Cycling through Greece..

..through air that's not thick with anything

The air in Greece is not thick with anything. There is nothing etched on the faces here. You cannot feel the tension on the streets... at least not the streets of Edessa, the northern town I reach soon after crossing from Macedonia. Greece is suffering a stark hyperbole crisis, sensationalism here has run into diminishing returns. If we were to tax the financial media's use of words like 'toxic' and 'brink'... southern Europe would soon be back in the black. Greece is a European country being stuffed by the markets. Simple. It's not doomsday here... just a country being stuffed by the markets.
 

Greece is not in turmoil. This is especially relevant to stock markets, which Flaubert once described as nothing more than "barometers of public opinion". Irrespective of any fundamentals, objective or otherwise, the projection of chaos that has become associated with Greece is partly responsible for the fact that the Greek government has to pay yields of up to 30 per cent to borrow money. I ride into Thessaloniki, up the inside of stagnant traffic jams. When whole cities can still afford to sit in cars, burning petrol at €1.80 a litre... there's obviously a lot of crisis left to run.

Everyday Greeks seem similarly dismissive of Crisis! A woman in a bakery smiles... "What did you expect?... are we all supposed to be crying?" A man sits outside a cafe... "Pro-pa-gan-da!... Bullshit!" His friend grabs a stool... belly like a water melon, stubble, black sunglasses, curly hair cut short at the sides. He spreads his legs, pulls his shorts up like a Greek John Goodman straight out of The Big Lebowski. He plants a finger on a hairy thigh... "You see a crisis here?!... we have sun, sea, farms, petroleum... There is a crisis... a bankingcrisis... and they want us to pay for it." He goes on. "The euro was a catastrophe for Greece..." he points into his palm... "€1 was 340 drachma... coffee was 100 drachma before... then it was €1." Italians will say exactly the same. Prices doubled overnight.

Meanwhile Europe is drip-fed a diet of ignorance. Reuters will whisper about 'Grexit' and a 'drachmageddon' that will cost hundreds of billions of euros if Greece fall out of the eurozone. Either lazy journalism or market omerta prevents the making of the obvious point that bailouts to keep Greece in the euro have already cost - erm - hundreds of billions of euros, failed to work, and will ultimately see Greece sell their national assets - from islands to major ports - at far below their true value. It's a little confusing that the structure of a Greek restructure is a country that has sold the very things by which it could once have made money... perhaps that's just the formula for the 'mature economy' the Greeks are to become. A mature economy is one that innovates new ways in which it can be stuffed by the markets.

Talking to people on the streets, what is most obvious is that everyday Greeks quite clearly do not want to be bailed out, just as Angela Merkel tries to appease the everyday Germans who do not want to bail them out. If everyday Europeans, both bailers and bailees, do not want to do any bailing... it seems the only ones in favour of a bailout must be the French and German banks that will otherwise be unable to absorb the losses of their own failed investments. Let's be clear... we do not bail out governments or taxpayers... we bail out banks, the primary representatives of capitalism who are not themselves subject to the primary rule of capitalism. Failed businesses are supposed to go bust.

And yet there's more to it than that, and northern Europeans would do well to resist judgements of lazy Greeks getting what they deserve. Greece is a foothold for the idea of market preeminence over societies, applauding its application in the Mediterranean will help bring about the day when we are all made Greek. The 1929 Wall Street Crash and Great Depression saw Roosevelt famously tell the American people, "we have nothing to fear but fear itself"... in the twenty-first century our governments encourage us to shit ourselves and hope that the markets will clear up the mess. Keep hoping. For five years Europeans have been given a constant crisis narrative, one accompanied by a paucity of any real information. Italians have low household debt, a banking system thought to be solvent, and high government debt. Spain has a largely insolvent banking system and low government debt. Public sector spending is higher in France than in Italy, and yet traditionally stable France has become a more attractive destination for investment since Crisis! gathered momentum. Britain saw a financial sector debt crisis transformed into a public sector debt crisis, not least because of the costs of supporting the financial sector. Faced with very diverse economies and problems, each different nation has been prescribed the exact same solution. Strip your states... empower the markets. The markets, the markets... always the markets, a remedy proposed by those who stand to benefit from its application... if this were a medical situation we'd be talking about quack doctors and second opinions. Only in a climate of hysteria could such flimsy reasoning have come so far.

 
It is this climate that has prompted the human suffering that is the overwhelming focus of contemporary media about Greece. A 40 per cent increase in suicides has become the most infamous indicator for as much... and I wonder if perhaps that's just what the markets call the price of a mature economy. Even with recent gains in the suicide rate, it should be noted that the Greeks were starting from a very low suicide base... you're still much more likely to kill yourself as a Frenchman, German or Brit. Racist attacks have also increased significantly, some Greeks have fallen for that all too human failing... when being screwed by a white man who speaks your own language or English... the obvious thing to do is beat up an immigrant. Health and social services are being deprived of resources, so that a recent case drawing nationwide and international attention saw patients in a psychiatric hospital facing food shortages. Modern capitalism will frequently be given credit for the notion that they are responsible for feeding the world. Whether in the form of austerity-hit hospital budgets or high oil prices diverting land to biofuel rather than food... it's less talked about that markets also know just how to starve people.

Heading east for Alexandropoli I see graffiti covering signposts, a handful of which caution drivers to turn on headlights in tunnels, to be aware of landslides. It's noticeable that just the English language portion of the warning has been painted over, so that you can only see it if you're passing slowly on a bicycle. I doubt it will cause the deaths of many foreigners, but the antipathy of some is clear. None of what I'm saying is to claim that all was once well in Greece. There is general consensus that taxes were evaded, corruption problematic and pensions generous. Whatever the truth in that, the solutions on offer will create new problems rather than eradicating old ones. 

