Some ex-politicians spend their jobless days with being guest in talkshows and current affairs programmes. Other politicians get a job as professor with a special chair on (for instance) politics or the science of Public Administration.
That is a good choice in most cases, as these politicians have inside knowledge in all kinds of domestic and foreign affairs and can supply special information that was previously unknown for people outside the political arena. Their special knowledge makes them wanted for television and universities.
Sometimes, however, ex-politicians have opinions that seem ill-considered and even ridiculous, but still get a lot of airplay as these people are… ex-politicians. This seems to be the case with former Assistant Secretary of Finance and Minister of Social Affairs and Employment, the current professor Willem Vermeend.
According to professor Willem Vermeend: “
should be kicked out of the Euro-zone and it should be forced to readopt the Drachme again. They could, however, remain a member of the European Union” He wrote this in a Op_Ed to Dutch newspaper The Telegraaf (www.telegraaf.nl). I will show here a large part of this Op-Ed, translated to English by me. Greece
The news in the European Union is already hijacked for months by the threat for a default of EU member
. The country is part of the Euro-zone and battles with an ever-increasing state debt. At the end of May 2011 this debt was €330 bln, more than 150% of the Greek GDP. Greece
Besides this gigantic debt, the Greek government spends much more money than in receives in tax yields;
has a budget deficit of 11%. On top of that, it doesn’t seem like it that the empty Greek treasury will yield from extra income due to economic growth. To the contrary: the Greek economy doesn’t grow anymore. The Greek economy will even shrink with 3.5% this year, is the general expectance. Due to these problems, the international creditworthiness of this small EU member-state – with a GDP of €220 bln, about 2.6% of the economic domestic value of the Euro-zone – has gone to a very low level, almost equal to junk status. This makes that the Greek government will get in bigger and bigger monetary problems. As the financial position of Greece is disastrous, international banks and other financial suppliers will only supply money at extreme interest rates. But through the extra loans and extreme rates, the mountain of debt will only become higher, putting Greece in even more trouble. At this very moment the Greek government should already use 35% of its income for interest payments to creditors. With the other European debt countries Greece Spain, Irelandand this rate is below 5%. Portugal
Within the Euro-zone, governments disagree about the way that the Greek debt crisis should be solved. There are countries that don’t want to support
anymore. Other countries want that import creditors of Greece , like banks and pension funds, share the burden of saving the Greek. The major opinion of voters in the Euro-zone countries is that Greece should stand on its own two feet and should not receive any extra financial support. A lot of voters think that Greece should be kicked out of the Euro-zone. The Greek government itself created the financial mess and they should solve it themselves. Greece
The majority of governments of the Euro countries want to remain supporting
, under the condition that the Greek government will carry out necessary cutbacks and reforms. Governments and (hardly surprising) bankers state that the continuing European support for Greece is necessary to prevent banks from getting in a renewed financial crisis. European banks owe €140 bln in loans to Greece . Proponents of further European financial support assume that Greece can’t repay its bank debt without this European support. These proponents are especially found among bankers. Greece
It looks like it that the Euro countries, under heavy pressure of the European Central Bank and the European banking industry, go on with keeping ‘bankrupt’
upright. They lie against their better judgement that Greece will repay its debt. An increasing number of citizens don’t want to be fooled anymore by these people.People are also getting increasingly angry with the fact that governments with their support are busy saving the banks a second time. These banks took – driven by sheer greediness – unresponsible risks and added to the economic crisis. They were saved with taxpayer’s money and that is yet again the case. Greece
The European debt crisis should be solved by the Euro countries with sturdy, enforcable agreements about debt restructuring and a healthy financial policy with adequate European supervision. Beside that, this policy should be faced with enough public support from the citizens of the Euro-zone. This makes it necessary that the governments of the Euro countries, next to the announced bank tax, ask for a substantial contribution from the banks in the costs for solving this debt crisis.
