Saturday 9 April 2016
How corruption revealed in Panama Papers opened the door to Isis and al-Qaida
Patrick Cockburn in The Independent
The message of Rudyard Kipling's poem is that corruption is always with us and has not changed much down the ages. There is some truth in this, but degrees of corruption greatly matter, as the Cheops would have found to his cost if he tried to build his pyramid in modern Iraq instead of ancient Egypt. The project would cost him billions rather than millions - and he would be more likely to end up with a hole in the ground than anything resembling a pyramid.
Three years ago I was in Baghdad after it had rained heavily, driving for miles through streets that had disappeared under grey-coloured flood water combined with raw sewage. Later I asked Shirouk Abayachi, an advisor to the Ministry of Water Resources, why this was happening and she said that "since 2003, $7bn has been spent to build a new sewage system for Baghdad, but either the sewers weren't built or they were built very badly". She concluded that "corruption is the key to all this".
Anybody discussing the Panama Papers and the practices of the law firm Mossack Fonseca should think about the ultimate destination of the $7bn not spent on the Baghdad drainage system. There will be many go-betweens and middle men protecting anyone who profited from this huge sum, but the suspicion must be that a proportion of it will have ended up in offshore financial centres where money is hidden and can be turned into legally held assets.
There is no obvious link between the revelations in the Panama Papers, the rise of Islamic State and the wars tearing apart at least nine countries in the Middle East and North Africa. But these three developments are intimately connected as ruling elites, who syphon off wealth into tax havens and foreign property, lose political credibility. No ordinary Afghans, Iraqis and Syrians will fight and die for rulers they detest as swindlers. Crucial to the rise of Isis, al-Qaida and the Taliban in Iraq, Syria, Afghanistan is not their own strength and popularity, but the weakness and unpopularity of the governments to which they are opposed.
Kipling was right in believing that there has always been corruption, but since the early 1990s corrupt states have often mutated into kleptocracies. Ruling families and the narrow coteries around them have taken a larger and larger share of the economic cake.
In Syria since the turn of the century, for instance, the rural population and the urban poor no longer enjoyed the limited benefits they had previously received under an equally harsh but more egalitarian regime. By 2011, President Bashar al-Assad's first cousin Rami Makhlouf was reported to be a dominant player in 60 per cent of the Syrian economy and to have a personal worth of $5 billion.
In Iraq earlier this year, a financial specialist, who wished to remain anonymous, said that the government of prime minister Haider al-Abadi held files on corrupt individuals, including "one politician who has amassed a fortune of $6 billion through corrupt dealings."
The danger of citing extreme examples of corruption from exotic and war-ravaged countries like Iraq, Afghanistan and Syria is that these may sound like events happening on another planet. But the political and economic systems in Iraq and Afghanistan were devised under the tutelage of the US and allies like Britain. They were proponents of free market economics which in the West may increase inequality and benefit the wealthy, but in Kabul and Baghdad were a license to steal by anybody with power.
Neo-liberal economists have a lot to answer for. A few days after Isis had captured Mosul in June 2014, I was in Baghdad and asked a recently retired four-star Iraqi general why the much larger and better-equipped Iraqi army had been defeated so swiftly and humiliatingly. He replied that the explanation was: "Corruption! Corruption! Corruption!"
He added that this was pervasive and had begun when the US was building a new Iraqi military after the overthrow of Saddam Hussein in 2003, when the American commanders had insisted on out-sourcing food and other supplies to private contractors. These businessmen and the army officers soon determined that, if the Iraqi government was paying money to feed and equip a battalion of 600 men, but its real strength was only 150, they could pocket the difference. So profitable was this arrangement that by 2014 all officers' jobs were for sale and it cost $200,000 to become a colonel and up to $2m a general in charge of a division.
Blatant corruption at the top in Kabul and Baghdad has been frequently reported over the years, though nothing much seems to change. But it is a mistake to imagine that this was simply the outcome of a culture of corruption specific to Afghanistan and Iraq. The most corrupt ministers were appointed and the most crooked contracts signed at a time when US officials were the real decision-makers in Baghdad.
For example, the entire military procurement budget of $1.2 billion was effectively stolen in 2004/5 when the Defence Ministry was substantially under US control, raising questions of the competence, or even collusion, of the US authorities.
The situation has got worse, not better. "I feared seven or eight years ago that Iraq would become like Nigeria," said one former minister in 2013, "but in fact it is far worse."
He cited as evidence a $1.3bn contract signed by a minister with one foreign company that had only a nominal existence - and a second company that was bankrupt. This took place in a country in which one third of the labour force is unemployed, and, if the underemployed are taken into account, the figure rises to over half.
The use of offshore financial centres by the moneyed elite in the oil states and much of the rest of the world is not always to avoid taxes which they would not pay if they kept the money at home, but in some cases to conceal what they have stolen and later to legally launder it.
Some of this can be done by buying property in places like Baghdad, which explains why property prices in that dangerous city are as high as London. But it is safer and better to buy property in London itself, something that will ultimately require the services of a company like Mossack Fonseca - though these services will be far removed from the original toxic source of the investment.
The Panama Papers give insight into the names and mechanisms through which globalised elites hide their wealth and avoid paying tax on it. Commentators now predict that popular disgust with political establishments will benefit radical leaders like Bernie Sanders in the US and Jeremy Corbyn in the UK.
What they do not see is that the way in which the detachment of interests of elites from the countries they rule has already produced states that have failed or are failing, or are wracked by conflict and war.
Who shall doubt 'the secret hid
Under Cheops' pyramid'
Was that the contractor did
Cheops out of several millions?
The message of Rudyard Kipling's poem is that corruption is always with us and has not changed much down the ages. There is some truth in this, but degrees of corruption greatly matter, as the Cheops would have found to his cost if he tried to build his pyramid in modern Iraq instead of ancient Egypt. The project would cost him billions rather than millions - and he would be more likely to end up with a hole in the ground than anything resembling a pyramid.
Three years ago I was in Baghdad after it had rained heavily, driving for miles through streets that had disappeared under grey-coloured flood water combined with raw sewage. Later I asked Shirouk Abayachi, an advisor to the Ministry of Water Resources, why this was happening and she said that "since 2003, $7bn has been spent to build a new sewage system for Baghdad, but either the sewers weren't built or they were built very badly". She concluded that "corruption is the key to all this".
Anybody discussing the Panama Papers and the practices of the law firm Mossack Fonseca should think about the ultimate destination of the $7bn not spent on the Baghdad drainage system. There will be many go-betweens and middle men protecting anyone who profited from this huge sum, but the suspicion must be that a proportion of it will have ended up in offshore financial centres where money is hidden and can be turned into legally held assets.
There is no obvious link between the revelations in the Panama Papers, the rise of Islamic State and the wars tearing apart at least nine countries in the Middle East and North Africa. But these three developments are intimately connected as ruling elites, who syphon off wealth into tax havens and foreign property, lose political credibility. No ordinary Afghans, Iraqis and Syrians will fight and die for rulers they detest as swindlers. Crucial to the rise of Isis, al-Qaida and the Taliban in Iraq, Syria, Afghanistan is not their own strength and popularity, but the weakness and unpopularity of the governments to which they are opposed.
Kipling was right in believing that there has always been corruption, but since the early 1990s corrupt states have often mutated into kleptocracies. Ruling families and the narrow coteries around them have taken a larger and larger share of the economic cake.
In Syria since the turn of the century, for instance, the rural population and the urban poor no longer enjoyed the limited benefits they had previously received under an equally harsh but more egalitarian regime. By 2011, President Bashar al-Assad's first cousin Rami Makhlouf was reported to be a dominant player in 60 per cent of the Syrian economy and to have a personal worth of $5 billion.
In Iraq earlier this year, a financial specialist, who wished to remain anonymous, said that the government of prime minister Haider al-Abadi held files on corrupt individuals, including "one politician who has amassed a fortune of $6 billion through corrupt dealings."
The danger of citing extreme examples of corruption from exotic and war-ravaged countries like Iraq, Afghanistan and Syria is that these may sound like events happening on another planet. But the political and economic systems in Iraq and Afghanistan were devised under the tutelage of the US and allies like Britain. They were proponents of free market economics which in the West may increase inequality and benefit the wealthy, but in Kabul and Baghdad were a license to steal by anybody with power.
Neo-liberal economists have a lot to answer for. A few days after Isis had captured Mosul in June 2014, I was in Baghdad and asked a recently retired four-star Iraqi general why the much larger and better-equipped Iraqi army had been defeated so swiftly and humiliatingly. He replied that the explanation was: "Corruption! Corruption! Corruption!"
He added that this was pervasive and had begun when the US was building a new Iraqi military after the overthrow of Saddam Hussein in 2003, when the American commanders had insisted on out-sourcing food and other supplies to private contractors. These businessmen and the army officers soon determined that, if the Iraqi government was paying money to feed and equip a battalion of 600 men, but its real strength was only 150, they could pocket the difference. So profitable was this arrangement that by 2014 all officers' jobs were for sale and it cost $200,000 to become a colonel and up to $2m a general in charge of a division.
Blatant corruption at the top in Kabul and Baghdad has been frequently reported over the years, though nothing much seems to change. But it is a mistake to imagine that this was simply the outcome of a culture of corruption specific to Afghanistan and Iraq. The most corrupt ministers were appointed and the most crooked contracts signed at a time when US officials were the real decision-makers in Baghdad.
For example, the entire military procurement budget of $1.2 billion was effectively stolen in 2004/5 when the Defence Ministry was substantially under US control, raising questions of the competence, or even collusion, of the US authorities.
The situation has got worse, not better. "I feared seven or eight years ago that Iraq would become like Nigeria," said one former minister in 2013, "but in fact it is far worse."
He cited as evidence a $1.3bn contract signed by a minister with one foreign company that had only a nominal existence - and a second company that was bankrupt. This took place in a country in which one third of the labour force is unemployed, and, if the underemployed are taken into account, the figure rises to over half.
The use of offshore financial centres by the moneyed elite in the oil states and much of the rest of the world is not always to avoid taxes which they would not pay if they kept the money at home, but in some cases to conceal what they have stolen and later to legally launder it.
Some of this can be done by buying property in places like Baghdad, which explains why property prices in that dangerous city are as high as London. But it is safer and better to buy property in London itself, something that will ultimately require the services of a company like Mossack Fonseca - though these services will be far removed from the original toxic source of the investment.
The Panama Papers give insight into the names and mechanisms through which globalised elites hide their wealth and avoid paying tax on it. Commentators now predict that popular disgust with political establishments will benefit radical leaders like Bernie Sanders in the US and Jeremy Corbyn in the UK.
What they do not see is that the way in which the detachment of interests of elites from the countries they rule has already produced states that have failed or are failing, or are wracked by conflict and war.
David Cameron’s gift to the world: trickle-down tax-dodging
Marina Hyde in The Guardian
An intriguing approach to damage limitation by Panama prat David Cameron, particularly considering the prime minister’s only real life job ever was as a PR. The prime minister appears to have been the last person to realise what everyone else in Westminster could see on Monday. Namely, that he’d be sitting down for an awkward tell-all – or at least a tell-some – by Thursday.
