In these times of existential crisis, it’s often tempting for those of us in Northern Europe to wallow in self-pity; the Germans suffering a mass migrant rape epidemic, or the French and British nations creaking under the weight of Islamist terrorism. Whilst it’s true that, from Stockholm to Skegness, Northern Europe is facing mortal peril, the country suffering the greatest burdens sits much further south of the European continent. Greece might be known as a sunny holiday destination, but at the present time it’s a land rife with debt, austerity and betrayal most contemptible.
Greece’s hardships began in the immediate aftermath of the 2008 financial crisis, when French & German banks were faced with the prospect of insolvency should their debtors default on their repayments. As a side note, this truly exposed the farcical nature of fractional reserve banking, as the top three banks in France had, for example, lent over 19x the value of their total assets to the Spanish, Portuguese, Italian and Greece. This system only takes a small rupture to cause a chain reaction that can bring down the most stable of financial institutions.
As we now know, the Greek state quickly became unable to keep up with interest repayments on their debts to French and German banks as the recession set in. This resulted in the greatest financial swindle of modern times; not wanting to be seen to be “bailing out the bankers”, the governments of primarily France & Germany, along with their EU Commission Yes Men, arranged for European taxpayers’ money to be lent to the Greek state so that they could instantly send it to their northern creditors. This enabled the political class in Northern Europe to be able to shift the blame onto the “lazy, tax-evading Greeks”, who now shouldered the responsibility of bailing out Merkel & Hollande’s banks.
The guilty parties could be condemned ad nauseum, but after 3 “bailouts” and more governments than can be counted on one hand in the last 10 years, where does the Greek nation find herself today?
Quite simply, in a very poor place indeed. Since 2010, Greece has been shamefully transformed into history’s largest debtor’s prison, or “Bailoutistan” as their former finance minister and economics professor Yanis Varoufakis terms it. The refusal of Europe’s power-brokers to permit the Greek state to declare bankruptcy, coupled with the Troika’s imposition of crippling austerity measures, has resulted in sharp, perennial economic contraction and an even sharper fall in living standards, real-term wages and employment rates. Despite the media’s continuing relative silence over the issue, the hardships imposed on Greece by the big banks of Europe show no sign of abating.
Unemployment is high, the highest in Europe in fact, settling at around 22.5% om average in 2017 so far. Youth unemployment is even higher. With a rate of 47.5% of youth unemployment in January of this year, Greece ranked behind only Spain in this regard, although youth unemployment in parts of Greece such as the North-West remain as high as 68%. Wages have decreased at almost an exact negative correlation with unemployment, with wages today a massive 25% lower than they were at the beginning of the financial crisis. This is further compounded by a rise in inflation that means the actual decrease is harsher in real terms than the figures suggest, although inflation has come down from a high point in 2012.
These problems have been predominantly caused by the creditors’ ideological commitment to the deals they negotiated with the Greek government. They all seem to propagate the same neo-liberal economic brand that advocates large-scale cuts to public expenditure (austerity) and also mass privatisation of state-owned enterprises. Despite the fact there is little to no evidence that this economic strategy works as a means for controlling inflation or reducing a budget deficit, these were the conditions on which the Greeks were offered their first “bailout” in 2010. The results were, as predicted by a few chastised voices of dissent, terrible; between 2010 and 2012 Greek state expenditure was cut by 15%. In the same period, her national income reduced by 16%.
What the Troika failed to realise in their ideological haze is that a reduced national income as a result of a strangulation of economic stimulus results, invariably, in lower tax receipts with which the state could service their debt. All the while, the state continues to default on its payments to the creditors, resulting in the amount of interest owed growing whilst the ability of the state to service that interests shrinks. This is what happened in Greece, which resulted in the second and ultimately third “bailouts” being provided.
The only form of debt restructuring permitted to the Greek state by the Troika was in the form of outstanding liabilities to the Greek people themselves. That is, they refused to permit debts to irresponsible lenders to be written off or reduced, instead insisting that the state cut its liabilities by reneging on promises made and money earned to the Greek people themselves. This resulted in a cynical “hair cut” of Greece’s debt, which in practise saw money put aside for Greek pensioners be siphoned off by the banks in Paris and Frankfurt. As an example, those in the top 20% of pensioners better off than the rest of their contemporaries saw reductions to their monthly state pension of around 30%. The average pensioner lives on just €660.00 per month, whilst 43% of Greek pensioners live below the poverty line.
