Reverse Robin Hood: Politics of Discord in the EU

Faisal Ali

The German Iron Lady still analyses the issue in detail. (Photographer: Armin Kübelbeck, CC-BY-SA, Wikimedia Commons)

I can’t help but feel many people are misinformed vis-à-vis the Eurozone and the nature of bailouts, monetary policy and austerity.  Germany’s Eurosceptic party Alternative für Deutschland (Alternative for Germany) has taken big steps towards establishing itself as a national force by winning seats in elections in Hamburg, as well as receiving 10.6% of the vote in Thuringia and 12.2% in Brandenburg on the 14th September.

Among other issues this party has gained in popularity for is its strong stance against bailouts, likening any such policy to a budgetary coup d’état on the Bundesbank, essentially forcing regular German taxpayers to foot the bill for ‘profligate Southerners’.

Well this has been kept very quiet but the majority of bailouts didn’t actually reach regular Greeks, they barely reached any “main-streeters” in Europe actually. Many of us – mainly Greece – got austerity instead.  And to add insult to injury, generally, the Greeks and Southern Europeans (meaning the citizens) who, it might be noted, played little, if any, role in the financial crisis, have been exposed to racist and distasteful stereotypes as far-right groups in creditor nations, as well as politicians, find a useful scapegoat, to what is in fact a wider systemic issue in Europe. Given that the lion’s share of the bailouts came from core countries – primarily Germany – one might be forgiven for holding this view, as it could be argued that they have extended a warm and helping hand to their troubled European brethren – reluctantly as it may appear. But this notion of some kind of solidarity between German taxpayers and Greek people is in fact FALSE.

Well then, what actually happened you might ask? 90% of the €240 Billion that the Greek Government borrowed went straight to financial institutions – not the Greek people. The financial institutions which were bailed out (drumroll please) were major French and German banks, who were heavily exposed to Greek debt. In an op-ed written by the incumbent Greek Finance Minister Yanis Varoufakis, he spoke quite plainly that what happened in reality was a “cynical transfer of private losses from the banks’ shoulders onto the shoulders of Greece’s most vulnerable citizens”. A small total of 11% was actually used to fund the Greek Governments operating needs.

Sadly, this is only part of the story. Roughly half of the finances that were provided were simply for debt servicing. From the loans, €81 Billion was used to meet maturing debt obligations and for interest payments that exceed €40 Billion. The money was used to bail out, either directly or indirectly, the financial sector and in the process, the overwhelming majority of Greek government debt was transferred from the private to public sector, with other Eurozone governments now liable for approximately 65% of Greece’s debt. So basically banks took the risk, they gave loans, which went bad and now WE – the people of Europe – have to pay.

Making it seem as though profligacy in Southern Europe is the cause of the bailouts has proved very effective for Germany and European Elites more generally as it has provided a fantastic scapegoat, and moral justification for brutal austerity. People have been misled into believing that the bank bailouts are an act of solidarity with regular Greeks, failing to understand that (1) the bailouts primarily helped banks in Germany and France and (2) the austerity has actually increased the burden Greece is placing on Europe, in what is the largest taxpayer loan in history, such that Greeks have lost one-quarter of their incomes, making the debt burden and austerity even less sustainable.

Philippe Legrain, former advisor to former European Commission President Manuel Barroso wrote, “to avoid losses for German and French banks, eurozone policymakers, led by German Chancellor Angela Merkel… lent European taxpayers’ money to the insolvent Greek government, ostensibly out of solidarity, but actually to bail out creditors”. There was a shift in liabilities- twice- from banks in the periphery to the governments (thus citizens) of the periphery and from banks of core governments again to the citizens of distressed states.

Robin Hood is a character found in old English Folklore- an outlaw- who, alongside his band of “merry men”, would take from the rich and give to the poor. What’s happening in Europe is exactly the opposite. This irrefutably puts shame to the claims of those who argue “taxpayer money” is being used to save Greeks and other reckless profligate periphery countries. What’s actually happened is that these bailouts where backdoor bailouts for reckless lenders who remain wealthy and prosperous – at a great cost to Greece and by the way, all the rest of us also. “Anybody who does the Greek debt arithmetic knows that it cannot repay its external debts, now around 170% of GDP, without a level of pain that is simply beyond the tolerance of democratic societies” remarked Jeffrey Sachs, a renowned Economist. This should give us all food for thought, because whilst Greece has suffered the most, almost all of Europe has had to endure some degree of austerity – but at least now it should be clearer where to point the finger, as the European dream quickly becomes a stagnant, exploitative European nightmare.