As I ride for Turkey I think back to Paris, to the businesswoman who told me the French didn't believe in the crisis and would "bury their heads in the sand." The more I think about it the more I disagree. Swallowing the pill of austerity and putting your faith in ultimate salvation from the markets has been disguised as some sort of dignified resilience. Suck it up and don't squirm. She had it the wrong way round... the only dignified thing left to do is voice the sort of truths that society has long been made embarrassed to declare. The rules of our system are broken... we must take our heads out of the sand in order to say so.

A Greek road. Photograph: Julian Sayarer

Julian Sayarer is cycling from London to Istanbul, he blogs at thisisnotforcharity.com, follow him on Twitter @julian_sayarer.

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The 2017 Budget will force Philip Hammond to confront the Brexit effect

Rising prices and lost markets are hard to ignore. 

With the Brexit process, Donald Trump and parliamentary by-election aftermath dominating the headlines, you’d be forgiven for missing the speculation we’d normally expect ahead of a Budget next week. Philip Hammond’s demeanour suggests it will be a very low-key affair, living up to his billing as the government’s chief accounting officer. Yet we desperately need a thorough analysis of this government’s economic strategy – and some focused work from those whose job it is to supposedly keep track of government policy.

It seems to me there are four key dynamics the Budget must address:

1. British spending power

The spending power of British consumers is about to be squeezed further. Consumers have propped up the economy since 2015, but higher taxes, suppressed earnings and price inflation are all likely to weigh heavily on this driver for growth from now on. Relatively higher commodity prices and the sterling effect is starting to filter into the high street – which means that the pound in the pocket doesn’t go as far as it used to. The dwindling level of household savings is a casualty of this situation. Real incomes are softer, with poorer returns on assets, and households are substituting with loans and overdrafts. The switch away from consumer-driven growth feels well and truly underway. How will the Chancellor counteract to this?

2. Lagging productivity

Productivity remains a stubborn challenge that government policy is failing to address. Since the 2008 financial crisis, the UK’s productivity performance has lagged Germany, France and the USA, whose employees now produce in an average four days as much as British workers take to produce in five. Perhaps years of uncertainty have seen companies choose to sit on cash rather than invest in new production process technology. Perhaps the dominance of services in our economy, a sector notorious hard in which to drive new efficiencies, explains the productivity lag. But ministers have singularly failed to assess and prioritise investment in those aspects of public services which can boost productivity. These could include easing congestion and aiding commuters; boosting mobile connectivity; targeting high skills; blasting away administrative bureaucracy; helping workers back to work if they’re ill.

3. Lost markets

The Prime Minister’s decision to give up trying to salvage single market membership means we enter the "Great Unknown" trade era unsure how long (if any) our transition will be. We must also remain uncertain whether new Free Trade Agreements (FTAs) are going to go anyway to make up for those lost markets.

New FTAs may get rid of tariffs. But historically they’ve never been much good at knocking down the other barriers for services exports – which explains why the analysis by the National Institute for Economic and Social Research recently projected a 61 per cent fall in services trade with the EU. Brexit will radically transform the likely composition of economic growth in the medium term. It’s true that in the near term, sterling depreciation is likely to bring trade back into balance as exports enjoy an adrenal currency competitive stimulus. But over the medium term, "balance" is likely to come not from new export market volume, but from a withering away of consumer spending power to buy imported goods. Beyond that, the structural imbalance will probably set in again.

4. Empty public wallets

There is a looming disaster facing Britain’s public finances. It’s bad enough that the financial crisis is now pushing the level of public sector debt beyond 90 per cent of our gross domestic product (GDP).  But a quick glance at the Office for Budget Responsibility’s January Fiscal Sustainability Report is enough to make your jaw drop. The debt mountain is projected to grow for the next 50 years. All else being equal, we could end up with an incredible 234 per cent of debt/GDP by 2066 – chiefly because of the ageing population and rising healthcare costs. This isn’t a viable or serviceable level of debt and we shouldn’t take any comfort from the fact that many other economies (Japan, USA) are facing a similar fate. The interest payable on that debt mountain would severely crowd out resources for vital public services. So while some many dream of splashing public spending around on nationalising this or that, of a "universal basic income" or social security giveaways, the cold truth is that we are going to be forced to make more hard decisions on spending now, find new revenues if we want to maintain service standards, and prioritise growth-inducing policies wherever possible.

We do need to foster a new economic model that promotes social mobility, environmental and fiscal sustainability, with long-termism at its heart. But we should be wary of those on the fringes of politics pretending they have either a magic money tree, or a have-cake-and-eat-it trading model once we leap into the tariff-infested waters of WTO rules.

We shouldn’t have to smash up a common sense, balanced approach in order for our country to succeed. A credible, centre-left economic model should combine sound stewardship of taxpayer resources with a fairness agenda that ensures the wealthiest contribute most and the polluter pays. A realistic stimulus should be prioritised in productivity-oriented infrastructure investment. And Britain should reach out and gather new trading alliances in Europe and beyond as a matter of urgency.

In short, the March Budget ought to provide an economic strategy for the long-term. Instead it feels like it will be a staging-post Budget from a distracted Government, going through the motions with an accountancy exercise to get through the 12 months ahead.

Chris Leslie MP was Shadow Chancellor in 2015 and chairs Labour’s PLP Treasury Committee

 

 

 

Chris Leslie is chair of Labour’s backbench Treasury Committee and was shadow Chancellor in 2015.