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.

The Euro: A lot on their Plato.

As most of Britain watched Murdoch in the dock at the House of Commons Home Affairs Select Committee, the Euro countries finally agreed to bail out Greece once again with an enormous 96 billion pound loan. Immediately markets across Europe were relieved, particularly across southern Europe where the Spanish and Italian economies were teetering from Greek contagion. However; the French president Nicolas Sarkozy has said that this bailout is purely to deal with Greece’s economy and other Euro countries will not move to assist the other ailing PIGS (Portugal, Italy, Greece, Spain). Yet as Britain strictly stays on the outside and European countries head towards fiscal union, where does the European project stand?

After centuries of war and bloodshed, it is remarkable to find that the European project has been so successful in turning military hostilities into economic partnerships. A continent ravaged by war became one of the world’s most important free markets. It appeared to be the correct decision to take as well. Europe, an economy of ideas and inventions would be an ideal competitor against the US and Japan. The decades after the Second World War saw great European statesman bridging differences and pushing beyond economic matrimony to a full-scale political partnership. This was a generation that had lived or emerged from two wars that had destroyed and killed millions, the plans that were unfolding before them seemed not only possible but the only option.

However, the increasing integration of the European project hit a brick wall, literally, when the Berlin Wall came down. For fifty years, Western Europe was a bulwark against the Communist East and now with democracy sweeping across Eastern boundaries, what was Europe and the EU supposed to stand for? Germany was always central to the project and unsurprisingly leaders were concerned about a reunified superpower in the middle of the continent.

European institutions, whether in Brussels, Luxembourg or Strasbourg have fundamental issues: a weak mandate, they lack transparency and accountability, further bureaucracy and perhaps most importantly to ordinary Europeans, they don’t know what it stands for. Perhaps this was the trouble with the European project; there was an original idea and as things kept on moving along, no one questioned where it was going. Monetary union was purely a facade to continue the project and did not encompass any financial instruments to ensure its success. Politicians and cultural commentators have speculated that a single currency would ultimate fail because the EU had no fiscal powers to monitor and penalise countries. As we have learnt over the past few weeks, there was no mechanism in place to leave the Euro.

The recent financial crises occurred because of a political impasse against the European project. Each country had its own interests to bear against an increasingly frustrated national electorate. It is unsurprising; billions of Euros are being spent on bailouts, particularly Greece, when its economic affairs were in a ruinous state before it joined the currency. Why should billions be spent in on the Greek economy when they should never have been allowed in from the start. This is not a victory to the little Englanders of the right-wing press who claimed it would all end in tears from the start; their grievances were aimed at bendy cucumbers and the inability for town halls to parade the flag of St George. This was a rose-tinted view that economic union would endure culminating in further political union.

So does a two-tier Europe have a chance? That is Euro countries forming a political bloc with countries such as Denmark, Sweden and the UK on the outside. It certainly retains the status-quo, France and Germany dominating the internal politics and directing its future. Tighter regulation of finances would bring control of taxation and other macroeconomic measures in house. That would be a massive repeal of sovereignty. Yet is there a political or cultural demand for such changes? Do European people seem content to move in a closer direction? The rejection of the Lisbon treaty or European constitution would suggest no and after the recent bailouts Northern European countries would demand checklists to ensure tighter controls on the PIGS, not to mention new entrants. Yet for the Euro to survive, as it stands now, this is the safest solution.

And Britain. Although it is not part of the bailout plan, it is yet to hear the last of Europe.

FIFA: Back the bid?

Panorama and Andrew Jennings added another act to the joke that is FIFA yesterday. It is not the first time it has been smeared for corruption allegations.

We are indeed amidst the closing stages to see who will host the FIFA World Cup in 2018 and 2022, and if votes go our way it could possibly be in England. Anyone who ever reads Jennings’s excellent website Transparency in Sport will be aware of the activities behind the scenes at FIFA. The real question should be, would we really want to host it and really, who gains most?

The world of politics and diplomacy is always a bit shady (as we know from wikileaks) but why does no one ask any questions of FIFA? Sepp Blatter must be the only President of an organisation who does not declare his wage, yet politicians invite him to the corridors of power in an attempt to persuade him to consider their bid. A man who started as a lawyer working for Adidas, now holds the highest seat in international football, but opposes transparency or reform. The ‘beautiful’ game has become ‘tarnished’.

Blatter’s legacy is supposedly to help the expansion of the game throughout the world and use football as a tool to unite people. The South African World Cup was the first occasion to bring the ‘beautiful game’ to the African continent. No one questions the merits of the event, but why aren’t people a bit more sceptical of all things ‘unifying’ and ‘legacy’. No one questioned whether Africa could host a competition (IPL, the Rugby World Cup, the African Cup of Nations) but in meeting FIFA’s strict criteria, was it necessary to build new stadia and the infrastructure? The answers suggest no; since the tournament, several of the stadiums lay empty and recent matches have only filled tiny proportions of the ground. The improved transport links will lay foundations for future economic benefits, but it doesn’t fill the hotels built to cater for prospective tourists.

Since the Athens Olympics in 2004, the Olympic stadium and other supporting arenas have become wastelands. Since Euro 2004 in Portugal one of the stadiums was knocked down because of high maintenance costs. Both Spain and Portugal are the favourites for the upcoming bid, yet Spain too has dozens of stadium that are half built or under-prepared. These will be sorted out if the bid is won, but why should stadiums of such magnitude be built, under executive orders and government submission, only to be left redundant a month later? It is all put in perspective if both Iberian countries are apparently on the verge of collapse, this isn’t FIFA’s problem.

I understand the power of sport and the impact it can have on society. I do not buy this idea that through spending billions will you achieve this acclaimed legacy. It certainly makes a country feel better but it is not the only solution. If England wins the bid then it will continue to be no questions asked and will purely highlight this country’s great sporting tradition and capacity to hosting global events. FIFA and its bandwagon will be a part of this and no further questions will be asked.