My absolute favourite tale from Cameron’s era as press chief for the culturocidal Carlton Television comes courtesy of the Guardian’s then media correspondent, who rang him up on a story. Like all mediocre PRs, a large part of his strategy was ignoring calls, but having accidentally answered this one he was cornered – and consequently pretended to be his own cleaner. “I can’t prove it was him,” the journalist reflected later, “but it certainly sounded a lot like him.” Well, he does have that central casting cleaner’s voice, so perhaps we ought to leave the case file open. Even so, for the journalists who recall the barefaced whoppers Cameron was able to tell them back in those days, this week has not been an occasion to break out the smelling salts.
“I’ve never tried to be anything I’m not,” Cameron claimed to Robert Peston in his belated confession. What about a cleaner? Or a football fan? Evidently the PM judged it the wrong moment to bring up either impersonations of the help, or Aston Villa. Or, indeed, West Ham. Still, at some point, Fortune was always going to collect on the deal Cameron foolishly made when he called the comedian Jimmy Carr’s (also legal) tax arrangements “morally wrong”. Showbiz now joins football on the list of things upon which he ought never to comment again.
Explaining to Peston that “my dad was a man I love and miss every day”, Cameron admitted that he and his wife had in fact invested in Ian Cameron’s offshore firm Blairmore in 1997, then sold their stake in 2010 for “something like £30,000”. That Cameron’s shifty cover-up has been more damaging than his non-crime is almost too insultingly obvious to state. He will not be assisted by the subconscious dismissiveness in that styling – “something like £30,000”. There is a fine line between fastidious precision and sounding like something north of the average British salary is rather forgettable, and the PM fell on the wrong side of it.
Even so, despite the obvious temptations, it would be a destructive mistake for Cameron’s enemies to get too tribal about these things. For all that this story appears currently to concern the Conservatives, there is something rather more Labourish – New Labourish, particularly – to it. The history of British political scandal dictates that it is traditionally sex that gets the Tories in trouble, and money that lands Labour in hot water.
That the Camerons’ investment in Blairmore lasted from 1997 to 2010 – the precise era of New Labour government – feels like a bit of a signpost. Indeed, for a story featuring something called Blairmore, it is surprising that it is Blair-less. For my money – something like £30, for this bet – the saga this most closely resembles is “Cheriegate”. Back at the very end of 2002, you may remember, Cherie Blair unwittingly used a conman (the gentleman caller of her special-adviser-cum-aromatherapist) to assist her in the purchase of two £250,000 Bristol flats.
Just as it has with Cameron, it took Mrs Blair several days to realise she was going to have to tell the truth, but eventually she too was making an emotional speech explaining that she had only been trying to protect her family “particularly my son in his first term at university [sob] living away from home”. A cri de coeur that certainly put in perspective the worries of other mothers who were at that time sending their 18-year-olds off to her husband’s war in Afghanistan. Toughest game in the world, the university game.
That said, Cameron’s emotional citation of his father, though obviously relevant, does rather recall Gordon Brown when on a sticky wicket. A defensive mention of his dad was Brown’s poker tell, and one almost as inscrutable as Homer Simpson’s habit of dancing round the table shrieking in delight at having been dealt four jacks. Mr Brown was never delighted when he brought up the scrupulous honesty of his Presbyterian minister father, but felt the urgent need in order to bolster the fib he was about to tell. An absurd denial that he’d never contemplated sacking Alistair Darling, for instance, came with the giveaway mention that his father had taught him “always to be honest”.
“He’s a prime minister,” skills minister Nick Boles conceded of Cameron on Friday morning, “but he’s also a human being and he’s a son.” I think we can ignore Mr Boles on the father-son dynamic. His last public reference to it was when he accused the grieving father of a Tory activist who had killed himself of trying to “hound” the party chairman out of a job.
Even so, Labour should consider the bigger picture. There are – how to put this delicately? – certain big political names of the relatively recent era that have yet to feature in the tale of tax avoidance, but on whom you’d be unwise to bet against emerging in some future story, some later data leak. Then again, perhaps these persons unnamed have opened their umbrella firms even more carefully, and we shall never know on the record. But we shall know it in our hearts, with that epistemology made fashionable by Tony Blair. “I only know what I believe,” he once intoned. Don’t we all, Mr Blair. Don’t we all.
The gravest danger of casting the tax debate as some tribal battle between the same old foes is to us – the little people who pay taxes, as Leona Helmsley once deathlessly observed. A tit-for-tat between parties does society in which we all have a stake no favours. Down that path, the path where ordinary people conclude that politicians and companies are all in it together, lies a corrupted society like Greece, where top-tier tax dodging eventually trickled down to dentists and doctors and beyond.
The idea that Britain – where people traditionally paid tax relatively willingly – could ever end up anything like this was unthinkable only a few years ago. It is now rather more thinkable, with the accretion of endless stories about Google, Amazon, the Panama Papers names … Never mind the details. Over time, overall impressions are taken. In the end, ordinary people will only know what they believe, and the fear for society is that they will begin to act accordingly.
An intriguing approach to damage limitation by Panama prat David Cameron, particularly considering the prime minister’s only real life job ever was as a PR. The prime minister appears to have been the last person to realise what everyone else in Westminster could see on Monday. Namely, that he’d be sitting down for an awkward tell-all – or at least a tell-some – by Thursday.
My absolute favourite tale from Cameron’s era as press chief for the culturocidal Carlton Television comes courtesy of the Guardian’s then media correspondent, who rang him up on a story. Like all mediocre PRs, a large part of his strategy was ignoring calls, but having accidentally answered this one he was cornered – and consequently pretended to be his own cleaner. “I can’t prove it was him,” the journalist reflected later, “but it certainly sounded a lot like him.” Well, he does have that central casting cleaner’s voice, so perhaps we ought to leave the case file open. Even so, for the journalists who recall the barefaced whoppers Cameron was able to tell them back in those days, this week has not been an occasion to break out the smelling salts.
“I’ve never tried to be anything I’m not,” Cameron claimed to Robert Peston in his belated confession. What about a cleaner? Or a football fan? Evidently the PM judged it the wrong moment to bring up either impersonations of the help, or Aston Villa. Or, indeed, West Ham. Still, at some point, Fortune was always going to collect on the deal Cameron foolishly made when he called the comedian Jimmy Carr’s (also legal) tax arrangements “morally wrong”. Showbiz now joins football on the list of things upon which he ought never to comment again.
Explaining to Peston that “my dad was a man I love and miss every day”, Cameron admitted that he and his wife had in fact invested in Ian Cameron’s offshore firm Blairmore in 1997, then sold their stake in 2010 for “something like £30,000”. That Cameron’s shifty cover-up has been more damaging than his non-crime is almost too insultingly obvious to state. He will not be assisted by the subconscious dismissiveness in that styling – “something like £30,000”. There is a fine line between fastidious precision and sounding like something north of the average British salary is rather forgettable, and the PM fell on the wrong side of it.
Even so, despite the obvious temptations, it would be a destructive mistake for Cameron’s enemies to get too tribal about these things. For all that this story appears currently to concern the Conservatives, there is something rather more Labourish – New Labourish, particularly – to it. The history of British political scandal dictates that it is traditionally sex that gets the Tories in trouble, and money that lands Labour in hot water.
That the Camerons’ investment in Blairmore lasted from 1997 to 2010 – the precise era of New Labour government – feels like a bit of a signpost. Indeed, for a story featuring something called Blairmore, it is surprising that it is Blair-less. For my money – something like £30, for this bet – the saga this most closely resembles is “Cheriegate”. Back at the very end of 2002, you may remember, Cherie Blair unwittingly used a conman (the gentleman caller of her special-adviser-cum-aromatherapist) to assist her in the purchase of two £250,000 Bristol flats.
Just as it has with Cameron, it took Mrs Blair several days to realise she was going to have to tell the truth, but eventually she too was making an emotional speech explaining that she had only been trying to protect her family “particularly my son in his first term at university [sob] living away from home”. A cri de coeur that certainly put in perspective the worries of other mothers who were at that time sending their 18-year-olds off to her husband’s war in Afghanistan. Toughest game in the world, the university game.
That said, Cameron’s emotional citation of his father, though obviously relevant, does rather recall Gordon Brown when on a sticky wicket. A defensive mention of his dad was Brown’s poker tell, and one almost as inscrutable as Homer Simpson’s habit of dancing round the table shrieking in delight at having been dealt four jacks. Mr Brown was never delighted when he brought up the scrupulous honesty of his Presbyterian minister father, but felt the urgent need in order to bolster the fib he was about to tell. An absurd denial that he’d never contemplated sacking Alistair Darling, for instance, came with the giveaway mention that his father had taught him “always to be honest”.
“He’s a prime minister,” skills minister Nick Boles conceded of Cameron on Friday morning, “but he’s also a human being and he’s a son.” I think we can ignore Mr Boles on the father-son dynamic. His last public reference to it was when he accused the grieving father of a Tory activist who had killed himself of trying to “hound” the party chairman out of a job.
Even so, Labour should consider the bigger picture. There are – how to put this delicately? – certain big political names of the relatively recent era that have yet to feature in the tale of tax avoidance, but on whom you’d be unwise to bet against emerging in some future story, some later data leak. Then again, perhaps these persons unnamed have opened their umbrella firms even more carefully, and we shall never know on the record. But we shall know it in our hearts, with that epistemology made fashionable by Tony Blair. “I only know what I believe,” he once intoned. Don’t we all, Mr Blair. Don’t we all.
The gravest danger of casting the tax debate as some tribal battle between the same old foes is to us – the little people who pay taxes, as Leona Helmsley once deathlessly observed. A tit-for-tat between parties does society in which we all have a stake no favours. Down that path, the path where ordinary people conclude that politicians and companies are all in it together, lies a corrupted society like Greece, where top-tier tax dodging eventually trickled down to dentists and doctors and beyond.
The idea that Britain – where people traditionally paid tax relatively willingly – could ever end up anything like this was unthinkable only a few years ago. It is now rather more thinkable, with the accretion of endless stories about Google, Amazon, the Panama Papers names … Never mind the details. Over time, overall impressions are taken. In the end, ordinary people will only know what they believe, and the fear for society is that they will begin to act accordingly.
Thursday 7 April 2016
Making money is not a vice, but refusing to contribute tax is
We can have a vision of a good life that is not simply a yacht off the Virgin Islands, but one in which we have decent schools and hospitals. Photograph: Alamy
Suzanne_Moore in The Guardian
That global elite – I always suspected they were up to no good … I must be psychic! And look, here is the proof: the Panama leaks show all these vultures hiding away their money in perfectly legal schemes to avoid paying taxes in countries out of which they operate their businesses. The yachts flying Panamanian flags off the coast of some of these islands may have been a hint but somehow the wrong-doing of the super rich has simply become part of the environment. A stroll around London reveals rough sleepers among ghost mansions and empty penthouses, bought by those who will never make them homes.
