Moral Hazards in connection to Greek Crisis. The New
Labour in Greece
Dr.
Themistoklis Sofos, Ph.D. (Bonn) , Advocate (Athens)
The changes in the political situation and the debt
reduction seemed to have put Greece on a track for a reversal of the negative
spiral of derailed fiscal consolidation and austerity-induced recession, after
two substantial haircuts on Greek sovereign debt, the PSI of February 2012 and
the buy-back of December 2012, two gigantic bailout loans with unprecedented
concessions on their repayment terms and even greater liquidity provision.
Given this unparalleled international effort, Greece has not been able to exit
its crisis and enter a path of economic recovery due to the systemic character of the crisis, and the problem of the
"fragility of the eurozone", which creates a vicious circle of
shocks being transmitted from the government to the banking sector and from the
banking sector to the government. The experienced reactions are consistent with
wider descriptions of the Greek mentality, and the handling of the crisis
revealed by the Greek political system a failure of communication to the public
of the need for austerity and the criticality of the situation, and
co-ordination among political parties.
During the last three years, all thinking people in
Greece are watching with some embarrassment and of course anxiously, statements
and publications of the Finance Minister “Global Thinker and Local
Actor” Yanis Varoufakis. Undoubtedly he is a man who has monopolized the
interest of the entire world community more than Alexis Tsipras, PM. Coming
from a class of people who know very well the university community and
certainly their childhood diseases I defend people in the court room attempting
to uphold the requirement of a fair trial and the prerequisite of the
defendant’s fundamental rights. So my first interim finding, in terms of a
“prosecution”, is that this government is ravenous for promotion and famished
by publicity. Ι thought that my education does not allow
me to stick to Yani’s external eccentric and bizarre reactions during his TV
interviews, since it is not the only case but Yanis certainly was the case
knocked louder in everyone's ears and eyes, moreover his aesthetic choices
particularly helped in this direction and not unconsciously. Ι had to look for his writings and through reading
understand his thoughts and especially motives and intentions. After reading
his Global Minotaur and the Modern political Economics, his Game Theory and
Rational Conflict, I found Yanis a sufficient academia and I am very glad he is
not insane, moreover I am proud he knows exactly the terms of use during the
academical negotiations.
Yanis can’t avoid his weakness, as all human beings;
like another hermit scholar, who sat in his office writing incomprehensible
articles and thick books, addressing to an international audience of about two
hundred familiar people, the crisis broke his little oasis. He was found
heard and read from crowds unknown, both in Greece and abroad. Yanis does not
hide that he feels embarrassed. Especially when he has to deliver within two
minutes, a view on an issue of timeliness.
Yanis’s six explanations of what happened, especially
his toxic theories are really highly instructive as to the collapse of the
banking system in the United States after 2008. But that problem was not associated with the Greek crisis, nor the Greek culture. Neither the
reactions of the Greeks in any novelty. neither the systemic reaction of
organized minorities disguised by the mantle of the unionism and the
syndicalism. Yanis is right; adopting a guess where its internal logic
doesn’t hold is wrong. But betting the fate of the world capitalism in
such a conjecture is verging the crime.
Two economists, Robert Merton and Myron Scholes,
received the Nobel Prize in 1997, and they were able to convince not only the
jury of the Nobel prizes, but all mankind, for their ability to calculate the
odds of facts to happen, such as a sequence of bankruptcies, which in the model
itself considered impossible to be calculated.
Has Yanis thought that he may be verging the same
crime? In his book, the Global Minotaur, also
available in German, Greek, Italian, Spanish, Czech and, most recently, in
Finnish, Yanis gives the explanation of what the government is doing today: The
answer lies in the field of mass psychology rather than that of economics;
economists did something that happened only in the realm of propaganda, which
today is known as of marketing, they renamed ignorance and designated as a form
of temporary knowledge, they renamed the uncertainty to a harmless risk, they
renamed the inexplicable unemployment to a natural rate of unemployment. In Yanis’
words “…the artful deception by the economists concerns everyone,
and not only the academia, behind every economic policy which has an
incalculable impact on our lives is hidden a toxic economic doctrine…”. The
elephant in the room, so to speak, is a stumbling Minotaur. Yanis argues that the current financial problems are connected to the
emerging fault lines of the international monetary system. The US (the
Minotaur) used to govern the international monetary system, but no more; and
this crucially means that there is no surplus recycling mechanism that can
reliably stabilise the world economy. As Manolis Glezos
declared via his Movement for Active Citizens
website “renaming the Troika into
Institutions, the Memorandum of Understanding into Agreement and the lenders
into partners, you do not change the previous situations as in the case
renaming meat into fish.”
