January 5, 2015

Greeks might be bearing great gifts for us

Posted in Sunday Business Post · 42 comments ·

The new year will kick off with another financial crisis in Greece. The problem for Greece in 2012/13 was not that it defaulted, but that it didn’t default enough.

And this half-baked debt renegotiation is coming back to haunt Greece and the rest of the eurozone.

For the past two years there has been a narrative spun by Brussels and Frankfurt that the eurozone debt crisis is over. It is not; it has simply mutated.

This column has argued for many years that the best way to understand the stagnant politics that has afflicted all of Europe over the past decade is from an insider and outsider perspective. When economies stagnate and the growth rate plateaus, the game becomes an exercise in who gets the biggest slice of an ever smaller pie.

This then becomes a game of self-preservation, where each interest group in society rethinks their strategy with the ultimate objective of keeping their slice of the pie and trying to minimise whatever nastiness is coming down the track.

The interest groups are the insiders – those with a stake in society, those with influence and those who can affect the outcomes. Outsiders are on the margins, not sufficiently visible, organised or powerful to influence the self-preservation game.

As eurozone economies stop growing – because they are too old, too bureaucratic and are carrying too much debt in an overvalued currency – the manageable squabble between insiders and outsiders becomes an existential battle.

Insiders are on the left and the right.

On the right, Irish Water is a great example of an insider organisation. It will milk the punter until it is nice and fat and then sell itself off to shareholders, who will get rich. The people employed there will do extremely well, as will the consultants, lawyers and other experts drafted in.

But there are insiders on the left too. The upper echelons of the trade union movement and the loftier end of the public service are a great example of this. They make sure their interests are well looked after, and can cloak their strategy in the ham verbosity of fraternal struggle, deploying the misery of their brothers in the lower end of the public service to deflect from their own feather-bedded existence.

In a crisis, the insiders converge and the people who get crushed are the outsiders, those without a stake. These are the unemployed, the contract workers not protected by unions, immigrants and, of course, the young.

On the traditional right, they are the self-employed small business people who have no one to shout for them either and simply want to be able to sell their goods in the market without being encumbered by huge taxes, charges and levies.

The key for European politics in a crisis is to make sure that the insiders stay in charge at whatever price. This is why the statist left and corporatist right are in power in Italy, France and Spain, making them cozy bedfellows despite hollow ideological posturing aimed at trying to convince the electorate that they are opposed to each other, when in fact they are on the same team. You couldn’t find a better example of this insider alliance than our own coalition between the supposedly right-wing Fine Gael and the allegedly left-wing Labour Party.

When any party representing outsiders threatens the citadels of power in Europe, the insider elite that rule the eurozone get freaked out. One such party is Syriza in Greece. This party looks likely to win the Greek general election on January 25 and it has put the fear of God into Europe’s insider elite. Its policy of defaulting on Greece’s still enormous debt is just what most sensible economists would advocate and something that the IMF was advocating for countries with similar problems for years.

Syriza sets out its view of the problems facing Greece and the failure of policy in its manifesto.

The impact of austerity on the Greek economy and Greek society has been devastating. The austerity measures included cutting wages and pensions, reducing the cost of public utilities through privatisation, imposing extensive labour reforms and making cuts to health and welfare services. These led to an unprecedented unemployment rate of almost 30 per cent (among young people it is more than 60 per cent), widespread poverty – with a 98 per cent increase in the poverty rate, over-indebtedness of households, closures of many small shops and businesses and an economic recession which has exceeded 20 per cent of GDP in the past five years. The government debt has further increased and young people are leaving the country – thus reducing the potential for future economic growth.

To put the entire episode in context, latest figures show that there are 3,586,900 Greeks employed now. In 2008, there were 4,639,600 employed. This means that almost one million Greek jobs have disappeared and wages are 14.2 per cent lower than they were in 2008. Is it any wonder that Greek voters are fed up?

So a Syriza government would default more. So what? That’s what a heavily indebted firm would do.

The financial markets are limiting their concerns right now to Greece as if Greece can be quarantined from the rest of the eurozone. However, there is still no mechanism by which a eurozone country can leave the euro.

The implication is that Greece will be allowed to default again and this will have absolutely no impact on the rest of the currency area. This hardly seems possible, does it?

The Greek economy has just gone through a 1930s-style contraction. During all this, the insiders managed to stay in power. The two big parties swapped and deals were done with the EU that involved the same civil servants who had always gone to Brussels before the collapse. There was no change in the old order.

