The Greek government has a moral duty to use its veto in the next EU Summit: Q&A with Zdenka Pankovic

Q&A with Zdenka Pankovic of financial journal DVENVIK:

The leaders of the political parties in the ruling coalition have agreed a unanimous position on the further negotiations with the international creditors. According the media speculations, the unanimous position is not to accept further obligations or additional strict austerity measures. Don’t you think that Greek leaders should have done this lot earlier?

I fear that ‘news’ of their unity behind a tough line have been grossly exaggerated. The reality is far less heroic. After beating their chest for a little while they will buckle under the moment the troika raises its proverbial voice. The time to have put their foot down was at least 18 months ago. At the time they were signing the so-called 2nd Bailout. Once they gave in then, they are on a roll of making great pronouncements that “enough is enough” before imploring greek citizens to accept “a little bit more” of mindless, self-defeating austerity.

Greece is one of the countries in which most austerity measures were implemented in the past. On the other side, all the analysis showed those measures had only brought counter effects. Still, Greece is required to continue with the same measures. Why do you think this happens?

The answer is very, very simple: Europe is in denial of the systemic crisis it finds itself in. It prefers to treat it as a Greek crisis that is separate from the Portuguese crisis, which is different to the Irish crisis and so on and so forth. Once caught up in such a denial, the only thing to do is to extend loans to the nations bankrupted by the systemic crisis, pretending that these will be repaid on commercial terms, while justifying to the donor countries’ Parliaments this ‘largesse’ on the basis of ‘European Solidarity’ that comes with austerity (i.e. disciplinarian) strings attached. Of course the result is that austerity makes the debt dynamic worse while mass unemployment is undermining the democratic legitimacy of both the national governments and the EU.

If the political leaders stand firmly for a different position in the negotiations with the foreign creditors, what steps will Greece need to take to exit the deep crisis?

First and foremost the Greek government must use its veto at the level of the EU Summit. Declare that the EU will be paralysed until and unless the country’s slide into the abyss is halted. And how will it be halted? First, by making all future repayments on Greece’s debts to the EU, the ECB and the IMF conditional on the level of GDP growth (i.e. by giving to the troika a vested interest in seeing Greek GDP stop its slide and start recovering). Secondly, by insisting that the Greek banks are cleansed properly, which means passing their shares and warrants to the European Stability Mechanism (ESM) in exchange for (a) writing off the Greek public debt the monies borrowed from the ESM to recapitalize the Greek banks, and (b) having the ESM, in association with the ECB, replace all the boards of directors and begin a process of returning these banks to health, before the ESM auctions off its shares in order to recoup its investment. Lastly, the European Investment Bank should be given the task of investing in the Greek private and public sector, on pure banking principles, the billons of euros of structural funds that the Greek government was allocated since 2007 but which were never utilised because of the crisis.

The European Union keeps pressuring your country to sell its property: state-owned companies and institutions. At the same time, it imposes conditions on what companies may or may not become owners of the state-owned property. Do you think these conditions are aimed at accumulation of capital to cover the debts with the sale or there is another “background” for them?

Partly, yes – they want to use the proceeds from the privatisations to repay Greece’s debt to its Northern European creditors. But this is not the whole story. There is also an element of a fire sale whereby some of the donor countries’ governments are assisting their own corporations to acquire some of these ‘assets’ on the cheap.

Do you thing the Eurozone, such as it is, has a future? Would you agree that the EU is created in such manner that makes it convenient only for the countries with highly developed economy while the rest of the countries face economic problems?

Certainly not. This Eurozone, as it is structured today, and with our current leadership’s plans for it, has no future. It may survive for a while, exacting a major human cost on our populations. But it is macroeconomically designed to fold. As for the overall design o f the European Union, things are worse than you suggest: The EU is now utterly dependent on the Eurozone’s survival. A collapse of the Eurozone will lead to a disintegration of the EU. And the disintegration of the EU will not be good for anyone – surplus or deficit countries. We are talking about a spectacular failure of politics, of design and of our leaders’ perception.

In your opinion, what is the future of the euro as a common currency?

