Chris Johns: Anglo, Greece and the euro expose democratic deficit

What links the euro, Greece and Anglo Irish Bank? While troubled countries and failed banks contributed to their own problems, the half-finished euro project created the conditions that allowed all that reckless borrowing and lending to take place. International investors wouldn't have become bondholders in either Greece or Anglo on anything like the scale they did if the euro hadn't come into existence or if the single currency had been properly put together.

Greek promises to end austerity and to renegotiate bailout terms were either an exercise in (not uncommon) impossible- to-deliver electioneering or simply breathtakingly naive.

A key weakness of democracy is that electorates are simply too easy to con. That’s why populist politicians are popular. In extremis, fascists, communists and loonies of one kind or another make promises that attract surprisingly large numbers of people. We can be fooled, time and again.

Great umbrage has been caused by Syriza’s accusations that the European Union is ignoring Greek democracy. In response, democratic mandates in other countries are cited as cover to argue just about anything. But who voted for any of this chaos? Greece is a study in poor governance.

Election manifestos published by Irish political parties in the coming months will promise growth, jobs, homes, an end to the mortgage crisis, better health care and happiness for all. There won’t be as stark a policy contradiction as offered to the Greek people, but six impossible things before breakfast will be a common feature of all platforms.

Many countries have established agencies to try to make some kind of honest assessment of manifestos, particularly in the context of budgetary polices. Where there is genuine independence we sometimes see decent results.

Our own Fiscal Advisory Council (IFAC) was set up to try and help with all of this. Currently it is criticising the Government for doing the inevitable: relaxing the fiscal reins ahead of a general election. This is akin to observing that water does in fact roll downhill and wishing it were otherwise. Perhaps IFAC should be more pragmatic.

An addition to the democratic process would be to supplement (often ignored) fiscal warnings with a considered analysis, grounded in realpolitik, of what is possible for politicians who need to get re-elected. Accept that some giveaways are inevitable, point out that there are absolute limits and suggest ways in which things can be done that would be the most effective.

Any manifesto could be analysed this way. The contradictions could be highlighted, the impossible ridiculed and politicians informed as to how their objectives might better be achieved.

Crucially, the answer “We don’t know” should be allowed. Far too much trouble is caused by claims to certainty: if a respected agency says it is not possible to know what the outcome of a particular policy would be, this would be a valuable piece of information for voters. And would offer a welcome contrast to political grandstanding. Even more important, “We don’t know but the outcome is unlikely to be good” would be a powerful check on many idiocies.

Independence and authority are crucial. In Greece, austerity was costed by the International Monetary Fund (IMF), in 2010. Internal dissension was rife, all the way up to the executive board, but it insisted on publicly claiming the economy wouldn’t be too badly damaged.

This was catastrophically wrong. The suspicion is that European political influence at the top of the IMF took precedence over hard-headed analysis. Independence and pragmatism gave way to cynical calculation. To its credit, the IMF has (almost) admitted this and has returned to analysis. But it persists with being part of a troika that keeps insisting on more of the same. Greece will never be the same but nor will the IMF.

Democratic deficits are everywhere, not least in the way Europe is run. Who of us ever voted for Greece to be bailed out badly (at least twice)? The EU remains riddled with deficits, but its democratic and governance gaps are much more worrisome than its fiscal holes. The euro is a project that resembles what was intended as Anglo Irish Bank's headquarters: both are salvageable but in dire need of finishing. If we are starting to ask fundamental questions about the euro, the EU itself will soon be similarly interrogated.