Now there is the prospect of a real outsider party coming to power that represents the dispossessed. This terrifies the insiders and it may be the first of many such developments in Europe, from the right-wing National Front under Marine Le Pen in France to the left-wing Podemos in Spain.

Their messages are the same: the traditional centre left and the traditional centre right are all the same, their objective is power. This is not working for the average guy – so it has to change.

Maybe the same will happen here?

  1. VincentH

    So you see dear Lucinda providing the wherewithal for us here do you.

    • merrion

      Lucinda already being subtly ridiculed by the existing parties – which is how it works.

      I spoke with French friends over christmas who work in Brussels and they said that noone in Brussels cares about or knows anything about the Irish, or our problems.

      So lets see what the new political party does. I welcome it. I want a new political party – that is business friendly, that knows about money, economics and is not afraid to stand up for us in Europe. That looks after our vulnerable members of society and that is not afraid to look at our welfare system and add personal responsibility along with entitlement to the agenda.
      David is correct, France and the UK are lining up also to challenge Brussels. Sinn Fein in Ireland is close to power.
      So I hope we have the good sense to allow the new party to emerge. And we should at least say ‘ well done’ for stepping forward.

      • jackofalltrades

        Lucinda “seeeeeal the deal” Creighton?


        maybe that’s the best we can hope for

        • Pedro Nunez

          Oh dear,

        • Deco

          There are millions of jobs in this Treaty…I don’t know which sectors they are in…..

          She is part of the problem. I cannot see her being much of a solution. She is an improvement on centrally controlled, mainstream FG. And they are a disaster.

          And I don’t trust Hobbs.

          He comes across as somebody better suited to some racket like selling cars, or property.

          • DB4545

            Eddie Hobbs? Maybe when he’s doorstepping voters they can ask him how all the property he was flogging in Cape Verde a few years back is doing today? Still don’t see any direct flights from Ireland to the place? Lucinda Creighton? A new political party that’s already hiding from the electorate.Sometimes I want to weep for my little Country. I think politicians will be so afraid of being linked to a mainstream party at the next election that the party affiliation will probably be completely removed from most posters.

      • Deco

        bbbbb..but we voted yes because RTE/FG/FF/GP/LP/The Irate Times etc… all told us that if we voted yes, we would be “at the heart of Europe”…..

        I feel as if we have been lied to…..(again)

  2. Colin

    subscribe. Happy Little Christmas everyone!

  3. michaelcoughlan

    Hi David,

    “Maybe the same will happen here?”?

    It’s already happening.

    The centre isn’t holding. Excellent article. What scares me having read this article is the point you made a couple of years ago when you alone I think pointed out that deflation brought Hitler to power and now we see wholesale deflation in many parts of the financial system with sinn fein leading the polls with 24% as far as I know. Bizarrely Sinn Fein advocate capitalist solutions to the problems we face ie defaulting on bondholders etc.

    I wonder will this sorry episode end up David with Germany leaving the euro and the weaker countries like Ireland staying in with a devalued euro in place?

    I was at a wedding at the weekend and told a story of still another national school with only 30% of the kids Irish. Whatever party takes up the gauntlet better have polish and latvian speaking members.


    • Reality Check

      Hi Micheal; Re your comment on the Anthony Migchels Alternative currency – I think you are right.

      • michaelcoughlan


        I am a member of a a lets crowd but pulled back for the reasons I outlined. I suggested we contribute shopping vouchers to the value of 100 euro instead of cash to establish a hard money/currency and was prepared to spend/trade my 100 credits backed by 100 euros worth of shopping vouchers immediately but I was unable top persuade others of the validity of my point.

        I subsequently had a lady who wanted to trade her shopping vouchers for euros and not the credits which said it all. Other members wanted diesel and petrol etc but were only offering car boot sale junk in return.


  4. Colin

    ‘Maybe the same will happen here?’

    Time for yourself, Paul Sommerville, Peter Mathews, Constantin Gurdgiev and a few other fellow economically literate pundits to sit down and have another chat about forming a political party. I see Eddie Hobbs is in the picture already.

  5. Adelaide

    Until politicians and would-be politicians familiarise themselves with how our Monetary Model operates to the detriment of society and the economy, and design Monetarist policies to reform it, then they are ALL part of the problem, even the ones with honest good intentions.

    “An ill-informed do-gooder is as dangerous as a well-informed psychopath.”

    Lucinda’s Party Without Policies Re-Booth Ireland, a laughable stunt.

