The Default Line: THE INSIDE STORY OF PEOPLE, BANKS AND ENTIRE NATIONS ON THE EDGE Read Online Free Page A

Angela Merkel’s government in Berlin and the European Central Bank in Frankfurt. The ECB thought it could handle Europe’s problem nations on its own, a position described as ‘complete wishful thinking’ at the IMF. The ECB was first and foremost an institution concerned with monetary policy, the setting of a single base interest rate across the Eurozone, as well as the logistics of running a pan-continental currency. The ECB over a series of bailouts was to emerge as bad cop to the IMF’s good cop. But there were a good number of splits in the Troika, as well as an Anglo-Saxon/European split within the IMF itself. The ECB, keen to establish its hardline credentials, was uncompromising on so-called ‘frontloaded’ tax rises and spending cuts, and, initially, on getting Greece to repay every penny of its debts to nervous markets. ‘The ECB has taken a very conservative view on fiscal policy,’ the governor of one Eurozone central bank told me. He went on to explain what the ECB view was: ‘It’s responding to a fiscal problem, and fiscal problems can be solved by cutting back on public expenditure, which no matter how low it is, should be lower.’ In contrast, he said, ‘The IMF has a longer understanding and perhaps a better understanding of policy and politics.’ The IMF was, he said, ‘less doctrinaire’ than the ECB.
    In broad terms, by 2011 Papandreou’s Greece had embarked on the fiscal measures: pay cuts, spending cuts and tax rises. However, they had done very little about the rest of the structural economic reforms promised to Greece’s new bankers in Brussels, Frankfurt and Washington. To try to get the politicians to act, in the summer of 2011 Governor Provopoulos of the Bank of Greece said the country was voting for its life and to vote down the economic reforms would be ‘suicide’ and a ‘crime’. At this point he had already overseen the Athens Airlift of billions of euros, but could say nothing about it to either the politicians or the citizens of Greece. Provopoulos had a dual role – as representative of the Greek people at the European Central Bank in Frankfurt, and as representative of the ECB to the Greek people. In a dynamic repeated in all the bailed-out countries, the governor’s hyperbole in warning of imminent doom was no more nor less than an attempt to oblige domestic politicians to make painful decisions. In Greece, however, this pattern of brinkmanship would repeat itself, on a quarterly basis. The Greeks would struggle with the notion of no longer being sovereign masters of their fate. Each time, the Greek people, the financial markets and the euro itself would be pushed to the brink by the increasingly explicit threats of the drachmailers.
    Parliament duly passed the measures demanded by the Troika, and so the latter released the bailout money. However, it was not long before the brinkmanship resumed. When Troika inspectors returned to Greece in September 2011, they found that though the Greeks had passed the measures, they had not actually applied them. Greece’s finance minister at the time, Evangelos Venizelos, later told his party that at this point the Troika offered Greece a ‘velvet exit’ from the euro, smoothed with EU money – another form of drachmail designed to shock Greek politicians into compliance with the loan conditions. The end result was the hated electricity tax, the tax that Venizelos would come to blame for toppling his government later that year.
    For the Troika overlords of Greece, the real problem was that the country was not implementing the programme it had agreed – partly because of the actions of aggrieved groups like the striking tax collectors. A former IMF official told me they should have been aware of the ‘massive political obstacles’ in the way of the required reforms: ‘Very, very strong vested interests in Greece blocked most things, and therefore you then get into a downward spiral because you’re trying to do things