The cradle of European civilisationNovember 28, 2011
Is the cradle of European civilization leading the way again? Greece is in turmoil and on the brink of bankruptcy, raising the prospect of an avalanche of financial calamities including the end of the Eurozone and a breakdown of the global financial system.
Before stepping down and giving way to a national unity government under Lucas Papademos, predecessor George Papandreou sealed a deal with the European Union to get a 130 billion Euro bailout in return for strict austerity measures and the privatization of most state assets.
The new Prime Minister is a former governor of the Bank of Greece and former vice president of the European Central Bank, he studied at MIT (Massachusetts Institute of Technology). Papademos understands the language and the thinking of high finance very well and it is most likely also his way of thinking.
The new coalition government includes PASOK (Centrists – though they still call themselves Socialists), Nea Dimokratia (Conservatives) and the far-right LAOS, whose leaders openly idealize the military coup in 1967. No left wing party joined the government.
Even this constellation is not a guarantee for total compliance with the EU demands and when Antonis Samaras from Nea Dimokratia refused to sign a commitment to EU dictated austerity measures, Germany had to make clear that there would be no money transfers until all coalition parties agree to the plan.
Right now Prime Minister Papademos is in Brussels for crucial talks on the sixth aid tranche of 8 billion Euro.
Whatever may be agreed in Brussels, the economic forecasts are not encouraging. Unemployment is 18 percent and rising, youth unemployment is around 30 percent. Since the start of the financial crisis two years ago the economy contracted by 15 percent and is expected to shrink by another 5.5 percent this year and by 2.8 percent in 2012.
How could things deteriorate this far?
Greece people who have still a job, don’t produce much, they mainly trade and administrate. Services have become the dominant sector of Greece’s economy, contributing about two-thirds of GDP. Greece is an importing nation, in 2009 imports totaled 64 billion US$ against exports of 21 billion.
Like anywhere else, industrialists in Greece don’t contribute much to state revenues and wealthy Greeks are not severely affected by the financial turmoil because they transferred their assets to safe havens abroad long time ago. Greeks own the largest fleet in Europe, but the ships fly under the flags of different nations, and not a single ship owner in Greece pays taxes anymore. Greece’s government recently compiled a list of 15,000 tax cheats who defrauded the state of roughly 51 billion US$.
A new real estate tax is hugely unpopular and makes no exceptions for the unemployed or the elderly. It shall raise 2 billion euros this year alone but as it seems now the new tax will only increase the habit of tax evasion. The tax will also drive more people into the shadow economy, which is already about 25 percent of GDP.
This solid shadow economy could be beneficial as a safety net in case of a complete economic breakdown, but only if it includes small scale food production. At present Greek agriculture cannot feed the population.
Greece’s mediterranean climate is well suited for growing food, but poor soil and inadequate precipitation are a hinderance. Greek agriculture still employs 528,000 farmers, 12 percent of the labor force. At present, agriculture is subsidized by the EU, but Greek farmers have driven themselves into a corner by growing cash crops like cotton and tobacco, that the EU can get more cheaply elsewhere.
Men induced environmental damage increases the economic problems. Fishing is declining because of depleted fish stocks and major forest fires destroy large quantities of forests and contribute to soil erosion and desertification. Soil erosion has been ongoing since ancient times (already noticed by Plato). The EU prescribed policy of olive farming is exacerbating soil erosion.
A disaster plan for Greece would have to include:
1. Reducing or even completely abandoning the army, stopping military spending.
Greece directs approximately 4.3 percent of its GDP to military expenditures, the 2nd highest percentage in Europe. The Greek military budget ranked 28th in the world in 2005 and arms purchases are among the highest in the world (3rd place in 2004). The country’s military spending has risen even during the global financial crisis. The military budget was 7.1 billion Euros in 2010, compared with 6.24 billion in 2007.
Greece was the biggest buyer of German military exports between 2005 and 2010. In addition to 800 Leopard tanks the Greek own also eight German built submarines (U-209). An order for new type U-214 boats from ThyssenKrupp though is clouded in corruption and bribery allegations as well as disputes about the contract terms. Greece has refused to accept the first boat which is docked in Kiel since 2006.
Included in the new austerity plans are defense spending cuts of 200 million Euros in 2012 and 333 million in the following years. The second emergency austerity package will see the closure of a number of army, air force and naval bases across the country. One army corps, five divisions, a number of regiments and 80 miscellaneous units will be disbanded.
Yet there are also disturbing reports that German Chancellor Angela Merkel and French President Nicolas Sarkozy only agreed to grant Greece the 130 billion Euro loan in return for a commitment to purchase more Leopard tanks from Germany and Rafale combat aircrafts plus four frigate war ships from France, all together worth 10.5 billion Euro.
2. Reversal of the urbanization process, that took place in the last century and a massive buildup of subsistence gardening and farming.
3. Reforestation campaigns (like SAE, Penteli SOS Volunteer Group, Friends of Mt. Taygettus) on a nationwide basis.
4. Increased building of solar energy farms.
At present it seems that only the Chinese get it: Chinas state-owned energy group Dongfang signed an agreement with Greek partner DTS for a “long-term strategic cooperation” in the production of solar energy plants and wind turbines. Sky Solar Group, a Chinese company that develops alternative power plants, wants to acquire licenses and construction permits for 194 solar projects, each capable of producing 350 to 500 kilowatts of electricity.
The Chinese are not the good samaritans here and their efforts are part of a strategic plan, that envisions Greece as a gateway to Europe. The Chinese state-owned company Cosco acquired the rights to the container port of Piraeus (Pier II) for 35 years, with an option for an additional five years. China also bids for the port of Thessaloniki and for Athens International Airport.
5. Retraining the workforce, refocusing education, and shifting employments from services to small scale local (and preferably high tech as well as environmental friendly) productions.
It is not possible to address the details of training and education here, yet a few buzzwords for a start: A broad based curriculum should teach social skills and subsistence skills, but also provide gateways to high tech (mathematics/programming, engineering, biology and chemistry).
None of these measures are included in the now by the European Union dictated plan, which has the sole and very obvious purpose to exploit Greece’s remaining resources, secure the profits of banks and weapons producers, and make the country a helpless and powerless subordinate and a cheap and easily disposable pawn in the global strategic power games.
More infos: http://www.keeptalkinggreece.com/
What does the Greek crisis mean from a global perspective?
Greece’s default alone would not bring down the global financial system, but with Italy, Spain, Ireland, Portugal waiting in the wings, it could be the first domino stone.
The unraveling of the global financial system and the ensuing recession would mean hardship for billions and would force people in the western world to significantly change their lifestyle, but would reduce trade and international dependencies, would reduce fossil fuel consumption, waste of resources, pollution, and environmental destruction, would give a chance to reorganize societies.
It could also mean chaos and more failed states, warlords, a feast for disaster capitalists.
Necessary preparations for the worst case scenario: Building local networks (neighborhood committees), subsistence economy, barter trade, co-ops, counter currencies. More details can be found in earlier blog posts.