Avalanche5: Is the euro crisis about olive-growing States or politicians' fingers in the nation's piggy bank?

Is the EU and the euro suffering from a southern problem? Is it a problem of olive-growing southerners against the cold, industrialized northern countries?

Not at all. The disapproving idea behind the epithet PIGS, that some Mediterranean countries are somehow genetically or geographically inferior, is a nonsense. For a start these countries led the other European States at certain times our common history. They were pioneers for Europe, whether it was trade or exploration of the world or inventions. There were also powerful bankers that led the world when northern Europe was still somewhat lacking.

Yet something is seriously missing and it is not climate. Spain and Portugal are not too warm for innovation and industrial prowess in the twenty-first century. Why then is Portugal not the equal to those on the same climate zone like California's Silicon Valley to the West or Israel's vibrant technological wonder to the East? Portugal has the advantage of a bigger internal market than the USA. This incongruity is even more apparent to the Mediterranean natives who migrate this latitude to the East or the West. They will tell you: 'There is something wrong at home.'

Is it then a matter of Europe's geography? Not at all. Europe’s most southern State is doing rather well and has not had problems in attracting long term finance. What then makes Malta superior to Greece and Portugal at the moment? Clearly Europe’s problems have nothing to do with whether the State is south or produces olive oil or not.

It is about oily hands where they should not be. Political hands. How do politics and politicians make currencies weak and sap innovation?

A major factor is the interference of politicians in the machinery of monetary affairs. The national bank should be independent of politicians. A European Bank should be independent of European politicians. Banks should be run without any interference. The Statistical Office should also be a forbidden zone for politicians. They can't resist tweaking the figures to say how great they are.

Look what happened with one member State —- Greece. This is not to say that Greece is the worst example. Every State has its own breed of corruption. Most are more sophisticated. Some facts about Greece however are in the open. They are instructive.

When Greece applied for membership, the European Commission — which was not then stuffed to the gunnels with party politicians but had a few people of honest and independent character — had to make an assessment according to the law of the three treaties. For the Economic Community, article 237 applied. The Commission delivered this Opinion in January 1978. What did it say? It said that while a positive response to the eventual application should be given, Greece was not ready.

Was it because it was poor or grew too many olives? Nope. The Commission said that an accession transition period was necessary in order to undertake ‘economic reforms.’

That was a polite way of saying it. After the years of the dictatorship of the Colonels, Greece was still in a chaotic and corrupt situation. Everyone knew it. But the Greek political leadership made political appeal to their brother politicians. What was a technical matter about bad bookkeeping leading to corruption became a hot political issue.

Roy Jenkins, who became Commission President the next year was quite frank about this. Three countries had applied for membership. Greece was ‘the least qualified for membership, but it was too late for that view greatly to signify’ because of the political influence of the Greek Prime Minister Karamanlis. Guess who became a full member first?

At the time the population of Greece was 10 million and they were promised a few billion in accession funds. Later they got more munificence in the Integrated Mediterranean Programme. That looked like a politically agreed inducement. Why were European funds amounting to a few thousand for each man woman and child necessary? It doesn’t take that much to make sure the book-keeping systems are working properly. It requires hiring some honest professionals, probably at a lower salary. Investment and venture capital wings its way into any environment because it finds the right combination of active intelligence and trust.

In the Community system it is not necessary to bribe the voters. That destroys trust. If the people do not want to join, then it’s up to them. So it is not necessary for the Brussels authorities to supply other people’s money to do this bribing -- especially when the taxpayers are not asked about providing it. However if the enterprises and the workers of a country want to join there are several Community bodies with which they can establish contact and that should provide impartial and useful information. Citizens should be educated to discern the facts. They should not be the targets of a public relations campaign. It would be far better to supply funds so they could learn to detect political hum-bug on a European scale.