    • Reality Check

      +1 Adelaide; Part stunt, Part Controlled opposition methinks….

      • Deco

        “controlled opposition”.

        I think you hit the nail on the head.

        Russian oligarch Bereshovsky had a plan once for Russia, after Yeltsin.

        A centre right and a centre left party. Alternating between power and opposition. The whole thing would be a sham. A deliberate effort to construct a façade. People would assume that they had choice, therefore they would shut up and obey. Both options would be answerable to the oligarchs.

        He even backed Putin for the purpose of being one leader of one of those. He made a mistake of picking somebody who did not consent to the “alternating” part of the deal.

        The frightening bit of all of this, was that he was modelling this on what had already occurred in the West.

        Even more concerning….Western “advice” to Russian after 1992, was designed to ensure that the business ownership structure, was conducive towards replication of a flawed model of the usurpation of democracy.

        George Carlin was correct….the mega-rich have bought the whole thing up. We just get their actors telling us our instructions, and presenting it as if it is somehow or other moral, because it has pretence.

        • cooldude

          I agree fully. The existing “insider” parties who are all now culpable for stitching us with the unsecured debt know they are under pressure and are happy to see this so called “new party” take some of the vote. They want this because they know full well that Lucinda is “one of theirs” and will be more than happy to enter into coalition with one of them to keep the status quo intact.

          This is what is known as the illusion of choice. Let the mugs think they are voting for change but it is just two sides of the same coin. Just look at the farce with this banking inquiry. Same old Enda line of “we partied and now we must pay” Total bullshit as usual and just another set up job.

          Here is an interesting article and interview from the DDI website. No mention of them in the media because they are definitely not on the inside. Very good and clear article nonetheless about a subject that is being swept under the carpet


  6. We are all outsiders now. Most of the insiders will be inside out before long

  7. Subscribe. The tick box to receive follow up comments seems to have disappeared.

  8. It appeared as soon as I pressed ‘Submit Comment’ – same thing on my phone. Awful interface this.

  9. Pat Flannery

    I notice you avoided your usual obsession with the imbalance between our biggest trading partner currency (the Pound) against that of our sick partners in the Euro according to you. But now that this imbalance might be correcting itself you remain silent.

    So far the Pound seems to be totally identified with the Euro in the currency markets. Sterling is following the Euro down against the Dollar, almost point for point. Was there ever an imbalance? Is that why you have avoided mentioning it today?

    Your entire thesis on UK-Irish economics is based on Ireland not belonging to a currency that handicaps it against the Pound. Now that they both behave as if they are one currency how could leaving the Euro and rejoining the Pound or going it alone like Iceland benefit Ireland?

    Does not the current behavior of the markets refute your entire UK-Irish argument?

    • swan4641

      Not true 1€ was 84 pence sterling lasts March and is now 78 pence .
      The US dollar and Sterling have both got stronger over the past year.
      See Articles in today’s Uk telegraph how European Holliday’ s are 15%+ cheaper for 2015.
      Basically the Euro isn’t working

  10. Mike Lucey

    A ‘spot on’ article David, particularly about Irish Water being fattened up, gift wrapped and got ready for a future sell off to the ‘banksters’ so they can fully control all the wires and pipes that lead to our homes.

    I really don’t think party politics is or has ever been truly a successful means of democratic rule. Politicians may start off with good intentions but in order for them to survive they have to compromise their initial aims and the longer they remain in power / position the easier this becomes conscience wise and they end up only keeping an eye on the fat pensions as they mature.

    With the current system we rarely get what we vote for when it comes to policy. Many elected politicians openly state that what they say pre election is often for the birds. For example, Pat Rabbitte “Isn’t that what you tend to do during an election?”

    The problem as I see it is that the folks that go for election are not the brightest by any means, cunning definitely. Bright people generally are not happy to work within the current political party system unless of course they are heads of the party.

    Many only venture into politics when they are able to keep their alternative jobs open for a return to should they not succeed to get backsides securely fixed to Dail seats and become voting fodder.

    We need to figure out a better way of providing democratic government. One idea might be for the abolition of the requirement for TDs and set up a system whereby we vote for bright, creative, independent thinking and successful people with their own teams running for a particular ministerial post, Prime Minister, Finance Minister etc. In the current situation we would be voting for 15 individuals. I would see remuneration for these posts running at €500K p/a upwards plus annual performance bonuses. Pay peanuts and get monkeys!

