Brussels, 14/03/2012 (Agence Europe) - Back from a two and a half day official visit to Greece, the head of the Social Democratic “alternative troika”, Robert Goebbels (S&D, Luxembourg), criticised the counterproductive austerity measures forced on Greece by the official troika of lenders (the European Commission, the ECB and IMF) in an interview with this newsletter on Wednesday 14 March. He said the general feeling was that the official troika has forced solutions on the country that clearly do not work, commenting on his meetings with representatives of Greek employers, trade unions, research institutes and the future leader of the Socialist party who is the current finance minister, Evangelos Venizelos. The European Parliament's Social Democratic alternative troika (Goebbels, Elisa Ferreira of Portugal and Ivailo Kalfin of Bulgaria) will publish a report on their fact-finding mission next week. The heads of the alternative troika briefed the EP's economic and monetary affairs committee on their mission on Tuesday 27 March. The people who speak in the name of Europe have to be made to justify themselves, commented Goebbels.
He said that the aim pursued by Greece's lenders was domestic devaluation by slashing public and private income, pensions and purchasing power. He drew a sombre picture of the outcome of this policy, pointing out that household spending had fallen and the Greek economy had shrunk by 20% in four years with unemployment touching on 20% of the working population (nearly half of all young people). Half a million Greeks have been left without any income because unemployment benefit only lasts for a year. The Greek debt is automatically increasing as a percentage of GDP, of course, because GDP is shrinking. The debt, therefore, is rising despite no further money being borrowed. The rise in VAT has led to a fall in tax revenues. Taxes are killed off if set too high, explained Goebbels.
Generating investment. What can be done to help Greece pull through? Goebbels said that the bond write-down (which will reduce the amount of debt held by private investors by more than €100bn) will give the Greek government a bit of breathing space, but the first line of attack is to generate investment, particularly because the ECB's operations have led to calm at banks and on the markets. Investment can take the form of utilising dormant EU Structural Fund cash. Goebbels said the Commission's special taskforce was doing quite good work by identifying projects with a leverage effect, like building and transport infrastructure.
Everyone agrees that Greeks have to simplify their tax system, improve the functioning of the civil service and slash red tape, said the MEP. Greek shipbuilders pay virtually no tax because they are registered in tax havens. Likewise for the Church, which owns vast latifundia in the country. Goebbels said that the Greek administrative system was so cumbersome that no fewer than 11 different ministries have to be consulted before a hotel can be built. He agrees with privatisation that makes sense, like selling off military land, but pointed out that the Greek government has already done a lot, decreasing the number of local authorities, letting go more than 100,000 people who used to have contracts with the public authorities, and starting to introduce a land registry system.
Despite all this, Goebbels says that Greece belongs in the eurozone and letting the country go bankrupt would create more problems than it would solve. Civil servants would not get paid, even at universities or hospitals, and reintroducing the drachma to replace the euro would lead to a massive devaluation. Iceland, whose currency lost nearly 70% of its value in the 2008 financial crisis, was forced to reintroduce capital controls, added Goebbels. Yet under the terms of the EU treaties, Greece would not be allowed to introduce capital controls if it left the eurozone, which would therefore mean it would also be forced to leave the EU if it were to leave the euro. (MB/transl.fl)