Saving Greece, saving Europe: the unnecessary crisis

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      Is it fair to condemn the people of a country to economic misery because of the sins of their leaders, especially when the problems are also the result of global political and economic forces beyond their control?

      More specifically, should that nation’s legitimate debts be forgiven? What kind of example would that set?

      While these questions might apply in the case of Greece, they are also relevant in the case of Germany. What is rarely mentioned in the current discussion about solving “the Greek problem” is what Europe, Canada, the United States—and Greece—among other countries, did in 1953. At least half of Germany’s debts were written off to allow its economy to recover. (And this debt reduction was done, of course, for the country which was guilty of starting the Second World War in Europe.)

      Nevertheless, German chancellor Angela Merkel is leading the charge to deny the people of Greece some of the very policies which benefitted her country’s economy. Moreover, she is demonizing the Greek people as an excuse to continue policies which are not only cruel and unfair, but not even effective.

      What should be done? Given the complications of this crisis, it is important to understand both how it developed and why it has escalated so badly.

      The main points to be stressed are that, despite the rhetoric of some in the media and various political and economic elites, the multi-dimensional crises in Greece are not the result of deficiencies in the Greek people, and the solutions are the exact opposite of the “austerity” demands imposed by the “Troika”: the European Central Bank, the European Commission, and the International Monetary Fund.

      Consider one common myth: that the main reason for the debt crisis is that Greeks are lazy. The facts are just the opposite: OECD figures show that even after the crisis began, Greeks were working more hours per year than any other Europeans (Germans work only 70 percent of the Greek average). As economist Ha-Joon Chang observed, “The beauty of this worldview – for those who disproportionately benefit from the current system – is that, by reducing everything down to individuals, it draws people’s attention away from the structural causes of poverty and inequality.”

      Another myth is that Greeks benefitted from the debts that they are told they must pay. In reality, as minutes from a May 2010 IMF board meeting reveal, the true purpose of the loans was: “not as a rescue of Greece, which will have to undergo a wrenching adjustment, but as a bailout of Greece’s private debt holders, mainly European financial institutions.” In other words, the money went to foreign speculators and banks who were happy to lend money recklessly at high interest rates, but which were bailed out by public European banks when their risky investments went bad. The Greek people did not benefit from loans that they are told they must repay.

      Austerity demands are sucking the life blood out of Greece, causing the Greek economy to contract even further: unemployment is over 25 percent and over 50 percent for youth. Marshall Auerback, a portfolio strategist at hedge fund Madison Street Partners, notes: “There is no relief in sight as the EU elites continue to grind the nation into the modern day equivalent of a debtors’ jail. They seem to be incapable of understanding that if you savagely cut government spending while private spending is going backwards and the external sector is not picking up the tab then the economy will tank.”

      Moreover, the amount of money being demanded is, on an EU scale, not that significant for Europe. Yet the troika is willing to take a chance on a global economic crash in order to keep pressuring Greece. This irrational policy is explained by Nobel Laureate Joseph Stiglitz, who wrote that: “it’s not about the money. It’s about using ‘deadlines’ to force Greece to knuckle under, and to accept the unacceptable – not only austerity measures, but other regressive and punitive policies.” These policies include slashing pensions and social services, and selling tens of billions worth of Greece, including “the ports of Piraeus and Thessaloniki; prime Mediterranean real estate; the national lottery; Greek Telecom; the postal bank and the national railway system” to primarily foreign investors.

      Stiglitz says that the reason for these absurd demands is to destroy Syriza, the progressive party that was elected in January, and which put the latest EU demands to a nationwide vote on July 5. “If the government were simply fulfilling its campaign promises,” Stiglitz adds, “it would already have rejected the proposal. But it wanted to give Greeks a chance to weigh in on this issue, so critical for their country’s future wellbeing. That concern for popular legitimacy is incompatible with the politics of the eurozone, which was never a very democratic project.”

      Many European leaders believe that they can eventually bring down the Greek government by bullying it into accepting an agreement that contravenes its mandate. True to its principals, Syriza asked the people themselves to have the final say.

      The outcome surprised almost everyone. Over 61 percent of the Greek people said, No!” to the demands of Europe’s financial elite. (Reports indicated that over 85 percent of young people voted “no”).

