Thursday, 27 September 2012

The moral implications of bail outs and austerity

Morally bankrupt.
How little we have seen of the human impact of the ongoing financial crisis in the Europe.
Of course we have seen reportage of the human reaction, be they stern faced Ministers assembling around large oak tables, shooing away the clucking throngs of news journalists awaiting any shred of carrion to be tossed from the wreckage, or the gathering crowds of unhappy protestors, waving banners before being strewn with rubber bullets by an equally unhappy, yet duty bound police.
And yet then, when we read on, we learn that Greece has asked for that, despite being reprehensible for having committed such and such an oversight, while doom laden Spain is sure to encounter this in their fate leaving it to Germany to propose that, and so forth.
As such the anthropomorphic labelling of whole countries is enabling both journalist and reader to be removed from what should be the real news story of the unfolding Eurozone disaster, the true cost to the everyday citizen. The people angle.
But it has suited the European Union to convey this image and the largely national-leaning print press to extenuate it. Define the problem as an entire country’s fiscal profligacy and then the only tool for debt solution is the EU's favoured austerity that must be shouldered by all. In Brussels it allows for a convenient bypass of democratic wont in order to transact further powers within their scope, while for national governments and newspapers, it conjures a sense of national unity  by lauding an "all-in-this-together" sermon that allows the weakest in society to be most heavily burdened, despite being the furthest removed from the causes of the crisis. What is so ironic is that while in Brussels, Barroso readily condemns the very notion of nationalistic, populist barriers to deepening European integration, he relies upon it implicitly to sell the Troika imposed programme of cuts to a nation. Everyone must do their bit.
Mr Barroso, it was your fiscal policy and foolhardy adherence to a single currency, placing political will before economic sense, that both caused the problem and continues to prolong it, so why must Senor Garcia be forced to work until his joints are ground to dust while his children will be taxed for the ills committed by their predecessors? I am sure when the concept of a single currency without unified fiscal policy was being drawn up he wasn't consulted.
Every country that found itself in the same position as the Eurozone after the credit crunch in 2008 was able to find a solution. In Iceland, the economy hit such a wall that the country defaulted and devalued the Krona. Iceland is now recovering very quickly and is borrowing again on the world markets as a creditworthy entity.
You see the debate that has raged in newspapers across Europe about what to do with a problem like Greece depends heavily on viewing each and every man, woman and child on an Athenian controlled island as both part of the problem and therefore responsible for its solution.
If a person borrows money, they receive the amount directly and must pay it back according to the terms and conditions. If a country borrows money, the citizens are unlikely to be informed of the loan, its purpose and certainly not its terms and conditions. How then does central government, let alone the government of a third country, morally justify imposed austerity?
Yet the personification of Greece as the naughty member of the Eurozone allows the EU to paint the picture of the reckless neighbour who, finding themselves unable to pay for their mortgage, appeals to the bank for help to keep their house. They are relucantly granted a reprieve on condition of some very stern, and of course wholly warranted, terms and conditions. Therefore if Greece gets a bail out at the cost of imposed spending cuts and strict austerity measures, then Spain would have to subscribe to the same punitive conditions if their economy is also to be rescued. Of course Senor Garcia cannot see why his benefits are being stripped when he has done nothing but work hard all his life. Meanwhile Germany, who does not find herself in such a financial mess, can bang the fist on the table and make demands which will affect the retirement age of Kirios Papadopoulos. Of course when I say Germany I mean Merkel and her cronies and their Brussels-based counterparts.
In 1995 Germany strongly opposed an IMF bail out of Mexico arguing moral hazard in giving a €17.8 billion loan as it essentially worked out as a rescue package for the American investors who had shored up so much Mexican short-term debt. Now the boot is on the other foot and it is German banks facing losses if Greece is allowed to go under, with as much as €22 billion of Greek public debt held by German investors. Suddenly Frau Merkel repeats the tune of solidarity for Greek and EU ears, but will happily pour scorn on Athens as and when it will placate her own people.
It may suit Brussels, political leaders, newspapers and ministers to talk about Greece, Spain, Germany, Portugal and Ireland as if they are characters in philosophical problem. But the real moral debate is not who should be paying the debt, but how.

No comments:

Post a Comment