Greece: It's nearly sorted (possibly)…

Protesters march in Athens (28 June 2011) Tens of thousands of people are expected to stop work and take to the streets

Here is my take from Exarchia in downtown Athens this morning, as I join what looks to be a huge demo of public sector workers across the city.

It is crunch time for the opponents of the austerity plan. It looks like it will go through parliament narrowly - possibly with the privatisation element ring-fenced into a separate law, so that the deputies do not vote directly on the privatisation of energy and water.

With remarkable aplomb, no fewer than 156 Greek MPs have registered to speak in the debate. So it will drag on for 48 hours.

Prime Minister George Papandreou's Pasok party's essential argument right now is this: the culpability and chaos at the heart of the eurozone have turned an agenda that should be about urgent, long-term structural reform into one of urgent insolvency.

Therefore they need to throw what has to be thrown at the solvency problem without forgetting the key is to remedy decades of post-war corruption, inefficiency and institutional weakness in Greece.

This was put to me eloquently by Elena Panaritis, one of the party's "nationally nominated" MPs (see her interview with me on Newsnight at 2230 on BBC Two tonight).

'Contemplating the abyss'

I put it to her that the party and the government is engaged in a kind of psychological transference - choosing to focus on the long-term structural issues because the short term solvency issue is so painful.

Athens 28 06 2011 On the streets of Athens today

But the Greek political elite is demonstrating remarkable coolness under fire in this regard. Pasok is determined to govern alone and to get through this. It is not widely understood but the small business class, which is going to get hammered by tax rises, largely votes Pasok - so it is hard to see them coming out of the next election unscathed.

However, everyone here is now contemplating the abyss: it is becoming clearer to the proponents of default that it would mean, an instant "the ATM ate my card" situation for the whole population.

This, actually, is the strongest card Ms Panaritis and co can play with the Europeans: this is a crisis of the euro, not of Greece - a crisis of shoddy decision making, charisma-free leadership and general drift in Brussels, Frankfurt, Paris and Berlin.

So despite the formalities the subtext is becoming clear, I think.

The Greeks pass the austerity; they do some of it but not all of it. But by then the majority of the bad debt is on the books of the north European taxpayer - through the IMF, ECB and country governments.

Meanwhile, the 27% owned by banks is buried deep in a "Brady Bond" solution - for 30 years.

If your debt problems are solved on a scale of 30 years (private) to forever (the European states), then any problems in meeting the austerity timetable are not going to shake the earth. The Greek politicians and the Eurocrats will protest otherwise but I think this is the real situation that is emerging.

I will be tweeting from the demos.

Paul Mason Article written by Paul Mason Paul Mason Former economics editor, Newsnight

End of an era

After 12 years on Newsnight, Economics editor Paul Mason has moved on to pastures new and this blog is now closed.

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  • rate this

    Comment number 24.

    The low yields on UK, and US Bonds are due to the fact that everyone with a brain, which clearly doesn't include Government Economics spokespeople, knows that unlike Greece, neither the UK nor US are going to go bust, so there is no question of not getting their money back. What happens to UK yields as inflation continues to rip ahead, whilst austerity measures tank growth?

  • rate this

    Comment number 23.

    #6 David Lilley. The Greek economy is only a fraction the size of the UK. Greek debt to GDP is 150% going to 200%. In UK its 70%. UK has huge overseas assets. UK has control of its currency. The US debt is much larger than UK, but T-Bills are below 3%. UK 10 Yr Gilt was at the current level & falling at beginning of 2010. It rose from 3.2 to 3.8% after June Budget!

  • rate this

    Comment number 22.

    A Greek fudge cannot resolve the bigger issue of the bankruptcy of the world banking system.
    They have to keep postponing the crisis even though it makes the inevitable crash bigger because capitalism may not survive it.
    They are running on breaking ice (& have been for the last 3 years plus).

  • rate this

    Comment number 21.

    Thank you, Paul Mason, at last some sense from a BBC correspondent. YOU have always been reliable, long may it continue. Simple Keynes, in the long run we are all dead. AND, that doesn't mention inflation. In 1933, Barbara Hutton inherited $42million, now equivalent to $2000 million. In 30 years, who knows the currency we will all be using. Kick it far enough down the road, and we are free.

  • rate this

    Comment number 20.

    Disappointed in your appearance last night Paul. Austerity versus default. It's a false dichotomy.


Comments 5 of 24



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