Politicians too often prefer to dispense money in favour of their own ideological policies. Not their own money of course. They like to be considered public benefactors but that is not really their job description. Whose agreement is necessary for representatives of the people to give away public money? Surely the public, the non-political tax-payers! The taxpayers in the other parts of the Community were not asked to provide financial supervision like the Community is supposed to do. Each of the three Communities has a consultative committee, a chamber for organized civil society, unfettered by political considerations. Their role was frozen out in the secret deals done by politicians.

Did this largesse help Greece with the ‘economic reforms’?

Judge from what happened in Court.

At the vortex of the public scandal was the Bank of Crete. This was a major bank in the Greek system, being originally an emitter of banknotes. It became a siphon for Brussels funding. Then in the 1980s one of its employees, yes an employee, an accountant working there for only two years, raised a loan from the bank and bought it! A remarkable feat pioneering criminal operations that banksters seem to have emulated elsewhere. With European and depositors’ money at his disposal, he then proceeded to create a banking and publishing empire. It controlled three daily newspapers, other publications, a radio station and a soccer team.

Of course when you buy a bank like that you think it is your own personal piggy-bank. Oily fingers dip into the till. When things got hot, the bankster fled to the USA. He ended up in jail. He was charged with forgery, bribery and embezzling more than $200 million from the Bank of Crete. Note it wasn't the Greek politicians that threatened to take him to Court. In fact when he fled Greece, a minister had to resign for this 'carelessness'. Safely in the US after a detour in Brazil, he said that operatives were out to kill him. Who did not want exposure?

Then he sang. The Greek people and other Europeans were spell-bound.

He claimed that the prime minister ordered state companies to deposit funds with the bank and took bribes from stolen money. The allegations resulted in the resignations of several ministers and demands for a vote of no confidence in the government of Prime Minister Papandreou. A court case lasting ten months astounded the public with the exposure of ministerial goings-on. Thus in 1992 several years after the event, Mr Papandreou was cleared of all charges by the Greek Supreme Court (with a close 7 to 6 vote on the most important charge). Two of his former Cabinet ministers were found guilty of related charges.

Of course there may be many such scandals hidden under the surface. Not every one is exposed in court. If one person can get away with such outrageous conduct, no doubt many others try and succeed. Did Greece and the European institutions learn a lesson? Did they install great anti-corruption measures?

The very next year Mr Papandreou was re-elected as prime minister. The Council of Ministers decided to provide even more money for the Mediterranean region.

Where did Greece and Europe go wrong? Clearly if Greece had reformed its finances to Swiss, German or Dutch standards the euro would not be in the pretty pass it is in today. Who is to blame? Clearly a succession of politicians did not do the cleaning job.

But what of the floods of European money that streamed into the banks and into the politicians pockets? What of the money that was used to bribe voters, rather than proper reconstruction and ‘economic reform’? Why was there no case to answer for this debacle in the European courts? One indication would be that the only active institutions at the time were full of people brandishing membership cards of political parties. They were already a sort of cartel.

The responsibility still lies with the European institutions. In this post-Gaullist period Europe was already creating its political buddy network where each scratched each other’s back. What’s the problem with political friendships? Nothing for the politicians but it does not get rid of the fleas.

A governance system controlled by a political cartel is a big problem for the public and the survival of independent media who criticize them. It is no coincidence that the crook in this case bought heavily into the media and offered free gifts to journalists. The politicians too often did not have the courage to clean up their own mess. Why? How can you be hard on political friends that you meet all the time at European party meetings to work out policy together? You need their vote and support to advance your own political ideas in Europe. Political parties open their doors to every lobby group in the telephone book and a few more besides. Parties can easily be captured by such lobbies. That is why the Commission should function in total independence of political parties and national governments.

Only an independent, supranational authority can cure this type of corruption that Europe is presently suffering from. The best way to achieve it is to examine the politicians’ interests in an open debate with non-ideological sections of society like enterprises, workers, consumers and the regions. Five independent bodies should provide a modicum of practical sense.