It is quite obvious that SYRIZA is now able to comprehend that the stabilisation of the world economy does not boot by disrupting the foundations of the European
Unification. Nash’s equilibrium as a sign of respect in his memory could eventually be very helpful for this conclusion, since the Game Theory has been critically commented by Yanis; refinement of John
Nash’s 1950 definition aim primarily to distinguish equilibria in which
implicit commitments are credible due to incentives. One group of refinements
requires sequential rationality as the game progresses. Another ensures credibility
by considering perturbed games in which every contingency occurs with positive
probability, which has the further advantage of excluding weakly dominated strategies.
Yanis has been accused that his obsession to highlight
the international dimension of the crisis gives an alibi to the Greeks not to
make the painful changes needed. Although he has never revealed why his good
friend Joseph Halevi threw a huge scissors from his anger against him, I would
instruct his friend to do it exactly the same way if he gives intentionally that
alibi to the Greeks not to make the painful changes needed. Yanis argues that
all political parties in Greece agree on a key position, which finds us all in
line. We all would agree in Greece that the terms and conditions of Greece’s
so-called bailout programs are unfair and that the troika of lenders (the
European Commission, the European Central Bank, and the International Monetary
Fund) are imposing conditions on Greece that are permanently damaging the
country’s social fabric and are impossible to fulfil. SYRIZA has a fundamental disconnect between
understanding goods and rights, which has led them to a determination that
freedom and security must be balanced.
Debunking that odious misconception we must say that
rights, specifically natural rights, are intangible and enforceable existing a
priori to any political or economic system. A good is a commodity or service
that is a result of mixing of an individual’s labour and resources and either
others’ labour, resources or both. One is the inherent product of human
character and existence that cannot be exchanged or assigned – even via a market-
and the other is derivative of one’s or another’s labour, which is freely
transferable and developed for a market. Complicating this scheme somewhat is a
theory of precedence of rights, for example, that the right to life precedes
the right to property. Best way to illustrate this is Jean Valjean, the character of Les Miserables, who has stolen the bread to feed his starving family. Javert, the ardent
police officer is the perfect example of legalists in Europe, as his moral code
comports totally with the legal code. Now if Javert arrests Valjean for the
crime of theft, is Javert right to do so? Thomas
Aquinas, in Summa Theologiae
opined that the natural law requires whatever material things a person
possesses in superabundance be used to help the poor. John Locke similarly declared that, in the state of nature, the
needy have a right to the surplusage of their fellows.
In the interest of transparency and for the
information of the Greek people, the European Commission published in June 28th,
2015 the latest proposals agreed among European Commission, European Central
Bank and International Monetary Fund, which took into account the proposals of
the Greek government of 8, 14, 22 and 25 June 2015 as well as their talks at
political and technical level. Discussions were ongoing with the Greek government
on Friday night in view of the Eurogroup of the 27th of June 2015.
The understanding of all parties involved was that this Eurogroup meeting
should achieve a comprehensive deal for Greece, one that would have included
not just the measures to be jointly agreed, but would also have addressed
future financing needs and the sustainability of the Greek debt. It also
included support for a Commission-led package for a new start for jobs and
growth in Greece, boosting recovery of and investment in the real economy,
which was discussed and endorsed by the College of Commissioners on Wednesday
24 June 2015. “However, neither this latest version of the document, nor an
outline of a comprehensive deal could be formally finalised and presented to
the Eurogroup due to the unilateral decision of the Greek authorities to
abandon the process on the evening of 26 June 2015” (EC press release). The
reason for the Greek authorities to abandon the process on the
evening of 26 June 2015 is obviously the fact that PM Tsipras was assured that
he would not achieve the parliamentary support for his agreements from his own
party and in front of the threat of a tremendous defeat by his intraparty
colleagues in a multicultural political union, he chose to
leave the negotiations after a leer and return to Greece and,
pretending that he was angry and/or disappointed, he asked the Referendum.