Undoubtedly they chose pensioners to target with their enforced austerity measures, as they are the group least likely to “make a fuss” about it. But perhaps the worst aspect of these despicably cruel austerity measures was that the Greek government, supposedly there to serve the people, agreed to them! Initially, the social democrats (PASOK) – the main “establishment party” between 1974 and 2012 – agreed to the first bailout, complete with all its crippling caveats. Despite feigning outrage and opposition from the sidelines, the conservative New Democracy (ND) party became themselves the willing participants in this scam upon taking office in 2012 – not only did they continue the measures of the PASOK government, they entrenched and institutionalised them.
Finally in January of 2015, the cartel of the old establishment parties was broken when the Coalition of the Radical Left, or SYRIZA as they’re colloquially known, stormed to power having only existed as a parliamentary party for a few short years. Their election came on a platform of rejecting any “bailout” proposal, instead demanding a complete restructuring of Greece’s debt (declaring bankruptcy, in effect) and being prepared to walk away from the table should Greece be threatened with expulsion from the Eurozone. Of course it goes without saying that, as a left-wing party, SYRIZA promised to reject out of hand any further austerity measures that may otherwise be imposed by Berlin.
When further bailout conditions were due to be imposed by the ECB, European Commission and IMF (International Monetary Fund), SYRIZA Prime Minister Alexis Tsipras announced a referendum on the deal in which, to a crowd of 250,000 impoverished Greeks in Syntagma Square, he recommended a “No” vote. Understandably and entirely predictably, the Greeks voted “Oxi” (NO) to the measures, with a large majority of 61.1% of the vote. Despite this, Tsipras turned his back on the voters who had entrusted him with the task of standing up to the financiers and instead embraced the latest austerity package just 10 days after the nationwide plebiscite. These measures included increasing VAT, “restructuring” the pension system, cutting public spending, privatising €50 billion worth of state-owned enterprises, “recapitalise” the banks (bailing out the richest 1% of Greek oligarchy) and rescinding all but 1 of the laws his government had passed since being in office.
By any objective measure this was nothing short of a betrayal, both of the people who elected SYRIZA full of hope and to Alexis Tsipras’ own principles. This was evident in to his own parliamentarians, 40 of whom voted against the measures in parliament, leaving the Prime Minister relying on opposition conservatives to pass the loathed austerity measures. This in turn led to new elections in the autumn of 2015, in which SYRIZA under Alexis Tsipras once again won enough seats – albeit less than in January – to form a government in coalition with the nationalist Independent Greeks (ANEL).
The rest is history; Greece still can’t pay her debts and SYRIZA are still in government doing the bidding of the Troika. Yet the answers to their crisis are much more radical than the solutions currently being offered. Firstly, the Greek state needs to effectively declare bankruptcy. This means rejecting any further loans from the international financiers of the ECB, IMF or any other institution and formally confirm to the banks in Paris and Frankfurt that they cannot pay their debts to them. Secondly, Greece must leave the Eurozone. This is something SYRIZA ultimately rejected due to the risks of announcing a devalued currency months in advance, about which of course they were correct. Therefore it is incumbent upon any Greek finance minister with an ounce of patriotism to roll out said devalued currency, presumably the old Drachma, without first announcing it to the world. This would require extensive preparation, but with enough will and discretion it would be possible.
Finally, the Greek state must cut taxes and invest what money it has back into the public economy. The most proven form of economic stimulus is a two-fold approach of increased public spending on infrastructure, and enabling the average citizen to have more disposable income which they themselves can invest in the economy with their increased purchases. Debt-based spending on the part of the ordinary citizen is, however, a failure in any objective analysis, thus it must come through reduced taxation on income and a reversal of the austerity cuts to pensions and grants.
Of course, it is beyond the realms of possibility that SYRIZA will ever adopt these measures, despite them being the crux of the party’s economic platform prior to their election to government. However, they are on course to suffer for their betrayal at the ballot box, currently languishing at around 22% in most opinion polls. Independent Greeks (ANEL) have a positive platform combining Keynesian economic theory with a nationalist message, yet their influence is waning as their coalition with SYRIZA is proving them to be rather ineffectual. The most radical option is, of course, Golden Dawn (XA) who are continuing to rise in the opinion polls. At the last legislative election 2 years’ ago, they gained 17 seats with 7% of the votes. If an election were to be held tomorrow, they would most likely double their representation in the Hellenic Parliament, such is the growth in their support.
Whatever happens in the future of Greece’s economic policy and electoral politics, one thing’s for certain; the policies of austerity and privatisation imposed by the Troika have proven beyond doubt to achieve nothing but the opposite of the initial objective. Cuts in public spending simply work to shrink the economy as a whole, while mass privatisation of state enterprise allows foreign investors to take control of large swathes of a nation’s public life at a cut-down price. These outcomes cannot be acceptable to the Greek people and, by extension, should not be acceptable to any Greek politician with an ounce of loyalty or self-respect.