The Economic Blackmail Of Greece In Full Vogue
Greece has been a financial basket case for some time. To be sure, it is not the average Greek that is to blame. The titans of finance’s big tax evaders (like the big tax evaders here in the United States) are to blame for the Greek financial debacle. The Guardian’s Dan Roberts explains it this way.
Like many countries, the Greek government relies on borrowed money to balance its books. The recession has made this harder to achieve, because tax revenues are falling just as welfare payments start to rise. It doesn’t help that, in Greece, tax evasion is commonplace and pension rights are unusually generous – but, to be fair, using public spending to even out the bumps of the global downturn is what most large developed economies are trying to do right now.
Greece found itself in a catch 22 situation. Credit rating agencies downgraded their credit to junk status. That caused interest rates for their bonds to surge further exacerbating their financial situation. Over time they went to the troika (the International Monetary Fund, the European Central Bank, and the European Commission) for relief.
Greece was forced to accept draconian austerity terms to get funded. These austerity measures inflicted severe hardship and pain on the average Greek citizens as their economy shrank and their unemployment surged.
The Greek masses got fed up. They elected a progressive politician that promised to loosen the chains of indentured servitude to the banks by increasing wages and passing other policies to aid the suffering Greeks. This victory has some wondering if a European Spring is coming as stated by Lorenzo Del Savio and Matteo Mameli in their Truthout op-ed.
In the wake of the victory of the progressive party Syriza at the Greek general election on January 25, 2015, some have started talking about the coming of a European Spring, a democratic uprising against the political status quo in Europe.
This status quo has imposed brutal austerity policies on countries like Greece, Cyprus, Spain, Italy, Portugal and Ireland. These policies have protected and advanced the interests of banks, and more generally, of those holding large financial assets. They have protected and advanced the interests of large corporations. They have generated unbelievably high unemployment rates, a huge squeeze on workers’ wages and an astonishing number of bankruptcies among small businesses. They have resulted in dramatic cuts to social security and public health systems.
These are economic issues, but they are also moral issues. Robbing a whole generation of European youth of the possibility of finding a decent job is stripping them of their hopes and dignity. But alongside these issues, there are other features of the European status quo that are outrageous. Through a variety of mechanisms – from the memoranda of the Troika to EU pacts and treaties – European institutions have robbed European citizens of any meaningful democratic control over political decisions. For all of these reasons, a European Democratic Spring is urgently needed.
Europe and the banks are fighting back. They are resisting attempts by the new Greek leader from providing his citizens relief.
A document prepared by Germany for a meeting of EU finance officials, obtained by Reuters, made clear Berlin wants Athens to go back on promises to raise the minimum wage, halt privatizations, rehire public sector workers and reinstate a Christmas bonus for poor pensioners.
“The aim is the perpetuation of the agreed reform agenda [no roll back of measures], covering major areas as the revenue administration, taxation, public financial management, privatization, public administration, health care, pensions, social welfare, education and the fight against corruption,” the paper said.
This is punitive. Paul Krugman clearly notes that a relaxation of austerity would increase economic activity. This in turn would not be disastrous for debt payment but would give relief to the Greek citizens.
Greece has been running a primary surplus since 2013, and according to its agreements with the troika it’s supposed to run a surplus of 4.5 percent of GDP for many years to come. What would it mean to relax that target?
It would not mean demanding that creditors throw good money after bad; everyone has already implicitly acknowledged that the debt will never be fully paid at market rates, but Greece is making a transfer to its creditors by running a primary surplus, and we’re just arguing now about how big that transfer will be.
So let’s think of a maximalist case, in which Greece stopped running a primary surplus at all (this is not a proposal). You might think that this would let the Greeks spend an additional 4.5 percent of GDP — but the benefits to Greece would actually be much bigger than that. Remember, the main reason austerity has been so harsh is that cutting spending leads to economic contraction, which leads to lower revenues, which forces further cuts to hit the budget target. A relaxation of austerity would run this process in reverse; the extra spending would mean a stronger economy, which means more revenue, which means that the primary surplus wouldn’t fall as much.
Americans look at the problems in Greece, Portugal, Spain, and other European countries as something happening over there. Could it happen here? Of course it could.
It is clear that the austerity imposed on Greece and many of these countries have nothing to do with their economic survival. Austerity as an economic tool has been debunked for some time. The economic fraud perpetrated by ‘renowned economists’ Carmen Reinhart and Kenneth Rogoff was exposed. Those who promoted austerity used the work of these economists as their holy document.
What these bankers and the Plutocracy are attempting to do is to use austerity to destroy the safety nets (social security, health care, living wages, pensions) as a right. It is not an economic issue. It is a moral issue. It is a paradigm shift where the masses are but indentured servants with no benefits as all the excesses from their labor is extracted and given to the Plutocracy.
Again, can this happen in America? It is already happening. You hear about reduction in entitlements for the masses even as profits and wealth soar for the few. You hear about cutbacks in every spending area except defense since one must have a strong defense to suppress anyone that opposes the physical and/or economic massacre of the masses. Listen closely to Paul Ryan and many of the Republicans calling austerity and Libertarian policies by a different name.