- 2 years ago
GN Debate - The Greek deal, good or bad? Gulf News Editor At Large Francis Matthew and Senior Associate Editor Mick O'Reilly debate the pros and cons of the latest Greek bailout. See more at: http://gulfnews.com/gntv
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00:00I'm Mick O'Reilly, and I think the bailout for Greece was a bad idea. You don't give
00:08a crack addict more crack to cure him.
00:10I'm Francis Mathew, and I think that the Greek deal was essential for the future of the Eurozone
00:16and consequently for Europe itself.
00:23Francis, was the third bailout good or bad?
00:26The deal was necessary. It was essential for the Euro that they made a deal. It was
00:31essential for Greece that they got a deal, both short term, so that they had cash in
00:35the banks, and long term, so they can start to survive again.
00:39I don't necessarily agree that a deal is a good deal. I think that the third deal is
00:43actually a bad deal, and it should never have been done. I don't think that Greece has proven
00:48itself capable of paying back any money so far in the two bailouts that it has received,
00:53and that it does nothing to advance the cause of the Euro.
00:56The Euro is in danger if a country is allowed to escape, is allowed to leave, as the German
01:02finance minister rather shamefully suggested in the very last round. There was no plan
01:06at all for a Grexit. They were not ready for any other currency. So it's a proposal that
01:12Europeans should simply dump a country into the outer darkness. It's shameful.
01:17But the cost of a Grexit had been factored into international markets for the last two
01:22years. Everybody was expecting it to come to this. The contingency plans weren't in
01:27place, but they could have been put in place quite easily. It's better to have no deal
01:33than simply a bad deal and pour more debt onto Greek taxpayers.
01:42The deal went a long way to saving the Euro. It's necessary to have a currency of all countries
01:48combined in that project to keep the European project on the go. We miss the point if we
01:55focus simply on the simplistic mathematics of money into Greece, money back again. The
02:01main point of the saving of the Euro was that it should also rebuild the European economy
02:06and recreate a competitive Europe, which it is now not.
02:10This deal hasn't done that. All it's done is place a very high tax burden and debt burden
02:15on the Greek economy. The GDP to debt ratio is now at 200%, which is untenable. It's simply
02:22put off a crisis for down the road. It hasn't solved anything.
02:26No, if there's a problem with the deal, it's not that it was done. The problem is it wasn't
02:31generous enough.
02:32So what you're saying is that a bad deal is better than no deal at all?
02:35Because it's an essential first step towards the next deal. This deal only addresses 86
02:42billion, which is going to Greece. The other 200 billion is waiting there to be repaid
02:47after 2020 with the IMF, and that could easily be delayed. The problem is not the numbers.
02:52The numbers can be made to add up. The problem is the political will to get Europeans, some
02:58of whom want austerity as the sole way to reflate their economy, and some of them who
03:03want easy money to reflate their economy.
03:06The fact of the matter is that it is all about the numbers. They've received 90 billion,
03:10a 240 billion, and now another 86 billion. They haven't taken the measures necessary
03:15to pay back those monies. They haven't shown themselves worthy creditors. You don't give
03:20a crack addict more crack and hope that it cures him.
03:24You've got Prime Minister Tsipras, who's a socialist, now going in to enforce these monetary
03:28policies on Greece, which does need structural reform. It does need to get less generous
03:34pensions. It does need to collect more tax. That is definite, and this is what Tsipras
03:38has said he would do. But this is not the way to simply add up the money and say, deal
03:44done, Greece is safe. Greece needs more credit to get itself out. The cure should not kill
03:51the patient.
03:52Yes, but all of those measures, like tax reforms, pension reforms, state savings, were all supposed
03:58to be done as part of the first bailout for 90 billion. Ireland, when it entered the bailout,
04:05got 90 billion in funds from Europe to bail out its banks. It cut its social programs,
04:10it raised its taxes, it cut its spending. Greece has simply failed to do that.
04:16In 2011, when the financial crisis hit the euro, with its completely inadequate political
04:21management, the Europeans ran around frantically trying to find an answer. They found it through
04:26austerity and applied it to their four countries who needed it. Ireland was one, and that was
04:32the answer in 2011. In 2015, the problem is different, the answer is different. It's not
04:37about getting money back, it's about reflating the economy and creating a Europe which is
04:42a more level playing field.
