Debt and football: writing off the Greeks

Good news stories are something of a premium in Greece at the moment. Last night’s victory over Russia in Warsaw at the European Championships made it hard for any football supporter not to be delighted for the tournament’s rank outsiders. The energy and celebrations at the end of the game sent the thousands of Greeks fans in the stadium into ecstasy, whilst much of the country greeted the news in the same way back home.

Yet, this is far removed from the shock and optimism after the country’s victory in Euro 2004. Greece was a founding member of the Euro zone economy, its people were becoming wealthier and EU money was investing in capital projects that would help improve the way of life. That Greece is now a distant and rose-tinted memory. As the financial crisis began to bite in Europe, European delegates began to understand how desperate the situation in Greece had become. Several countries including France and Germany had broken the rules of the European Central Bank’s growth and stability pact. The pact stated that a country’s budget deficit should not exceed 3% of its GDP and its national debt should not exceed 60 per cent of GDP. Little did they know how Greece managed to stay in between the lines.

Captain Karagounis

Even when the Euro finally became an economic reality, many officials believed that Greece simply wasn’t ready to join. The underlying currency and economic conditions would have made convergence for the whole of the Euro zone difficult. When the Greek government collapsed and its successors opened the books, the whole of the world was shocked. Previous administrations had managed to ‘cook the books’ on an enormous scale, using accounting methods that had placed huge chunks of the Greek national debt off the official records. Overnight officials discovered that Greece was running annual deficits of 12% with a national debt of 129% of GDP.

The downward spiral has continued from there since. As successive Greek governments have implemented severe austerity measures in return for EU bailouts, the social contract for ordinary citizens has begun to dissipate. Cuts to the public sector, higher taxes as well the inability to feed their families has seen Greeks take the streets on a daily basis. News footage no longer depicts Athens as the birthplace of democracy, but a city defiled with graffiti and polluted with tear gas. The language that invented the words crisis, chaos and catastrophe has brought them to life.

Panic on the streets of Athens.

The Greeks inability to trust any politician or economist makes its long term future even more indecisive. Since the crisis unfolded, over 10 per cent of the population has emigrated in search of work and most likely a settled life. With them, they have taken their money. Over a third of Greek bank deposits have left the country since the crisis began, €9 billion has left since the beginning of the year.

It is unsurprising then that many have turned to alternative parties in the recent elections. Not only has the far-right party Golden Dawn managed to generate great support, but the radical left party Syriza has taken votes away from the tradition socialist party Pasok. Syriza, led by its charismatic and young leader Alexis Tsipras has vowed that Greece will remain in the Euro but stop the austerity measures by reneging on its outstanding debt. A victory for Syriza in the re-run of last month’s general election is more than likely to be the first step of Greece leaving the Euro zone.

Yet how rational can the Greeks be at a time like this? Many have been unemployed for over two years, whereas those in work have not been paid for months. They are seeing all around them that a country in Western Europe has become destitute and suffering affliction that you would only associate with a war-torn nation. Suicide and food kitchens are part of the daily routine. Any political party that gives them a glimmer of hope is bound to cajole them to vote that way. Yet it is an entire fantasy. Greeks long to remain in the Euro because it once gave them everything they wanted, yet remaining in it would entirely undermine their recovery. The Syriza party may be acting out of goodwill, with a hue of opportunism, yet even they wouldn’t be able to remain in the EU without paying their debts. It would only lead to other debt-ridden countries in the Euro zone to doing the same, pushing the overall picture in the wrong direction.

The problem beyond both inside and outside of Greece is the fact no one is certain of what will happen next. The recent bail out of Spanish banks pushed Spanish and Italian bond yields to historical highs. The EU Troika may have finally laid down contingency plans for future crises, but inevitably they have acted too little and too late. If Greece falls then the economically uncompetitive Italy and Spain are bound to fall next, bringing down the already bailed out Irish and Portuguese. Capital flight may have created a safe haven in the non-Euro member UK, but its banks are heavily indebted to Spanish and Italian banks, who’s not to say that the UK could fall into another deep financial crisis as well?

The questions surrounding Euro bonds seem futile, they may avert short term crises, but they do not underwrite the fundamental problems that these countries face. The German Chancellor Angela Merkel is increasingly becoming isolated as world and EU leaders ask her to react, whilst her own country feels that their prudence should not be sacrificed for feckless southerners. If the Germans put forward the bulk of an EU firewall would it do anything or is it too late? Would a Greek return to the drachma see an instant return to growth or would it lead to high inflation. These are all the questions that no one seems to have the answer to.

The only thing that is certain is Greece will play Germany in the quarter-finals. Who will win? I’m not sure. We thought Greece would leave earlier, but they seem to have a knack of hanging on and causing a bit of damage. The football may be important to most, but Monday’s results will have implications for us all.

England expects?

The politics of following the English national team appears to get stranger and stranger as each tournament approaches. Not since 1966 has England managed to win a major international trophy and despite coming close on one or two occasions, most notably in 1990 and 1996, the dream of winning anything seems rather remote.

Yet, the English, who invented the game and this being rather noteworthy, appear to have a morbid fascination in seeing their football collapse and capitulate. For every tournament they enter, the whole country expects them to go and win it; this is despite the severe technical deficiencies and sheer exhaustion of playing a Premier League season. It is not just the fans who crank up the pressure; the media plays its role. For example, before most knock out games, be certain to see a headline play reference to Lord Admiral Nelson’s famous adage that ‘England expects everyman to do his duty’. In fact, ITV’s recent build up has parodied England going into the tournament on the back of their twelfth straight World Cup victory.

The 'heroes' of 1966.

It is worth reminding that the so-called ‘Golden Generation’ that infamously went onto win nothing, was actually a name given to the team by none other than the Football Association. Talk about hyperbole.

For many years England did expect, purely because they did invent the game and that was that. England famously did not enter into early World Cup tournaments because they believed that they were not properly devised nor was the FA willing to acknowledge them.

Even the mentality was wrong, British players were often renowned for the idea that running with your head down can get you out of trouble. The so-called ‘kick and rush’ football may have worked in the British leagues and in the early half of the 20^th century, but footballing tactics had moved on. England did not. One Dutch commentator said that his country admired the way the English played but they thought it was completely suicidal.

And here we are today. Less than two weeks before Euro 2012 kicks off in Poland and Ukraine and everyone is trying to down play it all. The preparation was not good. The departure of Italian Fabio Capello was not an ideal scenario. Despite Capello’s unpopularity with the press and a number of players, he was a winner and he knew what he wanted. The FA’s bizarre attempt to find an interim manager and hire him less than a month before the tournament speaks volume of the organisation.

I do not expect England to win, nor do I expect most people. Yet, I don’t understand this idea of trying to subvert any optimism. We don’t need to label ourselves as dark horses or chance outsiders. Why would you enter a tournament without thinking you were going to win it? You don’t go to a strip club to enjoy the furnishings.

Tournament success is about preparation and a spot of luck, for too long the conversation was ‘we invented the game so we’ll win it’ and later it became ‘we’ve got the best league in the world so we’ll win it’. Two remarkable truisms that have no real logic. 

If England ever do win a tournament it will require hard work and good players, but it will mainly require ideas and knowledge. The FA’s previous solutions of throwing money at the problem will add nothing further disappointment. Let’s hope, but not get ahead of ourselves.