Wednesday

19th Sep 2018

Opinion

Schaeuble could destroy eurozone, not just Greece

  • A poster against German finance minister Wolfgang Schaeuble during the 2015 campaign for the Greek bailout referendum. (Photo: Eric Maurice)

The sudden suspension of Greece’s short-term debt relief measures on Wednesday evening (14 December) has sparked fierce criticism by a number of EU officials.

EU commissioner Pierre Moscovici, European Parliament president Martin Schultz, French president Hollande and finance minister Michel Sapin, along with many MEPs from the GUE/NGL, S&D and the Greens groups, have echoed support for Greece and prime minister Alexis Tsipras’s decision to give a one-time relief package to low-income pensioners.

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  • Greek PM Alexis Tsipras is due in Berlin on Friday for talks with German chancellor Angela Merkel (Photo: Consillium)

In essence, there has been no official decision taken by the Eurogroup, the European Stability Mechanism (ESM), or the European Council.

Instead, there's been unilateral action from the head of the Eurogroup without prior coordination with his colleagues.

Creditors should respect their own part of the deal and conclude the second review of the bailout programme, and acknowledge that there are open issues that need be addressed.

The Greek government is fully implementing the bailout deal, moving on to needed reforms, providing safety nets for the vulnerable social groups.

It's possible Tsipras’s announcement was brought about by German finance minister Schaeuble and other circles pushing Greece to the limit.

But in truth, we need not investigate who has taken the decision but instead focus on substantial issues.

These issues include lowering primary surplus targets after 2018 and loosening tax rates so that the economy can become stable and growth can reach sustainable levels.

Even with such strict deadlines, the Greek government has achieved all fiscal targets for 2016, increasing public income and reaching a higher primary surplus than expected.

This positive development prompted Tsipras, a few days ago, to announce a one-time relief package for low-income pensioners; a substantive decision after 12 consecutive pension cuts between 2010 and 2014, a loss of more than 30 percent of national GDP, during the same period, with a considerable part of the population facing poverty and social exclusion.

The Greek government’s urgent measures are the least this government can do to temporarily do something for the worse off.

A short-sighted approach

At the same time, the Greek side is trying to explain common sense to the International Monetary Fund (IMF) and Germany.

The fund is demanding further pension and wage cuts, while Germany's finance minister is continuously asking for more reforms without specifying what kind of reforms are needed.

Since 2010, the IMF has failed completely in its projections for the performance of the Greek economy, something IMF officials admitted in July 2016, identifying that the fund’s financial policy mix had decisively worsened the domestic economy instead of saving it.

Nonetheless, it continues to ask for more austerity, rejecting any discussion on the reinstitution of collective bargaining in the labour market, insisting on the adoption of the same policy mix that caused recession in Greece.

As of Germany’s stance, nobody could expect such a biased, hypocritical and short-sighted approach by finance minister Schaeuble. He is the leading political figure that attempted in 2015 to force Greece exiting Eurozone.

He has never recognised the big reforms of the Greek government, nor the fact that during the last couple years Greece more than met its fiscal targets.

Schaeuble keeps insisting on the need for the domestic economy to be more competitive, ignoring the burden sky-rocketed debt relief poses towards that direction.

Keeping up the good work

Although it is true that the Greek economy needs to be more competitive, more of the same won't do it.

It is certain that the economy will not be more competitive without reducing taxes, by keeping primary surplus at 3.5 percent in annual basis for the next years nor by cutting pensions, wages and further minimising public spending on social benefits.

Things are simple. Greece is moving steadily down a very demanding and difficult path, making sacrifices and important reforms.

The government should keep up the good work so that positive financial figures can be translated into more production, more consumption, more benefits for the household and investors and the private sector.

Those who want Greece to fail will see themselves proved wrong.

Dimitrios Papadimoulis is vice president of the European Parliament and head of the Syriza party delegation.

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