should be supported to leave the Euro-zone. Greece
By itself, it seems that the proponents of further financial support to
have strong arguments. The essence of their plea is that Greece Europecan prevent having a new banking crisis and that would get its money (the taxpayer’s money(!)) back eventually. This plea has no convincing power anymore. All international calculations show that already drowned in its debt. Bond investor PIMCO calculated that Greece should have a budget surplus of 8% or more for the next twenty years, to meet the European demand that the state deficit should be brought back to 60% of Greek GDP. This is an impossible demand. Greece
The stringent cutbacks and increasing debt will let the Greek economy shrink, not grow and it will cause an increase in unemployment. It is also a fact that the inefficient and (according to the international corruption index) corrupted Greek government will not sell enough state-owned properties to substantially diminish the Greek debt burden in order to meet the Euro-zone’s demands. In shorter or longer notice, the Greek government will have to announce to the IMF and the European countries that it will not be able to pay back its debt (in time), in spite of more cutbacks, lower wages and the sales of state-owned properties. The Greek state is bankrupted and it makes sense that
decides for itself to leave the Euro-zone. The Euro-countries could speed up this process by offering a restructuring of debt to Greece when it leaves the Euro-zone. This package can exist of a combination of prolongation of redemption terms, a lower interest rate and remission of debt. New European instructions can force the European banks to contribute to this process. By executing this contribution proces in phases, no banks would fall over and no renewed banking crisis would emerge. With its own currency, Greece can work on its economic recovery. Greece
The first part of this letter makes much sense and I have no doubt that the figures shown in this letter are right. The situation of
Greece is indeed hopeless and the chances that will pay back its debt are very small. Greece
It is, however, the last part of the letter that awards professor Willem Vermeend the Golden Doughnut for 'ideas that have a clear hole in the middle':
The fact that Willem Vermeend thinks that
can “just step out of the Euro and readopt the Drachme again” is ill-considered and clueless. I especially blame Vermeend for this, because he was Assistant Secretary of the Ministry of Finance and he should know the kind of hard work it was to get the Euro-zone countries into the Euro. Greece
I wrote my reasons in a number of articles:Here are some snips of the first article:
Already the introduction of the Euro in the vast European non-cash payment network was an operation without a peer in
Europe. It started with the setting of fixed exchange rates between the Euro and all twelve native currencies in the Euro countries.
Greecewould readopt the Drachme now, it should do the same thing the other way around: setting an exchange rate that doesn’t make the drachme too expensive (the market will punish this as being implausible) or too cheap (a catalyst for hyperinflation in ). And there is nobody in Greece Europethat can help them figuring it out.
After the exchange rates had been set, all computer systems that were used for non cash money transfers had to be made dual currency: for the native currency and the Euro. And if you know that the kernels of much banking and insurance computer systems were from the fifties and sixties (hurray for Cobol, a legacy programming language) and almost nobody dared to touch them in the nineties, you can imagine this has been a very expensive operation (billions of dollars). Greece would have to go through the same operation once again and pay the same amount of money again, with one difference: those banking and insurance systems are even older now and the amount of Cobol programmers has diminished currently.
For the introduction of the cash Euro the operation was even bigger. All ATM’s, point-of-sale terminals and cash deposit machines needed to be reconfigured for the new cash and non-cash money. ATM’s and cash deposit machines should:
In Lelystad, The
- recognize the new money;
- distinguish counterfeits from true money without any mistakes
- hand out the right amounts of money without grabbing double bills or forgetting to grab bills
- settle the right amount to account numbers in two different currencies
- have the right amount of drawers: there are four popular Euro bills, but there might be more popular Drachme bills, as this currency will have a much smaller value.
, a money warehouse was built by De Nederlandsche Bank (DNB, Dutch national bank) that would give Scrooge McDuck five months of sleepless nights. Before 1-1-2002 there was a stash of litterally billions of Euro’s in coins and bills; afterwards it became the stash of exchanged Dutch guilders. Netherlands
In the last week of 2001 all money needed to be transported to the banks, large shops, supermarkets and department stores, without being robbed or hindered and with the rockhard guarantee that nobody distributes the money early (people and companies could receive prison time and extreme penalties for early distribution of the Euro). You could imagine that this is a ‘logistical challenge’ in the small country The
Netherlands, but an absolute nightmare on with its thousands of islands and shipping as a means of logistics. Greece
And further almost all printed paper and a lot of objects mentioning the Euro need to be changed again: preprinted invoices, pricelists, traffic signs mentioning penalties, matrix signs at exchanges, menucards in restaurants, stationery, account statements. Everything you can imagine has to be changed.
And the most important factor of the Euro exchange programme was that it had to be finished at 01-01-2002, to be credible for the rest of the world. Also
needs a fixed deadline to keep her last bit of credibility. Greece
Imagine one of the most complicated logistical and financial programmes the world has ever seen. And imagine that the poor Greeks need to do that one more time, without
Europehelping them with anything. Can you? I can’t!
In the first place it is a very complex operation that would turn
upside down for at least three years. And it is a very expensive operation that might cost Greece billions of Euro’s. And it is a very, very high-risk operation involving amounts of paper money and coins that are beyond your imagination. And for what? For a currency that soon would not have the value of the paper it is printed on?! Don’t be ridiculous (no offense)! Greece
Those were my arguments why
would not leave the Euro-zone and these arguments stand – yet again – upright. Greece
Of course the Greek will have to restructure their debt. But they should do this as a member of the Euro-zone. Of course this would have grave consequences for the stability of the Euro-zone and for the banks within the Euro-zone. But these consequences are (in my opinion) not worse than if
would leave the Euro-zone. There will be pain either way, but the pain for Greece Greece and the other Euro-countries will be less if stays in the Euro-zone. Greece
And therefore I want to award professor Willem Vermeend with the Golden Doughnut for ill-considered ideas: fighting the right problem with absolutely the wrong solution.