Democracy and transparency remain the biggest victims of the euro crisis

Over on the Telegraph blog, we argue:

The 80,000 Greeks that came out in Athens yesterday to protest the latest round of bailout austerity imposed by EU-ECB-IMF troika can shout all they want. They can even express their disgust at the polling booths in the country’s general elections, scheduled for April. It won’t make much difference. To get its second bailout, the leaders of Greece’s main political parties are required to submit a written commitment to fully implement the package regardless of who wins the elections in April.

Everyone recognises that Greece needs fundamental reform – the country has for too long epitomised reckless economic behaviour. But as Andreas Vosskuhle, the heavyweight President of the German Constitutional Court, said in a recent speech: “It would be tragic and fatal if we were to lose democracy on the road to saving the euro.” Beyond everything else, this is the central dilemma the eurozone faces: necessary economic reforms are constantly pitted against basic democratic principles.

The demand for a written assurance to stick to the austerity plan in Greece is only one in a series of direct assaults on democracy, accountability and transparency that have followed in the wake of the eurozone crisis, including:

The technocratic regimes in Italy and Greece: Berlusconi was hopeless and Mario Monti has given Italy a boost, but the replacement of elected governments in Greece and Italy – under heavy pressure from eurozone leaders – with unelected technocratic regimes, has left a very bad taste. This was unintentionally summed up by the President of the European Council, Herman Van Rompuy, when he remarked in a recent speech that “Italy needs reforms, not elections".

This a practical issue too: reforms decided by technocrats without a proper popular mandate are less likely to be implemented and to stand the test of time.

An EU ‘budget-veto’ commissioner: A leaked German/Dutch plan would see the creation of a Commissioner, with the power to veto the budgets of poorer eurozone states – the proposal instantly drew a barrage of criticism and looks to be a step too far a the moment.

Central banks dictating economic policy: In August last year, the ECB sent an absolutely extraordinary letter to Berlusconi’s government, setting out a range of prescriptive reforms, including changes to the Italian Constitution, that Rome needed to enact in return for the ECB agreeing to buy Italian government bonds. These demands, which were only revealed months afterwards through leaks, appeared to have become government policy.

“Dark, secret rooms”: Symptomatic of the crisis, Eurogroup Chairman Jean-Claude Juncker suggested last year that eurozone meetings should take place in “dark, secret rooms” to avoid market speculation, admitting that he often “had to lie” during his career. In creditor and debtor countries alike, elected MPs are becoming increasingly frustrated at playing second fiddle.

Reduced insight for citizens: Citizens are left in the dark too. The opaqueness has even spread to traditional pro-transparency, non-euro countries such as Denmark. Since the eurozone crisis erupted, the website of the Danish parliament no longer publishes draft minutes of upcoming European Council summits – a great service which used to grant citizens insight. No explanation is given except for bilaget er fortroligt (the document is confidential).

The secrecy of the fiscal compact: negotiations on the much-hyped euro fiscal compact have equally been shrouded in great secrecy and the legality of key aspects of the document remains dubious.

The ECB’s mysterious balance-sheet: Apart from complaints in Germany that it’s engaging in illegal state financing (against promises made to German citizens), the ECB doesn’t publish any break-down of their bond purchases (not even with a time lag), nor any information about where the bonds they hold lay on the balance sheet. As the bond-buying amounts to a hidden, and growing, cost of the crisis to eurozone taxpayers, this begs the question: who, exactly, is accountable for these decisions?

And the list can be made much, much longer. As some are keen to point out, as all of this is happening under the auspices of (mostly) elected governments, it’s perfectly consistent with democracy. But even if that is true, the eurozone elite continues to test the limits of democracy at its own peril. If policies remain the same irrespective of who’s in power, sooner or later, voters will look to other, and far more unpleasant, alternatives.

Has Schäuble given up on Greece?

It is estimated that 80,000 took to the streets of Athens yesterday to vent their anger at the latest round of bailout austerity. Another 20,000 reportedly protested in Thessaloniki.

After days of talks, Greek MPs finally approved the latest round of measures required by the EC-ECB-IMF troika. The vote was carried by 199 in favour to 74 against. But the Coalition parties expelled 43 deputies for failing to back the bill.

Police said 150 shops were looted in the capital and 48 buildings set ablaze. Some 100 people - including 68 police - were wounded and 130 detained, a police official said this morning.

While condemning the violence, Prime Minister Lucas Papademos conceded yesterday that, "The full, timely and effective implementation of the program won't be easy. We are fully aware that the economic program means short-term sacrifices for the Greek people."

The problem is that "short-term sacrifices" is rather optimistic. Everyone recognises that Greece needs to reform, and no one could fail to be shocked by yesterday's scenes, but the Greek people also need to be offered some hope of a brighter future. Given that the plan for Greece is for it, in 2020, to be in more or less in the shape that Italy is in now - and many would suggest Italy's situation is unsustainable in the long-term without its own dose of reforms - the structural change required in Greece looks to be well beyond what the country can take.

