Peter FitzSimons, rugby union international, author and bandana wearer, spoke at the National Press Club this week. The topic? The rebirth of Australian republicanism. Now, this may not have been a particularly notable speech - a lot of people go through the NPC, and there are quite a number of disgruntled republicans around FitzSimons' age - were it not for FitzSimons' announcement that the Treasurer, Joe Hockey, was leading a Parliamentary Friendship Group on the issue.
I suspect most of the community was not even aware of the existence of such groups. We are told that the groups exist so that members of both major parties can discuss issues that they share positions on. Apart from the question of why MPs need such groups to discuss issues with members of other parties (surely a sign of our Parliament having descended into petty sport, if further proof was needed), the elephant-in-the-room question is why now?
For starters, the republican movement is not doing particularly well at the moment. The most recent poll done on the issue, from Newspoll last year, shows that republicanism has been trending downwards since the 1999 referendum, and is now neck and neck with monarchism. Most worryingly for the movement, the level of strong support has significantly ebbed, especially amongst the young. The largest amount of strong support comes from middle-aged men (like FitzSimons and Hockey).
I suspect there are two reasons for the lack of strong support among the young. Firstly, they do not remember the bad old days for the monarchy during the 90s, particularly between the annus horribilus and the death of Princess Diana. Secondly, they're quite taken with the Duke and Duchess of Cambridge, to say nothing of Prince Harry, quite possibly the only royal today who could become Governor-General of this country without too much fuss being made (not that he will). The young royals also make their older relatives look better. I suspect even Charles is more popular today than he was a decade ago. (Note: these are not the only reasons for young people (or older people) to support a monarchy, but they do help explain the changing levels of support.)
Maybe it's this waning republican fervour that has avowed republicans determined to make it an issue again, presumably thinking that as long as young Australians are made to think about the issue, that the 'incontrovertible logic' of an Australian republic will easily turn them to the cause. Given that young Australians also care less for democracy than any other age group, I'm not so sure this is the case.
If it is this desire to get republicanism waxing again before its too late, then there is still the question of why, specifically, right now? This was the week which the Treasurer began by announcing that he would be focusing on cutting income tax, and began setting out the case for such a move, explaining why it was that this must be done and why it must happen now. What logic is there in announcing this policy, proclaiming that it is important, and then two days later allowing another topic - one which has neither widespread support nor a pressing need to happen right now - to distract from this supposedly important issue?
The thing is, even the issue of income tax cuts appears to be a distraction. The case for it is not strong. Yes, bracket creep is an issue - a given when tax brackets do not keep pace with inflation - but it isn't one that is going to change the fundamentals of the economy (which are in desperate need of attention). Nor, in the short term, does it do anything for the deficit, which the government promised to deal with, or assist public services, which every federal government continues to expand, therefore requiring a larger tax base. If the money isn't coming from a healthy economy or income tax, where will it come from?
Furthermore, who benefits the most from cutting the income tax? At face value, this depends on how it is delivered. If it is simply from increasing the tax-free threshold, then anyone on the edge of a tax bracket benefits, from the poorest to the richest. If it is actually about cutting rates, then the government is presumably most interested in using it to gain votes from middle-income earners - but there's also no way they wouldn't then also cut the taxes of high earners, as that would just give the latter more incentive to take their earnings offshore (and also stop donating to their traditional party of choice). Given high earners are, by design, the largest individual contributors to the government collections of tax, this would create a shortfall that needs to be made up somewhere.
At another level, though, any income tax cut is likely to hit the affect the poor the most, not directly, but through indirect results. The shortfall can be made up in two ways: increasing income and reducing spending. Increasing income can only come from some other form of taxation which, given this government's record, is unlikely to be a form of company tax. Instead, it will likely be some other form of individual taxation, which isn't reliant on income. The thing is, flat taxation naturally affects the poorest more than it affects the richest, as it takes away a higher proportion of their wealth. This will essentially mean that cutting income tax will be a redistribution of taxation away from the rich towards the poor. Reducing spending can only come through cutting the amount of things the government does - that is, government services - which, proportionally, are also most used by the poorer. So, this important policy is simply a way of changing the degree to which wealth is redistributed amongst the population. It does nothing to change the structure of the economy. Or, to put it another way, it's a distraction.
