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Saturday, 5 February 2011

WE CAN HAZ STATEHOOD? PART II




I covered some time ago the rise and rise of the popular movement for the non-payment of road tolls in Greece. Already this has swelled to proportions substantial enough to prompt strong reactions from the Greek Government - which true to form involved mostly calling people names.
  

My feeling is that this movement is about to metastasize into something far more dangerous. Their very existence advertises to investors that the Greek state cannot honour any obligations arising from licences granted. I've no problem with a weak state mind you, but you'll probably find that citizens cannot opt for a strong state when they are on the receiving end and a weak one when they're on the giving end and this is what these guys are trying to do. It worries me even more that these people have been encouraged by their success so far to extend their campaign to public transport and even hospitals. Then again, compared to the tacit movement for not paying taxes, they are amateurs and their movement is merely a fledgling.

I suspect that this growing non-compliance movement is related to a phenomenon I discussed here. As the influence of regional clientelist networks wanes, political opportunists are trying to rebuild the client base in any way they can. I will not be altogether surprised if the main legacy of the non-payment movement is a new generation of clientelist politicians - perhaps even a single populist kingpin.

But back to our main topic: the refusal to pay tolls. Here the question is, how is this likely to play out? I strongly suspect the Skye Bridge in Scotland is the best example. 
  
Like Greece today, 1985 Scotland was a nation with limited sovereignty and a net receiver of subsidies from a population (the English) which many Scots were not too fond of (some tactful evidence here, some less tactful here). The Skye Bridge was built in response to pressure from local communities and entrepreneurs who felt that the Isle of Skye's tourist potential was being constrained by the limited capacity of the existing ferry system. They were told by the Government that they couldn't have a road for another 20 years unless they were willing to pay tolls for 27 years.

From the outset, the Skye bridge was especially controversial because it placed the Isle of Skye's only connection to the Scottish mainland in the hands of a private consortium. After it was delivered in 1995, the Skye Bridge soon became known as Europe's most expensive toll road and a massive popular movement came into existence calling for the abolition (not the renegotiation) of tolls. Refusal to pay tolls was commonplace and even the contractors' staff were known to make concessions for people they knew to be local residents. The Scottish locals' argumentation was remarkably similar to that of the Greek non-payment movement and they too received a reasonable amount of political support.  

Making non-payment a criminal offense (as opposed to a civil matter, a recipe we're about to try in Greece) did not help because local residents correctly calculated (as many of my compatriots also have) that no legal system can keep up with an entire population hell-bent on non-compliance. Unable to levy charges of any sort, the contractors decided to cut their losses and the UK Government was forced to buy the road back for £27m, in addition to the £33m paid in tolls over 10 years. The contractors wrote off about £100m in expected revenues and probably made a loss in real terms as construction had cost them £39m in pre-1995 money and maintainance had cost them another 3.5m of operating costs. This was obviously much better for the locals, who had now roped in pretty much every other taxpayer in the land to pay for something that benefitted almost exclusively themselves.  

Unfortunately, Greece cannot afford to buy anything back from anyone and I doubt the IMF will make an exception. I suspect that as more countries are faced with this problem, pressure will grow for Europe to step in and finance a low-interest buyback using some new Ponzi instrument. My favourite for this one are project bonds. The Commission will certainly welcome this, and they've even lined up a willing buyer - the European Investment Bank.  

[Barfs]

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