an easy escape' in this matter.
    • Whether this prolonged austerity helps Greece and the Greek population to solve their economic problems, does not matter anymore. Everybody did it, so they have to do it to... until the bitter end! 
  • And for Greece, especially Finance Minister Yanis Varoufakis has been so entangled in his communication and so busy demonstrating his presumed intellect and his serious gaming theory, that even his most avid followers don’t understand his strategy anymore.
    • These followers all come to the conclusion that Varoufakis probably does not have a strategy at all, but instead is playing a game of Russian Roulette with the Eurozone, which he is doomed to lose.
  • The categorical refusal of the Eurozone countries to write down on the outstanding Greek debt ignores the fact that the Greek debt position is not viable in the long run, according to various economists. It is a question of principle..., not of sense and sensibility!
Greece needs a real helping hand now, instead of yet more debt for a prolonged period of time, but the Eurozone does not want to give this helping hand anymore.

And now, at this very moment, the only road ahead seems an official default, possibly leading to a Grexit from the Euro-zone.

Quote: One small group of relatively weak countries (the PIIGS) was (almost) enough to demolish the Euro and, as a consequence, the whole Euro-zone. The political and economic unity in the Euro-zone was definitely ‘the weakest link’ and it almost led to ‘Goodbye’ for the Euro. 

In the current structure, it is impossible to make the quick decisions that are necessary to save a currency in distress. The Euro-zone has acted more like 20 frogs in a wheelbarrow than as a union during the last three years.

Especially in difficult times, the policy of choice was the proverbial: “everybody for themselves and God for us all”. 

My comments: The Eurozone definitely was the weakest link in hindsight… 

Although many pundits consider the Greek problem now as much more contained than five years ago and don’t see a Grexit as a disaster of the first degree anymore, the intrinsical weakness of the Euro itself and the Eurozone is currently more visible and obvious than ever.

The Eurozone has been disclosed as an emperor with very little clothing on, whose only remedy against the economic crisis has been austerity, more austerity and on top of it… austerity. 

Real solidarity and cooperation between the Eurozone countries is nearly dead and the only thing that seemingly happened during the political assemblies was a continuous kicking of the can down an endless road. That was until Mario Draghi as President of the European Central Bank came to the rescue at multiple occasions.

Little has been achieved in Greece, Spain, Portugal and Italy, regarding possible plans to make these economies really more competitive, through more efficient and effective production of goods and agricultural produce. 

Instead of having looked for ways to cooperate and offer each other a helping hand, the Eurozone has acted like an angry cop, who only is interested in punishing offenders of the European laws. Therefore the expression Marshall Plan remains something of the Second World War and unfortunately not of this crisis, as none of the Eurozone countries had the guts and stamina to reinvent and deploy such a plan.

Therefore the only thing that really happened in the PIIGS countries (excluding Ireland) is that social and personnel expenses have dropped significantly, due to massive austerity on social security, pensions and welfare. 

And there has been an enormous increase in unemployment, which forced the costs of labour down for the people that did find a job after all. "If you don't accept these lower wages I offer you, there are a hundred people behind you who will!" 

The latter definitely made production and exports in these countries cheaper and consequently it made their economy somewhat more competitive. However, the lower and middle class population in these countries ended up being much poorer than they were before.

Summarizing, the austerity operation might have succeeded in the PIIGS countries, but the patient (i.e. the average lower and middle class Joe Sixpack in the aforementioned countries) has become critically ill.

Germany, France, Finland and The Netherlands – although perhaps the economic ‘leaders’ of the Euro-zone – are not ‘The Fantastic Four’. Even with the roof and the upper floors of the Euro-house burning, the sense of urgency to form a fire brigade is still missing among the leaders of Germany, Finland and The Netherlands. 
  • France’s Nicholas Sarkozy feels this sense of urgency, but is in his own country almost 'presidenta-non-grata'.
  • Germany’s political leadership within the Euro-zone has weakened, due to its current weak Chancellor Angela Merkel.
  • Europe and the US in general share an immensely weak generation of politicians, who are very accessible for the ‘vox populis’ and lack the necessary backbone for taking the hard and impopular decisions.
  • The European Commision, on paper the daily executive for the EU and the Euro-zone, is exposed as a toothless tiger with exactly the weak kind of leaders that are favorised by the national leaders of the participating countries: José Manuel Barroso, Herman van Rompuy and Catherine Ashton.

My comments: Suffice it to say that the only real fireman of the last four years has been Mario Draghi of the ECB, who did all the hard work for the political elite. The elite itself rested on its hands ever since. In other words, these leading countries have indeed not been disclosed as the Fantastic Four.

How much has really happened within the Eurozone and the European Union? That is, except for the fact that now also the United Kingdom is looking for the emergency exit of the EU and we have entered into a new cold war with Russia, about a country – Ukraine  which we are not really planning to help, as we can’t afford that, even though we said that we would. 
  • In France, one hopeless right-wing president has been exchanged for an even weaker left-wing president;
  • Germany could not find someone more capable and brave than Angela Merkel and the rest of Europe has probably even worse leadership in general. This circumstance caused this ‘leading lady’ to turn into the autocratic Queen of Europe by default.
  • And with respect to POTUS Barack Obama? There are maybe dozens of good things to say about him, but as a US president, he seems one big, spineless failure.
  • The expression 'toothless tiger' describes exactly what the European executive leadership still is and will be in years to come.
    • 'Bleak' José Manuel Barroso has been succeeded by Jean Claude ‘Mr. Tax Ruling’ Juncker of Luxemburg and Frans ‘Hear me speak eight languages fluently’ Timmermans of The Netherlands: all form, but no function;
    • 'Grey mouse' Herman van Rompuy has been succeeded by Donald ‘Who?’ Tusk of Poland;
    • Last and least: ‘Invisible Woman’ Catherine Ashton has been succeeded by her own sequel, Federica ‘la donna invisibile’ Mogherini.

Is it any wonder that the European population has lost faith in its European leaders, when it has been 'rewarded' with leaders like the aforementioned ones?!

But the Greek debt crisis might be a blessing in disguise for the Euro; finally people started to think seriously about reinforcing the political union of the Euro-zone and on the deployment of bonds covering the whole Euro-zone: the so-called Euro bonds.

And finally the awareness evolves among the European leaders and citizens that the Euro is a marriage for eternity; not a Hollywood-marriage of which you can easily divorce.

My comments: How naive was I, when I wrote these words.

The political union as a part of the EU has rather weakened than strengthened and the populist politicians have kept the debate about reinforcement of the political union, in order to offer a stronger framework for the Euro, hostage.

Everywhere in Europe and outside of it, a nasty kind of nationalism is rearing its ugly head with more confidence and on every occasion it seems that the even smallest political spark could be sufficient to let the EU implode.

Worst thing is that a Grexit is more and more becoming an accepted risk for the Eurozone and nobody of the current generation of politicians seems able and willing to turn the tides. 

‘Who will be next... after the Greeks’ is the question burning on everybody’s lips. 

And that particular question turned Greece indeed into a genuine ‘Canary in a Coalmine’.

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