David Davis writes for Conservative Home about the Troika’s failure in the Greek Crisis


As published on Conservative Home:
Sir David Davis: Juncker, Draghi and Lagarde – the trio sacrificing the people of Greece on the altar of the Euro

The Euro-clique that is the Troika should be ashamed of itself. This organisation, comprising the European Commission, the European Central Bank, and the IMF run by yet another member of the cold-hearted Euro-elite, Christine Lagarde, is inflicting on the Greek people a policy that is little short of barbarism.

They have only themselves to blame if the Greeks reject their latest demands in the upcoming referendum. Not only is unemployment running at 25 per cent, and at nearly 60 per cent amongst the under 25s, but the Greek lower middle class, the traders that make any economy run, has been decimated.

Suicide is up 45 per cent. 30 per cent of the Greek people are living in poverty. Nearly one in five of the population does not have enough to eat, with food purchases having fallen by 28.5 per cent. Pensioners, now the bread-winners in many households (pensions are now the main – and often only – source of income for almost half of Greek families), have seen a 61 per cent fall in their pension payments.

Greek pensions were, pre-crisis, extremely generous, sometimes ridiculously so. In some sectors pensions could be more than 100 per cent of final salaries, with some public sector workers taking retirement in their early 50’. Coupled with an aging population – 20 per cent of Greeks are over age 65, one of the highest percentages in the Eurozone – this was a major factor in Greece’s problems.

But Greek pensions are no longer so generous. On top of the cut to monthly payments, the standard retirement age for men is being lifted to 67, one of the highest in Europe. Almost half of pensioners live on less than the poverty line of €665 per month. Food poverty is worsening people’s health. The stillbirth rate is up by 21 per cent and infant mortality rose by 40 per cent between 2008 and 2011. TB rates have doubled. HIV infection is up. Malaria has re-emerged after nearly half a century.

Health care is funded by insurance, so when people lose their jobs they lose their health care. Along with cuts in state funding and the subsequent hospital closures, the economy of the health service is being destroyed. Thousands of doctors have left the country. Those that remain work for about €12,000 a year. Some clinics now depend upon volunteers and doctors who work for nothing.

This destruction is repeated throughout Greece’s public sector. There is little doubt that it needed reform. It was rotten, with overpaid jobs and excessive pensions allocated by rousfeti (political patronage) and the distribution of its services often lubricated by fakelaki (bribes). But what was needed was modernising rationalisation, not the fit of devastation that has left much of Greece dependent on soup kitchens and charity clinics.

As is now clear to all, this Troika-imposed economic vandalism has not even succeeded in its stated aims. Greece’s debts are up by 50 per cent since 2010 while the economy has shrunk by a quarter. Greece has dutifully cut the public sector, reformed pensions, and they now raise more tax as a percentage of GDP than previously. But due to the economic programme imposed on Greece the economy has shrunk so much that the nominal tax take has actually gone down.

The problem is that for a normal economy a measure of public austerity is bearable, and often a good thing. But what the Troika proposed for Greece was not a well measured and reasonable package – it was beyond the possible. It is as if a patient were diagnosed and recommended surgery, but instead suffered a maiming amputation. And the Troika’s latest proposals do not look much better: how they can think that a tax on tourism, one of Greece’s few surviving successes, will do anything but harm, I cannot imagine.

It is commonplace in Greece to compare their current sufferings with Weimar, and the miseries visited on Germany between the wars by Allies fixated on war reparations. Some of these parallels are poignant, given that this crisis is driven to a large extent by the inflexibility of Chancellor Merkel. Above all, however, they see the Troika’s proposals as being driven as much by a desire to punish Greece’s past misdemeanours as much as to mend its future.

The problem is that they are punishing the wrong people. Greece had a corrupt public system driven by a corrupt political class -of that there is no doubt. But that was well known before Greece was allowed into the Euro. And the origins of Greece’s predicament lie much more in the collective fraud that allowed the Greek entry to happen than in anything else.

In order to gain admission to the Euro the then Greek government undertook a spectacular piece of creative accounting. They hid debts and deficits, principally using a debt swap mechanism sold to them by Goldman Sachs. This was deliberate. It was neither particularly sophisticated, nor particularly secret. In the words of one banker, “these things are quite popular in the Mediterranean states.”

It should have been pretty obvious to those whose job it was to police admission to the Euro that Greece had not suddenly had an attack of fiscal rectitude. That they did not notice the oddity of the numbers implies either gullibility on a grand scale or deliberate complicity. In other words, there was either criminal incompetence or criminal involvement.

Who was guilty of this is pretty clear. Obviously the Greek Treasury and Bank of Greece were involved. So were some bankers at Goldman Sachs. But so too were the European Commission. As this was a major fraud on the European taxpayer, why none of the principals are languishing in prison is hard to fathom. They are certainly more guilty than the Greek public, especially those under 25 who contributed nothing to this crisis, but who have seen their entire life chances sacrificed in a doomed attempt to right past wrongs.

The reason no action has been taken against the real protagonists is the same reason as why the fraud was perpetrated in the first place: the obsession with making the Euro work as a continent-wide project. They have shown that they are happy to do anything and everything to rescue the EU and the Euro, but will not move an inch to relieve the plight of the Greek people. It must have taken an extraordinary lack of self-awareness for Jean-Claude Juncker to say: “We will never let the Greek people down. And we know the Greek people don’t want to let down the European Union.”

It is clear to everyone that much of the money owed by Greece will never be repaid. The best solution for Greece and for Greece’s creditors would be a debt write-down and for Greece to exit the Euro and start again with a new, free-floating currency. Nothing can be gained from further punishing Greece’s people for its failures. Exit from the Euro would result in a few tough years for Greece, but at this point a debt reduction followed by a currency devaluation is the only path back to competitiveness. Life outside the Euro will be no worse than the suffering of the past 7 years.

This course of action is being resisted, not because it would be bad for Greece, but because it would be bad for the Euro project. Which, at the end, is why Juncker, Draghi and Lagarde should hang their heads in shame. Whatever the political value of the Euro, it does not even nearly balance the terrible cost that it is inflicting on the Greek people.