Michael Portillo on Greece’s ‘rigged’ finances when entering euro
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Greece this week submitted its National Recovery Plan to the European Commission, containing its proposals for using the bloc’s crisis funds to combat the effects of the coronavirus pandemic. It will focus on four areas: digital transition; employment, training, and social cohesion; the green economy; and boosting investment. Alex Patelis, chief economic adviser to Prime Minister Kyriakos Mitsotakis, said: “The plan consists of both reforms and investments.”
The country is set to become one of the two largest benefactors on a per capita basis, with the EU’s coronavirus recovery package scheme aiming to help those hardest hit.
Many fear that the package will bring a rerun of the crippling debts European countries found themselves in after the 2008 financial crash, however.
Greece was thrown into turmoil after the 2008 global financial crash, forced to seek bailouts from the European Central Bank (ECB) and International Monetary Fund (IMF) to avoid defaulting.
Many, like the former Conservative politician Michael Portillo, blame Greece’s demise post-2008 directly on the EU.
During his 2012 BBC programme, ‘Michael Portillo’s Great Euro Crisis’, he spoke to people in the country to see how the crash had affected them, and whether they wanted a return to the drachma currency.
He visited hedge fund manager and economist Jason Manolopoulos who became an expert on Greece’s economic makeup post-2008.
Mr Portillo asked: “A lot of people think that the figures to enable Greece to join the euro were rigged, on the deficit and so on.
“Is that true? Were the figures rigged?”
Mr Manolopoulos replied: “It’s common knowledge that they were rigged.
“Everybody in the European Commission also knew it.
“But Greece joining was a political project back then rather than a purely economic project.”
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There were a series of “boom years” after Greece joined the euro.
The country hosted the Olympic Games around the same time, and sought to rebrand itself as a nation.
Mr Manolopoulos explained that Greeks began to take out loans to finance a new way of life.
He said: “You had all these fancy villas springing up. You had huge amounts of spending in luxury goods.
“People were taking weekend trips to Paris rather than going to their local village, there was a huge sense of euphoria, everybody was happy going out.
“Greece had won the European Football Championship, won the right to hold 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 a decade earlier.
When asked whether Greeks would have been able to buy as many cars as they did if the country hadn’t joined the euro, Mr Manolopoulos said: “Absolutely not.”
Many like Mr Manolopoulos have condemned this short-lived financial boom and the effect it has since had on Greece.
Yanis Varoufakis, the country’s former finance minister, has specifically blamed the EU for much of Greece’s and Europe’s woes.
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During his 2018 Oxford Union address he explained how the country had been taken advantage of by an influx of loans from European banks, facilitated by the euro.
Talking about the eurozone – the EU’s monetary union – Mr Varoufakis said: “Germany is the greatest beneficiary of the eurozone.
“Between 2000 when the euro began and now – because effectively the euro is another form of the deutsche mark, let’s not fool ourselves – the fact that the riff raff of Europe was part of the euro, of the deutsche mark, it was our currency, the Mediterraneans, it kept the value of the currency low.
“That was a great boon to German exporters; the total net export surplus of German industry between 2000 and 2018 was €2.2trillion, which isn’t bad.
“Now, what do you do if you’re constantly in surplus with somebody? If you’re in surplus with someone it means you keep selling stuff to them.
“But, if I keep selling more stuff to you, then I end up with your money, and I don’t have anything to do with that money.
“The result was a lake of euros accumulating in the banks of Frankfurt.
“The biggest nightmare of a banker is of money they are not lending – they don’t sleep at night if they have money and there is not enough demand for it.
“So what do they end up doing? Lending it to the Greeks, lending it to the Irish: What did Greece, Ireland, Portugal bring into the eurozone? We brought low levels of debt.”
In the years following the crash, mass unemployment and homelessness crippled Greece.
By 2012, homeless numbers in the city had reached 20,000, not including the country at large.
Currently, 40 percent of those aged 15-24 are still unemployed.
The average for the same age group across the entire continent is just 14 percent.
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