04:49The problem with this bailout is that it's actually given fuel, it's added fuel to the
04:53fire for those who want to leave Europe, like Britain. It says that it can't operate within
04:58these constraints.
05:00No, it's got nothing to do with Britain. Britain is not a member of the Eurozone. This is a
05:04deal about the Eurozone. The Eurozone needed to rescue itself, and this deal is one of
05:10the ongoing process of how the Eurozone will continue to shape it. Where the Eurozone now
05:15needs to go is to find a strong Europe, a strong euro. They need to find a way in which
05:21they have better central bank, a stronger European central bank, and they need much
05:27more economic convergence.
05:29But you're not building a stronger Europe by having it based on bailouts for countries
05:33that simply don't pay it back. When you walk down the streets of any Greek village and
05:37you see homes that are halfway under construction, that's not work in progress. That's simply
05:42stopped for tax purposes so they won't have to pay income taxes or property taxes. Who's
05:48paying those taxes to keep that town running? The Germans and the Finns.
05:53The Germans have done well out of the Euro. They are well ahead. Their currency, if there
05:58was to be a Deutsche Mark, would be about 30% more expensive. Unemployment in Germany
06:03is running about 6%. Unemployment in the rest of the Eurozone is around 13%. So Germany
06:09is doing very well. The problem which is facing Europe and the Eurozone is how to equalize
06:16those members of that currency and have similar fiscal and monetary policies.
06:22The fundamental issue is that when Greece joined the Euro in 2001, for seven years its
06:27GDP tripled from €10,000 per person to €30,000 per person. At the same time it
06:33funded the Olympics and it simply spent money like drunken sailors and has done nothing
06:37since to pay it back. That's the fundamental issue.
06:40No. It has paid back some. It has failed to pay back rest. And like many fringe countries
06:47in the European project, it's done very well out of the European system.
06:51Francis, lend me €20 and I'll pay it back to you. Better still, lend me another €40
06:56and I might pay it back to you. No, better still, lend me another €100 and I'll see
07:00if I can pay it back. And if I can't...
07:03We're not talking about personal. We're not talking about handbags. We're not talking
07:08about purses. We're talking about a country which will continue. We're talking about millions
07:12of people living in a country who need an economy which will work. To achieve that,
07:17Europe needs to commit to Greece. Greece needs to commit to Europe. And that is what this
07:21deal did.
07:27Looking ahead, this is only a start. It's not an end. It's not a beginning. It's a process
07:32which will now go on. Almost certainly, Greece will have to go back and renegotiate to have
07:37a larger debt holiday. It'll probably do so with more effect if and when Tsipras comes
07:42back to the Europeans and the IMF, proving that he can manage his country better than
07:48the previous governments.
07:49No Greek leader has gone back to the IMF to be able to show that he's been able to handle
07:53this economy, looking over the last three bailouts. Nothing is going to change. If anything,
07:58all this has done is to simply put the crisis further down the road when the cost of a Grexit
08:03had already been factored into the markets. It simply spread more uncertainty.
08:08The cost of the Grexit was factored into the financial markets. It was not factored into
08:12the Greek people. It was not factored onto the effects of having a large part of Europe
08:16suddenly being kicked out into a no-zone. What happened was that both Greece and Germany,
08:23from their very different political perspectives, came together and said, we can make an agreement.
08:29They had the support of many other Europeans who hate the austerity being imposed by Merkel
08:35and her German view that that is the sole solution to rebuild European competitiveness.
08:42But in the Irish case, austerity worked. It's back on the bond market. Its employment rate
08:48has fallen. Its exports are booming. Austerity worked.
08:52And there's a problem in Spain, which is a much bigger country and more significant than
08:55Ireland. There's a problem in Italy. And there's a problem in Portugal. And the danger of having
09:01no deal would have been that any of those countries could have been picked off by the
09:06markets in a future downturn. This deal meant that the Euro stays a Euro.
09:15There's a difference between staying a member of the Euro and staying a member of the European
09:18Union. There's a place for Greece within the European Union. There's not a place for Greece
09:21within the Euro.
09:23The leaders of the Eurozone disagree with you. They've just made a deal to keep Greece
09:28in the Eurozone and find a way forward together.
09:31We haven't come to any agreement today, but if you'd like to know more about what we've
09:35said, go to the views section of Gulf News in print and in gulfnews.com.