      Now that the Greek people themselves have rejected increased “austerity”, Prime Minister Alexis Tsipras has a clear and democratic mandate to tell the Troika that they have to be more reasonable.

      Moreover, in an almost unprecedented act of solidarity, the four main opposition parties in the Greek Parliament are backing Tsipras.

      Time is short, however. The economic disaster in Greece means that people are finding it harder to get essentials, like electricity, medicine, and even food. Yet the Troika is willing to increase the suffering in order to get its way, even though its policies have made things much worse.

      Nobel Prize-winning economist Paul Krugman, recently wrote that, “the campaign of bullying — the attempt to terrify Greeks by cutting off bank financing and threatening general chaos, all with the almost open goal of pushing the current leftist government out of office — was a shameful moment in a Europe that claims to believe in democratic principles. It would have set a terrible precedent if that campaign had succeeded, even if the creditors were making sense.”

      Noam Chomsky said it best: “austerity is really class war”—in this case, to privatize the Greek economy, make its workers more “flexible”, and eliminate all restrictions on corporate profit. In addition, the financial elites are also concerned that, if Greece shows that resistance is not futile, people in other countries, such as Spain, Italy, and even France, might be inspired to reject neo-liberalism.

      And maybe even in Canada.

      Peter G. Prontzos teaches political science at Langara College in Vancouver. He recently returned from a visit to Greece.


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      P.G. Prontzos

      Jul 7, 2015 at 11:29pm

      "Thomas Piketty, author of the best-selling book Capital, said it was up to Merkel to remember the benefits Germany had received from debt relief and show leadership.
      In a letter to the Guardian, Piketty and other leading economists said: “Together we urge Chancellor Merkel and the Troika to consider a course correction, to avoid further disaster and enable Greece to remain in the eurozone. Right now, the Greek government is being asked to put a gun to its head and pull the trigger. Sadly, the bullet will not only kill off Greece’s future in Europe. The collateral damage will kill the eurozone as a beacon of hope, democracy and prosperity, and could lead to far-reaching economic consequences across the world.
      “In the 1950s Europe was founded on the forgiveness of past debts, notably -Germany’s, which generated a massive contribution to post-war economic growth and peace. Today we need to restructure and reduce Greek debt.”

      Larry Kazdan

      Jul 8, 2015 at 1:43am

      Greece should not accept any further austerity – full stop!

      "Fiscal policy rules. Greece is where it is at present because it was forced to endure the worst austerity (fiscal shift) imaginable.

      There is no secret as to why its economy has contracted by at least 25 per cent and its unemployment remains stuck around 25 per cent.

      What the data does emphasise, however, is the Greek government should head to Brussels today with a fiscal stimulus plan and forget about the debt relief for the time being. Its priority should be to get an agreement whereby it can run a significantly large fiscal deficit funded by the ECB through the QE program (that is, indirectly given the stupidity of the Treaty) to get the economy growing again.

      The fact that the Syriza government was stating it would accept conditions that still left it to pursue primary fiscal surpluses (that is, once interest payments are made) tells me that it would be just another Greek government imposing austerity on its people.

      It is not the debt relief that matters in the coming months but the ongoing austerity.

      That is what the people voted NO for – to end the fiscal austerity. Syriza should demand that now and not backdown and accept some watered down austerity (at best)."
      Modern Monetary Theory in Canada


      Jul 8, 2015 at 7:30am

      No sure I'm buying this argument: "In other words, the money went to foreign speculators and banks who were happy to lend money recklessly at high interest rates, but which were bailed out by public European banks when their risky investments went bad. The Greek people did not benefit from loans that they are told they must repay."

      To whom did the "foreign speculators and banks" originally lend the money to?

      Sehll Game

      Jul 8, 2015 at 1:23pm

      The foreign speculators leant money to the government of Greece to pay the usurious interest on loans it had taken out before. The issue is not paying back the principle on the loans but the never ending cycle of having to pay off the usurious interest on the loans.

      This system was put in place by the lenders for one reason - to eventually force Greece (and other countries in the same predicament) to sell all of their public assets to a few rich people. The end game here is the destruction of democracy and the establishment of a world-wide aristocracy.

      miss leigh

      Jul 8, 2015 at 4:20pm

      They did"t pay taxes.The big boys won"t pay though, the average joe will as in n. america,where all the bailouts to them(Boys) happened when they really should have been bankrupt.