Saturday, August 22, 2015

Political Developments in Turkey and Greece

            The Turkish opposition parties that together won a majority of the vote in last month’s parliamentary elections were unable to form a government by the deadline.  The Islamist President has called for new elections.  See my post from June, Islamists Lose their Majority in the Turkish Parliamentary Elections,  

            In the meantime, Turkey’s Islamist caretaker government did grant the United States access to its base at Incirlik from which to launch manned and unmanned aircraft to strike the “Islamic State” in Syria and IraqTurkey itself also joined the fight against the Islamic State, as well as attacked Marxist Kurdish terrorists in western Turkey, where their rebellion has flared up, and in northern Iraq

            The leftist Prime Minister of Greece has resigned after losing the confidence of a significant minority within his far-left party when he gave into demands from the Hellenic Republic’s creditors for reforms in order to receive a third bailout from them, despite his party’s parliamentary election campaign in February on a platform of rejecting such a deal. 

As neither the two next largest parties, the center-right party or a new party formed by the governing party’s most leftwing rebels, are expected to be able to form a government, the President will call parliamentary elections next month.  The Premier’s rump leftist party, despite the defections, is again expected to win a plurality of seats, but have to form another coalition government.  It currently governs with a right-wing party which shares its anti-austerity platform.  The Prime Minister will remain in office as head of a caretaker government in the meantime. 

Greece’s creditors, the European Commission, the European Central Bank and the International Monetary Fund (IMF), had insisted on spending cuts, privatizations, tax increases and market liberalizations in exchange for more loans in order to avoid a Greek default on its current sovereign debt, which is mostly owed to that troika, as well as a possible Greek abandonment of the Euro, the common currency of the European Monetary Union.  A Greek departure from the Eurozone would produce an uncertain degree of at least short-term harmful effects on Greece’s economy and an additional degree of effect on others.  The first two institutions of the troika are components of the European Union.  The U.S. is the largest contributor to the third troika member, the IMF.

Because Germany is the European state with the highest gross domestic product, German taxpayers have generously funded most of the hundreds of billions of dollars worth of loans to the Hellenic Republic to keep Greece in the Eurozone.  The Germans and other Northern Europeans tend to be more prosperous, as they emphasize work and savings more than Southern Europeans.  They complain about the Southern Europeans as lazy and unproductive, without considering the hotter Southern climate that reduces productivity and encourages a slower, healthier, more leisurely lifestyle, and lecture the Southerners incessantly about the necessity of being responsible by repaying debts.  However, Germany also has yet to pay Greece reparations it owes for its invasion during the Second World War.  The Nazi regime had been favored by the overwhelming number of Germans.  Furthermore, Germany does not contribute proportionately to its own defense, the cost of which is born mostly by the U.S., and it engages in defensive or peacekeeping missions in only limited manners, and thus is reliant on foreign taxpayers, like Greece.  In contrast, Greece spends a relatively larger share of its national budget on defense.  Its creditors insisted on some defense cuts, which the Greek Government accepted, despite objections by the right-wing junior coalition member, which nevertheless backed the deal. 

Although not to the extent of Italy, Greece is bearing a disproportionate share of the costs of rescuing refugees from North Africa and the Middle East because of its proximity.  The European Union has begun a rescue mission to replace Italy’s and is also sharing the load for taking care of the refugees.

The Greek Government also committed to better enforcement of laws against tax evasion.  Tax evasion and corruption have plagued Greece’s economy, in addition to overspending (e.g. generous pensions and transfer payments and too many civil servants), too much bureaucracy and lack of economic liberalization.  Greek governments of the late 1990s and early 2000s had lied about the Hellenic Republic’s finances to make them appear better in order for Greece to gain entry into the Eurozone, which some of the other European states apparently ignored for ideological reasons or the political benefit of the expansion of the common currency.  The previous center-right government had made much progress through austerity of reducing Greece’s sovereign debt, which is at the highest percentage of gross domestic product in the European Union.  Although there had been some economic recovery from the depression, the Greek economy remained weak, which allowed the governing leftist party to win a plurality and to form a coalition with the anti-austerity right-wing party.

I have posted several times during the European debt crisis over the last few years about the flaws of the European Monetary Union, of which the debt crisis in Greece is the best example.  

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