Don’t believe the tripe about the crisis in Europe. With the election of the Syriza Party in Greece, the Greek people have offered Europe hope. This is Europe’s chance to turn from the crippling austerity that has left the South mired in depression and the North sinking in deflation. Syriza is calling for a “New Deal,” not only for Greece but for all of Europe.
The question is whether the rest of Europe will exhibit statesmanship — or condemn the people of Europe to years more of misery. The initial reactions in Germany and Brussels opt for misery. Now is the time for the Obama administration, progressives in Congress and across the country to join in a bold call to save Europe from its folly.
The facts of the situation are clear. The Greek debt cannot be repaid. When the bottom dropped out of the global economy, Greece, plagued by a corrupt and indebted government, was the most vulnerable of the European Union nations. The so-called “troika” — the EU, the European Central Bank and the IMF — stepped in to bail out reckless banks, assume most of the debt, and inflict harsh terms on the Greeks to repay it. The Greeks have sold off their assets, crushed workers, trampled labor laws and slashed vital public services to ensure that the private bankers be paid.
The Greek debt — over 300 billion Euros — is 11 billion euros less than it was three years ago. But the debt as a percentage of GDP has also risen from 146 percent in 2010 to 175 percent because the Greek economy has collapsed. Unemployment is above 25 percent ; 50 percent among the young, who are abandoning the country. The minimum wage has been cut by more than 20 percent. Many have been cut off of electricity and prescription drugs and other “luxuries.”
The Greeks have suffered the most, but in Italy, Portugal, and Spain, people are also at the end of their rope. In Spain, austerity has forced 570,000 from their homes, lifted childhood poverty to 36 percent according to UNICEF, left 23 percent unemployed, including 51 percent of those under 25. And the debt has soared to nearly 100 percent GDP. Italian public debt has gone from 116 percent to 133 percent of GDP in three years despite primary budget surpluses. That austerity has left youth unemployment at 44 percent.
Syriza, as well as Podemos in Spain (The “We Can”party formed only a year ago and now leading in the polls) and reform parties elsewhere represent democracy offering a way out.
Syriza is a pro-European party. It does not want to leave the EU. Its leader, Alexis Tsipras, says that it wants to honor Greece’s debts. But debt that cannot be repaid will not be repaid. So Syriza calls for writing off half of the debt (almost all of it now owed to governments and the “troika”) and restructuring the rest so that it is repaid as Greek grows, not as it sinks. It will rebuild public services, raise the minimum wage, and put people to work. It seeks a European-wide reconstruction program to get Europe going. It is far more committed to reform than the previous parties that negotiated with the “troika.” It offers the best hope of cracking down on the oligarchs who have corrupted Greek politics, and looted the public till while evading taxes.
“All we’re asking is for,” feisty Finance Minister Yanis Varoufakis has said, “is an opportunity to put together a proposal that will minimize the costs of Greece’s loan agreement and give this country a chance to breathe again after policies that created massive social depravity.”
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This is the prescription that Europe needs for its ills. All that is required is adult leadership to join in saving the community.
Instead, the initial reaction of European officials has been juvenile bluster. Wolfgang Schäuble, Germany’s finance minister, states that Greece is bound by the terms of its contract — even if the contract is bankrupt. “Elections change nothing,” he says, “There are rules.” Bundesbank’s Joachim Nagel threatens “fatal consequences” if Greece violates the terms of the deal. The Germans scorn any fear of contagion. “We are relaxed,” says Schäuble.
This is, in a word, idiocy. As Varoufakis notes, “To believe that you can talk about Grexit [from the euro] and then contain the after-effects, takes a degree of unprecedented silliness.”
The contagion that threatens is political, not financial. Across Europe, more and more people are saying no more. Syriza and Podemos offer a way out for Europe. If they fail, the contagion could well take far uglier forms. The biggest opposition parties in Italy are hostile to the euro. In France, the far-right Front National won the most seats in the recent European Parliament elections, pledging a return to the franc.
As Ambrose Evans-Pritchard, international business editor of the Daily Telegraph, concludes, the question isn’t whether Greece can be forced into an ever deeper depression to abide by the deal its predecessors signed. The question is whether Europe can be rescued from an economic depression caused by five years of utterly mad austerity.
One wonders if the Germans have learned anything from their own history. After World War I, they were forced to pay unaffordable reparations. The result was hyperinflation followed by deep depression and the rise of Adolf Hitler. After World War II, the allies had enough good sense to forgive German debt — racked up by the most heinous of all governments — and put the country on the road to growth. Greece, of course, has neither the weight nor the threat posed by Germany. But the threat to Europe extends across the frayed community.
Here, America, as ally and trading partner, has a role to play. The administration should be raising the roof in backrooms challenging the German folly. President Obama’s statement of last week that Greece needs growth, not more austerity has been welcomed in Athens. The Obama administration should use its influence at the IMF to drive a new deal. If Republicans had any sense, Congress would focus less on investigating Benghazi once more, and more on calling Europe to its senses. Absent that, progressives in the Senate and House should use their megaphones to stand with the peoples of Europe against creditors who have gone too far.