So how did Europe get into this fix with a party political cartel replacing de Gaulle’s paternalistic system that subsidized the French farming systems and others?

The biggest area of corruption occurred when the Commission became more and more the instrument of the political parties. The Treaties say the opposite. The members of the Commission should be absolutely independent. They should not talk to governments except in the Council of Ministers where there are witnesses and the public can see and hear. Yes, where the public can hear everything going on. After many years of abuse of secret political deals with their wine lakes and meat mountains, a clause was specifically written into what is now the Lisbon Treaty. It says in article 15 that all sessions of the Council must be open when they are considering money matters and any legislation. That was obvious before. Money is a public matter. Now it is written clearly in law.

After saying goodbye to de Gaulle, Europe must straighten out the party political seizure of the Commission. The treaties still say that the same thing. In the early days party politicians had the honesty to resign from parties when the joined the Commission. They said it was to ensure that they were independent but also seen to be independent.

Recently however after one secret night session, the politicians of the European Council decided without asking the people that the Commission should become their intergovernmental party political secretariat. The Council decided to prolong what was a temporary, transitional arrangement. They now stipulated that Commission members must be nationals, one each for the 27 Member States and all must be party card-holders of the main parties. That does violence to the spirit and the letter of the treaties. It is opposite to what it says. It is also dangerous for the political, financial and moral health of Europe.

In the past the Commission members — some of the strongest democrats —were not politicians and the Commissioners were independent of the States. That was because the Treaties say that the Commissioners must be independent, meaning having the courage to say NO to parties and to governments. Commissioners often take instructions from governments, also in flagrant violation to treaty law. Treaty law still says the same thing, but that does not stop the politicians of the European Council to make illegal maneuvers contrary to the treaties. They act in no-one’s interest but their own.

The next failure of Brussels lies with the representatives of organized civil society and their debating chamber. What chamber you might ask? Rightly. The members of the Economic and Social Committee — which the treaties say should have powers comparable to Parliament has NEVER been elected. If there were a debating chamber with legal powers over the legislation, we would not be in the euro crisis we have today.

A proper functioning Economic and Social Committee would have its own monetary and fiscal committee that would be independent of parties. It would ask pertinent questions about where European money was going. It would demand answers. It would not shut its mouth when the Council of Ministers and the Commission wants it to. It would also act by taking some cases to Court.

The euro crisis is the result of many years decay in professional standards of European supervision. The euro crisis will not be resolved until Europe has the proper democratic bodies functioning properly. According to the treaties a democratic Economic and Social Committee would also have its influence on whether a candidate State was accepted in the first place — such as setting its house in order before its prime minister takes a seat in the Council of Ministers.

Europe can be strong financially, politically and morally. That requires that the Commission should be independent and composed of the wisest and the best among Europe's 500 million citizens. It requires a selection process that the Council have signally failed to introduce in more than half a century.

If Europeans want to get their currency into a healthy state they should begin by insisting that the Council obeys the spirit and the letter of the law. If they do not do it themselves, someone else will make them. National courts are now examining dossiers that will begin this reform process. The Council has chosen to discriminate against Europe’s 500 million citizens, by making it impossible for free citizens to become candidates for the Commission and the Consultative Committees. Europe's 500 million citizens have ample potential to take these abuses and others to the European courts. That right of the individual and of every association was written into the treaties from the very start.

Europeans have powerful legal rights to safeguard their freedoms. A national court can catch some of the villains. But in the European system if one government is colluding criminally with other politicians, a court case can be taken out in any of the 27 national courts. People can go to the European level. They can ask for rulings on pertinent European matters even if they have a case in the lowest national tribunal. That is why governments and politicians are restricting the number of judges in the Courts in Strasbourg and in Luxembourg. However, the courts may act slowly but they do act eventually with force. On 18 April 2011 Europeans should celebrate that freedom and the sixtieth anniversary of the foundational Community Treaty and the great Charter of European inter-dependence.