Here is an edited version of my column in today's Irish Daily Mail --
At this point in the eurozone crisis, the only question to ask is, ‘What are the Germans playing at now?’ The Irish had better figure it out, because after the Germans get finished playing it with desperate, suffering Greece, they are going to be playing it with Portugal and Ireland. And it looks like a nasty little game.
So far the clues point this way: the Germans may want to trigger a disorderly default in Greece so that Greece falls out of the eurozone – and out of the domestic political problems of Angela Merkel.
Apparently the Germans imagine that their banks are now strong enough to withstand a Greek default (I’d say the Greeks have a word for that, and it’s hubris, but German hubris is not the issue today). Therefore, the thinking goes, Merkel can now stop the bail-out loans – which clearly are never going to be repaid -- and thereby force the Greeks out of the single currency. Her taxpayers will then stop complaining that she is pouring their money into a country full of Mediterranean losers.
Here are the facts. At last week’s meeting of the eurogroup in Brussels, the euro finance ministers were scheduled to sign off on the second bailout loan to Athens, worth €130bn. But the eurogroup, controlled by the Germans, announced they would delay any agreement until at least next Wednesday. They said they would stall the pay-out because they want the Greeks to agree to another €325m in cuts.
They also said they would stall the payments because they want the Athens government to have its political party leaders sign promises that, no matter what the voters say in the upcoming elections, they will enforce the austerity policies to which the present government has agreed.
I will come back to the austerity and that demand for voter-proof political promises in a moment. First look at the €325m demand.
Chancellor Merkel has said on several occasions in the past two years that Germany and the eurozone will do ‘whatever it takes’ to keep Greece in the single currency. So you have to ask yourself if €325m is so significant a sum that these euro-bosses would risk Greece going into uncontrolled default next month and crashing out of the euro – Greece has €14.5bn in debt repayments due on March 20 -- rather than just wave the latest bailout loan through? No, it’s not.
In terms of any Western country’s finances, €325m is petty cash. There are private individuals walking around the streets of most capital cities in the world who could write a personal cheque for €325m.
The €325m is not a reason. It’s an excuse.
It’s an excuse to put more pressure on the Greeks by way of more humiliation. In other words, the Germans want to find out how far they can push the Greeks before the Greeks snap and walk out of the euro – leaving Mrs Merkel saying ‘more in sorrow than in anger’ that ‘we did all we could to help, but they decided to leave.’ (Is this German manoeuvre what the shrinks call ‘passive aggression?’ I think so.)
However it is unlikely the Greeks will snap this week. Last night the Greek parliament was due to agree to all the increased austerity as demanded by the eurogroup. As I write this, the vote has not yet taken place, but unless the Greek parliamentary whips are incompetent, the government will get the cuts through.
But will the leaders of the Greek political parties actually humiliate themselves – and their electorate – by signing public promises to stick to the bail-out deal no matter how the vote swings in the upcoming elections?
That would be the real achievement for the Germans, because their aim is to drain democracy out of EU affairs. Why? Because too many electorates refuse to see things the Berlin way.
In short, what the Germans are demanding is the end of politics in Greece. There will be only one policy on offer, whatever combination of political parties forms the next so-called government in Athens: it will be the Berlin policy.
The Irish should not be surprised. Ireland saw the end of politics when the Government capitulated to Brussels and forced the electorate to vote twice on the Lisbon Treaty (also in the way the Fine Gael and Labour blustering on renegotiating our bailout changed right into the Brussels line once the general election was over and they were in Government.)
This is why the new German-directed intergovernmental treaty demands that the laws implementing austerity must be put ‘into national legal systems through binding and permanent provisions.’
The treaty is framed to force all countries ratifying it to invent laws which are beyond the touch of any national parliament ever to be elected. This ‘permanent’ law is to be law beyond the reach of voters. It is to be law the next parliament elected in Ireland, and the one after that, and the one after that, can’t ever touch.
That’s what the Germans intend shall govern all the countries of the EU now: German-designed law beyond the reach of any national ballot box.
And that is why they intend to humiliate the Greek political party leaders this week by forcing them to sign public pledges to ensure just that. And if they don’t – well, it is now easy enough to open the trap door and let the Greeks fall out of the eurozone and perhaps out of the EU altogether.
Still, some people persist in believing the German propaganda that all this – the austerity, the troika demands on Greece, the surrender of national sovereignty to EU institutions – is necessary to ‘save’ Greece, to keep it from declaring bankruptcy and leaving the euro. (I will leave aside for the moment the fact that leaving the euro is exactly what Greece should have done at the start of this series of disasters two and a half years ago.)
But that propaganda is not true, and as evidence I give you remarks by Mohamed El-Erian, chief executive of Pimco, which runs the largest bond fund in the world. Dr El-Erian, former IMF, former advisor to the US Treasury and plenty more, was interviewed on BBC Radio 4 Today programme on Saturday. He described the policy being followed for Greece these last two years by the troika as ‘active inertia. They are active, every three months, yet another set of discussions, more drama, but it’s inertia. They basically have not abandoned an approach that has proved to be totally ineffective.’
‘What is being pursued right now is more of the same, and it will not succeed.'
‘I think that Greece has no long term option but to ask itself how do we restore growth? It leads you to the uncomfortable conclusion that Greece will have to take a sabbatical from the eurozone.’
Or in less diplomatic language, leave the eurozone.
‘It will have to go through a major debt reduction,’ that is, default.
Then it must have ‘a major devaluation to make it more competitive’ which Greece can only do once it is out of the euro and back in the drachma. ‘Then it can regain the path to sustained growth.’
Which is where we come back to the Germans and the game they are playing with Greece. Dr El-Erian said that though Greece leaving the euro is what must be done, ‘No one wants to go down in history for being responsible for this, not Greek politicians, Mrs Merkel doesn’t want it, no one in the EU wants it, no one in the IMF wants it. So because no one wants to go down as responsible for this historic decision, it doesn’t get taken, Greece continues to be stuck in this active inertia, and things get worse.’
In other words, the Germans and EU powers running Greece now know the answer is to get the country out of the eurozone. But for political reasons no one, least of all Mrs Merkel, will say so.
So this dishonest game is being played of putting so much pressure on Greece, of heaping so much humiliation on the politicians and the people, that at some point they will break and say ‘Enough, we are getting out.’
Unfortunately, this dishonest manoeuvre means that the German-led EU is piling tens of billions more in un-repayable debt on Greek shoulders as they wait for the country to reach breaking point.
Exactly the way the German-led EU has piled billions in un-repayable debt on Ireland's shoulders. As I said at the start, this game won’t stop in Athens.
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