With the political wrangling over another Greek bailout continuing today, we thought CoffeeHousers might care to read (or re-read) Faisal Islam's cover piece for The Spectator from four months ago:
In a theatre in central Athens, over a thousand tax inspectors have gathered to shout crossly about the latest cuts to their pay and pensions. Eventually the argument, between the government-affiliated union leader and his members, spills out on to the street. The rank-and-file feel betrayed: they were persuaded to accept the first wave of pay cuts earlier this year, and now they are being asked to take even more. This does not feel to them as if they’re being bailed out by kindly neighbours. It feels to these tax inspectors, and to Greeks in general, like humiliation. They feel trapped in an inescapable relationship with sadistic Germany. As the wife of one inspector puts it, Greece is being ‘treated like Hector, being dragged around and around by Achilles’ chariot’.
This is the front line of the euro crisis: resentment all round. Perhaps you’d imagined that Greek taxpayers were out working their fingers to the bone, collecting every euro cent? Not so. When even the tax collectors are starting to urge non-payment of tax, you can be sure everyone else feels the same way. The tax inspectors tell me they’re soon to go on strike. They are even advising fellow Greeks to defy the new ‘emergency taxes’ on property.
I speak to Franteska, an Athenian tax inspector whose husband has been unemployed for two years and whose son is joining the flood of Greeks leaving their homeland. ‘My paycheck keeps getting smaller,’ she says. ‘I used to have a salary of €2,000 a month, now I barely earn €800. It’s not even enough to cover our basic needs.’ Government ministers, she says, warned her against investigating the tax affairs of the Greek elite.
This is what a country near default looks and sounds like. There’s not just a collapsing economy, but a failing tax system and a broken social contract between Greece’s people and its rulers. Greece has been hit harder than the other European Union ‘programme nations’, or PIGs (Portugal, Ireland and Greece) as the markets refer to them. From Athens to Berlin, government ministers have now decided that the euro crisis is well beyond mere finance. It is now reaching a second phase: a remarkable historic struggle over sovereignty.
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If Greece feels bitter, Germany feels no less so. The offices of the European Financial Stability Facility — the new bailout fund — is the epicentre of the debate in global financial diplomacy — and has become the focal point for intensifying German fears. The EFSF’s mission is to lower the interest rates paid by indebted European nations by effectively sprinkling their debts with some AAA gold-dust. Its war chest, so far, contains €780 billion of guarantees from Europe’s remaining AAA-rated nations, with almost a fifth stumped up by German taxpayers. The increasingly anxious US Treasury Secretary, Timothy Geithner, believes even this sum is inadequate — and that a €2 trillion bailout fund is needed. If such money is raised, then the EFSF’s funds would be ten times the annual budget of the European Union. Quite something for an office that employs 15 people.
Last week, Angela Merkel fought a parliamentary battle to approve the expansion of the bailout fund to €440 billion. She made various assurances that the fund would not be increased into trillions. The Bundestag did, in the end, give the enlarged powers of the EFSF resounding approval — but Chancellor Merkel’s own government benches left her in no doubt that a furious Germany was reaching the limits of its tolerance with what it sees as lazy, slovenly Greece. Horst Seehofer, the leader of Merkel’s coalition partners, put it succinctly, ‘The answer cannot be that we take national debts and socialise them into European debt, because we would then stop being a stability union and start becoming a debt union.’ The split in the government challenges Germany’s two most-cherished post-war political axioms — a commitment to European integration and a deep hostility to debt. The euro crisis, specifically the EFSF bailout fund, entangles the two.
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A troop of uniformed officers staging a protest is a rare and disarming sight. But to hear the Greek policemen chanting ‘You’re shooting us, you’re bleeding us, you’re pushing us off the cliff’ is something else. That this was the scene outside the German embassy in Athens, an insight into Greece’s self-image as battered spouse. ‘Kick out the Troikans,’ proclaimed the police protest banner — a reference to the three powers now overseeing Greece’s austerity drive, the International Monetary Fund, the European Commission, and the European Central Bank.
