The Greek people have already paid highly for their own governments’ mistakes. Photo: Getty
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The Greek people have paid for their governments’ mistakes – and for the errors of the Troika

The meltdown in Athens and the mistakes of the IMF.

To make sense of the confrontation between the Syriza government in Greece and the Troika (the European Commission, the European Central Bank and the International Monetary Fund), it is vital to understand the one big mistake that each side made. The mistake on the Greek side is well known. In the years following the formation of the eurozone, the Greek government borrowed far more than it should, sometimes secretly. When the full extent of that fiscal profligacy became known, the financial markets realised that default was a distinct possibility, and the government was no longer able to borrow from them.

Over the next few years the Troika provided large sums of money to “bail out Greece”. The minor share of that provided new loans to the Greek government so that it could gradually balance its books. When Greece complains about the austerity imposed on it by the Troika, it is important to understand that without Troika assistance it would have had to endure something even worse and far more immediate. The government was spending much more than it received in taxes, and from the moment it stopped being able to borrow from the markets it would have had to end this. Almost certainly the banking system would have collapsed, and the government would not have had the resources to support its banks.

The Troika’s big mistake was what it did with the larger part of its rescue package. If it had done nothing, the Greek government would have been forced to default on its debt, and those who owned that debt (Greece’s creditors) would have received very little or nothing. Instead, the Troika partly bailed out these creditors, who included many of their own leading banks, in Germany and France in particular. In effect, what the Troika did was to buy much of the Greek government debt owned by these private-sector institutions, at discounted prices. From the Greek government’s point of view, this replaced private-sector debt with debt owned by the Troika.

Why was this partial bailout of Greece’s private-sector creditors a mistake? It meant that the remainder of the rescue package, designed to ease the Greek government’s transition to balance, was far too small. The Troika thought that the Greek government could quickly cut spending and raise taxes with little consequence for the rest of the Greek economy. It was completely and predictably wrong. Sharp and intense austerity played a great part in reducing GDP by 25 per cent and creating mass unemployment.

Imposing less austerity on Greece, producing a more modest decline in Greek output, would have required additional loans from European governments. If this had been available in addition to the existing package, it would have saddled Greece with a debt it surely could not have repaid, and may have been unacceptable to European voters. This is why the partial bailout of Greece’s original creditors was such an error. If it had not been done, and some of that money had been used to allow less austerity to be imposed on the Greek people, we would not be at the present impasse.

Over the past year the Greek government has managed to achieve approximate primary budget balance: its taxes cover all its spending, excluding interest payments. It is no longer asking for more money to cover spending, but simply additional loans to pay back interest and maturing loans. In short, it needs money from the Troika to repay the Troika. As the price of these loans, the Troika is demanding yet more austerity. The Syriza government wants to avoid this to give the economy a chance to recover.

From a macroeconomic viewpoint, this is reasonable, because it would probably be in the long-term interests of the Troika. The OECD estimates that Greece has unused resources worth at least 10 per cent of GDP. A pause in austerity would allow demand to increase, reducing unemployment and generating more taxes. The Greek government could use some of the additional revenue to start repaying its loans.

So why does the Troika insist on continuing with austerity? The Troika contains many different views and interests. Some may still not believe, despite all the evidence, that austerity hurts growth. Perhaps others are happy to see a left-wing government fail, because it does not accept the received wisdom from Brussels and Frankfurt on what good economic policy involves.

Another explanation is that eurozone governments have become victims of their media’s rhetoric. The impression the media conveys is that all of the Troika’s loans have gone to cover Greek government spending. In fact, most went to bail out Greece’s previous creditors and any further loans will just repay existing loans. But to people in the eurozone it seems as if the Troika is transferring more of their money to Greek citizens. In these circumstances, the politicians need to appear to be tough on Greece. They fear that to change policy now would lead their electorates to ask why previous policies have failed, which would expose the Troika’s big mistake.

The Greek people have already paid highly for their own governments’ mistakes before 2010. Now it seems they must suffer as a result of the Troika’s errors. That the governments of the eurozone continue to display a macroeconomic understanding of fiscal policy equivalent to that of Angela Merkel’s imagined Swabian housewife is perhaps not surprising – it has been a consistent pattern since the eurozone began. More surprising is the behaviour of the IMF, established to represent the international community and full of hundreds of economists. That it had the means to stop this happening but chose not to do so is equally tragic.

Simon Wren-Lewis is Professor of Economic Policy in the Blavatnik School of Government at the University of Oxford

 Simon Wren-Lewis is is Professor of Economic Policy in the Blavatnik School of Government at Oxford University, and a fellow of Merton College. He blogs at mainlymacro.

This article first appeared in the 01 July 2015 issue of the New Statesman, Crisis Europe

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How society is failing transgender children

In the wake of the cancellation of a public debate on this subject, one of the speakers shares her view on where society's approach to gender nonconformity is going wrong.