Indeed, we don’t need SYRIZA to remind us the folly in
the logic of forcing a bankrupt government to take out huge new loans on the
condition of savagely reducing national income an unavoidable result of harsh
austerity during a deep recession. Yet, the governing coalition is acting again
like a model prisoner, as the previous did, obeying instructions while,
on the side, pleading for a rationalization of the imposed policies, terms, and
conditions. Yanis believes that a way getting the European Union to treat
Greece reasonably and raise the austerity measures is (a) to spearhead an
immediate re-think of the ‘Greek Program’ through, first, the unilateral
suspension of policies demanded by the troika, and (b) via the use, or threat
of using, its veto power in the European Council; I am afraid that nothing of
the above is feasible.
Yanis is now trying to turn his well experienced
academical into political negotiations. Indeed, right now, Greeks neither want to leave the euro nor see the euro zone
disintegrate, an eventuality likely
to bring down the European Union. Yanis believes that Greeks know exactly
what Europe’s approach to the crisis is, but he has to realize today that he doesn’t know them, he is misled
thinking he knows them. Greeks just don’t want to hear about harsh austerity
and loans. Greeks are interested in their quietness and silence. Greeks philosophise
in their lives and they do not like the deadlocks, especially they hate when
you squeeze them in blackmailing dilemmas, as the previous government did and the present does since it is
blackmailing the dilemma posed by the deafening silence to the sirens of the
European Commission, the European Central Bank, and the International Monetary
Fund.
But it is not only the Greeks, who think so, the whole
Europe think in this way. Is it really the interest of the Greeks to find a
solution that big, or they are likely to keep an intermediate standby, a
temporary situation where no solution can be applied? The latter is a way of
living in Greece. We live in an intermediate standby, we don’t have standard
rules, we don’t know a standard legislature, we can’t experience a standard tax
program. Greeks dream their quietness, silence and stability, they like when
somebody meets progress and is considered as a successful person, provided he
is at the position to prove that he has gained his status by labour and hard work
and sweat; they get angry with the improvement of fellow human beings without a
serious cv. But is it Greece that proud or the whole Europe? I think Greece is
like Europe a small proud country.
In the words of Yanis the basic requirements for reform
could be within existing European treaties. They include a mutualisation of
servicing sovereign debt to be mediated by the E.C.B.; restructuring of the
European banks by a European Stability Mechanism turned into a kind of European
equivalent of America’s post-crisis Troubled Asset Relief Program and an
investment and jobs program; but Yanis admitted that America’s policy was not
followed by strengthening the unemployment insurance, nor they kept the basic
pensions, or the deposit insurance while core public institutions like
education and health are in a worse situation than before.
The real winner in 1989 was not democracy but capitalism, and Europe as
a whole is now facing the task with which the Western Europe grappled by the
1930s, that is to form a sustainable relationship between the two. The
recession of the thirties showed that democracy may not survive a major crisis
of capitalism, and indeed the final triumph of democracy over communism would
be unthinkable without the revised social contract that followed the Second
World War. The end of full employment and cuts in welfare services make it more
difficult to maintain this achievement, particularly in societies with aged
populations. With the globalization of markets becomes increasingly difficult
for nation states to hold their independence of action, yet still the markets,
as evidenced by a series of panic and collapsing situations, generate their own
social tensions and irrationality.
