A controversial strategy. It's no use trying to make excuses. Europe's failure to make a decision this week on further support to Greece is not due to the drama involving the director-general of the IMF but to a number of divergences between eurozone countries, particularly with regard to the question of what additional measures Athens will have to implement in order to put into practice its commitment to re-establishing budgetary balance. These measures have to be clarified. The EU decision will only come into being next June, which means that it is not too late for the repayment deadlines Greece has to respect in 2012 (EUROPE 10380). The real debate, however, will centre on the overriding question: can Greece really respect its commitments and what strategy will it adopt to do so?
All the different possible strategies were submitted to far reaching analyses by various specialists (who often disagreed with each other) and a number of conclusions appear to have broadly agreed: (a) leaving the euro is dismissed for several reasons. The most obvious being that the debt would in any case have to be repaid in euro, at an astronomical cost to the national currency. Only a mass rejection by the people of the indispensable rules for remaining in the euro would make leaving the currency unavoidable (see this column yesterday);( b) restructuring the debt, in the sense that this term is usually understood, is impracticable because it would involve endless problems, as proved by detailed studies, which I have found convincing; (c) the strategy that has been, in principle, agreed, consists of an operation described as re-profiling and would essentially mean delaying repayments and introducing greater flexibility into the conditions (with the agreement of the creditors). This is also known as restructuring at a slower pace.
Reprofiling involves tough rules and an avalanche of different measures, which have, in principle, already been decided and outlined. The list of privatisations includes franchises for companies on the motorways, new spectrum frequency for telecommunications operators, energy providers, the railways, Athens airport and a huge number of public buildings. Mr Papandreou has reaffirmed that the objective is to obtain €50 billion for reducing its public debt. The Eurogroup will assess the results in June.
Is all the criticism from the Socialists justified? I, like everybody else, have observed the virulent attacks made by the Socialist Group in the European Parliament on the austerity programmes imposed by the Eurogroup and IMF on failing countries (I'll leave out the more extreme positions on both the Left and Right, which advocate leaving the Euro - a legitimate position but only on the condition that they assume all the consequences). The Socialists are right to fight to ensure that the workers don't have to shoulder all the burden of this austerity. They should not, however, forget that it has been Socialist governments in Greece, Portugal, Ireland and Spain that considered it both necessary and wise to reduce the budget deficits (often provoked, in Greece and elsewhere, by previous governments of the Right). The Socialists should support their respective governments, which are trying their best to ensure that their countries can play the essential role conferred upon them by eurozone membership. This also involves thinking seriously about what one of the promoters of the stability programmes said: “Cleaning up our public finances is an imperative if we are to rediscover our national sovereignty.” Demands for social justice and economic growth are increasingly being taken into consideration within the Eurogroup - for example, some governments have demanded responsibility for wage indexation being included in the national remit. With regard to the question of the age of retirement, increasing life expectancy has a logical impact (basing its calculations on those of the experts, the United Kingdom has already decided to raise the retirement age to 66). The fact that the United Kingdom is not in the eurozone does not, in this case, have any significance. If raising the retirement age is rejected, a very heavy burden will be borne by the youth of tomorrow. Austerity also implies that citizens pay their taxes (a habit that does not exist everywhere) and that other well-known kinds of abuse be fought, such as artificially expanding the public sector or its inefficiency. In a reference to his country, George Papandreou said that “it is the country that has to restructure, not its debt”.
Testimonies. Obviously, the Socialists are right to demand greater efforts from more privileged sectors of society. A radical overhaul of the way in which the financial world operates is currently taking place. This column will return to this subject tomorrow and provide a “message” from Jacques Delors and others on what they consider should be done and what positions should be taken.
(F.R./transl.fl)