In August this year, several UK councils issued guidance to schools on accommodating female pupils who wear binders. A binder is a constricting undergarment for the upper body: what it binds are the breasts, pressing them down to a flatness that the wearer feels is appropriate to their self-perception as masculine or gender-neutral. According to Cornwall Council, the binder is “very important to [the wearer’s] psychological wellbeing.” But binders have unwelcome physical side-effects too, including “breathing difficulties, skeletal problems and fainting.” Lancashire Council’s advice urges teachers to “monitor [wearers] carefully during physical activities and in hot weather. It may be necessary to subtly offer more breaks.”

When the NSPCC invited me to participate in a discussion on the subject “is society letting down transgender children?” (part of its Dare to Debate series), those guidelines were one of the first things I thought of. They’re written in accordance with the overriding principle of gender identity politics, which is that affirmation is all. Any bodily harms incurred count for little compared to the trauma believed to be inflicted by a “mismatch” between appearance and identity. It’s a doctrine that insists we’ve moved beyond the tyranny of physical sex and social pressure, and into a realm of pure selfhood where all must be able to live in accordance with their own inherent being.

And yet, look again at that list of side effects: breathing difficulties, skeletal problems, fainting, inability to participate fully in exercise. The female adolescents wearing binders have reproduced all the problems of tight-lacing corsets, this time in the service of restrictive anti-femininity rather than restrictive femininity. So is issuing guidance to reduce the harms of binder-wearing in schools an act of care for transgender children, or an abdication of it? Is the role of adults in authority – whether parental, educational or medical – to validate everything that comes under the rubric of transition, regardless of long-term consequences, or could another approach be better?

The number of children who identify as trans is small, but rapidly increasing: referrals to the Tavistock and Portman NHS Trust’s gender identity development service have doubled year-on-year. Putting gender-nonconforming youths on a medical track opens the possibility that they will be prescribed puberty blockers, delaying the physical changes of adolescence that individuals may find distressing. Later, treatment can include cross-sex hormones and surgery to create the desired sexual characteristics.

For many, this can alleviate profound anguish about the self, but not without costs. The long-term effects of hormone therapies aren’t known, and won’t be until the current generation of trans children have lived well into adulthood. There’s a risk that increased medicalisation could be imposing permanent physical changes on children who, left to their own devices, would discover they are quite happy living with their natal sex – about 80 per cent of children diagnosed with gender dysphoria desist before adulthood, but the normalisation of medical transition could commit many to irrevocable treatments they would otherwise avoid.

Remarkably, as I found out when I worked on a long feature on the subject, there isn’t any agreement on what gender identity is or how it relates to the physical body. Which means that transitioning children are receiving an untested treatment for an undefined condition. Medicine often involves a surprising degree of idiosyncrasy and guesswork, but this uncertainty both about what is being treated and the effects of the treatment should be a cause for caution. While many who transition find it wholly positive, not everyone does: doubt and detransition happen, and these stories tell us that the quickest path to reassignment is not always the best treatment for someone presenting with dysphoria.

Sometimes, a diagnosis of gender dysphoria might mask a different underlying cause to a child’s distress. Psychiatrist Susan Bradley reports that children with cross-sex identification are often (not always) either responding defensively to a violent background or engaging in the obsessive behaviours associated with autistic spectrum disorders. A policy of “watchful waiting” – listening to the child, supporting them and giving them freedom to experiment and develop – is vital if we are to give children the kind of help they really need. But in an environment where anything short of total and immediate reinforcement is deemed abusive, “watchful waiting” is not an option.

One more problem: if gender dysphoria is conceived as the problem, and gender reassignment as the solution, then transition represents the summation of a process which should in theory resolve everything. In practice, newly-transitioned young people (especially those crossing the threshold from child and adolescent mental health services to adult provision) can find themselves stranded, no longer in receipt of the support they had during transition. We simply aren’t getting the treatment of transgender children right if we’re only treating their gender.

The consequences extend well beyond children who identify as trans, of course. Schools are suffused with sexual harassment and sexual violence, yet girls are expected to accept a child they previously knew as a boy as female like them, or be called bigots. The naturalisation of sex-stereotypes in parental narratives of transition surely has a limiting influence on other children’s conception of sex-appropriate behaviour. For some gender-nonconforming children, the cultural celebration of transition leads to anxiety about whether they themselves should be trans, even if they’re happy in their bodies. Certainly, many gay and lesbian adults have looked back on their own childhoods and remarked nervously that their behaviour then would qualify them as trans now.

If we’re not able to address these issues, then we’re manifestly failing children. But addressing them is incredibly difficult: practitioners who privately mention their doubts about current approaches to gender noncomformity are afraid to ask questions publicly, anticipating personal attacks and the loss of their jobs.

They’re not wrong to do so. After announcing the Dare to Debate event, the NSPCC was put under sustained pressure, I was persistently abused, and following the withdrawal of the other panelist, the charity cancelled the event. Previous installments in the series have looked at child sexualisation, foetal alcohol syndrome, and asked whether the investigation of child sexual abuse has tipped into “hysteria”, but apparently it would be just too daring to talk about gender. Doctrine so bitterly defended that it must even be protected from good-faith debate is a kind of restrictive garment for the intellect. Wearing it can ease our mental pangs. But the damage it does besides is very real.

Sarah Ditum is a journalist who writes regularly for the Guardian, New Statesman and others. Her website is here.