While there is a recognition that it is important for Greek politicians to be seen by voters to be putting up a fight, there is a growing fear that all the political grandstanding could backfire, and plunge the country into bankruptcy.
Karen Maley, Business Spectator
The job of Greece’s prime minister, Lucas Papademos, is not a fun one. As a technocratic appointment, he has no political backing. Hence, passage of legislation requires the parties represented in the Greek parliament to agree with his proposals. Of course, if they were political winners, they’d probably fly through. But there is nothing palatable about the measures being imposed on Greece is exchange for ongoing financial assistance.
The current sticking point is enforcing cuts to wages — a strategy of internal devaluation to boost Greece’s competitiveness. Antonis Samaras, leader of the centre-right New Democracy party, has complained that the country’s creditors are ‘asking for more recession than the country can take’. If the leaders fail to agree, then there is a real prospect that further bailouts will be halted. That would almost certainly prompt a total Greek default by March.
The problem, as Business Spectator’s Karen Maley reports, is that Greece has consistently over-promised and under-delivered since it was first sucked into the current debt crisis. Greece has frequently failed to meet agreed deadlines, and targets for a variety of measures have slipped away. Even if the latest impasse is resolved, there will surely be another one soon enough. How long before the inevitable strikes, and Greece is rendered broke by its squabbling politicians?
Speculation falls short of facts
When I tuned into the ABC’s ‘Insiders’ programme on Sunday morning, I’m quite sure I could have been watching a replay of virtually any edition from last year. The dominant topic of conversation for the nation’s political journalists is leadership — specifically, the leadership of the governing Labor party. Report after report after report has told us that Prime Minister Julia Gillard’s position is terminal; that members of her party are agitating for a change of leaders; and that her predecessor, Kevin Rudd, is set to back a stunning comeback.
It would be nice if there were even a skerrick of evidence that any of this is true.
But as Ben Eltham writes, while there are myriad articles and commentaries on the topic, no one has gone on the record to say that leadership change is imminent. True, you can’t take a politician at their word at the best of times — by the time they publicly admit that a change of leader is being considered, the said leader is already lying on the floor in a pool of blood. However, after nearly a year of speculation about Gillard’s prospects from unnamed sources, Eltham argues that there’s surely a point at which journalists should question the merit of continuing to publish the same stories without any proof of their validity. Fiction can often be more interesting than facts — but that’s no grounds for the media to substitute the former for the latter.
Berlin is as much a problem as Athens. The two countries are two sides of the same euro coin.
Oliver Marc Hartwich, Centre for Independent Studies
There has been much commentary about why German chancellor Angela Merkel is wrong in her dogged determination to impose austerity measures across Europe. And Oliver Marc Hartwich has another column in Business Spectator today expressing much the same sentiment. Seemingly nothing new to see here.
However, there is new insight in Hartwich’s article, as he examines why Germany seems so incapable of listening to the widely available analysis. And perversely, it’s because it might be in their interests to keep the likes of Greece and others in Europe’s ‘periphery’ dependent on Germany. The alternative is to allow the rest of Europe to become more competitive, thereby bolstering their own economies. That sounds good, but from the German perspective, it weakens their relative advantage. Of course, the collapse of the Eurozone would be no picnic either — so the Germans want to avoid that outcome too. But there is a difference between averting armageddon and promoting prosperity. While there is a gulf between the two linguistically, the distinction in policy terms amounts to a very fine line. Europe’s future depends on how well Merkel sticks on her chosen side of that line.
The tent embassy revisited
The most recent Australia Day offered a reminder of how contentious some issues are in Australian politics. When opposition leader Tony Abbott responded to a question about the Aboriginal tent embassy in Canberra by suggesting that it might be ‘time to move on’, it unleashed a robust response just hours later at a glass-walled restaurant within spitting distance of the Indigenous protest site that was marking its 40th anniversary that day. As is now well established, Abbott’s comments were only considered offensive by the protesters because they were misinterpreted — those at the tent embassy had been whipped up in a frenzy at suggestions (perhaps by an insider from the prime minister’s office, or a related party to them) that Abbott had called for the tent embassy to be shut down.
Still, even as the facts have become clearer, some still reckon the reaction from the tent embassy’s defenders was justified. In a rather jumbled diatribe produced for The Age, researcher Russell Marks criticises Abbott for daring to offer an opinion on the merits of persisting with the tent embassy. On different occasions, Marks acknowledges that Abbott’s remarks were ‘factually accurate’ and ‘technically correct’. But apparently being right isn’t a justification for answering a question at a press conference. (Never mind the fact that if Abbott had declined to answer the question, it might well have provoked much doubt and more damaging commentary about Abbott’s intentions.)
Particularly offensive is the underlying argument that somehow it’s somehow ‘racist’ for Abbott to even express a view on indigenous political affairs (as represented by the tent embassy). First of all, as a political figure himself, Abbott is probably able to form an impression about whether a particular strategy is working well or not. It is deeply regrettable that indigenous disadvantage remains such a serious issue today — but the fact it persists 40 years after the tent embassy was erected suggests that there might be more productive approaches that would be worth considering. Second, it implies precisely the kind of divisive sentiment — an ‘us and them’ approach — that Marks himself seeks to condemn.
For a European future, just add German consumers
Europe’s leaders might be relieved that the European Central Bank has stepped in to try and fix up the mess that national governments have created. Refinancing operations launched by the ECB in December have successfully reduced the interest rates owed on the debts of some embattled governments relative to the mighty German bund. But just because the arteries of Europe’s financial system are no longer quite as clogged does not mean that the patient has been healed. Make no mistake, Europe still faces a massive crisis.
Despite some evidence that policymakers recognise the need for pro-growth measures (such as structural reforms), Europe’s recovery prospects are being hamstrung by an ill-targeted focus on austerity. Yes, massive budget deficits need to be pared back over time. As Martin Wolf writes, key to this story are the economic imbalances within the Eurozone. Germany is warranted in resisting efforts to convert the Eurozone into some kind of transfer union, where prudent Germans are forever left to backstop profligacy elsewhere. But as if to make an example of the merits of austerity, Germany too is cutting its relatively modest budget deficit, when there is absolutely no need for it to do so. In fact, its consumers should be spending more — not less — to help boost intra-European trade. German belt-tightening is entirely counterproductive, and prevents the necessary rebalancing between the competitive (Germany, the Netherlands) and the uncompetitive (Spain, Italy).
Citing arguments by Christine Lagarde, the head of the International Monetary Fund, Wolf contends that Europe’s austerity drive should not be an across-the-board proposition. Rather, the adjustment process must be facilitated by a selective approach to fiscal policy. If the German government doesn’t want to hand over bucketloads of money to other European governments, then cutting spending at home is the opposite of what is needed. Instead, it should give more money (in one way or another) to its own people so that they can in turn spend it on goods and services, many of which will come from elsewhere in the region. A bubbly German economy is necessary to boost optimism in the Eurozone, and help lift its debt-ridden neighbours out of their malaise.