This is just what a globalised capital city looks like. This is where global capital comes to hide itself. Never mind these idyllic tax havens, the UK itself is a centre for a form of money laundering. This is “our” success.
After the crash of 2008, the City rallied, paying for more than half of the Tory election campaign.
Anger at the bankers dissipated into a sort of shrug of the shoulders. Those who caused the damage hung on to their bonuses. Austerity works by saying that it is in our own self-interest to punish ourselves.
Hopefully some of this compliance is now falling apart, but the Panama leaks reveal something so massive that it’s hard to get to grips with it: big, bad, rich people do secret, mean things.
Jeremy Corbyn, as ever, seems mildly irritated by the workings of global capitalism. After all, he was elected in protest at a leadership that had simply sucked it up. New Labour was so intensely relaxed about wealth that it made up phrases such as “wealth creators”. All of this was personified by Cherie Blair, forever on some grabby supermarket sweep while her hollowed-out husband sells his services to dictators. Corbyn’s asceticism may be a relief, but its not yet an alternative.
Some things need to be said now, and said clearly. Not paying tax may not be illegal, but it is immoral. It is a form of theft. The acceptance of a caste system whereby the likes of David Cameron and George Osborne rule us, and we are not allowed to question the finances of this elite has to stop. We all pay tax to train doctors and maintain the roads they are driven on. The idea that this elite does not use the services that are provided is simply not true.
Try, for instance, calling a private ambulance and having it driven only on private roads? I note, after another strike by junior doctors, that just before the 2010 election, Jeremy Hunt, then culture secretary, reduced his tax bill by £100,000 through a deal that meant he transferred his companies’ office buildings. This is only human isn’t it? Why shouldn’t he do this?
Here is why: tax is a marker of civilisation, a form of a social contract that right now is being torn up in front of our eyes. Even Adam Smith called tax a badge of liberty. And yet for many, freedom is entirely bound up with paying as little tax as possible. The richer you are the more free you are to not contribute – though you are still free to lecture others on the benefits of hard work.
This is what is so peculiar, too, about Cameron telling us he will no longer benefit from his father’s offshore arrangements. He did. He has. That is not in question. But the new kind of privilege is one that sees itself both as God-given and hard-earned. This delusion has hit its apotheosis in Zac Goldsmith, that charisma vacuum, who is strangely listless except when he is stirring up racial tension.
But then this wealth bubble is a private-members club because it is, by nature, profoundly antisocial. Tax-dodging, aversion or whatever polite term we use, is premised on the free movement of money. The social consequences of this, be it the movement of migrants or the closure of industries, is someone else’s problem.
Part of this hyper-capitalism is the idea that only money makes money and people make nothing. “The left” went badly wrong buying into this worldview for a while. Financialisation meant only services would produce profit. But making things, whether you’re assembling a car, or a painting, or a house, still matters. We also became muddled about aspiration. It was good, then it was bad – rather than it being just a fact of life, like breathing. The need is to simply find a language of aspiration that is about all of us. The economy is increasingly spoken of as if it were the weather and completely uncontrollable. No.
We can have a vision of a good life that is not simply a yacht off the Virgin Islands, but one in which we have decent schools and hospitals, and our entrepreneurial skills are both useful and what we use to contribute. Where we understand that we pay tax precisely because there is such a thing as society; making money is neither a vice nor a virtue. Refusing to contribute, though, is a vice. That tight bastard who never buys a round in the pub though he earns more than you? Do you really want him running the country? Because that’s the country in which we currently live.
Suzanne_Moore in The Guardian
That global elite – I always suspected they were up to no good … I must be psychic! And look, here is the proof: the Panama leaks show all these vultures hiding away their money in perfectly legal schemes to avoid paying taxes in countries out of which they operate their businesses. The yachts flying Panamanian flags off the coast of some of these islands may have been a hint but somehow the wrong-doing of the super rich has simply become part of the environment. A stroll around London reveals rough sleepers among ghost mansions and empty penthouses, bought by those who will never make them homes.
This is just what a globalised capital city looks like. This is where global capital comes to hide itself. Never mind these idyllic tax havens, the UK itself is a centre for a form of money laundering. This is “our” success.
After the crash of 2008, the City rallied, paying for more than half of the Tory election campaign.
Anger at the bankers dissipated into a sort of shrug of the shoulders. Those who caused the damage hung on to their bonuses. Austerity works by saying that it is in our own self-interest to punish ourselves.
Hopefully some of this compliance is now falling apart, but the Panama leaks reveal something so massive that it’s hard to get to grips with it: big, bad, rich people do secret, mean things.
Jeremy Corbyn, as ever, seems mildly irritated by the workings of global capitalism. After all, he was elected in protest at a leadership that had simply sucked it up. New Labour was so intensely relaxed about wealth that it made up phrases such as “wealth creators”. All of this was personified by Cherie Blair, forever on some grabby supermarket sweep while her hollowed-out husband sells his services to dictators. Corbyn’s asceticism may be a relief, but its not yet an alternative.
Some things need to be said now, and said clearly. Not paying tax may not be illegal, but it is immoral. It is a form of theft. The acceptance of a caste system whereby the likes of David Cameron and George Osborne rule us, and we are not allowed to question the finances of this elite has to stop. We all pay tax to train doctors and maintain the roads they are driven on. The idea that this elite does not use the services that are provided is simply not true.
Try, for instance, calling a private ambulance and having it driven only on private roads? I note, after another strike by junior doctors, that just before the 2010 election, Jeremy Hunt, then culture secretary, reduced his tax bill by £100,000 through a deal that meant he transferred his companies’ office buildings. This is only human isn’t it? Why shouldn’t he do this?
Here is why: tax is a marker of civilisation, a form of a social contract that right now is being torn up in front of our eyes. Even Adam Smith called tax a badge of liberty. And yet for many, freedom is entirely bound up with paying as little tax as possible. The richer you are the more free you are to not contribute – though you are still free to lecture others on the benefits of hard work.
This is what is so peculiar, too, about Cameron telling us he will no longer benefit from his father’s offshore arrangements. He did. He has. That is not in question. But the new kind of privilege is one that sees itself both as God-given and hard-earned. This delusion has hit its apotheosis in Zac Goldsmith, that charisma vacuum, who is strangely listless except when he is stirring up racial tension.
But then this wealth bubble is a private-members club because it is, by nature, profoundly antisocial. Tax-dodging, aversion or whatever polite term we use, is premised on the free movement of money. The social consequences of this, be it the movement of migrants or the closure of industries, is someone else’s problem.
Part of this hyper-capitalism is the idea that only money makes money and people make nothing. “The left” went badly wrong buying into this worldview for a while. Financialisation meant only services would produce profit. But making things, whether you’re assembling a car, or a painting, or a house, still matters. We also became muddled about aspiration. It was good, then it was bad – rather than it being just a fact of life, like breathing. The need is to simply find a language of aspiration that is about all of us. The economy is increasingly spoken of as if it were the weather and completely uncontrollable. No.
We can have a vision of a good life that is not simply a yacht off the Virgin Islands, but one in which we have decent schools and hospitals, and our entrepreneurial skills are both useful and what we use to contribute. Where we understand that we pay tax precisely because there is such a thing as society; making money is neither a vice nor a virtue. Refusing to contribute, though, is a vice. That tight bastard who never buys a round in the pub though he earns more than you? Do you really want him running the country? Because that’s the country in which we currently live.
Tuesday 5 April 2016
Why we must save the EU
Yannis Varoufakis in The Guardian
The first German word I ever learned was Siemens. It was emblazoned on our sturdy 1950s fridge, our washing machine, the vacuum cleaner – on almost every appliance in my family’s home in Athens. The reason for my parents’ peculiar loyalty to the German brand was my uncle Panayiotis, who was Siemens’ general manager in Greece from the mid-1950s to the late 1970s.
A Germanophile electrical engineer and a fluent speaker of Goethe’s language, Panayiotis had convinced his younger sister – my mother – to take up the study of German; she even planned to spend a year in Hamburg to take up a Goethe Institute scholarship in the summer of 1967.
Alas, on 21 April 1967, my mother’s plans were laid in ruins, along with our imperfect Greek democracy. For in the early hours of that morning, at the command of four army colonels, tanks rolled on to the streets of Athens and other major cities, and our country was soon enveloped in a thick cloud of neo-fascist gloom. It was also the day when Uncle Panayiotis’s world fell apart.
Unlike my dad, who in the late 1940s had paid for his leftist politics with several years in concentration camps, Panayiotis was what today would be referred to as a neoliberal. Fiercely anti-communist, and suspicious of social democracy, he supported the American intervention in the Greek civil war in 1946 (on the side of my father’s jailers). He backed the German Free Democratic party and the Greek Progressive party, which purveyed a blend of free-market economics with unconditional support for Greece’s oppressive US-led state security machine.
His political views, and his position as the head of Siemens’ operations in Greece, made Panayiotis a typical member of Greece’s postwar ruling class. When state security forces or their stooges roughed up leftwing protesters, or even killed a brilliant member of parliament, Grigoris Lambrakis, in 1963, Panayiotis would grudgingly approve, convinced that these were unpleasant but necessary actions. My ears are still ringing with the rowdy exchanges he often had with Dad, over what he considered “reasonable measures to defend democracy from its sworn enemies” – reasonable measures that my father had experienced first-hand, and from which he would never fully recover.
The heavy footprint of US agencies in Greek politics, even going so far as to engineer the dismissal of a popular centrist prime minister, Georgios Papandreou, in 1965, seemed to Panayiotis an acceptable trade-off: Greece had given up some sovereignty to western powers in exchange for freedom from a menacing eastern bloc lurking a short driving distance north of Athens. However, on that bleak April day in 1967, Panayiotis’s life was turned upside down.
He simply could not tolerate that “his” people (as he referred to the rightist army officers who had staged the coup and, more importantly, their American handlers) should dissolve parliament, suspend the constitution, and intern potential dissidents (including rightwing democrats) in football stadia, police stations and concentration camps. He had no great sympathy with the deposed centrist prime minister that the putschists and their US puppeteers were trying to keep out of government – but his worldview was torn asunder, leading him to a sudden spurt of almost comical radicalisation.
A few months after the military regime took power, Panayiotis joined an underground group called Democratic Defence, which consisted largely of other establishment liberals like himself – university professors, lawyers, and even a future prime minister. They planted a series of bombs around Athens, taking care to ensure there were no injuries, in order to demonstrate that the military regime was not in full control, despite its clampdown.
For a few years after the coup, Panayiotis appeared – even to his own mother – as yet another professional keeping his head down, minding his own business. No one had an inkling of his double life: corporate man during the day, subversive bomber by night. We were mostly relieved, meanwhile, that Dad had not disappeared again into some concentration camp.
