Why it’s misguided to treat the eurozone crisis as a morality tale about “lazy” southerners

As southern European countries rack up record debts, Helmut Kohl has told friends “Merkel is destroying my Europe”.

On 1 December, a 13-year-old girl died after inhaling carbon mon­oxide fumes in the Greek city of Thessaloniki. She and her un­employed mother had been trying to use a makeshift stove to heat their freezing flat, having had their electricity cut off several months earlier. In Greece, austerity continues to kill.

The Greeks have few friends in our part of Europe, however, as I discovered at a recent Intelligence Squared debate on Germany and austerity at Cadogan Hall in London. “Why should hard-working northern Europeans pay for the Greeks?” asked a Dutch member of the audience. “The Greek railway is so inefficient that it would be cheaper to move everybody by taxi,” sneered a German. There is a sense in southern Europe, suggested another audience member, that “money just grows on trees”.

Isn’t it odd that there is always money available to bail out banks but not people? As my fellow panellist Euclid Tsakalotos, a Greek economist and member of parliament for the left-wing Syriza party, put it to me afterwards: “Public debate has suffered a dumbing-down process.” How, he asked, could “a world economic crisis of such proportions that has affected so many economies ... be put down to differential work efforts”?

Work, or jobs, is what Greece lacks. One in four Greeks is unemployed; more than half of the country’s youth cannot find work. Suicides are up; the birth rate is down. On a visit to Athens in 2012, I met Nikitas Kanakis, the chairman of the Greek branch of the charity Doctors of the World. “If the people cannot survive with dignity,” he told me, “we cannot have a future.”

It is dangerous, misguided and mendacious, as countless economists from the New York Times columnist Paul Krugman to the Financial Times commentator Martin Wolf have pointed out, to treat the eurozone’s ongoing debt crisis as a modern-day morality tale. It isn’t.

Record debts were caused by post-crash bank bailouts and a crisis-induced collapse in tax revenues. Take Spain. That country’s downturn was the result not of excessive government spending or public debt but of the explosion of private debt, particularly in the real estate and banking sectors. Because of the crash, Spain’s public-debt-to-GDP ratio morphed from being one of the lowest in the eurozone to one of the highest.

Overspending didn’t cause the crisis but underspending is exacerbating it. Austerity isn’t working. Don’t take my word for it: a paper published in October by the European Commission’s Directorate-General for Economic and Financial Affairs revealed how the cumulative cost of fiscal self-flagellation across the eurozone was 6 per cent of GDP between 2011 and 2013. Crucially, the paper also pointed out that the catastrophically contractionary consequences of austerity in the southern debtor countries were “aggravated” by Germany and other northern creditor countries simultaneously cutting spending and raising taxes.

Another reason why we shouldn’t moralise about debt is to avoid the charge of rank hypocrisy. After all, why pick on the Greeks, rather than the Germans? In the years before the crash – for example, from 2003 to 2004 – Germany persistently breached the budget deficit rules laid down in the EU’s growth and stability pact; the then chancellor, Gerhard Schröder, demanded that his country be exempted from any penalties. In 2006, while Spain and Ireland were running budget surpluses, Germany was in deficit.

Then there’s the German private sector. In 2008, as an investigation by Bloomberg subsequently revealed, over-leveraged German banks and financial institutions received secret loans from the US Federal Reserve.

Now go back 60 years. In 1953, Germany’s postwar debt trap was lifted in London, at a conference of creditors in which the enormous amount of money the country owed was cut in half and the repayment period spread out over 30 years. One of those creditor countries was ... Greece.

Few historians would dispute that the astounding growth of the postwar German economy and the ascent of Germany to world economic power status wouldn’t have happened without the London Debt Agreement. So why such a different attitude now? Why the mocking, demonising and punishing of debtor countries such as Greece, Spain and Portugal? Why the pretence that debt forgiveness isn’t effective or doable or that it is without precedent?

It is perhaps because such a strategy would require bold and far-sighted leaders. What Europe needs right now is a Konrad Adenauer or a Charles de Gaulle, but the leaders it has to make do with are Angela Merkel and François Hollande.

Writing in these pages in June 2012, I attracted the ire of Germanophiles and deficit hawks alike by accusing Merkel, who was elected for a third term as chancellor in September this year, of “destroying the European project, pauperising Germany’s neighbours and risking a new global depression”.

But this isn’t merely the prejudice of a nasty British journalist picking on poor, defenceless Mutti. Listen to the former German chancellor, Helmut Kohl, who, according to Der Spiegel, has told friends: “She [Merkel] is destroying my Europe.”

A break-up of the eurozone may be where we are headed if spending cuts take precedence over debt defaults and if the financial crisis continues to be cynically portrayed as a morality play. What the continent needs is a debt jubilee and a halt to austerity. Oh, and some solidarity. Otherwise, a second Great Depression beckons.

To borrow a line from the US economist Michael Hudson: “Debts that can’t be repaid won’t be repaid.”