The republican issue served to distract from the distraction of income tax cuts. Is it any wonder so many seem disenchanted with the government?
Showing posts with label referendum. Show all posts
Showing posts with label referendum. Show all posts
Saturday, 29 August 2015
Tuesday, 7 July 2015
The three choices facing the troika
Well, as it turns out, the Greeks did indeed say όχι. The size of the victory, especially (60/40), has undoubtedly brought great joy to those who care about democracy and good economics. It has also, for the same reasons, undoubtedly annoyed the troika even more, as they now have to go through their options.
As I see it, they can go one of three ways.
1) Ignore
This is the option where the troika simply continue to offer the same 'deal' to the Greeks as though no referendum had ever happened.
Currently, it seems to be the favoured option of the northern economies in the Eurozone. Jeroen Dijsselbloem, head of the Eurogroup, has said today that "regardless of the outcome, difficult measures are necessary in Greece." The Finnish foreign minister, Timo Soini, has been more unequivocal: "If they want to hang on in the euro, which I think they do, they must obey the rules and play by the rules. It is a big moral hazard if they can vote in Greece and send the bill of that result to Finland."
That phrase, 'moral hazard', is often used in such arguments. The claim being that by agreeing to negotiate with Greece to bring down their debt (that they can't pay), they are paving the way for Greece to be profligate in the future, as they know that they will be rescued. But what is the alternative? That the Greek people are weighed further down by a debt imposed on them and austerity measures that have only shrunk the economy? That seems to be more of a genuine moral issue, rather than the hypothetical of the greedy Greeks. Furthermore, has the initial moral hazard not already been pushed through anyway? The initial bailout was not of Greece. It was of their lenders. So, way back in 2010, the moral hazard of saving the various banks that had lent out money they shouldn't have was apparently not that important.
This scenario is entirely political, as the hardliners cannot be seen to back down domestically, lest their approval ratings plummet. It uses the underlying assumption that because Greece is wedded to the idea of remaining in the Euro, they will have no choice but to agree to the demands being put forward, no matter how much they dislike or disagree with them.
2) Spin
This option was dependent on the strength of the result. Had turnout been lower and the result been closer, we may have heard language along the lines of 'Greece has not really voted no,' such as was used when France and the Netherlands voted against the European Constitution.
Because of the strength of the result, it cannot be spun this way. Instead, there may simply be spin of a different kind. With Yanis Varoufakis gone, some of the more conciliatory creditors may seek to at least offer to resume 'extending and pretending' for a little while longer, in order to see if the two groups at loggerheads will come to an agreement.
Other spin that will continued to be used will be the idea that the Greek people are the ones to blame for this crisis, another politicised claim that takes advantage of some of the backwards parts of the Greek economy to suggest that it is those parts of the economy that caused Greece to enter into a debt that is 180% of their GDP. This is, of course, simply not true, but it has been a politically useful tale to tell. Just look at the opinions on the BBC live updates blog to see how widespread the idea is.
3) Accept
This option may well be in the realm of pigs flying. The Eurogroup, in particular, seems most unwilling to accept that the Greek people deserve a say over something they have never had a say over. But fractures may be emerging amongst the troika. The release by the IMF of a document which clearly states that debt relief is necessary was the first indication. The second indication(s) can be seen in the responses of the governments of other southern European nations. While the northerners are taking a hard line of austerity and rules, the French, Spanish and Italians (amongst others) have indicated a greater openness to meeting Greece part way. Why? Partly, as with the previous options, it is political. These nations do not have such fiscally conservative governments in place. For those that see politics in the old left vs right spectrum, the southern countries currently lean towards the left, just like Syriza.