My enduring memory of those years, in fact, is the crackling sound of a radio hidden under a red blanket in the middle of the living room in our Athens home. Every night at around nine, mum and dad would huddle together under the blanket – and upon hearing the muffled jingle announcing the beginning of the programme, followed by the voice of a German announcer, my own six-year-old imagination would travel from Athens to central Europe, a mythical place I had not visited yet except for the tantalising glimpses offered by an illustrated Brothers Grimm book I had in my bedroom.
Deutsche Welle, the German international radio station that my parents were listening to, became their most precious ally against the crushing power of state propaganda at home: a window looking out to faraway democratic Europe. At the end of each of its hour-long special broadcasts on Greece, my parents and I would sit around the dining table while they mulled over the latest news.
I didn’t fully understand what they were discussing, but this neither bored nor upset me. For I was gripped by a sense of excitement at the strangeness of our predicament: that, to find out what was happening in our very own Athens, we had to travel, through the airwaves, and veiled by a red blanket, to a place called Germany.
The reason for the red blanket was a grumpy old neighbour called Gregoris. Gregoris was known for his connections with the secret police and his penchant for spying on my parents; in particular my Dad, whose leftwing past made him an excellent target for an ambitious snitch. Strange as it may sound today, tuning in to Deutsche Welle broadcasts became one of a long list of activities punishable by anything from harassment to torture. So, having noticed Gregoris snooping around inside our backyard, my parents took no risks. Thus the red blanket became our defence from Gregoris’s prying ears.
A few years later, it was from Deutsche Welle that we learned what Panayiotis and his colleagues had been up to – when the radio announced that they had all been arrested. Dad would joke for years to come about the pathetic inability of these bourgeois liberals to organise an underground resistance group: only a few hours after one of the Democratic Defence members was accidentally caught, the rest were also rounded up. All the police had to do was read the first man’s diary – where he had meticulously listed his comrades’ names and addresses, in some cases including a description of each subversive “assignment”. Torture, court martial and long prison sentences – in some cases the death sentence – followed.
A year after Panayiotis’s capture, the military police guarding him decided to relax his isolation regime by allowing me, a harmless 10-year-old, to visit him once a week. Our already close bond grew stronger with boy-talk that allowed him a degree of escapism. He told me about machines I had never seen (computers, he called them), asked about the latest movies, described his favourite cars.
In anticipation of my visits, he would use matchsticks and other materials that prison guards would let him keep to build model planes for me. Often, he would hide inside his elegant artefacts a message for my aunt, my mother, on occasion even for his colleagues at Siemens. For my part, I was proud of my new skill of disassembling his models with minimal damage, retrieving the message, and putting them back together.
Long after Panayiotis’s death, I discovered the last of these: a matchstick model of a Stuka dive-bomber in my old family home’s attic. Torn between leaving it intact and looking inside, I decided to take it apart. And there it was. His last missive was not addressed to anyone in particular.
It was a single word: “kyriarchia”. Sovereignty.
A tank outside the parliament building in Athens during the military coup in 1967. Photograph: Bettmann/Corbis
It was almost 50 years after those childhood evenings under the red blanket that I made my first official visit to Berlin as finance minister of Greece, in February 2015. My first port of call was, of course, the federal finance ministry, to meet the legendary Dr Wolfgang Schäuble. To him, and his minions, I was a nuisance. Our leftwing government had just been elected, defeating a sister party of the Christian Democrats – New Democracy – on an electoral platform that was, to say the least, a form of inconvenience for Schäuble and Chancellor Angela Merkel, and their plans for keeping the eurozone in order.
Our success was, indeed, Berlin’s greatest fear. Were we to succeed in negotiating a new deal for Greece that ended the interminable recession gripping the nation, the Greek leftist “disease” would almost certainly spread to Portugal, Spain and Ireland, all of which had general elections looming.
Before I arrived in Berlin, and only three days after I had assumed office as minister, I received my first high-ranking visitor in my Athens office: Schäuble’s self-appointed envoy, Jeroen Dijsselbloem, the Dutch finance minister and president of the Eurogroup of finance ministers. Within seconds of meeting, he asked me whether I intended to implement fully and unwaveringly the economic programme that previous Greek governments had been forced by Berlin, Brussels and Frankfurt – the seat of the European Central Bank (ECB) – to adopt.
Given that our government had won a mandate to renegotiate the very logic of that disastrous programme (which had led to the loss of one third of national income and increased unemployment by 20%), his question was never going to be the beginning of a beautiful friendship.
For my part, I attempted a diplomatic reply that would be my standard line of argument for the months to follow: “Given that the existing economic programme has been an indisputable failure, I propose that we sit down together, the new Greek government and our European partners, and rethink the whole programme without prejudice or fear, designing together economic policies that may help Greece recover.”
My modest plea for a modicum of national sovereignty over the economic policies imposed on a nation languishing in the depths of a great depression was met with astonishing brutality. “This will not work!”, was Dijsselbloem’s opening line. In less than a minute he had laid his cards on the table: if I were to insist on any substantial renegotiation of the programme, the ECB would close down our banks by the end of February 2015 – a month after we had been elected.
The Greek finance ministry’s office overlooks Syntagma Square and the House of Parliament – the very stage on which, in April 1967, the tanks had crushed our democracy. As Dijsselbloem spoke, I caught myself looking over his shoulder out to the broad square teeming with people and thinking to myself: “This is interesting. In 1967 it was the tanks, now they are trying to do the same with the banks.”
The meeting with Dijsselbloem ended with a tumultuous press conference in which the Eurogroup’s president lost his cool when he heard me say that our government was not planning to work with the cabal of technicians the troika of lenders habitually sent to Athens to impose upon the elected government policies destined to fail. The die had been cast and the battle for reclaiming part of our lost sovereignty was only beginning. Berlin, where I was to meet the troika’s real master, beckoned.
As the car that was driving me from Berlin’s Tegel airport approached the old headquarters of Goering’s air ministry – now the home of the federal ministry of finance – I wondered whether my host, Schäuble, could even begin to imagine that I was arriving in Berlin with my head full of childhood memories in which Germany featured as an important friend.
Once inside the building, my aides and I were ushered briskly into a large lift. The lift door opened up into a long, cold corridor at the end of which awaited the great man in his famous wheelchair. As I approached, my extended hand was refused and, instead of a handshake, he ushered me purposefully into his office.
While my relationship with Schäuble warmed in the months that followed, the shunned hand symbolised a great deal that is wrong with Europe. It was symbolic proof that the half-century that had passed since my red blanket days, and those prison visits to Siemens’ man in Athens, had changed Europe to no end.
I have no idea what role Siemens played in securing my uncle’s release some time in 1972, two years before the regime’s collapse. What I do know is that my parents were convinced that the German company had played a decisive role. For that reason, every time I saw the word “Siemens” around our home, I felt a warm glow. It is the same kind of warmth I still feel when I hear the words Deutsche Welle. Indeed, back then, in the exciting, bleak years of my childhood, Germany featured in my imagination as a dear friend, a land of democrats that, under Chancellor Willy Brandt, did what was humanly possible to help Greeks rid ourselves of our ugly dictatorship.
Returning home to Athens from my first official visit to Berlin, I was struck by the irony. A continent that had been uniting under different languages and cultures was now divided by a common currency, the euro, and the awful centrifugal forces that it had unleashed throughout Europe.
A week after our first bilateral meeting in Berlin, Schäuble and I were to meet again across the long, rectangular table of the Eurogroup, the eurozone’s decision-making body, comprising the common currency’s finance ministers, plus the representatives of the troika – the ECB, the European Commission, and the International Monetary Fund. After I had recited our government’s plea for a substantial renegotiation of the so-called “Greek economic programme”, which had the troika’s fingerprints all over it, Dr Schäuble astounded me with a reply that should send shivers up the spine of every democrat: “Elections cannot be allowed to change an economic programme of a member state!” he said categorically.
During a break from that 10-hour Eurogroup meeting, in which I had struggled to reclaim some economic sovereignty on behalf of my battered parliament and our suffering people, another finance minister attempted to soothe me by saying: “Yanis, you must understand that no country can be sovereign today. Especially not a small and bankrupt one like yours.”
This line of argument is probably the most pernicious fallacy to have afflicted public debate in our modern liberal democracies. Indeed, I would go as far as to suggest that it may be the greatest threat to liberal democracy itself. Its true meaning is that sovereignty is passé unless you are the United States, China or, maybe, Putin’s Russia. In which case you might as well append your country to a transnational alliance of states where your parliament is reduced to a rubber stamp, and all authority is vested in the larger states.
Interestingly, this argument is not reserved for small, bankrupt countries such as Greece, trapped in a badly designed common currency area. This same noxious dictum is today being peddled in the UK – supposedly as a clinching argument in favour of the remain campaign. As a supporter of Britain remaining in the EU, nothing upsets me more than the enlistment to the “yes” cause of an argument that is as toxic as it is woolly.
The problem begins once the distinction between sovereignty and power is blurred. Sovereignty is about who decides legitimately on behalf of a people – whereas power is the capacity to impose these decisions on the outside world. Iceland is a tiny country. But to claim that Iceland’s sovereignty is illusory because it is too small to have much power is like arguing that a poor person with no political clout might as well give up her right to vote.
To put it slightly differently, small sovereign nations such as Iceland have choices to make within the broader constraints created for them by nature and by the rest of humanity. However limited these choices might be, Iceland’s citizens retain absolute authority to hold their elected officials accountable for the decisions they have reached (within the nation’s external constraints), and to strike down every piece of legislation those elected officials have decided upon in the past.
An alliance of states, which is what the EU is, can of course come to mutually beneficial arrangements, such as a defensive military alliance against a common aggressor, coordination between police forces, open borders, an agreement to common industry standards, or the creation of a free-trade zone. But it can never legitimately strike down or overrule the sovereignty of one of its member states on the basis of the limited power it has been granted by the sovereign states that have agreed to participate in the alliance. There is no collective European sovereignty from which Brussels could draw the legitimate political authority to do so.
One may retort that the European Union’s democratic credentials are beyond reproach. The European Council comprises heads of governments, while Ecofin and the Eurogroup are the councils of finance ministers (of the whole EU and of the eurozone respectively). All these representatives are, of course, democratically elected. Moreover, there is the European parliament, elected by the citizens of the member states, which has the power to send proposed legislation back to the Brussels bureaucracy. But these arguments demonstrate how badly European appreciation of the founding principles of liberal democracy has been degraded. The critical error of such a defence is once more to confuse political authority with power.
A parliament is sovereign, even if its country is not particularly powerful, when it can dismiss the executive for having failed to fulfil the tasks assigned to it within the constraints of whatever power the executive and the parliament possess. Nothing like this exists in the EU today.
For while the members of the European Council and the Eurogroup of finance ministers are elected politicians, answerable, theoretically, to their respective national parliaments, the Council and the Eurogroup are themselves not answerable to any parliament, nor indeed to any voting citizens whatsoever.
Moreover, the Eurogroup, where most of Europe’s important economic decisions are taken, is a body that does not even exist in European law, that keeps no minutes of its procedures and insists its deliberations are confidential – that is, not to be shared with the citizens of Europe. It operates on the basis – in the words of Thucydides – that “strong do as they please while the weak suffer what they must”. It is a set-up designed to preclude any sovereignty derived from the people of Europe.
