“One clue that the leader of Greece gives no f$$cks about his country defaulting: not wearing a tie as he addresses his government.” Rob Lowe, on Twitter, 29th June 2015.
Rob Lowe is an actor. Sam Seaborn is a character on the West Wing who played a lawyer who was also a Deputy Communications Director in President Bartlett’s White House.
No one expects someone whose education began and ended in a US high school to understand or think or even care very much about the Greek and EU economy. But even so, Rob Lowe’s assertion that it’s all to do with Alexis Tsipras’s failure to wear the correct gentleman’s haberdashery must be in the running for Silliest Comment Made.
“We wear sweaters. It’s a Tommy Hilfiger ad.”
However, Owen Jones’s riposte was … not good.
@RobLowe stick to the increasingly unwatchable films
— Owen Jones (@OwenJones84) June 29, 2015
Of all the ways in which Owen Jones could have pointed out to Rob Lowe that complaining about Alexis Tsipras’s ties demonstrates Lowe’s uncomprehending ignorance of the situation facing Greece – and the rest of the EU – to say that Rob Lowe plays in “unwatchable films” allowed Lowe to change the subject from his ignorance of economics to the quality of the films he’s appeared in, and though Rob Lowe is no Sam Seaborn, he was certainly bright enough to take that route.
Bartlett: “If the shoe fits.” Is that the best she could do?
Leo: Of her many transgressions, Mr. President, let’s not worry about she resorted to cliché.
To be fair to Rob Lowe, he did then make inquiry of his 1.13 million followers, as follows:
- First: “Do I have any economists out there? Please educate me: gimme 3 reasons why Greece is where it is today. What’s the lesson?”
- And then, satisfied that in crowdsourcing an answer from his fans he had done all that was humanly possible to inform himself: “I love my followers. You guys rock. There seems to be a broad consensus on why. Will other countries/politicians ever learn? #Greece”
One of the articles recommended to Rob Lowe was a Vox.com piece by Timothy B. Lee, citing Milton Friedman’s explanation from 1997 why Friedman thought the Eurozone was sure to fail: that Europe’s common market “is composed of separate nations, whose residents speak different languages, have different customs, and have far greater loyalty and attachment to their own country than to the common market or to the idea of ‘Europe’.” Friedman further notes that even though the EU is a free trade area goods and capital “move less freely than in the US” and he adds:
Moreover, regulation of industrial and employment practices is more extensive than in the United States, and differs far more from country to country than from American state to American state. As a result, wages and prices in Europe are more rigid, and labor less mobile. In those circumstances, flexible exchange rates provide an extremely useful adjustment mechanism.
Milton Friedman was an advisor to both Ronald Reagan and Margaret Thatcher: a believer in the free market economy and the first serious proponent of floating exchange rates. He was a libertarian opposed to “government intervention” in international exchange rates, and also the first proposer of negative income tax (which is basically the same idea as basic income, as envisaged by a right-wing economist). Milton Friedman died in 2006, so while it would be interesting to know what he thought of the 2008 financial crash and government and banking responses to it, Lee and others are stuck with recycling old quotes.
Friedman believed in the free market: and we’ve had plenty of time in the forty years or so since Friedman’s line of thinking won to see that the free market is not an acceptable means of regulating the international finance industry:
The Greece and European debt crisis is the latest in a long-line of debt crises which have affected all continents since bank lending was liberalised in the 1970s. The African and Latin American debt crises of the 1980s and 1990s were followed by the East Asian Financial Crisis of 1996-1998, Russian default in 1998 and Argentina default in 2001.
Back in 2004 Greece got the poisonous chalice: the Olympic Games were in Athens that year, at an estimated cost of approximately 9 billion euros. From a report on corruption in Greece and German complicity with this corruption, “Germany’s national railway operator Deutsche Bahn apparently resorted to bribes to win an underground railway contract in the run-up to the 2004 Olympic Games in Athens”.
Such business deals are highly lucrative — even with miza [bribes]. “Anyone who pays bribes to get a government contract can pad his margin with a few extra million,” says one investigator. “The excessive prices are of course shouldered by taxpayers.”