The other reason is economic. These nations are the ones that will be affected the most by Greece exiting the Eurozone. Once the Euro ceases to be an indissoluble monetary union and instead becomes a currency peg, the question will become not "will it survive?" but instead "who is next?" This means that attention will turn to the other PIIGS - Portugal, Ireland, Italy and Spain - and if they, too, are sent flying out of the Eurozone, the future of not merely the Euro, but the European Project too, is at stake. National sovereignty has already played a vital role in the most recent part of this crisis, and it could well totally re-establish itself on the continent if the dominoes fall one by one.
So, which of these is most likely? I don't think spin is a realistic possibility any more, as it seems like its time has been and gone. Ultimately it will depends on who gets their way. Greece holds the moral card of referendum, but it is the Eurogroup who will have the final say. If they do not budge, the ECB will do nothing. If neither of those troika members do anything, the IMF will be loathe to go it alone. If none of the troika members do anything, it's off to the Drachma. This may well be a decade defining moment.
As I see it, they can go one of three ways.
1) Ignore
This is the option where the troika simply continue to offer the same 'deal' to the Greeks as though no referendum had ever happened.
Currently, it seems to be the favoured option of the northern economies in the Eurozone. Jeroen Dijsselbloem, head of the Eurogroup, has said today that "regardless of the outcome, difficult measures are necessary in Greece." The Finnish foreign minister, Timo Soini, has been more unequivocal: "If they want to hang on in the euro, which I think they do, they must obey the rules and play by the rules. It is a big moral hazard if they can vote in Greece and send the bill of that result to Finland."
That phrase, 'moral hazard', is often used in such arguments. The claim being that by agreeing to negotiate with Greece to bring down their debt (that they can't pay), they are paving the way for Greece to be profligate in the future, as they know that they will be rescued. But what is the alternative? That the Greek people are weighed further down by a debt imposed on them and austerity measures that have only shrunk the economy? That seems to be more of a genuine moral issue, rather than the hypothetical of the greedy Greeks. Furthermore, has the initial moral hazard not already been pushed through anyway? The initial bailout was not of Greece. It was of their lenders. So, way back in 2010, the moral hazard of saving the various banks that had lent out money they shouldn't have was apparently not that important.
This scenario is entirely political, as the hardliners cannot be seen to back down domestically, lest their approval ratings plummet. It uses the underlying assumption that because Greece is wedded to the idea of remaining in the Euro, they will have no choice but to agree to the demands being put forward, no matter how much they dislike or disagree with them.
2) Spin
This option was dependent on the strength of the result. Had turnout been lower and the result been closer, we may have heard language along the lines of 'Greece has not really voted no,' such as was used when France and the Netherlands voted against the European Constitution.
Because of the strength of the result, it cannot be spun this way. Instead, there may simply be spin of a different kind. With Yanis Varoufakis gone, some of the more conciliatory creditors may seek to at least offer to resume 'extending and pretending' for a little while longer, in order to see if the two groups at loggerheads will come to an agreement.
Other spin that will continued to be used will be the idea that the Greek people are the ones to blame for this crisis, another politicised claim that takes advantage of some of the backwards parts of the Greek economy to suggest that it is those parts of the economy that caused Greece to enter into a debt that is 180% of their GDP. This is, of course, simply not true, but it has been a politically useful tale to tell. Just look at the opinions on the BBC live updates blog to see how widespread the idea is.
3) Accept
This option may well be in the realm of pigs flying. The Eurogroup, in particular, seems most unwilling to accept that the Greek people deserve a say over something they have never had a say over. But fractures may be emerging amongst the troika. The release by the IMF of a document which clearly states that debt relief is necessary was the first indication. The second indication(s) can be seen in the responses of the governments of other southern European nations. While the northerners are taking a hard line of austerity and rules, the French, Spanish and Italians (amongst others) have indicated a greater openness to meeting Greece part way. Why? Partly, as with the previous options, it is political. These nations do not have such fiscally conservative governments in place. For those that see politics in the old left vs right spectrum, the southern countries currently lean towards the left, just like Syriza.