While opposing Schäuble’s logic on Greece in the Eurogroup and elsewhere, at the back of my mind there were two thoughts. First, as the finance minister of a bankrupt state, whose citizens demanded an end to a great depression that had been caused by a denial of our bankruptcy – the imposition of new unpayable loans, so payments could be made on old unpayable loans – I had a political and moral duty to say no to more “extend-and-pretend” loan agreements. My second thought was the lesson of Sophocles’s Antigone, who taught us that good women and men have a duty to contradict rules lacking political and moral legitimacy.
Political authority is the cement that keeps legislation together, and the sovereignty of the body politic that engenders the legislation is its foundation. Saying no to Schäuble and the troika was an essential defence of our right to sovereignty. Not just as Greeks but as Europeans.
How ironic that this should also have been the last missive I received from Siemens’ long forgotten man in Athens.
Supporters of a no vote in Greece’s referendum on its bailout, outside the Greek parliament in Athens last summer. Photograph: Nicolas Koutsokostas/Demotix/Corbis
Coming into the highest level of European decision-making from the academic world, where argument and reason are the norm, the most striking realisation was the absence of any meaningful debate. If this was not bad enough, there was an even more painful realisation: that this absence is considered natural – indeed, considered a virtue, and one that newcomers like myself should embrace, or face the consequences.
Prearranged communiques, prefabricated votes, a solid coalition of finance ministers around Schäuble that was impenetrable to rational debate; this was the order to the day and, more often, of the long, long night. Not once did I get the feeling that my interlocutors were at all interested in Greece’s economic recovery while we were discussing the economic policies that should be implemented in my country.
From the day I assumed office I strove to put together sensible, moderate proposals that would create common ground between my government, the troika of Greece’s lenders and Schäuble’s people. The idea was to go to Brussels, put to them our own blueprint for Greece’s recovery and then discuss with them their own ideas and objections to ours.
My own Athens-based team worked hard on this, together with experts from abroad, including Jeff Sachs of Columbia University, Thomas Meyer, a former chief economist at Deutsche Bank, Daniel Cohen and Matthieu Pigasse, leading lights of the French investment bank Lazard, the former US treasury secretary Larry Summers, and my personal friend Lord Lamont – not exactly a group of leftist recalcitrants.
Soon we had a fully-fledged plan, whose final version I co-authored with Jeff Sachs. It consisted of three chapters. One proposed smart debt operations that would make Greece’s public debt manageable again, while guaranteeing maximum returns to our creditors. The second chapter put forward a medium-term fiscal consolidation policy that would ensure the Greek government would never get into deficit again, while limiting our budget surplus targets to levels low enough to be credible and consistent with recovery. Finally, the third chapter outlined deep reforms to public and tax administration, product markets, and the restructure of a broken banking system as well as the creation a development bank to manage public assets at an arm’s length from politicians.
I am often asked: Why were these proposals of your ministry rejected? They were not. The Eurogroup and the troika did not have to reject them because they never allowed me to put them on the table. When I began speaking about them, they would look at me as if I were singing the Swedish national anthem. And behind the scenes they were exerting pressure on the Greek prime minister, Alexis Tsipras, to repress these proposals, insinuating that there would be no agreement unless we stuck to the troika’s failed programme.
What was really going on, of course, was that the troika could simply ignore our proposals, tell the world that I had nothing credible to offer them, let the negotiations fail, impose an indefinite bank holiday, and then force the prime minister to acquiesce on everything – including a massive new loan that is at least double the size Greece would have required under our proposals.
Tragically, despite our prime minister’s acceptance of the troika’s terms of surrender, and the loss of another year during which Greece’s great depression is deepening, the same process is unfolding now. Only a few days ago WikiLeaks revealed the troubling transcript of a telephone conversation involving the International Monetary Fund’s participants in the Greek drama. Listening to their discussion confirms that nothing has changed since I resigned last July.
Once I put it to Schäuble that we, as the elected representatives of a continent in crisis, can not defer to unelected bureaucrats; we have a duty to find common ground on the policies that affect people’s lives through direct dialogue. He replied that, in his perspective, what matters most is the respect of the existing “rules”. And since the rules can only be enforced by technocrats, I should talk to them.
Whenever I attempted to discuss rules that were clearly impossible to enforce, the standard reply was: “But these are the rules!” Once, while I was pushing hard for the argument, resulting from our team’s policy work, that primary budget surplus targets of 4.5% of Greece’s national income were impossible, and undesirable even from the creditors’ perspective, Schäuble looked at me and asked me, perhaps for the first and last time, an economic question. “So, what would you like that target to be?” At last, I rejoiced, a chance to have a serious discussion.
In an attempt to be as reasonable as possible, I replied: “For the target of the government budget primary surplus to be credible and realistic, it needs to be consistent with our overall policy mix. The budget surplus number, when added to the difference between savings and investment, must equal Greece’s current account balance. Which means that we can strive for a higher budget primary surplus if we also put in place a credible strategy for boosting investment and delivering more credit to exporters.
“So, before I can answer your question, Wolfgang, on what the primary surplus target ought to be, it is crucial that we link this number to our policies on non-performing bank loans (that impede credit to exporters) and investment flows (which are reduced when we set the primary budget surplus target too high, scaring investors off with the implicit threat of higher future taxes). What I can tell you at this point is that the optimal target cannot be more than 1.5%. But let’s have our people study this together.”
Schäuble’s response to my point, addressing the rest of the Eurogroup while avoiding my eyes, was remarkable: “The previous government has committed Greece to 4.5% primary surpluses. And a commitment is a commitment!”
A few hours later, the media was full of leaks from the Eurogroup, claiming that “the Greek finance minister infuriated his colleagues in the Eurogroup by subjecting them to an economics lecture”.
Wolfgang Schäuble and Yanis Varoufakis before a finance ministers’ meeting in Brussels in 2015 Photograph: Olivier Hoslet/EPA
There is a reason why I began this piece with the story of my Uncle Panayiotis. That reason is a question asked by a journalist towards the end of the press conference after my first meeting with Wolfgang Schäuble in Berlin.
The question was about Siemens and a scandal that had broken out some years earlier, when an investigation initiated in the US found evidence that a certain Michalis Christoforakos, a successor of Panayiotis, was actively pushing bribes into the hands of Greek politicians to secure government contracts on behalf of Siemens. Soon after the Greek authorities began investigating the matter, the gentleman absconded to Germany, where the courts prevented his extradition to Athens.
“Did you, minister,” asked the journalist, “impress upon your German colleague” – that would be Wolfgang Schäuble – “the German state’s obligation to help the Greek government snuff out corruption by extraditing Mr Christoforakos to Greece?” I tried to honour the question with a reasonable answer. “I am sure,” I said, “that the German authorities will understand the importance of assisting our troubled state in its struggle against corruption in Greece. I trust that my colleagues in Germany understand the importance of not being seen to have double standards anywhere in Europe.” Looking terribly put out, Schäuble mumbled that this was not a matter for his finance ministry.
On the aeroplane back to Athens, my mind travelled to the late 1970s. After his release from prison, Panayiotis returned to the helm of Siemens Greece. He was happy in that job, as he kept telling me, and proud of his work. Until he stopped being proud of it – so much so that he resigned in anger.
I remember asking him why he had resigned. His answer still resonates. He told me that he was facing pressure from his superiors in Germany to pay bribes to Greek politicians to ensure that Siemens would maintain its dominant position in Greece, getting the lion’s share of contracts related to the lucrative digitisation of the Greek telephone network.
There is a touching faith in the European north that Europe comprises ants and grasshoppers – and that all the frugal and cautious ants live in the north, while the spendthrift grasshoppers have congregated mysteriously in the south. The reality is much more muddled. A mighty network of corrupt practices has been laid over all of our countries – and the collapse of democratic checks and balances, due in part to our receding sovereignty, has helped hide it from public view.
As legitimate political authority retreats, we fall in the lap of brute force, inertia and demonisation of the weak. Indeed, by the end of June of 2015, the ECB had shut our banks, our government was divided, I resigned my ministry, and my prime minister capitulated to the troika.
The crushing of the Athens spring was a serious blow for an already wounded Greece. But it was also a wholesale defeat for the idea of a united, humanist, democratic Europe.
Our European Union is disintegrating. Should we accelerate the disintegration of a failed confederacy? If one insists that even small countries can retain their sovereignty, as I have done, does this mean Brexit is the obvious course? My answer is an emphatic “No!”
Here is why: if Britain and Greece were not already in the EU, they should most certainly stay out. But, once inside, it is crucial to consider the consequences of a decision to leave. Whether we like it or not, the European Union is our environment – and it has become a terribly unstable environment, which will disintegrate even if a small, depressed country like Greece leaves, let alone a major economy like Britain. Should the Greeks or the Brits care about the disintegration of an infuriating EU? Yes, of course we should care. And we should care very much because the disintegration of this frustrating alliance will create a vortex that will consume us all – a postmodern replay of the 1930s.
It is a major error to assume, whether you are a remain or a leave supporter, that the EU is something constant “out there” that you may or may not want to be part of. The EU’s very existence depends on Britain staying in. Greece and Britain are facing the same three options. The first two are represented aptly by the two warring factions within the Tory party: deference to Brussels and exit. They are equally calamitous options. Both lead to the same dystopian future: a Europe fit only for those who flourish in times of a great Depression – the xenophobes, the ultra-nationalists, the enemies of democratic sovereignty. The third option is the only one worth going for: staying in the EU to form a cross-border alliance of democrats, which Europeans failed to manage in the 1930s, but which our generation must now attempt to prevent history repeating itself.
This is precisely what some of us are working towards in creating DiEM25 – the Democracy in Europe Movement, with a view to conjuring up a democratic surge across Europe, a common European identity, an authentic European sovereignty, an internationalist bulwark against both submission to Brussels and hyper-nationalist reaction.
Is this not utopian? Of course it is! But not more so than the notion that the current EU can survive its anti-democratic hubris, and the gross incompetence fuelled by its unaccountability. Or the idea that British or Greek democracy can be revived in the bosom of a nation-state whose sovereignty will never be restored within a single market controlled by Brussels.
Just like in the early 1930s, Britain and Greece cannot escape Europe by building a mental or legislative wall behind which to hide. Either we band together to democratise – or we suffer the consequences of a pan-European nightmare that no border can keep out.
The first German word I ever learned was Siemens. It was emblazoned on our sturdy 1950s fridge, our washing machine, the vacuum cleaner – on almost every appliance in my family’s home in Athens. The reason for my parents’ peculiar loyalty to the German brand was my uncle Panayiotis, who was Siemens’ general manager in Greece from the mid-1950s to the late 1970s.
A Germanophile electrical engineer and a fluent speaker of Goethe’s language, Panayiotis had convinced his younger sister – my mother – to take up the study of German; she even planned to spend a year in Hamburg to take up a Goethe Institute scholarship in the summer of 1967.