The globalization of labour also calls into question the prevailing
conceptions of national citizenship, culture and tradition. It remains to be
shown whether Europe will be able to open a path between the individualism of
American capitalism and authoritarianism in East Asia by maintaining its own
mix of social solidarity and political liberty. The faith of Europeans in
themselves, which has its origins in Christianity, capitalism, the
Enlightenment and the enormous technological superiority may lead them to
believe that they constitute a solid cultural model for the whole world. This
explains why many of the liberated countries of the former Soviet empire did
not see the time to enter Europe. But what is Europe and what is its position
in the world seems less and less clear. The only visionaries who accept the challenge
are the Europeanists in Brussels, and the only vision offered is the vision of
a more and more coherent European Union. Globally, Europe has lost its primacy,
and perhaps it is what Europeans have difficulty accepting. However, compared
with other historical periods and other parts of the world today, the
inhabitants of Epirus enjoy a remarkable combination of individual freedom,
social solidarity and peace.
If Europeans fail to surrender their desperate desire to define
themselves with only one way, and if they can accept a more modest position in
the world, then maybe they can cope more easily with the differences and
disagreements which will not cease to mark their future, as marked their past.
In the words of Yanis Syriza’s electoral victory put
them on the path of compromises that they are loath to make. Just as PASOK
entered the government in 1981 with lofty left-wing pronouncements, which it
quickly shed on its road to establishment-status, so SYRIZA’s leadership, under
the extreme strains of negotiating Greece’s bankruptcy with Berlin, Frankfurt,
and Brussels, may well discard SYRIZA’s radical agenda for social and economic
change in Greece. It is a well-founded fear that SYRIZA’s leaders cannot afford
to ignore.
Regarding the use, or threat of using Greece’s veto
power in the European Council, things seem to be complicated. The EU has
competence to make decisions only in those areas specified in the Treaties.
Competence can be exclusive, joint with national governments, or supporting,
with national governments having lead competence. The Lisbon Treaty added some
policies to the responsibility of the European Union. Moreover, qualified
majority voting was extended to policy areas that required unanimity according
to the Nice Treaty. But the currently applicable voting system of the Council
is still defined in the Treaty of Nice since its entry into force on 1 February
2003. The following conditions apply to taking decisions: Majority of
countries: 50% + one, if proposal made by the Commission; or else at least
two-thirds (66.67%) and Majority
of voting weights: 74%, and Majority
of population: 62%. The last condition is only checked upon request by a member
state. In the absence of consensus, qualified majority voting is the Council's
key way of decision-making. In terms of the statistics before Croatia became a
member of the EU (1 July 2013), the pass condition translated into: At least 14
(or 18, if proposal was not made by the Commission) countries, at least 255 of
the total 345 voting weights, at least 311 mil. people represented by the
states that vote in favour. The last requirement is almost always already
implied by the condition on the number of voting weights.
A sovereignty is won by the stream that favours the principles it seeks
to promote. This stream is just the starting point. First the Greek society
needs a serious and reliable reform stream against syndicalists, who have misunderstood the true meaning of promoting labour solidarity
and labour rights. Thatcher climbed into power with such a stream against
unions in UK. In favour of Reagan worked a feeling for an America confident and
optimistic after feeling humiliated. Tiredness of longer than two decades of
conservative rule paved the way for the domination of Blair and New Labour. In
Greek society tiredness creates political introspection for the ruling and favourable
conditions for the opposition. The average Greek is not ready to deal with
long-term policies, want quick results, quick profits, quick turnaround, fast
progress. This is why it constitutes a basic policy of many governments in the
past which they lost power under “the
policy of the mature fruit”, implemented by the opposition with simple
Messiah statements and solutions which the government had no perception to
think. Greece needs the new labour and pragmatists, discussing with citizens
who are not aware of the legislation and intervene into the European mainstream
with vigour, not with hostility. We must realize that we cannot lift the bars
of the toll shouting "we do not pay". On the other side those bars
must exist to give the citizen a safe highway. Citizens are angry since in
Greece passed lots of money into the pockets of corruption. Citizens need to be
reconciled with the principle of majority. The sovereignty of labour people is
a reality in Greece. Greece can really be a small but proud country in Europe.
Dr. Themistoklis Sofos,
Ph.D. (Bonn),
Advocate (Athens)