The other reason is economic. These nations are the ones that will be affected the most by Greece exiting the Eurozone. Once the Euro ceases to be an indissoluble monetary union and instead becomes a currency peg, the question will become not "will it survive?" but instead "who is next?" This means that attention will turn to the other PIIGS - Portugal, Ireland, Italy and Spain - and if they, too, are sent flying out of the Eurozone, the future of not merely the Euro, but the European Project too, is at stake. National sovereignty has already played a vital role in the most recent part of this crisis, and it could well totally re-establish itself on the continent if the dominoes fall one by one.
So, which of these is most likely? I don't think spin is a realistic possibility any more, as it seems like its time has been and gone. Ultimately it will depends on who gets their way. Greece holds the moral card of referendum, but it is the Eurogroup who will have the final say. If they do not budge, the ECB will do nothing. If neither of those troika members do anything, the IMF will be loathe to go it alone. If none of the troika members do anything, it's off to the Drachma. This may well be a decade defining moment.
Saturday, 4 July 2015
Will the Greeks say όχι?
After years of lurching here and there, it appears Greece may be reaching some kind of ending. Maybe, possibly. The situation seems to change by the minute, but at this stage a referendum seems likely (though not guaranteed) for Saturday.
The Greek government has been the master of the mixed signal of late. On the one hand, Prime Minister Alexis Tsipras has been consistently pointing out how terrible Greece's creditors are. On the other, his government continues to offer further concessions, well beyond their original intentions.
As it stands, no-one really knows what will happen. Not Syriza, not the troika, not the Greek people, not economists and certainly not you or me. This is territory untravelled. No economy within the Eurozone has defaulted since joining, and there is no mechanism to leave the Euro. There is also no conceivable end to Greece's depression if they continue the pattern of scraping through their monthly repayments with continued austerity at the level of debt they have.
Should the referendum happen? I see no reason why not. Syriza was elected on a platform of ending austerity. Given that the acceptance of the troika proposals would mean further austerity, it is reasonable that the government should want the people to decide whether they want the government to renege on this promise. It would also be a rare occasion in the history of the European Project where the people get a say in their future. Generally when this happens, it doesn't go the way those inside the EU want, which is precisely why it is a rare occurrence.
That the referendum is rushed and somewhat unplanned goes without saying. The entire response to Greece for the past five years has seemed fairly unplanned. Certainly, there has never been established a point at which Greece will have returned to having a functioning economy. That a referendum should happen in a similar manner in order to decide the fate of such a lack of planning seems appropriate. (This is assuming that the troika were not entirely complicit the whole way through of ensuring that there wouldn't be an end to the crisis, a point which some would argue. Personally, I doubt the troika have such far-sighted abilities, though it seems clear they were quite happy to place an enormous burden on Greece for personal gain.)
So in the case it does happen, as it should, what will the result be?
It will be a matter of which emotion is stronger: fear, or pride. Fear what could result from the saying no to the troika, institutions which have essentially controlled Greece for five year; or pride in the belief that enough is enough, and no matter the consequences, it cannot be worse than what they are already experiencing.
It's a tough choice, but it's one they should never have been put in the position to make in the first place. It is hard to believe that Germany's finance minister, Wolfgang Schäuble, genuinely believes that further austerity is truly the solution to Greece's woes. You do not get that far by being unintelligent, and anyone can see that austerity is what has caused Greece's economy to spend years shrinking, putting them in an even worse position to pay off the debt that has been loaded onto them than when they started.
But the primary reason Schäuble and his compatriots across the Eurozone have been pushing austerity harder and harder has little to do with economics, and much more to do with politics. Austerity in other countries is popular at home. Schäuble's personal approval rating in Germany is through the roof, so why would he not continue down that path? There are no bad domestic political consequences for him in doing so, and thus his personal stake in the matter is secure, and the same is true for the rest of those pushing austerity.
