Tuesday, June 30, 2015

The cradle of democracy has betrayed its principles

By Ben Wright, Group Business Editor 28 Jun 2015

The Greek government was elected to make tough decisions and is now hiding behind a shotgun plebiscite. But it's not the only one in the wrong

Greece’s radical leftist leader Alexis Tsipras told a final campaign rally on Thursday night that his party represented the new Europe and German Chancellor Angela Merkel the old.

Alexis Tsipras, the Greek prime minister Photo: AFP

Just because you invented something doesn’t necessarily mean you are any good at it – look at how bad we Brits are at almost every sport we have ever dreamed up.

Yes, Greece is the birthplace of democracy but, no, it is not a master of the art, regardless of what Yanis Varoufakis, the Greek finance minister, might claim. Quite the opposite in fact.

Late on Friday night, Alexis Tsipras surprised everyone – including his own team of negotiators in Brussels who learned of the news on Twitter – by announcing a referendum.

We don’t yet know the exact wording of the question that will be put to the Greek people. But, according to Tsipras, it will be on whether Greece is prepared to accept the proposals for reforms its creditors have set as a condition of unlocking new bailout cash.

There are literally dozens of problems with this.

Let’s confine ourselves to some of the main ones, like, for example, the fact that there are no proposals. The two sides were still working on them on Friday night when Tsipras dropped his bombshell. On Sunday afternoon, the European Commission released the draft text. The key word there is “draft”.

On Saturday Jean-Claude Juncker seemed to suggest that even these nascent plans had been whipped off the table in a fit of pique. The Sunday statement left open the possibility that they could still form the basis of future discussions. Let’s just say the status of the proposals is extremely uncertain at best.

Nevertheless, I am not sure that the Greek people are going to enjoy reading this highly technical document over the next few days.

It’s also worth remembering that the bailout programme ends on Tuesday; the referendum is due to be held next weekend. As was pointed out on Twitter, the Greek government has effectively asked its creditors to extend the bailout programme just long enough to secure a vote rejecting it.

Carl Bildt


Greek leftist government is asking for extension of EU loan program in order to be able to reject it in referendum. Logic used to be Greek.

1:28 AM - 28 Jun 2015

Even if it was clear what the proposals were and the programme was still in existence, it’s hard to see what a referendum would achieve. A No vote would only take us back to square one – we already know that Greece is fed up with austerity; a Yes vote would likely lead to Tsipras’s resignation. Why not cut to the chase and just hold elections?

There is nothing wrong with referendums per se. But they need to be clearly framed and long debated. The Greek government was elected to make tough decisions (yes Greece is a democracy – a parliamentary democracy); it now appears to be hiding behind a shotgun plebiscite.

Greece’s problems can’t be solved by a one-question referendum. That is because they boil down to the tension between two different questions. The first is: should the country submit to more austerity to meet the terms of its bail out? The second is: does it want to stay in the euro?

As Varoufakis points out, you can’t ask the second question – it would be a violation of EU treaties and EU laws; indivisibility was one of the founding principles of monetary union (principles that a democratically-elected Greek government signed up to).

But that is not an argument for holding a referendum that will solve nothing; rather it highlights the futility of the whole exercise.

The Greek government must know this. So what is it up to?

The conspiracy theories are now running rampant. Did Syriza want to quit the euro all along? Were its negotiations a charade and its tactics deliberately designed to infuriate the creditors (and nothing is more likely to annoy a eurocrat than holding a referendum)? Did it want to get pushed out of the Eurozone so that it could lay the blame for Grexit at the door of its paymasters?

John Maynard Keynes, whose philosophy Varoufakis espouses, said: “When the final result is expected to be a compromise, it is often prudent to start from an extreme position.”

But perhaps Syriza’s extreme position wasn’t a starting point – perhaps it is the finish line.

Be in no doubt, this failure, should it transpire, will have many fathers. The original sin was the creation of the euro, which spliced monetary unity to political disparity; the IMF have played a bad hand appallingly; European governments have failed to acknowledge that the pain Greece has suffered makes it a special case when it comes to debt relief.


But Syriza has taken what was one of the fastest growing economy in the Eurozone at the end of last year and driven it into the wall. They have taken what was expected to be primary budget surplus this year and turned it into a deficit. Why? To end austerity, yes. But the Greek economy was already turning a corner.

It's likely that various ulterior motives will emerge from the chaos of the next few days.

On Sunday, Varoufakis tweeted to say that “capital controls within a monetary union are a contradiction in terms” and that “the Greek government opposes the very concept”. A few hours later Greek banks announced they won’t be opening today and likely all week.

Yanis Varoufakis @yanisvaroufakis

Capital controls within a monetary union are a contradiction in terms. The Greek government opposes the very concept.

9:59 PM - 28 Jun 2015

The whispers coming out of Greece suggest that senior bankers believe shutting up shop may be the only way to get the public to properly understand the gravity of the situation and the dangers of listening to Syriza. This is a pretty explosive state of affairs: it indicates that relations between the Greek government and the country's financial system have totally disintegrated.

And, if that’s true, it means the Greek banks are locking the doors on a burning building in an attempt to undermine a government that, whatever its faults, was democratically elected.

If this is how democracy is supposed to work then perhaps Winston Churchill was wrong about it being the least bad option.

The cradle of democracy has betrayed its principles - Telegraph