This man must know what he is talking about — he’s been investigating for years the Siemens corruption scandal, in which a double-digit million euro amount was allegedly siphoned off for kickbacks in Greece. The Siemens branch in Athens reportedly relied on such sums to fuel the company’s business deals in Greece until the year 2006. This included contracts with the former state-owned telecommunications company OTE, surveillance and security technology in connection with the 2004 Olympic Games, and underground railways.
In 2010, Angela Merkel spoke out angrily against the financial speculators who were – in proper Friedman free-market style – profiteering from the Greek crisis:
Warning against “stirring up resentment and emotions,” she hit out at currency speculators, who she said are taking advantage of debt piled up by euro-area governments to combat the financial crisis.
“The debt that had to be accumulated, when it’s going badly, is now becoming the object of speculation by precisely those institutions that we saved a year-and-a-half ago,” Merkel said in her speech late yesterday. “That’s very difficult to explain to people in a democracy who should trust us.”
As Alex Andreou pointed out in May 2012, the crisis in Greece was not of the Greek people’s making:
Greece’s total annual deficit is €53bn Euros. Of that, our primary budget deficit is, in fact, under €5bn. The other €48bn is servicing the debt, including that of the two bail-outs, with one third being purely interest. Europe is not bailing out Greece. It is bailing out the European banks which increasingly unwisely gave her loans. Greece is asked to accept full responsibility as a bad borrower, but nobody is examining the contribution of the reckless lenders.
The “reckless lenders” will do very well out of what they loaned to Greece:
When the IMF, European and ECB bailouts began in 2010, €310 billion had been lent to the Greek government by reckless banks and the wider European financial sector. Since then, the ‘Troika’ of the IMF, EU and European Central Bank have lent €252 billion to the Greek government. Of this, €34.5 billion of the bailout money was used to pay for various ‘sweeteners’ to get the private sector to accept the 2012 debt restructuring. €48.2 billion was used to bailout Greek banks following the restructuring, which did not discriminate between Greek and foreign private lenders. €149.2 billion has been spent on paying the original debts and interest from reckless lenders. This means less than 10% of the money has reached the people of Greece.
Today the Greek government debt is still €317 billion. However, now €247.8 billion – 78% of the debt – is owed to the ‘Troika’ of the IMF, European Union and European Central Bank, ie, public institutions primarily in the EU but also across the world. The bailouts have been for the European financial sector, whilst passing the debt from being owed to the private sector, to the public sector.
In 2010, many of the IMF countries with painful experience of the exploitation and damage done to developing countries where servicing debt has been forced on governments as a priority over internal investment and economic growth, wanted the debts to Greece cancelled.
After two years of trying to bail out the lenders, the IMF finally agreed that some of the debts needed to be cancelled. But vulture funds which had bought €6.5 billion of the Greek debt to private lenders refused to cancel the debt they had expected such long-term profit from, and the Conservative/LibDem coalition then refused to pass legislation to ban the vulture funds from profiting. (“Vulture funds” are hedge funds that buy up this kind of debt at a very low cost, then insist on the full debt being repaid to them: Greece will be paying billions to vulture investors over decades.)
For such companies, a crisis as big as Greece’s is mouth-watering. For months vulture funds have been working out the best way to pursue vulture strategies against Greece. Vultures have been buying up foreign-law Greek bonds because bonds controlled by Greek law were forced by a majority to accept the writedown.
The Greek writedown was a very good deal for bondholders who were paid 50% of the face value at a time when those same bonds were actually trading for around 35% value – and they got a cash incentive. But that was not good enough for the vultures. American law firm Bingham McCutchen was reported to be trying to organise a group of such funds in order to take legal action to get paid the full value of their bonds.
As the countries that protested the bankers bailout in 2010 knew: if you need a country to pay back loans, you need the country’s economy to grow:
if the aim is for Greece to pay back its debts, the Troika’s current policies [IMF, ECB, EU Commission] make no economic sense. If it is to be able to pay back some of its debts Greece’s economy needs to grow, but the consequence of Troika’s policies has been the opposite. As the Syriza government have been arguing: Greece needs to invest to grow its way out of recession, just like Germany did in 1953 after its foreign debts were cancelled and its repayments tied to economic growth.
