NÃO SÓ A GRÉCIA

Greece needs a new political culture

(c/p here)

By Gideon Rachman

There are not many luxury hotels that allow stray dogs to lie sprawled across their entrance. So I was charmed last week to come across the “Greek riot dog”, sheltering from the summer heat, on the steps of the Grande Bretagne, the smartest hotel in Athens. The yellow pooch has become famous on YouTube because of the enthusiasm with which he participates in anti-government demonstrations. He may soon be back in action.

To secure the fresh funds promised by the eurozone last week, the Greek government has had to commit to years of strict austerity. The country’s future seems to promise blood, sweat and tear-gas.

The Greek elite is struggling to keep its nerve, under enormous pressure. One government minister says that for the past 18 months, “every week has brought a new catastrophe”, adding: “It is like a war. The country is in huge danger.”

Without new loans from Europe and the International Monetary Fund, the Greek government would have run out of money within months. The payment of wages and pensions might have stopped and banks could have collapsed. Greece also imports most of its food and energy – and that too could have been threatened.

Yet while the fear of a sudden collapse has receded for now, the threat of a slow squeeze, crushing the Greek economy and causing social and political turmoil, is still very much alive. At present, Greece suffers from unemployment of 15.8 per cent and youth unemployment of about 40 per cent. The country is entering its fourth year of recession. Salaries have been cut, taxes are going up, shops and businesses are closing and bank lending is non-existent. Something like 25 per cent of Greeks already vote for parties of the extreme left or right.

Yet talking to the Greek elite left me feeling both sympathetic and exasperated. Almost everybody accepts that as George Papandreou, the prime minister, put it last week: “We want a different Greece.” It is widely agreed that the political system is corrupt and dysfunctional; rewarding the well-connected and punishing the honest and the enterprising.

And yet there is still a sense of entitlement and inertia, particularly among those who are used to benefiting from the state’s largesse. One liberal economist in Athens sighs that “Greek tricks” mean that there is less to many of the reforms enacted than meets the eye.

Despite a series of austerity packages, state spending has actually gone up over the past year. In part, this is because of an increasing bill for unemployment benefit. But it is also because the government has been keener to wave the axe, than actually to wield it. Whilst the private sector has haemorrhaged jobs, no public-sector workers have actually been laid off – they have all simply been put into a “jobs bank” on reduced wages. All members of parliament still have the right to their own official car – a privilege that is not enjoyed by German MPs. As a British taxpayer and therefore (via the IMF), a contributor to the Greek budget, I was irritated to discover that all Greek students still have a constitutional right to a free, university education – and spend an average of more than seven years over their degrees. British students will be charged up to £9,000 ($15,000) a year in tuition from next year.

The European Union has contributed to Greece’s something-for-nothing culture by pouring money into the country over the past 30 years. Greece has benefited from billions of euros of grants for agriculture and infrastructure. That money was channelled through government ministries, controlled by political parties that used European funds as a form of patronage. And yet, as part of an effort to restore growth to the Greek economy, the EU has just agreed to hand over another €17bn ($25bn) in new grants (not loans) to Greece. It is hardly surprising that northern European taxpayers feel upset about this.

If Greece is to do more than simply stagger from bail-out to bail-out, the country needs a profound change in its political culture. Some dramatic acts are needed, to start to push Greece in a new direction.

Here are four ideas. First: crack down on corruption by making some high-profile arrests of senior officials and businessmen. Second: close down the notoriously inefficient and corrupt government tax collection agency and replace it with a foreign, private contractor. Third: completely change the way in which European funds are spent. Disbursing the coming euro-billions through the usual channels will perpetuate corruption and waste. The money should be spent via an independent agency – supervised by EU officials – that lends directly to small businesses. Finally: cut taxes.

Cutting taxes would, of course, be a very tough sell to Greece’s European partners, since it hardly seems consistent with an effort to close the budget deficit. But lower taxes that were actually paid and collected would do more for business and government finances than the current dysfunctional system.

If Greece can successfully reform, it might even become an example to the rest of Europe – rather than a burden. For, as nervous bond-investors have noticed, while Greece’s problems are extreme, they are not unique. Similar problems of high debt, corruption and clientelism beset bigger and more systemically-important EU nations, such as Italy.

Greece has been promised new money. Now it needs a cultural change. Otherwise the country really is going to the dogs.