Michael Portillo on Greece’s ‘rigged’ finances when it joined the euro
Greece submitted its national stimulus plan to the European Commission this week, containing its proposals to use the bloc’s crisis funds to combat the effects of the coronavirus pandemic. It will focus on four areas: the digital transition; employment, training and social cohesion; the green economy; and stimulate investment. Alex Patelis, chief economic adviser to Prime Minister Kyriakos Mitsotakis, said: “The plan includes both reforms and investments.”
The country is on track to become one of the two biggest benefactors per capita, with the EU’s coronavirus recovery program aimed at helping those hardest hit.
Many fear, however, that the package will bring a repeat of the crushing debts European countries found themselves in after the 2008 financial crash.
Greece was rocked after the 2008 global financial crash, forced to seek bailouts from the European Central Bank (ECB) and the International Monetary Fund (IMF) to avoid default.
Many, like former conservative politician Michael Portillo, attribute Greece’s demise after 2008 directly to the EU.
During his 2012 BBC show, “Michael Portillo’s Great Euro Crisis,” he spoke to locals to see how the crash had affected them and whether they wanted a return to life. the drachma.
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He visited hedge fund manager and economist Jason Manolopoulos, who became an expert on the economic makeup of Greece after 2008.
Mr Portillo asked: âA lot of people think that the numbers to allow Greece to join the euro have been rigged, on the deficit and so on.
“Is that true? Have the numbers been rigged?”
Mr Manolopoulos replied: “It is common knowledge that they were rigged.
âEveryone at the European Commission knew that too.
“But Greece’s accession was at the time a political project rather than a purely economic project.”
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There was a series of âboom yearsâ after Greece joined the euro.
The country hosted the Olympics around the same time and sought to rename itself as a nation.
Mr. Manolopoulos explained that the Greeks started to take out loans to finance a new way of life.
He said, “You brought up all these luxury villas. You spent a lot of money on luxury products.
âPeople were doing weekends in Paris rather than going to their local village, there was a huge feeling of euphoria, everyone was happy to go out.
“Greece had won the European Football Championship, obtained the right to host the Olympics, it was like a dream come true.”
At one point in 2010, there were 8 billion car loans in Greece – three and a half percent of its GDP compared to zero ten years earlier.
Asked whether the Greeks could have bought as many cars as they did if the country had not joined the euro, Mr Manolopoulos replied: “Absolutely not”.
Many, like Mr. Manolopoulos, have condemned this short-lived financial boom and its effects on Greece.
Yanis Varoufakis, the country’s former finance minister, specifically blamed the EU for much of the woes in Greece and Europe.
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During his speech on the Oxford Union in 2018, he explained how the country had benefited from an influx of loans from European banks, facilitated by the euro.
Speaking of the euro area – the monetary union of the EU – Mr Varoufakis said: âGermany is the biggest beneficiary of the euro area.
âBetween 2000 when the euro started and now – because indeed the euro is another form of the deutsche mark, make no mistake about it – the fact that the raff riff of Europe was part of the euro, of the deutsche mark, it was our currency, the Mediterranean people, it kept the value of the currency at a low level.
âIt was a big boon for German exporters; the total net export surplus of German industry between 2000 and 2018 was 2.2 billion euros, which is not bad.
âNow what do you do if you are constantly in surplus with someone? If you are in surplus with someone, that means you keep selling them things.
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“But, if I keep selling you more stuff, then I end up with your money, and I have nothing to do with that money.”
âThe result has been a lake of euros that is piling up on the shores of Frankfurt.
âA banker’s biggest nightmare is money he doesn’t lend – he doesn’t sleep at night if he has money and there isn’t enough demand.
“So what do they end up doing? Lending it to the Greeks, lending it to the Irish: what have Greece, Ireland, Portugal brought to the euro zone? We have reduced it? ‘indebtedness. “
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In the years following the crash, mass unemployment and homelessness crippled Greece.
By 2012, the number of homeless people in the city had reached 20,000, not counting the country as a whole.
Currently, 40 percent of people aged 15 to 24 are still unemployed.
The average for the same age group across the continent is only 14%.