International

If Greece left the euro, it could deal with its debts and make itself more attractive to investors.

Dennis de Jong is Member of the European Parliament for the SP

All sorts of figures are flying around when it comes to Greece’s debt crisis and that of the other Eurozone countries. Hardly anyone can still follow what’s going on. Along with this comes the continual misleading of the Dutch people, and the putting of the interests of the banks ahead of those of the Dutch taxpayer.

Time to set things down in plain language: the EU member states’ finance ministers do not want Greece to leave the Eurozone under any circumstances whatsoever, from fear that should this happen the banks which still hold Greek bonds will collapse. In addition, in the ministers’ view there is a danger that other countries, such as Portugal, would follow Greece’s example, and that this would cause further problems for the banks. The ministers are afraid of a new financial crisis and want to prevent such a thing, whatever the price.

In my opinion the crux of the matter can be found in these last words – ‘whatever the price’. What is this price? In the first instance the Netherlands has extended loans totalling €4.7 billion in order to save Greece. Next came €25 billion in guarantees and €4 billion in actual loans to the EU’s temporary emergency fund, from which Ireland and Portugal have had support. In the meantime, Finance Minister Jan Kees de Jager promised to increase the guarantees to €50 billion. There is a sizeable chance that Greece will eventually come back to the emergency fund for more. There are strong indications that negotiations are now being conducted with a view to prolonging the term of the loan and lowering the interest that Greece must pay on its existing debts. It is also possible that repayment of part of the debt will be waived. And how much will we have to pay after that? It would be good if we could hear the whole story, but it seems that it’s so gloomy a prospect that no minister dares to tell it.

Beyond that, the tale that we have had firm guarantees via the conditions which we placed on the loans to Greece simply isn’t true.

The Greek economy is being downsized by huge cuts in public spending. Short term solutions aren’t ion the cards. The Greek government has announced that it wants to tackle corruption and nepotism, so that the rich will for once pay substantial taxes, but this is always something which takes years. It isn’t easy to change such a culture. The threat is that a whole generation of youth will be lost; the government has no money to improve education and thereby promote innovation, and no money to aid in the establishment of small, innovative firms. At the same time, social protest is assuming ever greater forms. You can’t keep lowering wages, especially when wages for ordinary working people are so low to start with. And meanwhile, the euro is the euro and Greece is saddled with a relatively strong currency.

Against this background, conditions imposed on Greece must indeed be softened, because otherwise the Greek economy will be sent sprawling still further. All the muscular talk directed at the country must therefore be taken with a very large pinch of salt. Finance ministers want us to believe that they only lend out money under strict conditions, but these conditions can’t actually be put into practice. The current policy of these finance ministers isn’t so far away, then, from the writing of a blank cheque.

So this must change. If Greece decides to turn its back on the euro, it could, just as Argentina did ten years ago, make an arrangement with international banking under which part of the debt would not be repaid. In addition, by introducing a new currency, Greece could instantly become cheaper and thus attract investments, as well as stimulating tourism. This would give the country the chance, in time, of coming out on top.

But then what should we do with the banks? Here too a solution exists – break them up! It might not then be the case that governments would continue to be held to ransom by financial institutions. If banks were forced to divide their activities into a speculative wing and one which occupied itself with ordinary transactions, no banks which were essential would collapse when speculation in bonds or other products goes wrong. This would prevent a repeat of the financial crisis and governments would, moreover, no longer feel the need to jump to their aid when banks make losses on their speculative transactions. Of course, we would face a one-off setback in the Dutch budget. To the extent that bonds are in the hands of the ECB, we’d suffer losses. The same applies to loans provided by the member states. But that would be to act with foresight and put an end to muddling along, which is what is currently happening.

I don’t believe that confidence in the euro would be shaken – if the weaker members of the Eurozone were to leave, what would remain would be a strong group. This would be a pity for the Europhiles, but sometimes you have to take a step backwards.

The solution is therefore in actual fact extremely simple – ministers of finance should make the breaking up of banks their very highest priority and then take a fresh look at countries such as Greece. As long as we have been able to split the banks and avert any risk of a new financial crisis, Greece can leave the Eurozone and we can deliver the taxpayers from the bottomless pit which you have opened beneath them.

This article was first published, in Dutch, in the Dutch national newspaper De Volkskrant on 12th May, 2011.