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Misleading Parliaments: The essence of Greek Bailouts Mk1 & Mk2

20/06/2011

Misleading parliament is, in normal times, frowned upon by the political class. Misleading several parliaments at once is, on the other hand, the current state of play in the European Union.

Consider yesterday’s (non-) decision regarding Bailout Mk2 for Greece, and the associated drama concerning the July installment leftover from Bailout Mk1. Yesterday the Eurogroup ‘decided’, with the Greek PM’s approval, that unless the Greek parliament passes Austerity Mk2 (which goes hand in hand with Bailout Mk2), the July payment will be cancelled and Greece will, thus, be in default before the end of next month. This is akin to threatening my 7-year old daughter that unless she does her homework I shall hold my breath till I expire. In game theory, we call it a non-credible threat; i.e. a threat that deserves to be treated with contempt.

So, what is the point of issuing such an unbelievable threat? Will it scare Mr Papandreou into some decision that he would not have otherwise taken? Of course not. The whole point is to lean heavily upon Greek MPs to vote in the said package. And why is that? Is it because European leaders truly believe that Austerity Mk2 will help contain the Greek debt crisis? Put simply, I refuse to believe that they can be so naive.

If the above is not totally mistaken, and Europe’s high and mighty are not expecting Austerity Mk2 to do the trick for the Greek debt crisis, why are they pushing so hard for it? The simple answer is: Because they have an urgent need to mislead their own Parliament! Could this ‘outrageous’ claim be true. You bet it can!

Ever since the euro crisis (also known misleadingly as the ‘Greek’ Crisis) erupted, the difficulty facing Europe’s political class concerned the banking sector and, in particular, how to hide its serious insolvency crisis through providing banks with rivers of liquidity. After the first two waves of funds were pumped into them (first in 2008 and then again in 2009), it became extremely hard to persuade Northern Parliaments to carry on pumping more public money into the bankers coffers (without receiving equity in return). And when the Greek bond yields soared, the Great Banking Conundrum escalated, threatening to bring the whole sector, once more to its knees, at a time when the governments lacked the earlier political leeway to come to the bankers’ aid.

Enter the Bailouts. Under the guise of solidarity to the stricken Southern states plus Ireland (an honorary Mediterranean country), a ‘decent’ alternative was discovered for diverting much needed public money from the North’s taxpayers to the North’s bankers. Now, the trouble with this scheme was that, in telling the North’s taxpayers that their money would have to be sent South (in order to ‘assist’ Europe’s prodigal, sundrenched, sons and daughters), the citizenry of the surplus countries, quite naturally, began to develop a certain animosity toward the assorted peripheral laggards. Thus emerged a new problem: How to contain the growing Northern discontent toward the South.

One option would be to allow the truth to be known; the truth that the Bailouts were not really an act of solidarity to the people of Greece, Ireland etc. but a pragmatic, cynical act of assisting bankers whose banks  had become insolvent (due to sheer mismanagement and a degree of bad luck). Alas, this would be tantamount to letting the cat out of the bag; to admit to their voters that, all along, they were being misled by their own politicians. Such an admission was, unsurprisingly, out of the question. Another means had to be found toward the end of placating the wrath of Northern electorates (and their MPs by association) against the Southerners.

The French philosopher Rene Girard would be well placed to explain the means that Europe’s politicians employed to this end: A form of ritual humiliation that is closely associated to that other favourite social-order-stabilising ritual known as scapegoating. To cut a long story short, and to spare the reader (God forbid) of French philosophy, let me state my working hypothesis here epigrammatically: Austerity Mk2 serves the main purpose of showing German MPs Greek blood and pain, hoping that its hideous sight will act as a form of (anti-Greek) anger ‘repressor’; a ‘mechanism’ that will reduce the Northern electorate’s resistance to piling more money upon the Greeks so as to pass the Bailout Mk2 loans through the German, Dutch, Austrian and Finnish Parliaments.

Meanwhile in Athens, the Greek government’s problems make the troubles of its Northern counterparts seem like a walk in the park. Being at the Crisis’ frontline, a few  of the socialist party’s more recalcitrant MPs (who feel deeply ashamed every time they have to pass by the Syntagma Square demonstrators, to enter the Greek Parliament) are not so naive as to fall for the Eurogroup’s incredible treat (see above). A few of them are, indeed, seriously thinking of throwing a spanner in the works and refusing to vote for Austerity Mk2.

The recently reshuffled Greek government knows this and is developing a new strategy, exploiting its new (politically seasoned) Finance Minister whose gravitas it intended as a bulwark against defections during the passage of Austerity Mk2. But because the gravitas of anyone in today’s Greek government is severely circumscribed, given the collapse of its political legitimacy among the voters, the government does not feel it can put all its eggs in Mr Venizelos’ (the Finance Minister) sizeable basket. Something else needs to be added to the mix.

That ‘something else’ comes in the form of another instance of wilful misleading: Various government whisperers are currently emitting the impression that Austerity Mk2 is just for show (which, of course, it is – only for different, Northern European consumption). The rebellious MPs are ‘allowed to imagine’ that if they vote in favour of Austerity Mk2 now, the Greek state will secure another €60 billion and, then, Mr Venizelos (courtesy of his much heralded gravitas) will slowly but surely find ways of ‘deconstructing’ the government’s austerity program…

To sum up, once it begins, subterfuge cannot be easily contained. These days, it is spreading like a bushfire across eurozone countries, from one Parliament to the next. Utilitarians might say that there are times when misleading Parliament(s) may not be such a bad thing, if good consequences follow. The trouble with the eurozone today is that nothing good will ever come of this. For the new loans will act, just like Bailout Mk1, as petrol on a kindling fire. When all our houses, North and South, are in ashes, we shall only have ourselves to blame.

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