    It could be required that each candidate set out in detail his / her team’s policies and stand solidly on those. Once the 15 are elected they thrash out an agreed national policy for the good of the Country and move on to implement same over a five year period.

    As a safeguard the ‘direct democracy provisions’ that were in the Irish Free State Constitution should be reinstated allowing the electorate to veto (via plebiscite) bills / policies that are not agreeable to the majority of voters. This would act as a deterrent to would be self-serving politicians and any resulting groups. In fact I would like to see monthly citizen referendums held via online and postal votes, the latter for backup if required.

    The final requirement would be that elected Ministers would have previous job security for a return to in so far as possible and only be allowed to serve 2 terms (10 years) in government at most. A reasonable pension, scaled on performance, would be delivered at the normal retirement age on top of whatever pension they are entitled to from other sources.

    To counter the abolition of the 150 or so TDs, I would suggest that we elect, every 5 years, County / City Managers and heads (and a few ranks down) of the Civil Service also the Judiciary, Garda Síochána, Military chiefs, heads of semi-state orgs ect etc, generally any top posts that the electorate pay for through taxes.

    It should also be compulsory that every citizen cast (or spoil) his / her vote. I they don’t exercise their franchise they shouldn’t receive any benefits.

    • Adelaide

      “It should also be compulsory that every citizen cast (or spoil) his / her vote. I they don’t exercise their franchise they shouldn’t receive any benefits.”

      What do you mean by ‘benefits’?

  11. Mike Lucey

    @ Adelaide

    What I wrote reads ‘hard’. I don’t mean social benefits, unemployment benefits, child supports, health care etc. Nothing that would effect a citizen at the grass roots level.

    I think things like Passports would be a good place to start. Perhaps the removal of the right to actually vote over a period of time if a citizen doesn’t voice their thoughts through the ballot might be an other option..

    People often only appreciate a privilege / right when there is a threat that it will be removed for a period of time at least.

    Its compulsory to complete the Census and I understand non compliance can result in a €25,000 fine! Is it not more important to have accurate and complete information on where the citizens of Ireland stand as regards the make up of their Government?

  12. SMOKEY

    I ended my 1st talk radio segment before the commercials today by saying,
    “when I come back, Peak oil, Bitcoin, and Lucinda Creighton, right here on Cutting Edge Ireland”.

  13. Deco

    The Greeks might bear a gift, but the Irish political establishment will only accept crumbs from the rich man’s table. Because that is what is the interests of the Irish establishment. The Irish political establishment has been bought by Brussels. It is all about grants, stooopid. Money for nothing. Except that was always a racket.

    How do we change this ?

    We change this but getting rid of hereditary candidates, by exposing as much nepotism as possible, by discussing openly the sort of cronyism that stems from such entities as Irish Water, by openly discussing the obvious stupidity coming from Brussels.

    Also we need to stop confusing increasing borrowing for growth. The central plank of Reaganomics/Thatcherism is to get people borrowing more recklessly, and “stimulating” the economy in the short term.

    We also need an open discussion on the rampant theft that is taking place in such entities as RTE, the ESB, Irish Water, CIE, etc..

  14. Deco

    FF-FG-GP-PD-LP have an interest in making sure that the Greek left get thumped by Brussels, and treated with open contempt.

    The banker-friendly spread in Irish politics, need the Greeks to be demolished and beaten. They need the Greek populace to be punished.

    And actually, so does the entire EPP political movement. Therefore in state owned television stations across Europe, we have continual panic about Greece defaulting. It is not the volume of money that is the problem. It is the example. The example changes the argument.

    The entire bailout the bondholders, and don’t mention their names (in case your media representatives/politicians are banned from the national circus complex) project would be revealed to be a joke.

    Greece will bring a gift to Ireland, and the Irish political establishment will bring nasty insults to the Greek people.

    This is what the entire centralized EU has become. The left in Britian warned in the 1970s that Brussels was a bosses club. Well, it is, but only of a small number of very powerful, very wealthy bosses. Following instructions form the completely inaccurately named European People’s party.

    The entire European power centralization movement is creating problems, misery, mistakes, bankruptcies, suicide, corruption, unaccountability, and waste. But for the political parties, who have their noses in the pie, it has produced spectacular results. In effect, it has completely undermined democracy.

    Small wonder then, that we have referendums being run until the result is achieved (under relentless expense and mainstream media narrative driving). Small wonder that the preferred option form Brussels is No referendums. Small wonder that Merkel has an opinion on what way the Greeks should vote. [ can she not clear off and mind her own business]. Small wonder that Sarkozy made it his business to show up in Dublin and lecture the Irish on what to do.