Alas, on 21 April 1967, my mother’s plans were laid in ruins, along with our imperfect Greek democracy. For in the early hours of that morning, at the command of four army colonels, tanks rolled on to the streets of Athens and other major cities, and our country was soon enveloped in a thick cloud of neo-fascist gloom. It was also the day when Uncle Panayiotis’s world fell apart.
Unlike my dad, who in the late 1940s had paid for his leftist politics with several years in concentration camps, Panayiotis was what today would be referred to as a neoliberal. Fiercely anti-communist, and suspicious of social democracy, he supported the American intervention in the Greek civil war in 1946 (on the side of my father’s jailers). He backed the German Free Democratic party and the Greek Progressive party, which purveyed a blend of free-market economics with unconditional support for Greece’s oppressive US-led state security machine.
His political views, and his position as the head of Siemens’ operations in Greece, made Panayiotis a typical member of Greece’s postwar ruling class. When state security forces or their stooges roughed up leftwing protesters, or even killed a brilliant member of parliament, Grigoris Lambrakis, in 1963, Panayiotis would grudgingly approve, convinced that these were unpleasant but necessary actions. My ears are still ringing with the rowdy exchanges he often had with Dad, over what he considered “reasonable measures to defend democracy from its sworn enemies” – reasonable measures that my father had experienced first-hand, and from which he would never fully recover.
The heavy footprint of US agencies in Greek politics, even going so far as to engineer the dismissal of a popular centrist prime minister, Georgios Papandreou, in 1965, seemed to Panayiotis an acceptable trade-off: Greece had given up some sovereignty to western powers in exchange for freedom from a menacing eastern bloc lurking a short driving distance north of Athens. However, on that bleak April day in 1967, Panayiotis’s life was turned upside down.
He simply could not tolerate that “his” people (as he referred to the rightist army officers who had staged the coup and, more importantly, their American handlers) should dissolve parliament, suspend the constitution, and intern potential dissidents (including rightwing democrats) in football stadia, police stations and concentration camps. He had no great sympathy with the deposed centrist prime minister that the putschists and their US puppeteers were trying to keep out of government – but his worldview was torn asunder, leading him to a sudden spurt of almost comical radicalisation.
A few months after the military regime took power, Panayiotis joined an underground group called Democratic Defence, which consisted largely of other establishment liberals like himself – university professors, lawyers, and even a future prime minister. They planted a series of bombs around Athens, taking care to ensure there were no injuries, in order to demonstrate that the military regime was not in full control, despite its clampdown.
For a few years after the coup, Panayiotis appeared – even to his own mother – as yet another professional keeping his head down, minding his own business. No one had an inkling of his double life: corporate man during the day, subversive bomber by night. We were mostly relieved, meanwhile, that Dad had not disappeared again into some concentration camp.
My enduring memory of those years, in fact, is the crackling sound of a radio hidden under a red blanket in the middle of the living room in our Athens home. Every night at around nine, mum and dad would huddle together under the blanket – and upon hearing the muffled jingle announcing the beginning of the programme, followed by the voice of a German announcer, my own six-year-old imagination would travel from Athens to central Europe, a mythical place I had not visited yet except for the tantalising glimpses offered by an illustrated Brothers Grimm book I had in my bedroom.
Deutsche Welle, the German international radio station that my parents were listening to, became their most precious ally against the crushing power of state propaganda at home: a window looking out to faraway democratic Europe. At the end of each of its hour-long special broadcasts on Greece, my parents and I would sit around the dining table while they mulled over the latest news.
I didn’t fully understand what they were discussing, but this neither bored nor upset me. For I was gripped by a sense of excitement at the strangeness of our predicament: that, to find out what was happening in our very own Athens, we had to travel, through the airwaves, and veiled by a red blanket, to a place called Germany.
The reason for the red blanket was a grumpy old neighbour called Gregoris. Gregoris was known for his connections with the secret police and his penchant for spying on my parents; in particular my Dad, whose leftwing past made him an excellent target for an ambitious snitch. Strange as it may sound today, tuning in to Deutsche Welle broadcasts became one of a long list of activities punishable by anything from harassment to torture. So, having noticed Gregoris snooping around inside our backyard, my parents took no risks. Thus the red blanket became our defence from Gregoris’s prying ears.
A few years later, it was from Deutsche Welle that we learned what Panayiotis and his colleagues had been up to – when the radio announced that they had all been arrested. Dad would joke for years to come about the pathetic inability of these bourgeois liberals to organise an underground resistance group: only a few hours after one of the Democratic Defence members was accidentally caught, the rest were also rounded up. All the police had to do was read the first man’s diary – where he had meticulously listed his comrades’ names and addresses, in some cases including a description of each subversive “assignment”. Torture, court martial and long prison sentences – in some cases the death sentence – followed.
A year after Panayiotis’s capture, the military police guarding him decided to relax his isolation regime by allowing me, a harmless 10-year-old, to visit him once a week. Our already close bond grew stronger with boy-talk that allowed him a degree of escapism. He told me about machines I had never seen (computers, he called them), asked about the latest movies, described his favourite cars.
In anticipation of my visits, he would use matchsticks and other materials that prison guards would let him keep to build model planes for me. Often, he would hide inside his elegant artefacts a message for my aunt, my mother, on occasion even for his colleagues at Siemens. For my part, I was proud of my new skill of disassembling his models with minimal damage, retrieving the message, and putting them back together.
Long after Panayiotis’s death, I discovered the last of these: a matchstick model of a Stuka dive-bomber in my old family home’s attic. Torn between leaving it intact and looking inside, I decided to take it apart. And there it was. His last missive was not addressed to anyone in particular.
It was a single word: “kyriarchia”. Sovereignty.
A tank outside the parliament building in Athens during the military coup in 1967. Photograph: Bettmann/Corbis
It was almost 50 years after those childhood evenings under the red blanket that I made my first official visit to Berlin as finance minister of Greece, in February 2015. My first port of call was, of course, the federal finance ministry, to meet the legendary Dr Wolfgang Schäuble. To him, and his minions, I was a nuisance. Our leftwing government had just been elected, defeating a sister party of the Christian Democrats – New Democracy – on an electoral platform that was, to say the least, a form of inconvenience for Schäuble and Chancellor Angela Merkel, and their plans for keeping the eurozone in order.
Our success was, indeed, Berlin’s greatest fear. Were we to succeed in negotiating a new deal for Greece that ended the interminable recession gripping the nation, the Greek leftist “disease” would almost certainly spread to Portugal, Spain and Ireland, all of which had general elections looming.
Before I arrived in Berlin, and only three days after I had assumed office as minister, I received my first high-ranking visitor in my Athens office: Schäuble’s self-appointed envoy, Jeroen Dijsselbloem, the Dutch finance minister and president of the Eurogroup of finance ministers. Within seconds of meeting, he asked me whether I intended to implement fully and unwaveringly the economic programme that previous Greek governments had been forced by Berlin, Brussels and Frankfurt – the seat of the European Central Bank (ECB) – to adopt.
Given that our government had won a mandate to renegotiate the very logic of that disastrous programme (which had led to the loss of one third of national income and increased unemployment by 20%), his question was never going to be the beginning of a beautiful friendship.
For my part, I attempted a diplomatic reply that would be my standard line of argument for the months to follow: “Given that the existing economic programme has been an indisputable failure, I propose that we sit down together, the new Greek government and our European partners, and rethink the whole programme without prejudice or fear, designing together economic policies that may help Greece recover.”
My modest plea for a modicum of national sovereignty over the economic policies imposed on a nation languishing in the depths of a great depression was met with astonishing brutality. “This will not work!”, was Dijsselbloem’s opening line. In less than a minute he had laid his cards on the table: if I were to insist on any substantial renegotiation of the programme, the ECB would close down our banks by the end of February 2015 – a month after we had been elected.
The Greek finance ministry’s office overlooks Syntagma Square and the House of Parliament – the very stage on which, in April 1967, the tanks had crushed our democracy. As Dijsselbloem spoke, I caught myself looking over his shoulder out to the broad square teeming with people and thinking to myself: “This is interesting. In 1967 it was the tanks, now they are trying to do the same with the banks.”
The meeting with Dijsselbloem ended with a tumultuous press conference in which the Eurogroup’s president lost his cool when he heard me say that our government was not planning to work with the cabal of technicians the troika of lenders habitually sent to Athens to impose upon the elected government policies destined to fail. The die had been cast and the battle for reclaiming part of our lost sovereignty was only beginning. Berlin, where I was to meet the troika’s real master, beckoned.
As the car that was driving me from Berlin’s Tegel airport approached the old headquarters of Goering’s air ministry – now the home of the federal ministry of finance – I wondered whether my host, Schäuble, could even begin to imagine that I was arriving in Berlin with my head full of childhood memories in which Germany featured as an important friend.
Once inside the building, my aides and I were ushered briskly into a large lift. The lift door opened up into a long, cold corridor at the end of which awaited the great man in his famous wheelchair. As I approached, my extended hand was refused and, instead of a handshake, he ushered me purposefully into his office.
While my relationship with Schäuble warmed in the months that followed, the shunned hand symbolised a great deal that is wrong with Europe. It was symbolic proof that the half-century that had passed since my red blanket days, and those prison visits to Siemens’ man in Athens, had changed Europe to no end.
I have no idea what role Siemens played in securing my uncle’s release some time in 1972, two years before the regime’s collapse. What I do know is that my parents were convinced that the German company had played a decisive role. For that reason, every time I saw the word “Siemens” around our home, I felt a warm glow. It is the same kind of warmth I still feel when I hear the words Deutsche Welle. Indeed, back then, in the exciting, bleak years of my childhood, Germany featured in my imagination as a dear friend, a land of democrats that, under Chancellor Willy Brandt, did what was humanly possible to help Greeks rid ourselves of our ugly dictatorship.
Returning home to Athens from my first official visit to Berlin, I was struck by the irony. A continent that had been uniting under different languages and cultures was now divided by a common currency, the euro, and the awful centrifugal forces that it had unleashed throughout Europe.
A week after our first bilateral meeting in Berlin, Schäuble and I were to meet again across the long, rectangular table of the Eurogroup, the eurozone’s decision-making body, comprising the common currency’s finance ministers, plus the representatives of the troika – the ECB, the European Commission, and the International Monetary Fund. After I had recited our government’s plea for a substantial renegotiation of the so-called “Greek economic programme”, which had the troika’s fingerprints all over it, Dr Schäuble astounded me with a reply that should send shivers up the spine of every democrat: “Elections cannot be allowed to change an economic programme of a member state!” he said categorically.
During a break from that 10-hour Eurogroup meeting, in which I had struggled to reclaim some economic sovereignty on behalf of my battered parliament and our suffering people, another finance minister attempted to soothe me by saying: “Yanis, you must understand that no country can be sovereign today. Especially not a small and bankrupt one like yours.”