Mehdi Hasan is a contributing writer for the New Statesman and the political director of the Huffington Post UK, where this column is cross-posted

Members of the public relax in Athens in 2012. Photo: Getty.

Mehdi Hasan is a contributing writer for the New Statesman and the co-author of Ed: The Milibands and the Making of a Labour Leader. He was the New Statesman's senior editor (politics) from 2009-12.

This article first appeared in the 04 December 2013 issue of the New Statesman, Burnout Britain

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The joy of only winning once: why England should be proud of 1966

We feel the glory of that triumphant moment, 50 years ago, all the more because of all the other occasions when we have failed to win.

There’s a phrase in football that I really hate. It used to be “Thirty years of hurt”. Each time the England team crashes out of a major tournament it gets regurgitated with extra years added. Rather predictably, when England lost to Iceland in Euro 2016, it became “Fifty years of hurt”. We’ve never won the European Championship and in 17 attempts to win the World Cup we have only won once. I’m going to tell you why that’s a record to cherish.

I was seven in 1966. Our telly was broken so I had to watch the World Cup final with a neighbour. I sat squeezed on my friend Colin’s settee as his dad cheered on England with phrases like “Sock it to them Bobby”, as old fashioned now as a football rattle. When England took the lead for the second time I remember thinking, what will it feel like, when we English are actually Champions of the World. Not long after I knew. It felt good.

Wembley Stadium, 30 July 1966, was our only ever World Cup win. But let’s imagine what it would be like if, as with our rivals, we’d won it many times? Brazil have been World Champions on five occasions, Germany four, and Italy four. Most England fans would be “over the moon” if they could boast a similarly glorious record. They’re wrong. I believe it’s wonderful that we’ve only triumphed once. We all share that one single powerful memory. Sometimes in life less is definitely more.

Something extraordinary has happened. Few of us are even old enough to remember, but somehow, we all know everything that happened that day. Even if you care little about the beautiful game, I’m going to bet that you can recall as many as five iconic moments from 50 years ago. You will have clearly in your mind the BBC commentator Kenneth Wolstenholme’s famous lines, as Geoff Hurst tore down the pitch to score his hat-trick: “Some people are on the pitch. They think it’s all over. It is now”. And it was. 4 - 2 to England against West Germany. Thirty minutes earlier the Germans had equalised in the dying moments of the second half to take the game to extra time.

More drama we all share: Geoff Hurst’s second goal. Or the goal that wasn’t, as technology has since, I think, conclusively proved. The shot that crashed off the cross bar and did or didn’t cross the line. Of course, even if you weren’t alive at the time, you will know that the linesman, one Tofiq Bakhramov, from Azerbaijan (often incorrectly referred to as “Russian”) could speak not a word of English, signalled it as a goal.

Then there’s the England Captain, the oh-so-young and handsome Bobby Moore. The very embodiment of the era. You can picture him now wiping his muddy hands on his white shorts before he shakes hands with a youthful Queen Elizabeth. Later you see him lifted aloft by his team mates holding the small golden Jules Rimet trophy.

How incredible, how simply marvellous that as a nation we share such golden memories. How sad for the Brazilians and Germans. Their more numerous triumphs are dissipated through the generations. In those countries each generation will remember each victory but not with the intensity with which we English still celebrate 1966. It’s as if sex was best the first time. The first cut is the deepest.

On Colin’s dad’s TV the pictures were black and white and so were the flags. Recently I looked at the full colour Pathe newsreel of the game. It’s the red, white and blue of the Union Jack that dominates. The red cross of Saint George didn’t really come into prominence until the Nineties. The left don’t like flags much, unless they’re “deepest red”. Certainly not the Union Flag. It smacks of imperialism perhaps. In 1966 we didn’t seem to know if we were English or British. Maybe there was, and still is, something admirable and casual about not knowing who we are or what is our proper flag. 

Twelve years later I’m in Cuba at the “World Festival of Youth” – the only occasion I’ve represented my country. It was my chance to march into a stadium under my nation’s flag. Sadly, it never happened as my fellow delegates argued for hours over what, if any, flag we British should walk behind. The delegation leaders – you will have heard of them now, but they were young and unknown then – Peter Mandelson, Trevor Phillips and Charles Clarke, had to find a way out of this impasse. In the end, each delegation walked into the stadium behind their flag, except the British. Poor Mandelson stood alone for hours holding Union Jack, sweltering in the tropical sun. No other country seemed to have a problem with their flag. I guess theirs speak of revolution; ours of colonialism.

On Saturday 30 July BBC Radio 2 will commemorate the 50th anniversary of the 1966 World Cup Final, live from Wembley Arena. Such a celebration is only possible because on 16 occasions we failed to win that trophy. Let’s banish this idea of “Fifty years of hurt” once and for all and embrace the joy of only winning once.

Phil Jones edits the Jeremy Vine Show on BBC Radio 2. On Saturday 30 July the station celebrates the 50th anniversary of the 1966 World Cup Final live from Wembley Arena, telling the story of football’s most famous match, minute by minuteTickets are available from: www.wc66.org