    The whole European centralization project has drifted, and has become an absolute sham. If we live in a Europe that takes the likes of Peter Sutherland and John Bruton seriously, they Europe is screwed.

    Time to get honest about the Euro-mess.

    The EU Commission President, Jean Claude Juncker says “when things get serious, you lie”.

    This is morally and intellectually bankrupt. It is also the EU norm. It comes from the top in Brussels.

    I have a better suggestion.

    When things get serious, you tell the truth. In order words, you adopt to Gorbachev perspective, not the Juncker perspective.

  15. Deco

    The key for European politics in a crisis is to make sure that the insiders stay in charge at whatever price. This is why the statist left and corporatist right are in power in Italy, France and Spain, making them cozy bedfellows despite hollow ideological posturing aimed at trying to convince the electorate that they are opposed to each other, when in fact they are on the same team. You couldn’t find a better example of this insider alliance than our own coalition between the supposedly right-wing Fine Gael and the allegedly left-wing Labour Party.

    Spot on.

    And we see it in Irish Water. I know of a lad who is working in Irish Water. And he has impressive FG credentials. He always votes FG, and his family always have. These are the types that are getting looked after in IW’s configuration. Plus a well known businessman who is featured on many posters.

    And the big plan from FG/LP is to initiate Irish Water, so as to set about borrowing to upgrade the infrastructure. In addition to the taxes (already in place) and the levy (proposed). It is another example of state largess, captive pricing, nepotism, cronyism, and waste.

    And in the middle of it, we have moral posturing and lecturing of the ungrateful, unwashed plebians by their political masters.

    The response of the national propaganda quango, around the corner from Ailebury Road/Shrewsbury Rd/The embassy belt. Protestors are now described the “radical fringe” or the “extreme fringe”. Hilariously enough, one of the protestors even managed a placard “radical fringe barbers”.

    Time to switch off the propaganda channel.

  16. coldblow

    Excellent article, David. The insiders – outsiders theme has long been one of your main ones.

    The main, insurmountable, problem with Creighton is her firm commitment to Europe.

  17. Yes, great article. Education I believe is at the root of this shift across Europe. There is a divide now between Joe Soap on the street and the often clumsy political oaf on the other side of the wall. There is frustration, dare I mention hospital trolleys and Irish water.
    I think we are naturally looking for something to break this lame political stalemate.
    Lucinda and Eddie are on the right track, but they won’t shake things up. Sinn Fein might, and I think that is why the voters are looking in their direction.
    This frustration in stale ineffective governance is just manifesting itself differently across Europe. People want real change.

  18. LKSteve

    Thanks David, good article. I have a special request. I am very interested to hear your views on the impending Syrian refugee crisis in Europe. I understand Ireland has not seen any of these unfortunate refugees yet but clearly Sweden & Germany have reached their limit. They must start arriving in Ireland soon. Over the Christmas Break I have watched the excellent documentary Through The Roof, now taken down from the RTE player. This detailed the accommodation deficiency in Dublin, the hospital beds crisis is another issue I have been watching, I also have read several articles about Ireland’s mishandling of bogus refugee claims & botched deportations, finally, I have been closely watching the Syrian refugee crisis unfold of which I admit being ignorant of until those two ships were abandoned in the Mediterranean. How will Ireland deal with the imminent arrival of thousands of Syrian refugees?

  19. http://ellenbrown.com/2015/01/06/eu-showdown-greece-takes-on-the-vampire-squid/

    Is this the gift that the Irish will accept?

    Austerity has plunged the economy into conditions worse than in the Great Depression. As Professor Bill Black observes, the question is not why the Greek people are rising up to reject the barbarous measures but what took them so long.
    Ireland was similarly forced into an EU bailout with painful austerity measures attached. A series of letters has recently come to light showing that the Irish government was effectively blackmailed into it, with the threat that the ECB would otherwise cut off liquidity funding to Ireland’s banks. The same sort of threat has been leveled at the Greeks, but this time they are not taking the bait.

    I wonder who delivered the message “or else” to Lenihan

  20. [...] of Frankfurt's yoke the austerity fascists will start to tumble. Interesting view by McWillaim Greeks might be bearing great gifts for us | David McWilliams The impact of austerity on the Greek economy and Greek society has been devastating. The [...]

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