[Update, 2nd July: I saw someone question whether Germany’s foreign debts had been cancelled in 1953. This was the “London Agreement on German External Debts”, more commonly known as the “London Debt Agreement” or “Londoner Schuldenabkommen”, agreed to between West Germany and creditor nations on 8th August 1953 after six months of negotiations. Creditor nations in Europe included Belgium, Denmark, France, Ireland, Italy, Liechtenstein, Luxembourg, Norway, Spain, Sweden, Switzerland, the UK, Yugoslavia – and, yes, Greece.
Germany owed about 16 billion marks: the Federal Republic of Germany acknowledged that as the successor nation it fell heir to those debts.
“The entire agreement was crafted on the premise that Germany’s actual payments could not be so high as to endanger the short-term welfare of her people or her long-term ability to rebuild a shattered economy and society. This basic understanding presupposed that the creditors would forgive some of the debt, agree to long repayment schedules for the rest, and be willing to re-negotiate terms if circumstances arose that made debt-service more onerous than originally thought. In this respect both the technical discussions and the political negotiations differed radically from the Reparations Commission set up in 1921.”
“Under the calculations used in the London Agreement, the reduction in the total obligations, both public and private, was about 50 percent. A more standard commercial calculation leads to a far higher write-down, however. [some detail explaining this] It is worth bearing in mind, however, that the London Debt Agreement required that Germany pay at the very most half of what she owed.”
Quotes from “Financial Vergangenheitsbewältigung: The 1953 London Debt Agreement”, Timothy W. Guinnane, Yale University, 2004.
So, it would be absolutely wrong for Germany to allow Greece to write off part of their debt and get to end austerity and start rebuilding their economy. That’s what Greece and other nations did for Germany’s debt in 1953, and sixty-two years later, look at the mess Germany’s in as a direct result.]
Asking ordinary citizens to help by giving the IMF and the vulture funds some of their own money is futile. (Yes, there is a crowdfunded response to the Greek bailout crisis.) To someone like Rob Lowe, comfortable in the US on a successful film star’s income, the idea that the proper thing to do is for a prime minister to wear a tie when he addresses the government may seem like the key point. The closest understanding an American could have to the situation is probably student loan debt – and the closest Rob Lowe ever came to student loan debt was the script for “20 Hours in America”.
About 10% of the money in the bailout is going to the people of Greece rather than to the predatory lenders. Every euro of it is expected to be paid back by the people of Greece: no matter what has to be cut from their daily lives. Pensions, public service pay, public utilities, public medicine: they are expected to live by charity and hand-to-mouth while labouring to pay back debts they didn’t incur to some of the richest institutions on the planet.
“Those that were already on the margins have been pushed right to the very, very edge, and those who were in the middle have been pushed to the margins,” said Ioanna Pertsinidou of Praksis, a charity that runs day centres for vulnerable people and offers legal and employment advice.
“So many people – ordinary, low-to-middle income people with jobs and homes and their lives on track – have seen their lives go down the drain so fast,” Pertsinidou said. “People who never dreamed that one day they would not be able to pay their electricity bill, or feed their children properly.”
As it has scrabbled for every last cent to satisfy its creditors and ward off bankruptcy, Greece’s government has taken cash wherever it could – local authorities, healthcare, pensions, social services have all been tapped. In a country of 11 million people, public spending is now €65bn (£45.6bn) less than it was in 2010. “There is no safety net left,” said Pertsinidou.
What can be done?
Well, it’s not too late to cancel the Greek debt.
I don’t see much chance of George Osborne siding with poor people against vulture funds, though.
Or of Rob Lowe caring more about Greece than his film awards, either.
I'll try to do better than the multiple Emmy's, Golden Globes and BAFTA's my last one won. Do your homework pal. https://t.co/Xc2jMblosS
— Rob Lowe (@RobLowe) June 29, 2015