This line of argument is probably the most pernicious fallacy to have afflicted public debate in our modern liberal democracies. Indeed, I would go as far as to suggest that it may be the greatest threat to liberal democracy itself. Its true meaning is that sovereignty is passé unless you are the United States, China or, maybe, Putin’s Russia. In which case you might as well append your country to a transnational alliance of states where your parliament is reduced to a rubber stamp, and all authority is vested in the larger states.
Interestingly, this argument is not reserved for small, bankrupt countries such as Greece, trapped in a badly designed common currency area. This same noxious dictum is today being peddled in the UK – supposedly as a clinching argument in favour of the remain campaign. As a supporter of Britain remaining in the EU, nothing upsets me more than the enlistment to the “yes” cause of an argument that is as toxic as it is woolly.
The problem begins once the distinction between sovereignty and power is blurred. Sovereignty is about who decides legitimately on behalf of a people – whereas power is the capacity to impose these decisions on the outside world. Iceland is a tiny country. But to claim that Iceland’s sovereignty is illusory because it is too small to have much power is like arguing that a poor person with no political clout might as well give up her right to vote.
To put it slightly differently, small sovereign nations such as Iceland have choices to make within the broader constraints created for them by nature and by the rest of humanity. However limited these choices might be, Iceland’s citizens retain absolute authority to hold their elected officials accountable for the decisions they have reached (within the nation’s external constraints), and to strike down every piece of legislation those elected officials have decided upon in the past.
An alliance of states, which is what the EU is, can of course come to mutually beneficial arrangements, such as a defensive military alliance against a common aggressor, coordination between police forces, open borders, an agreement to common industry standards, or the creation of a free-trade zone. But it can never legitimately strike down or overrule the sovereignty of one of its member states on the basis of the limited power it has been granted by the sovereign states that have agreed to participate in the alliance. There is no collective European sovereignty from which Brussels could draw the legitimate political authority to do so.
One may retort that the European Union’s democratic credentials are beyond reproach. The European Council comprises heads of governments, while Ecofin and the Eurogroup are the councils of finance ministers (of the whole EU and of the eurozone respectively). All these representatives are, of course, democratically elected. Moreover, there is the European parliament, elected by the citizens of the member states, which has the power to send proposed legislation back to the Brussels bureaucracy. But these arguments demonstrate how badly European appreciation of the founding principles of liberal democracy has been degraded. The critical error of such a defence is once more to confuse political authority with power.
A parliament is sovereign, even if its country is not particularly powerful, when it can dismiss the executive for having failed to fulfil the tasks assigned to it within the constraints of whatever power the executive and the parliament possess. Nothing like this exists in the EU today.
For while the members of the European Council and the Eurogroup of finance ministers are elected politicians, answerable, theoretically, to their respective national parliaments, the Council and the Eurogroup are themselves not answerable to any parliament, nor indeed to any voting citizens whatsoever.
Moreover, the Eurogroup, where most of Europe’s important economic decisions are taken, is a body that does not even exist in European law, that keeps no minutes of its procedures and insists its deliberations are confidential – that is, not to be shared with the citizens of Europe. It operates on the basis – in the words of Thucydides – that “strong do as they please while the weak suffer what they must”. It is a set-up designed to preclude any sovereignty derived from the people of Europe.
While opposing Schäuble’s logic on Greece in the Eurogroup and elsewhere, at the back of my mind there were two thoughts. First, as the finance minister of a bankrupt state, whose citizens demanded an end to a great depression that had been caused by a denial of our bankruptcy – the imposition of new unpayable loans, so payments could be made on old unpayable loans – I had a political and moral duty to say no to more “extend-and-pretend” loan agreements. My second thought was the lesson of Sophocles’s Antigone, who taught us that good women and men have a duty to contradict rules lacking political and moral legitimacy.
Political authority is the cement that keeps legislation together, and the sovereignty of the body politic that engenders the legislation is its foundation. Saying no to Schäuble and the troika was an essential defence of our right to sovereignty. Not just as Greeks but as Europeans.
How ironic that this should also have been the last missive I received from Siemens’ long forgotten man in Athens.
Supporters of a no vote in Greece’s referendum on its bailout, outside the Greek parliament in Athens last summer. Photograph: Nicolas Koutsokostas/Demotix/Corbis
Coming into the highest level of European decision-making from the academic world, where argument and reason are the norm, the most striking realisation was the absence of any meaningful debate. If this was not bad enough, there was an even more painful realisation: that this absence is considered natural – indeed, considered a virtue, and one that newcomers like myself should embrace, or face the consequences.
Prearranged communiques, prefabricated votes, a solid coalition of finance ministers around Schäuble that was impenetrable to rational debate; this was the order to the day and, more often, of the long, long night. Not once did I get the feeling that my interlocutors were at all interested in Greece’s economic recovery while we were discussing the economic policies that should be implemented in my country.
From the day I assumed office I strove to put together sensible, moderate proposals that would create common ground between my government, the troika of Greece’s lenders and Schäuble’s people. The idea was to go to Brussels, put to them our own blueprint for Greece’s recovery and then discuss with them their own ideas and objections to ours.
My own Athens-based team worked hard on this, together with experts from abroad, including Jeff Sachs of Columbia University, Thomas Meyer, a former chief economist at Deutsche Bank, Daniel Cohen and Matthieu Pigasse, leading lights of the French investment bank Lazard, the former US treasury secretary Larry Summers, and my personal friend Lord Lamont – not exactly a group of leftist recalcitrants.
Soon we had a fully-fledged plan, whose final version I co-authored with Jeff Sachs. It consisted of three chapters. One proposed smart debt operations that would make Greece’s public debt manageable again, while guaranteeing maximum returns to our creditors. The second chapter put forward a medium-term fiscal consolidation policy that would ensure the Greek government would never get into deficit again, while limiting our budget surplus targets to levels low enough to be credible and consistent with recovery. Finally, the third chapter outlined deep reforms to public and tax administration, product markets, and the restructure of a broken banking system as well as the creation a development bank to manage public assets at an arm’s length from politicians.
I am often asked: Why were these proposals of your ministry rejected? They were not. The Eurogroup and the troika did not have to reject them because they never allowed me to put them on the table. When I began speaking about them, they would look at me as if I were singing the Swedish national anthem. And behind the scenes they were exerting pressure on the Greek prime minister, Alexis Tsipras, to repress these proposals, insinuating that there would be no agreement unless we stuck to the troika’s failed programme.
What was really going on, of course, was that the troika could simply ignore our proposals, tell the world that I had nothing credible to offer them, let the negotiations fail, impose an indefinite bank holiday, and then force the prime minister to acquiesce on everything – including a massive new loan that is at least double the size Greece would have required under our proposals.
Tragically, despite our prime minister’s acceptance of the troika’s terms of surrender, and the loss of another year during which Greece’s great depression is deepening, the same process is unfolding now. Only a few days ago WikiLeaks revealed the troubling transcript of a telephone conversation involving the International Monetary Fund’s participants in the Greek drama. Listening to their discussion confirms that nothing has changed since I resigned last July.
Once I put it to Schäuble that we, as the elected representatives of a continent in crisis, can not defer to unelected bureaucrats; we have a duty to find common ground on the policies that affect people’s lives through direct dialogue. He replied that, in his perspective, what matters most is the respect of the existing “rules”. And since the rules can only be enforced by technocrats, I should talk to them.
Whenever I attempted to discuss rules that were clearly impossible to enforce, the standard reply was: “But these are the rules!” Once, while I was pushing hard for the argument, resulting from our team’s policy work, that primary budget surplus targets of 4.5% of Greece’s national income were impossible, and undesirable even from the creditors’ perspective, Schäuble looked at me and asked me, perhaps for the first and last time, an economic question. “So, what would you like that target to be?” At last, I rejoiced, a chance to have a serious discussion.
In an attempt to be as reasonable as possible, I replied: “For the target of the government budget primary surplus to be credible and realistic, it needs to be consistent with our overall policy mix. The budget surplus number, when added to the difference between savings and investment, must equal Greece’s current account balance. Which means that we can strive for a higher budget primary surplus if we also put in place a credible strategy for boosting investment and delivering more credit to exporters.
“So, before I can answer your question, Wolfgang, on what the primary surplus target ought to be, it is crucial that we link this number to our policies on non-performing bank loans (that impede credit to exporters) and investment flows (which are reduced when we set the primary budget surplus target too high, scaring investors off with the implicit threat of higher future taxes). What I can tell you at this point is that the optimal target cannot be more than 1.5%. But let’s have our people study this together.”
Schäuble’s response to my point, addressing the rest of the Eurogroup while avoiding my eyes, was remarkable: “The previous government has committed Greece to 4.5% primary surpluses. And a commitment is a commitment!”
A few hours later, the media was full of leaks from the Eurogroup, claiming that “the Greek finance minister infuriated his colleagues in the Eurogroup by subjecting them to an economics lecture”.
Wolfgang Schäuble and Yanis Varoufakis before a finance ministers’ meeting in Brussels in 2015 Photograph: Olivier Hoslet/EPA
There is a reason why I began this piece with the story of my Uncle Panayiotis. That reason is a question asked by a journalist towards the end of the press conference after my first meeting with Wolfgang Schäuble in Berlin.
The question was about Siemens and a scandal that had broken out some years earlier, when an investigation initiated in the US found evidence that a certain Michalis Christoforakos, a successor of Panayiotis, was actively pushing bribes into the hands of Greek politicians to secure government contracts on behalf of Siemens. Soon after the Greek authorities began investigating the matter, the gentleman absconded to Germany, where the courts prevented his extradition to Athens.
“Did you, minister,” asked the journalist, “impress upon your German colleague” – that would be Wolfgang Schäuble – “the German state’s obligation to help the Greek government snuff out corruption by extraditing Mr Christoforakos to Greece?” I tried to honour the question with a reasonable answer. “I am sure,” I said, “that the German authorities will understand the importance of assisting our troubled state in its struggle against corruption in Greece. I trust that my colleagues in Germany understand the importance of not being seen to have double standards anywhere in Europe.” Looking terribly put out, Schäuble mumbled that this was not a matter for his finance ministry.
On the aeroplane back to Athens, my mind travelled to the late 1970s. After his release from prison, Panayiotis returned to the helm of Siemens Greece. He was happy in that job, as he kept telling me, and proud of his work. Until he stopped being proud of it – so much so that he resigned in anger.
I remember asking him why he had resigned. His answer still resonates. He told me that he was facing pressure from his superiors in Germany to pay bribes to Greek politicians to ensure that Siemens would maintain its dominant position in Greece, getting the lion’s share of contracts related to the lucrative digitisation of the Greek telephone network.
There is a touching faith in the European north that Europe comprises ants and grasshoppers – and that all the frugal and cautious ants live in the north, while the spendthrift grasshoppers have congregated mysteriously in the south. The reality is much more muddled. A mighty network of corrupt practices has been laid over all of our countries – and the collapse of democratic checks and balances, due in part to our receding sovereignty, has helped hide it from public view.
