Friday, 17 February 2012

Greece Can’t Repay Its Debts With Austerity Medicine

As the so called ‘troika’ (European Union [EU], International Monetary Fund [IMF], and European Central Bank [ECB]) deliberates over whether to release funds to Greece in their latest ‘bail out’ attempt to keep it in the Euro, the simple fact is that Greece cannot repay its debts by making further cuts to jobs, wages and public services.

The ‘bail out’ let us remember is not intended to be a helping hand for the Greek people, but to save the international and national banks that lent money to the Greek government so recklessly and are now threatened with going bust, should Greece default on these loans. At best, any ‘bail out’ will only delay the inevitable for a while, because all the flesh has already been cut from the bone, and Greece is, after nearly five years of recession, falling further into debt, with a 7% drop in growth in the last year alone. The latest plan can only prolong Greece’s recession and will probably make it even worse.

Ironically, in the land where democracy was born, democracy has been suspended during this crisis, with an unelected Prime Minister and commissioners from the EU now running the country’s financial policies. There has even been a suggestion from the German government that the Greek general election, due in in April this year, be postponed so that the latest EU financial offer is not rejected by the people. At best, a gun will be held to the heads of Greek voters, effectively demanding that they endorse the austerity measures in a ballot.

Understandably, the Greek people have taken to the streets with widespread rioting across the country, in opposition to the policies being inflicted on them by remote political and economic elites. Political parties of the left are close to gaining a parliamentary majority in the latest opinion polls, and these parties have said that they will reject the austerity measures as they stand. Whether this would lead to expulsion from the Euro, and even the EU, is not clear, but if more favourable terms are not offered to Greece, it looks as though they will default on their debts, which is likely to lead to an exit from the Euro at least.

There is a precedent of sorts for this situation. In 2001 Argentina defaulted on its debts, and rejected the IMF imposed austerity programme. There was a run on the Argentine Peso, factories closed, and inflation ran riot, amid much pain for the people. But at least they had hit rock bottom economically, from where the only way was up. A new government in 2003 introduced heterodox (left wing) economic policies, setting aside large amounts of money for social welfare spending. With a cheap Peso, exports began to increase and Argentina got back on its feet again.

Argentina has more in the way of natural resources than Greece, and the world economic outlook was much better than that of today, where we are in the worst recession since the 1930’s, if not worse. For Greece though, the alternative is a decade of recession and austerity, with probably a higher national debt than it has now. Some choice.

If Greece does default on its debts; it will have a serious and negative effect on the world and particularly the European economy, including Britain. But we can’t stand by and watch the Greek people being punished like they are, just to prop up the banks, and should show support and solidarity with them. There is lesson for the UK here too, where austerity policies have led to misery for the people and an increase of £158bn in our national debt.

For the first time in Greece a documentary produced by the audience. See the excellent film "Debtocracy" here.

The photo above from The Guardian

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