What might be called a Troikan Horse will arrive this month, as five million ‘extra-taxed’ electricity bills land on Greek doorsteps. I met 40-year-old Kostas Antonopolous at the tax collectors’ union meeting. He invites me to his flat, expensively acquired during Greece’s euro-fuelled credit boom. He lives with his pregnant wife and his son. The couple fear for their children’s future after watching documentaries about the impact of IMF programmes in Argentina. ‘Meet our new tax inspector,’ he says, pointing to the electricity meter in his basement. A tax collector himself, his wages have halved to €900 per month, below his €1,000 mortgage payment. He can scrape it together this time by raiding his savings. He doubts he’ll be able to find the money next time.
A new property tax means a charge of hundreds of euros for every Greek household, including pensioners and even the recently unemployed. The tax was invented last month to fill a €2 billion shortfall in Greece’s austerity plan. Originally it was meant to be a small charge and temporary — but, as the saying goes, there is nothing more permanent than a temporary tax. So it was to prove: the property tax has doubled and is here to stay. Non-payers will lose their electricity. This is ‘shock therapy’, Greek style.
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At a sunny Oktoberfest in Munich, business is booming. Ten thousand revellers are paying €9 a time for authentic Bavarian brews. The oompah band blares out ‘Sweet Caroline’ at high volume. Thousands of Germans sing out ‘Good times never seemed so good!’ before clinking their glasses. It seems scarcely possible that I am in the same currency bloc, or even economic planet, as I had been in Greece the previous day. Bavaria is home to what they call the ‘laptops and lederhosen’ boom.
I meet Tobias and Christof, German electricians from a nearby town. ‘There is no crisis here in Germany,’ says Tobias. ‘The problem is that we have to pay for every country in Europe. Where do the taxes go? To Greece?’ Christoff adds: ‘We make our good work here, then we have to solve the problem of the others.’ They’re right. In Germany, there is no economic crisis. Far from it. Up until the latest quarter the German economy was racing ahead. At the beginning of the year there was record growth of 3.6 per cent. Exports were, if anything, helped by the way the crisis sent the euro plunging. German unemployment has now fallen every month for just over two years and now stands at the post-unification low of 7 per cent.
This surprise boom fuels the feeling that Germany — and its trade surpluses — will bail everyone out. A pattern has emerged. For weeks, the struggling markets meet stiff resistance from Berlin. Then at the last minute, in a dark corner of a conference centre in Brussels or Wroclaw or Marseilles, the Germans capitulate. Berlin always writes the cheque in the end, because the euro has been a blessing for its domestic economy.
The euro was intended to spread wealth around Europe. Instead it has meant too many factories in Germany — and too many public servants in Greece. Since the start of the crisis, the cost of the average worker has surged by 20 per cent in Greece, and has plunged in Germany, thanks to a weak euro. Germany embraced the tough economic reforms that Greece shirked. So even as Germany signs the bailout cheque, its government must demand a revolution in the governance and competitiveness of mismanaged Mediterranean countries. Chancellor Merkel’s chief whip Peter Altmaier tells me that, in return for bailout cheques, Germany will spread ‘the stability culture’ across Europe.
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This doesn’t strike everyone as a fair deal. A pensioner at Piraeus port told me that Germany should repay the gold ‘they looted from us during the occupation’. But the average Greek taxpayer is only too aware of fiscal mismanagement in Athens. A bus driver in Piraeus described Greece’s political elite as the ‘300 traitors’, and told me that Merkel would be ‘wilkommen’ to sort out Greece’s problems.
But Germany does not want to sort out Europe’s problems by diktat. It may be the more puritanical and thriftier partner, but it is loath to be tyrannical. Sensitive to its 20th-century history, it is now taking to its role as European imperitor rather reluctantly. The perils of debt and hyperinflation — and the social dangers from printing money — all loom large in Germans’ memories. It is why a quietly spoken MP, Frank Schaeffler, voted ‘no’ even to last week’s expansion of the bailout. ‘These rescue packages do not help, they add fuel to the fire,’ he says. Polls suggest that two thirds of Germans agree with him. The mood music in Berlin is firmly in favour of a larger Greek default, hitting lenders by 50 per cent or more, despite Greek opposition.
Slowly, but unmistakably, the future of the euro has come to depend on the relationship between Greece and Germany. In Britain, those in government are watching this drama anxiously. Will Greece rise up against austerity from Berlin and Brussels? Will Germany decide that the collapse of the single currency is a lesser evil than socialising Mediterranean debt? Greece and Germany have become the two poles of the eurozone, the paymaster and the pauper, locked in an uncertain embrace.