Greece at a Crossroads
Now that the Greek government has survived a confidence vote in Parliament, the stage is set for further confrontations in the lead-up to next week’s decision on whether to accept the new “austerity” plan demanded by the “troika” – the International Monetary Fund (IMF), the European Central Bank (ECB), and the European Union (EU).
While the origins of the crisis in Greece are many, there are a number of fundamental elements.
Part of the problem began when Greece adopted the Euro, which brought sharp increases in the cost of living and meant that the government had no way to manage the value of its currency.
Another difficulty is the political system itself, which is seen by most Greeks as an incompetent and self-serving “pathokratia” (pathocracy). The main parties have done little to modernize the Greek state, its economy, or the unfair tax system.
Also, as Andre Gerolymatos (Chair of Hellenic Studies at Simon Fraser University) noted:
“A major part of the Greek debt crisis is the result of excessive military expenditures forced on the country by the German military industrial complex.” As long as Greeks were borrowing to buy weapons, Germany was unconcerned about the debt.
(This is particularly “ironic”, since Germany experienced the largest national bankruptcies in the 20th century, not to mention the unimaginable destruction inflicted on Greece in the Second World War).
Another blow was struck by the global recession of 2008, sparked by financial speculators in the United States. The fallout hit the Greek economy hard, increasing unemployment.
Moreover, U.S. financial derivatives played a role in the crisis. The N.Y. Times reported that, “Wall Street tactics akin to the ones that fostered subprime mortgages in America have worsened the financial crisis shaking Greece.”
A further burden is the over 2 million refugees who have fled to Greece from the Middle East, North Africa, and Eastern Europe. (That would be equivalent to the U.S. taking in 60 million immigrants). Neither the Greek government nor the EU have provided sufficient resources to address the problem.
Last year, in the face of these multiple crises, the troika demanded cuts in public spending as well as tax hikes in return for a $145 billion loan to help Greece pay foreign creditors.
Public sector wages were slashed 20%. My cousin Maria, who has taught high school for 27 years, found her pay cut from roughly $2,000 to $1,600 per month.
In addition, more than 400,000 workers lost their jobs, including 20% of the public sector. The unemployment rate for youth is over 40%.
When I was in Greece last month, I saw scores of small businesses – both in Athens and in wealthier suburbs like Kifissia - that had been forced to close because of the lack of customers.
While these harsh measures benefited many European banks, it made the economic crisis in Greece even worse.
It is grossly unfair to punish the farmers, workers, and small business owners (a large sector in Greece) for a crisis that they did not create.
Polls have shown that around 80% of Greeks agree that sacrifices must be made, but they feel that the measures demanded by the troika are, “unfairly aimed at the poor while wealthy tax evaders and corrupt politicians got off lightly”, according to pollsters.
As one Greek put it: “This is not about me. This is about my children. Their future is not very bright.”
Now the troika is demanding more of the same: 28 billion euros in tax hikes and spending cuts, and further reducing public services, jobs, and (already low) pensions
Greece would also be forced to privatize up to $50 billion of pubic enterprises.
The imposition of these hardships would further damage the economy.
Nobel Prize-winning economist Paul Krugman agrees that, “slashing spending in the face of high unemployment is a mistake,” as it throws even more people out of work, reduces effective demand, and delays economic recovery.
And how will making Greeks poorer help them pay their debts?
There is a realistic alternative. Some form of debt reduction and restructuring, combined with an economic stimulus, and reforms to the Greek government, would help the economy recover without imposing even more suffering.
“The European authorities have more than enough money to finance a recovery programme in Greece, and to bail out their banks if they don't want them to take the inevitable losses on their loans. There is no excuse for this never-ending punishment of the Greek people”, according to Mark Weisbrot of the Center for Economic and Policy Research.
To understand why such harsh policies are demanded, one must begin with the question, “Who benefits?” In short, it is wealthy speculators, banks, and other major financial institutions who are insisting that their investments be protected, no matter the human cost.
U.S. banks alone hold over $40 billion in loans to Greece, while the liability of European banks is $162 billion.
In the 1980s, when an earlier “debt crisis” hit poor countries, the U.S.-dominated IMF imposed the same kinds of “structural adjustment policies” so that foreign speculators (mostly American) got their money.
The result was a “lost decade” (and more), as poverty, inequality, unemployment – and debt – increased. Greek writer Takis Fotopoulos (Inclusive Democracy) argues that the troika’s demands will have similar results – what he calls “the Latin-Americanization of Greece”.
However, Greeks are fighting back, inspired by similar struggles in Ireland, Portugal, Italy, Spain, Egypt, and even Britain. Demonstrations and strikes are continuing in an attempt to force the Greek Parliament to say NO when the deal comes to a vote next week.
One banner at Syntagma Square in Athens read, “No Pasaran” (“They Shall Not Pass”), the Spanish slogan used by anti-fascist forces in the 1930s, as well as by Nicaraguans resisting the U.S. “contra” terrorist war in the 1980s.
We will know the outcome of this latest battle for justice in a few days.