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The Dream of the European Union: Greece Under the Rule of Troika

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Robert Schuman, one of the founding fathers of the European Union (EU), speaking in Strasbourg, on May 16, 1949, said: "We are carrying out a great experiment, the fulfillment of the same recurrent dream that for ten centuries has revisited the peoples of Europe: creating between them an organization putting an end to war and guaranteeing an eternal peace." The realization of this dream seemed to get closer with the formation of the EU. According to Article 3 of the Treaty on European Union: "The Union's aim is to promote peace, its values and the well-being of its peoples... It shall work for the sustainable development of Europe ... aiming at full employment... shall promote social justice... and solidarity among Member States."

The eurozone crisis has unveiled many weaknesses of the Union design, is testing its cohesion, and has shuttered the dream of its peoples for a better future in a united Europe. Ireland, Portugal, Spain, Italy, Greece and Cyprus have been hit especially hard by the crisis. This article will concentrate on Greece where the dream has turned into a nightmare.

Greece joined the Union in 1981 and the eurozone in 2001. Since the 1980s Greece started to experience a continuously deteriorating debt problem. A debt to GDP ratio of about 20 percent in the 1970s reached 126.8 percent in 2009, with an annual debt to GDP ratio of 15.4 percent the same year, although a dispute that the latter two numbers had been artificially inflated has not yet been resolved. It has been claimed that Greece used extensively the creative accounting services of Goldman Sacks, JPMorgan Chase and other banks to hide its debt problem.

Greece's debt problem was fueled by high private and public consumption, widely spread corruption, and the inflow of money at low interest rates. It did not happen overnight and it was well known. The creative accounting of Goldman Sacks, JPMorgan Chase and of other banks was not a secret, and it was not used only by the Greek governments. The German and French banks that were lending money to Greece for private and public consumption knew very well the risks involved. Germany was a great beneficiary of the consumption boom. In 2009 the German trade surplus with Greece was $6.6 billion.

Politicians spent generously not in productive investments for the country, but for the growth of their political power by buying the favor of constituencies and creating the illusion of prosperity, while some enriched themselves. This was not a secret to their colleagues in the EU including the Germans. Many politicians and other public officials were corrupted by the offering of bribes by European companies seeking contracts in government purchases or purchases of the wider public sector. Among these, German companies like Siemens, Ferrostaal, Mercedes and Man are notable. It has been extensively written in the Greek press about the German submarines ordered by Greece that did not stand straight. Everyone was looking the other way until the bubble reached the bursting point, including many of the strict austerians who came out with a vengeance after the crisis broke.

Since 2010, Greece is under the rule of the Troika (IMF, European Commission (EC), European Central Bank), which is ruling under the terms of the Memorandum of Understanding (MoU), a very detailed text stating what is expected to be executed by the Greek government. One can get a pretty good idea of the MoU dictates from Annex 1, Item II of Ref.2 which lists 395 actions to be carried out by the Greek government. An example:

MoU 2.5.6.1: The Government will ensure effective and timely debt servicing and monitoring of cash flows through a reinforced implementation of the debt servicing account established by Law 4063/2012 (which established a segregated account in the Bank of Greece.)

MoU 1.a MEFP(12): A new law on taxation of real estate will be adopted...insuring revenue of at least EUR [2,7] billion.

MoU Annex 9.2.7: Selling and production of reproductive material for africultural plant species... (i)abolish minimum square requirements and (ii) introduce a 3-month period for administration to issue license ...

As Peer Steinbrueck, the Social Democratic Challenger of Angela Merkel, said recently, the Troika has administered to Greece a "deadly dose of austerity", including drastic tax increases, wide extension of taxation, slashing of salaries and pensions -- a proven recipe to kill an economy. Under the rule of Troika, Greece has been devastated. The GDP fell by 17 percent from 210 to 2012 (25 percent over the past four years) and continues to fall. The debt to GDP ratio has climbed from 126.9 in 2009 to 156.9 in 2012. The unemployment rate has skyrocketed to 27.6 percent, while youth unemployment has risen to 64.9 percent. Since 2010, over 120,000 scientists, engineers and other professionals have left the country. In 2012, there were 450,000 families having no working member. There are hundreds of thousands of Greeks who rely on soup kitchens for their daily meal, or on leftovers in garbage cans.

Although the Greek governments bear the main responsibility for leading Greece into this tragedy, the EC, ECB, and the governments leading the imposition of the deadly austerity are not free of blame. While it was well known that the Greek governments were leading the country to a wreck, why the EC and the ECB did not intervene preventively? Greece as a member of the eurozone has given up to institutions of the Union its sovereign rights on currency policy, and thus has deprived itself of one of the main tools in effectively responding to a deep economic crisis. Should be the response of EC and ECB to such a crisis in a member state the imposition of a "Troika" to inflict more pain by administering "a deadly dose" of austerity? Is this what does "The Union's aim is to promote... the well-being of its peoples... social justice... and solidarity among Member States" mean? Did the implementation of needed reforms require the imposition of a punitive austerity? Of course not.