At the weekend, German Finance Minister Wolfgang Schäuble seemed to be reaching a similar conclusion. He said in an interview published in the Welt am Sonntag newspaper that, "The promises from Greece aren't enough for us any more. Greece needs to do its own homework to become competitive, whether that happens in conjunction with a new rescue programme or by another route that we actually don't want to take."

When asked if that other route meant Greece quitting the eurozone, Schäuble said: "That is all in the hands of the Greeks themselves. But even in the event [Greece leaves the eurozone], which almost no one assumes will happen, they will still remain part of Europe."

Today, FT Deutschland quotes sources involved in the bailout negotiations suggesting that Germany's position on Greece is hardening to such an extent that it would actually now rather see Greece default. "Germany confused everyone else" in the negotiations, complained one. The paper also suggests that observers in the CDU are noticing a rift between Schäuble and his Chancellor. "Schäuble supports the bankruptcy of Greece, Merkel wants to strictly avoid it," said a leading member.

However, it seems that some in the German government may finally be beginning to realise that they are flogging a dead horse.

The Real Face(s) Of Greece'sTax Evasion

A story bordering on the surreal from Greek newspaper Ta Nea yesterday. Apparently, the Greek financial police (SDOE) are investigating 77 cases of 'parsimonious' Greeks who have managed to set aside bank deposits worth a mind-boggling total of €1.9 billion, despite their individual income tax-returns not always mirroring a situation of well-being. The list includes 36 doctors and three former hospital directors.

Here are some examples - they do really speak for themselves:

• A farmer who between 2001 and 2010 declared an annual income ranging between €1,608 and €6,774 (except for 2006 and 2007, when he submitted an income higher than €74,000) made deposits amounting to €10.6 million over the same period;

• A hair-dresser only submitted a tax-return for 2009, declaring an income of €35,435, while having deposited €423,531 between 2007 and 2010;

• An astrologist did not submit any tax-returns in 2007-2009, yet made deposits worth €2.19 million over the same period;

• A doctor only submitted tax-returns in 2005 and 2006, with a total declared income for both years of €172,014, but made bank deposits amounting to €5.7 million between 2005 and 2010.
  
  

This is seriously crazy stuff, which throws up a whole range of questions. For example, what's up with Greece and hairdressers? And how much of the €10.6 million pocketed by the super-wealthy farmer actually came from EU farm subsidies?

How much uglier will this get?

As we noted yesterday, EU-IMF mandated austerity is beinging things close to boiling point on the streets of Athens.

Portuguese sources are reporting this morning that Chairman of the EuroGroup Jean-Claude Juncker has received "death threats" from Greece.

And the German tabloid Bild today reports that a delegation of German MPs who visited Greece in May were threatened by Greek socialist MP Maria Skrafnaki, who said that "if you don't support our country (...) then your countrymen will know the same fate as those during the second world war in Crete". If accurate, it's hard to get any harsher than that. CSU MP Michael Hennrich told the newspaper that "Greek Parliament Speaker Philippos Petsalnikos has insulted us in the same way", which was denied by the latter.

Apparently, the WWII reference was not translated for the German MPs at the time, and only surfaced recently, which is why it took so long for the story to come out.

With further austerity on the way in the form of a second Greek bailout, things may sadly get even uglier. Again we pose the question, what is the political breaking point?

Close to boiling point?

According to some reports, between 80,000 and 100,000 people took to the streets of Athens yesterday in the 12th day of protests against the government’s ongoing austerity drive, as dictated by the EU and the IMF.

Crowds have pledged to continue protesting until the government reacts, but with a second bailout under design with even harsher austerity conditions set to come, the government’s room for manoeuvre is limited, at best.

Kathimerini reports that a group of protestors last week blocked 60 Greek and foreign parliamentarians in a restaurant. The MPs had to be escorted away from the restaurant by police on a boat. While some Hellenic hell raisers are to be seen with banners dipicting the the European flag with a swastika set between the twelve stars.

And Greece is not alone. The past few months have seen protesters take to the streets in countries across Europe. Austerity is usually an unpopular move, especially when it’s imposed from above, by officials people have never voted for and can't vote out of office. And even more so when the policies may not even work (i.e. the bail-outs).

On 15 May the Movimiento 15-M, otherwise known as the Real Democracy Now movement, saw some 25,000 protest in 50 cities across Spain. With youth unemployment reaching 40% and an economy trapped in the euro's uncompetitive periphery, there's little prospect of any improvement soon - though Spain is doing some things right. The next big rally is planned for 19 June.

And people in Portugal and Ireland aren't exactly happy either.

So far, EU leaders have been gambling on these protests being manageable. But with the eurozone facing a long, hot summer of discontempt, the question on everyone’s lips is how much more can the people take? And what happens if they reach the boiling point?

Democracy for Breakfast

Tomorrow morning, the European Commission will plan how to 'persuade' the Irish people to vote yes to the Lisbon Treaty in a second referendum, using €1.8 million of taxpayers' money.

Libertas, the group behind the successful 'No' campaign in the first referendum, which will fight in the European elections, will mark the occassion by mourning the death of democracy.

You can join them at the entrance of the Commission building at 8.45...