Does it seem right that the future of a nation and its people should be used as a political device by other sovereign states who routinely intervene in the nation's affairs? Of course not. It completely contradicts the idea of sovereignty, and indeed of statehood. That this is a regular theme of the actions European Union should not go unnoticed. At this point, it is clear what a yes vote means for Greece: further austerity, further intervention with no end in sight. When such an option is given, the unknown suddenly becomes less fearful.
This, I believe, is why the polls are so close. Fear is a powerful emotion which many politicians and other powerful people have used to their advantage since time immemorial. But the Greeks have now known fear for so long that even such a strong emotion may have lost its power.
The Greek government has been the master of the mixed signal of late. On the one hand, Prime Minister Alexis Tsipras has been consistently pointing out how terrible Greece's creditors are. On the other, his government continues to offer further concessions, well beyond their original intentions.
As it stands, no-one really knows what will happen. Not Syriza, not the troika, not the Greek people, not economists and certainly not you or me. This is territory untravelled. No economy within the Eurozone has defaulted since joining, and there is no mechanism to leave the Euro. There is also no conceivable end to Greece's depression if they continue the pattern of scraping through their monthly repayments with continued austerity at the level of debt they have.
Should the referendum happen? I see no reason why not. Syriza was elected on a platform of ending austerity. Given that the acceptance of the troika proposals would mean further austerity, it is reasonable that the government should want the people to decide whether they want the government to renege on this promise. It would also be a rare occasion in the history of the European Project where the people get a say in their future. Generally when this happens, it doesn't go the way those inside the EU want, which is precisely why it is a rare occurrence.
That the referendum is rushed and somewhat unplanned goes without saying. The entire response to Greece for the past five years has seemed fairly unplanned. Certainly, there has never been established a point at which Greece will have returned to having a functioning economy. That a referendum should happen in a similar manner in order to decide the fate of such a lack of planning seems appropriate. (This is assuming that the troika were not entirely complicit the whole way through of ensuring that there wouldn't be an end to the crisis, a point which some would argue. Personally, I doubt the troika have such far-sighted abilities, though it seems clear they were quite happy to place an enormous burden on Greece for personal gain.)
So in the case it does happen, as it should, what will the result be?
It will be a matter of which emotion is stronger: fear, or pride. Fear what could result from the saying no to the troika, institutions which have essentially controlled Greece for five year; or pride in the belief that enough is enough, and no matter the consequences, it cannot be worse than what they are already experiencing.
It's a tough choice, but it's one they should never have been put in the position to make in the first place. It is hard to believe that Germany's finance minister, Wolfgang Schäuble, genuinely believes that further austerity is truly the solution to Greece's woes. You do not get that far by being unintelligent, and anyone can see that austerity is what has caused Greece's economy to spend years shrinking, putting them in an even worse position to pay off the debt that has been loaded onto them than when they started.
But the primary reason Schäuble and his compatriots across the Eurozone have been pushing austerity harder and harder has little to do with economics, and much more to do with politics. Austerity in other countries is popular at home. Schäuble's personal approval rating in Germany is through the roof, so why would he not continue down that path? There are no bad domestic political consequences for him in doing so, and thus his personal stake in the matter is secure, and the same is true for the rest of those pushing austerity.
Does it seem right that the future of a nation and its people should be used as a political device by other sovereign states who routinely intervene in the nation's affairs? Of course not. It completely contradicts the idea of sovereignty, and indeed of statehood. That this is a regular theme of the actions European Union should not go unnoticed. At this point, it is clear what a yes vote means for Greece: further austerity, further intervention with no end in sight. When such an option is given, the unknown suddenly becomes less fearful.
This, I believe, is why the polls are so close. Fear is a powerful emotion which many politicians and other powerful people have used to their advantage since time immemorial. But the Greeks have now known fear for so long that even such a strong emotion may have lost its power.
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