As it stands, it has a bleak medium term future and no long term one. But that does not mean that it cannot be ‘fixed’. Alas, I see no sign of the political will and analytical capacity that are essential for ‘fixing’ it.

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  • Very nice interview. In addition to your excellent macroeconomic analysis on the future of the eurozone it would be helpfull for these foreign journalist to explain to them why the Greek government does not even comprehend the words “moral” and “duty” so standing up to the troika is completely out of the question. These foreign journalists are under the impression that Greece has a proper government albeit a weak and not quite capable one. They are mistaken, for all intents and purposes Greece does not have a government.

    • I agree with what you are saying, Tasso. But in fairness, Greece obviously does not have a monopoly on lousy governments. Here where I live in Canada you had the mayor of Montreal step down earlier this year because of corruption/mafia scandals; the mayor of Toronto, one of the largest cities in North America, is a crackhead — on video for all to see; the federal government, and damn the high unemployment, is planning balanced budgets, unbeknownst to the dummies that the Canadian dollar is a public monopoly. You see what I mean? But, and here is another but, Greece next to Canada is a tiny country and it doesn’t have the leeway to screw up.

    • All governments are lousy. That is the nature when X spends the moeny of Y on Person Z.

      So the solution is not better government, it is LESS government,

  • I am sorry, I lost you.

    What would the invocation of a veto do? The UK invoked a veto 2 years ago and still the issue that behind the veto remains unresolved. Unless you need absolutely nothing from the EU and you have amble time in your hands, invoking a veto is an invitation for ridicule and embarrassment.

    When Cameron invoked a veto, his basic concern was to prevent the UK contributing more to the EU budget since the UK is a “donor” country.

    I fail to see anything Greece could get by invoking a veto. A veto to what? What’s up for voting? I don’t get it.

    • Sure you do. It is not complicated. A veto on every item on the EU agenda until a new plausible plan for re-stabilising the Greek macro-economy (including but not limited to a debt write off) is tabled and debated.

    • All I know is this:

      1. If one Googles “EU veto” or similar, one comes up with an empty search. There is very little on the procedural rules of how to invoke a veto.

      2. Last time Poland invoked a veto it was ruled out as legally baseless.

      3. The unanimity issue (the politically correct term for invoking a veto) is a real German target. Germany maintains that unanimity is a thing of the past and with 28 members, impossible to obtain. Therefore if Greece invokes a veto she would be walking straight into a giant German trap. The Germans are actually looking for a naïve victim to invoke a veto so that they could prove to all how fast such single member would be marginalized.

      Are you sure that the veto idea is a well thought through tactical move or are you saying it in prose? Because Greece might very well be lacking valid legal arguments for such veto.

    • Proof that Google is no panacea and no alternative to understanding the workings and history of institutions. EU vetoes are almost never noted officially. When Andreas Papandreou announced in 183 that he was to veto the entry of Spain and Portugal into the EEC unless structural funds for the South were introduced, that veto was never noted. All that happened is that the Summit took longer to conclude and, finally, the fund that Papandreou had demanded was approved of. Similarly with Mario Monti in June 2012. He promised to veto the Sunnit’s conclusions until and unless progress was made on the banking union front. That veto was not noted either but monti got the resolution he had asked for. Similarly, now. The Greek government will announce its readiness to veto everything, the Summit will agree to adjourn for a week (like they did in the case of Cyrpus) to discuss a comprehensice Greek plan and history (as well as Google) will not register any actual veto having been used. (Come on Dean. Stiffen your lip. My veto suggestion is beyond reproach. It is the only decent move Samaras can make so as not to be condemned, like GAP was, to the dustbin of history.)

  • If the Greek government had but a scintilla of moral fiber it wouldn’t, for example, be doing business with a terrorist state such as Turkey. And you expect what again from the Greek government?

    Oh, Yani, sometimes you say the darnedest things 😉

  • Yiani,
    In reference to the veto I fail to see how you do business this way. Typically you do something like this if you have a reasonable chance of success and if you have others supporting you. Otherwise it makes no sense.