As legitimate political authority retreats, we fall in the lap of brute force, inertia and demonisation of the weak. Indeed, by the end of June of 2015, the ECB had shut our banks, our government was divided, I resigned my ministry, and my prime minister capitulated to the troika.
The crushing of the Athens spring was a serious blow for an already wounded Greece. But it was also a wholesale defeat for the idea of a united, humanist, democratic Europe.
Our European Union is disintegrating. Should we accelerate the disintegration of a failed confederacy? If one insists that even small countries can retain their sovereignty, as I have done, does this mean Brexit is the obvious course? My answer is an emphatic “No!”
Here is why: if Britain and Greece were not already in the EU, they should most certainly stay out. But, once inside, it is crucial to consider the consequences of a decision to leave. Whether we like it or not, the European Union is our environment – and it has become a terribly unstable environment, which will disintegrate even if a small, depressed country like Greece leaves, let alone a major economy like Britain. Should the Greeks or the Brits care about the disintegration of an infuriating EU? Yes, of course we should care. And we should care very much because the disintegration of this frustrating alliance will create a vortex that will consume us all – a postmodern replay of the 1930s.
It is a major error to assume, whether you are a remain or a leave supporter, that the EU is something constant “out there” that you may or may not want to be part of. The EU’s very existence depends on Britain staying in. Greece and Britain are facing the same three options. The first two are represented aptly by the two warring factions within the Tory party: deference to Brussels and exit. They are equally calamitous options. Both lead to the same dystopian future: a Europe fit only for those who flourish in times of a great Depression – the xenophobes, the ultra-nationalists, the enemies of democratic sovereignty. The third option is the only one worth going for: staying in the EU to form a cross-border alliance of democrats, which Europeans failed to manage in the 1930s, but which our generation must now attempt to prevent history repeating itself.
This is precisely what some of us are working towards in creating DiEM25 – the Democracy in Europe Movement, with a view to conjuring up a democratic surge across Europe, a common European identity, an authentic European sovereignty, an internationalist bulwark against both submission to Brussels and hyper-nationalist reaction.
Is this not utopian? Of course it is! But not more so than the notion that the current EU can survive its anti-democratic hubris, and the gross incompetence fuelled by its unaccountability. Or the idea that British or Greek democracy can be revived in the bosom of a nation-state whose sovereignty will never be restored within a single market controlled by Brussels.
Just like in the early 1930s, Britain and Greece cannot escape Europe by building a mental or legislative wall behind which to hide. Either we band together to democratise – or we suffer the consequences of a pan-European nightmare that no border can keep out.
Tax havens don’t need to be reformed. They should be outlawed
Richard Brook in The Guardian
The Panama Papers are not really about a central American state. They are a glimpse through a Panamanian keyhole of an orgy of tax evasion, money laundering and kleptocracy – amid the legitimate financial planning – hosted by the world’s tax havens. Seven years after world leaders came together at a post-financial crisis G20 summit in London and committed to end tax haven abuse, it is clear from these papers that no such end is in sight.
The good intentions have translated into a blizzard of international agreements on sharing information, amnesties through which tax evaders can come clean, and prosecution drives of variable quality to nail the cheats. All are demonstrably inadequate. Information will not, and cannot, be exchanged to any meaningful extent by countries and territories whose “offer” is that they don’t ask for it or will turn a blind eye to being deceived.
Amnesties teach rich tax evaders that, even if they are caught, they will get off far more lightly than somebody overclaiming a few pounds in social security benefits. Criminal pursuit of offenders, certainly in the UK, is little more than a joke. One prosecution from 1,000 tax evaders using HSBC’s Swiss accounts is the now infamously poor punchline.
Here, the Panama Papers lay bare another national disgrace: Britain’s longstanding role at the centre of the offshore web. More than half of the 200,000 secret companies set up by the Panama lawyers Mossack Fonseca were registered in the British Virgin Islands, where details of company ownership don’t have to be filed with the authorities, never mind be made public.
While this week’s leak is on an unprecedented scale, it exposes a historic as well as current failing. As the British empire faded away after the second world war and territories such as the British Virgin Islands drifted into the constitutional limbo of semi-independence, they were encouraged to develop financial services as a way of sustaining precarious economies. If this meant a few of the world’s wealthier people paid a little less tax, thought successive British governments, it was a price worth paying for not having to support the territories.
Late 20th-century financial liberalisation turned this already complacent calculation into something more lethal. With fortunes sloshing freely across borders, tax havens became voracious parasites on the world economy, most seriously sucking the life out of some of its poorer parts. All the great national robbers of recent decades, such as Nigeria’s Sani Abacha, have used tax haven companies, including British Virgin Islands ones, as the getaway cars.
Despite this long trail of evidence, leading economies refuse to address the problem at its source. The UK has great leverage over its 17 overseas territories and crown dependencies, all of which depend on the mother country for security and happily trade off its legal system. At a stroke our government could shut down the British Virgin Islands corporate system, for example. But under influence from a banking system that thrives on the legal benefits of offshore centres such as the British Virgin Islands and the Cayman Islands, it takes a more relaxed view. Asked recently about whether Britain’s overseas territories should publish registers of beneficial owners of their companies, foreign office minister James Duddridge replied that these were a “direction, rather than an ultimate destination”. The Panama Papers should expose this indifference for the great scandal that it is.
Without leaks like this week’s, nothing would be publicly known about the tax haven companies now exposed. And next to nothing would be known by the authorities in the countries affected. Yet, alongside dozens of other tax havens, the British Virgin Islands can claim to be on the Organisation of Economic Cooperation and Development’s “white list” of approved jurisdictions, having met conditions imposed for exchanging information. That’s right: a major centre of international financial crime, home to the shell companies of Vladimir Putin’s associates and any number of other money launderers and sanctions-busters, is endorsed by the rich nations’ club.
With around $1tn a year still flowing out of developing countries to tax havens, it is clear that coaxing these territories into increased transparency can achieve only marginal gains. The recent series of leaks poses a more potent threat: anybody contemplating hiding income offshore must now factor in the risk that many years later the details could make their way from an office such as Mossack Fonseca’s into the wider world. Far better, even the greediest might think, simply to pay the tax and get on with life.
But for others, especially those looting serious money, the offshore attractions will remain. There will be further added layers of secrecy: phoney foundations and fake beneficial owners with no names mentioned even in internal emails. A small proportion of scams will be exposed in the press and documentaries featuring telegenic palm trees and yachts will continue to hit our TV screens. But the tax havens will keep their place in the world.
To tackle the cancer of corruption at the heart of the global financial system, tax havens need not just to reform but to end. Companies, trusts and other structures constituted in this shadow world must be refused access to the real one, so they can no longer steal money and wash it back in. No bank accounts, no property ownership, no access to legal systems. The anti-corruption summit being hosted by David Cameron in May is an opportunity to start the international team effort that this would require. The world has been entertained by tax havens long enough.
The Panama Papers are not really about a central American state. They are a glimpse through a Panamanian keyhole of an orgy of tax evasion, money laundering and kleptocracy – amid the legitimate financial planning – hosted by the world’s tax havens. Seven years after world leaders came together at a post-financial crisis G20 summit in London and committed to end tax haven abuse, it is clear from these papers that no such end is in sight.
The good intentions have translated into a blizzard of international agreements on sharing information, amnesties through which tax evaders can come clean, and prosecution drives of variable quality to nail the cheats. All are demonstrably inadequate. Information will not, and cannot, be exchanged to any meaningful extent by countries and territories whose “offer” is that they don’t ask for it or will turn a blind eye to being deceived.
Amnesties teach rich tax evaders that, even if they are caught, they will get off far more lightly than somebody overclaiming a few pounds in social security benefits. Criminal pursuit of offenders, certainly in the UK, is little more than a joke. One prosecution from 1,000 tax evaders using HSBC’s Swiss accounts is the now infamously poor punchline.
Here, the Panama Papers lay bare another national disgrace: Britain’s longstanding role at the centre of the offshore web. More than half of the 200,000 secret companies set up by the Panama lawyers Mossack Fonseca were registered in the British Virgin Islands, where details of company ownership don’t have to be filed with the authorities, never mind be made public.
While this week’s leak is on an unprecedented scale, it exposes a historic as well as current failing. As the British empire faded away after the second world war and territories such as the British Virgin Islands drifted into the constitutional limbo of semi-independence, they were encouraged to develop financial services as a way of sustaining precarious economies. If this meant a few of the world’s wealthier people paid a little less tax, thought successive British governments, it was a price worth paying for not having to support the territories.
Late 20th-century financial liberalisation turned this already complacent calculation into something more lethal. With fortunes sloshing freely across borders, tax havens became voracious parasites on the world economy, most seriously sucking the life out of some of its poorer parts. All the great national robbers of recent decades, such as Nigeria’s Sani Abacha, have used tax haven companies, including British Virgin Islands ones, as the getaway cars.
Despite this long trail of evidence, leading economies refuse to address the problem at its source. The UK has great leverage over its 17 overseas territories and crown dependencies, all of which depend on the mother country for security and happily trade off its legal system. At a stroke our government could shut down the British Virgin Islands corporate system, for example. But under influence from a banking system that thrives on the legal benefits of offshore centres such as the British Virgin Islands and the Cayman Islands, it takes a more relaxed view. Asked recently about whether Britain’s overseas territories should publish registers of beneficial owners of their companies, foreign office minister James Duddridge replied that these were a “direction, rather than an ultimate destination”. The Panama Papers should expose this indifference for the great scandal that it is.
Without leaks like this week’s, nothing would be publicly known about the tax haven companies now exposed. And next to nothing would be known by the authorities in the countries affected. Yet, alongside dozens of other tax havens, the British Virgin Islands can claim to be on the Organisation of Economic Cooperation and Development’s “white list” of approved jurisdictions, having met conditions imposed for exchanging information. That’s right: a major centre of international financial crime, home to the shell companies of Vladimir Putin’s associates and any number of other money launderers and sanctions-busters, is endorsed by the rich nations’ club.
With around $1tn a year still flowing out of developing countries to tax havens, it is clear that coaxing these territories into increased transparency can achieve only marginal gains. The recent series of leaks poses a more potent threat: anybody contemplating hiding income offshore must now factor in the risk that many years later the details could make their way from an office such as Mossack Fonseca’s into the wider world. Far better, even the greediest might think, simply to pay the tax and get on with life.
But for others, especially those looting serious money, the offshore attractions will remain. There will be further added layers of secrecy: phoney foundations and fake beneficial owners with no names mentioned even in internal emails. A small proportion of scams will be exposed in the press and documentaries featuring telegenic palm trees and yachts will continue to hit our TV screens. But the tax havens will keep their place in the world.
To tackle the cancer of corruption at the heart of the global financial system, tax havens need not just to reform but to end. Companies, trusts and other structures constituted in this shadow world must be refused access to the real one, so they can no longer steal money and wash it back in. No bank accounts, no property ownership, no access to legal systems. The anti-corruption summit being hosted by David Cameron in May is an opportunity to start the international team effort that this would require. The world has been entertained by tax havens long enough.
Monday 4 April 2016
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