LETTER FROM GREECE:The high price paid by Greece for the easing of loan interest rates and extension of repayment period will not have escaped the attention of Ireland's new leader, writes RICHARD PINE
THE COMMON denominators linking Greece and Ireland will make interesting conversation between Enda Kenny and George Papandreou when they meet at gatherings of EU heads of government. Or, more particularly, perhaps, Michael Noonan and his counterpart Giorgos Papaconstantinou.
Apart from their astonishment at the wholesale routing of Fianna Fáil in the general election, Greeks found reassurance and solidarity in the fact that the FG-Labour coalition would seek to renegotiate the Irish bailout. Where Papandreou had been single-handedly wooing Merkel (the Greco-German MEP Jorgo Chatzimarkakis has even dubbed them “the odd couple”), now he might enjoy a flanking movement from Kenny.
The two countries on the margins of Europe may have more to talk about on the margins of EU meetings than at the meetings themselves. Kenny and Papandreou went home from the Brussels meeting on March 11th somewhat less optimistic about their respective financial positions than they had hoped: Kenny, because he would not surrender on the issue of corporate tax in order to achieve a reduction in the interest rate on the Irish bailout loans; Papandreou because, although he achieved a reduction in interest rates and an extension of the repayment period, he had to pay a high price, in the form of selling off far more of the state’s assets than anticipated.
The delicate movement towards renegotiation was given considerable support by Olli Rehn, EU monetary affairs commissioner, in December when he diplomatically praised Greece’s progress so far, even though it was clear that he was still wielding the EU’s big stick. He repeated this diplomatic gesture as recently as March 6th, when he suggested that the repayment period might be doubled, from 42 months to seven years, as it was on March 11th-12th .
But matters came to a head in February when the EU-IMF-ECB inspectors (the “troika”) made extremely undiplomatic noises about Greece’s capacity for reforms of the public finances and public service. While it is acknowledged that, on the surface, Greece is performing well in day-to-day financial matters, the inspectorate spoke scathingly about longer-term reforms, questioning whether they can be designed and implemented.
There is no disagreement on the need for such reforms, but the Papandreou government was incensed that the inspectors insisted on a far more rapid and extensive reform programme than Greece believes possible.
The body language and intonation of the three speakers at their press conference was along the lines of “we are here to punish you for being bad boys”. Athens went ballistic. Papandreou’s immediate and official reaction was “we don’t take orders”, phoning the IMF’s Dominique Strauss-Kahn to call off his bloodhounds.
But the troika’s insistence that the sell-off of assets (land and state-owned utilities) must come far faster than Athens would wish, has been confirmed in the deal done in Brussels on the long night of March 11th-12th. Whether the sale – of €50 billion of assets – can be achieved is highly dubious: it’s the equivalent of selling €240 million of assets every week for four years.
Papandreou’s undeniable problem is that, without the reforms he is seeking to introduce, Greece’s economic problems are almost certain to recur. Yet, on every side, general acceptance of the reforms is countered with “but why me?” So often, the reaction is “it isn’t fair”. As in Ireland, everyone is discovering that life isn’t fair. Cutting public service jobs is painful, and unions naturally resist such cuts. But so too is the effect of the economic situation on the private sector: it’s reckoned that up to one-quarter of all retail outlets will close over the next year, with a knock-on effect on unemployment, VAT and rentals, to say nothing of the palpable depression caused by the sight of widespread high-street closures.
The cry of “it isn’t fair” stems largely from the feeling of both Greek and Irish citizens that they are being forced to take the brunt of a problem that is not of their making, or, indeed, of their governments; rather, international economic forces have irresponsibly and uncontrollably created a crisis that has then led to further loss of sovereignty through EU-IMF intervention.
Another link between the economies of Ireland and Greece came on March 3rd with a call by a number of Irish academics, writers and activists – including Fintan O’Toole of this newspaper – and backed by such international figures as Noam Chomsky and film-maker Ken Loach, for an audit of Greece’s national debt. To which, rather predictably, some Greeks have responded by calling for a reciprocal audit of the Irish national debt. The purpose of such an audit would be to establish who, exactly, has been responsible for the crisis, and who owes what to whom, in the belief that the true culprits are not the man-in-the-street but the bankers, tolerated by complacent government.
As Papandreou “celebrates” Greek independence day on March 25th with what may be the most crucial day of his political life at the next EU summit meeting in Brussels, all these factors will influence his strategy. With the rapidly growing feeling in Finland that Greece and Ireland should never have been bailed out, and the prospect of Portugal teetering on the brink of a sovereign default, adherence to the euro zone becomes both problematic and imperative. And the other half of the “odd couple” is no longer Merkel but Kenny.