Letter of the EL Presidency:

Open letter to the Chancellor of Germany, Angela Merkel

C.C:
 The President of the French Republic, Mr Sarkozy
 The President of the European Council, Mr Van Rompuy
 The President of the European Commission, Mr Barroso
 The President of the European Central Bank, Mr Trichet

Dear Chancellor Merkel,

We are writing to you to express our grave concern about the policies being implemented in Greece. We sincerely believe that the overall approach is ineffective on its own terms and will not stabilize Greece’s debt as a percentage of GDP. At the same time the social consequences
are dire, with unemployment already exceeding 20% and with unprecedented levels of poverty, insecurity and social exclusion.

We feel that since 2008 Greece has been increasingly used as a guinea pig for Europe’s response to the crisis. But the results so far seem rather to bring to the fore what not to do in crisis conditions. It is time, we think, for a serious rethink.

The exclusive reliance, for countries facing serious fiscal disequilibria, on new, and expensive too boot, loans and austerity packages has led to a vicious circle of austerity leading to recession, requiring yet new loans and austerity packages. The truth of the matter is, as more and more influential economists have been arguing, that the overall approach does nothing for the underlying financial and economic problems. In this light, it is difficult not to conclude that the main goal is saving the banks of the North, rather than seriously confronting the problems of the South; a conclusion that has been drawn even in quarters, such as the Financial Times, with impeccably orthodox resources.

As it becomes increasingly clear that the overall approach to Greece represents a dead end, we have been witnessing the airing of even more ineffective, and socially unacceptable, strategies. Thus the ongoing plans for the privatization of Greek public assets through a company established in Luxembourg, has led to extremely negative responses in Greece, and it is should be taken as given that such moves will lead to multiple and serious reactions. We would ask you to consider only the reactions in your own country of a similar programme to privatize German assets, which would be of the order of 750 billion euro (1/3 of the German public debt), and which would be operated by a foreign company, without any participation from the German State! This plan must be immediately withdrawn, not only because it is unacceptable, but also because it would not resolve any of the problems of solvency of the Greek State. Furthermore, the realization of such a plan would raise serious questions of both political and legal responsibility for all those who would potentially be acting against the interests of the Greek State. It would also, of course, lead to enormous economic gains for those who wish to take advantage of the unprecedented crisis that the Greek people are experiencing, in order to buy public assets at prices dramatically lower than their real value.

Much has been made about Greece as an exceptional case. But it is important to be clear where such exceptionality lies. According to Eurostat, Greek public sector spending as a share of GDP does not diverge significantly from the average of the eurozone economies. Conversely
Greek military expenditures are systematically higher, while taxes on capital are lower than European averages. What is distinctive about the Greek case is the extent to which those on large incomes and with substantial wealth do not contribute to tax revenues according to their
tax-paying capacity.

Now all this has been obscured in European debates with the help of an unprecedented campaign of misinformation and misrepresentation by both populist parties and sections of the mass media. Unfortunately, you yourself contributed to this climate when you publically stated that Greek workers enjoy more holidays than the German workers. We would welcome a corrective statement, expressing your apologies to Greek workers and wage-earners. Of course the issue is rather more serious than such misinformation. Greek current account deficits were the other side of the same coin of German exporters surpluses, including those selling military hardware, and German banks, now being saved by your policies, those who gained from their role in financing Greece’s current account deficits. This is the result of the economic architecture of the EU.

Of course, you would also have to face the awkward issue of why German workers gained so little from this architecture. Moreover such an acknowledgment would bring into focus your responsibility within the eurozone. It is difficult to believe that the South will be able to gain
competitiveness without a more expansionary policy from the Northern economies. Germany cannot act as if it is a small open economy, neglecting demand conditions in the rest of the Union.

Attached to this letter is the framework of proposals of the Party of the European Left. As you know, our approach rests on the importance of social cohesion, including the improvement of the quality of life of German workers. It would be nice to think that such considerations were
somewhere on your list of priorities.
Yours sincerely,

The Presidency of the Party of the European Left
The President: Pierre Laurent
The Vice Presidents: Alexis Tsipras, Maite Mola, Marisa Matias, Grigore Petrenco
The Treasurer: Diether Dehm