Forest of Dean & Wye Valley

Blood Money: CATCHING GREECE IN THE AUSTERITY TRAP

In A.Graham on September 2, 2015 at 12:51 pm

During those boom years, before the economic collapse of 2008, Greece seemed to be riding high. It had hosted the Olympic games (and Athens gained a shiny new tramway system to go with it). Tourists and foreign investment flowed in to what seemed like a money trap. But in a country where tax evasion is a way of life amongst the very rich, the Greek government’s coffers failed to benefit.

Then came the domino effect of the economic collapse, and suddenly Greece found itself facing mounting debt, and no means to pay it back apart from borrowing more money from such creditors as the IMF and the European Union. At the beginning of the year, both the economy and the Greek government collapsed under the strain.

In the ensuing election, the left wing Syriza Party under its charismatic leader Alexis Tsipras gained victory, promising to end the enforced austerity that was crippling the country. Despite early optimism, it failed.

HUMILIATION FOR THE GREEK PEOPLE:
There’s no doubt that the EU knew what it was doing when it set about bringing the Syriza government to heel. In the new addition of The Global Minotaur*, Paul Mason writes in the introduction that at the beginning of February, the European Central Bank abruptly withdrew its regular loan facility to the Greek banks, and left them to bleed to death.

At the end of the day, Tsipras was backed into a corner and was faced with either agreeing to the demands of the country’s creditors – or, effectively defaulting, which would have meant Greece would be forced to leave the eurozone (and presumably return to the drachma as the country’s currency) – or even leave the European Union altogether.
Such a move would be an enormous leap into the dark. Whilst many in the Syriza party advocate a default position, and a return to the drachma, it was not something that Tsipras felt he could support.

When a hastily-called referendum convincingly backed the rejection of austerity, Tsipras found himself caught between a rock and a hard place. He chose to capitulate to the demands of the IMF and the European Union. The Greek people had been punished for their temerity in challenging their financial masters.

Meanwhile,  the Greek banking system had reached the point of virtual collapse. It was running out of money, pensions couldn’t be paid, whilst some banks were technically bankrupt.

The international Monetary Fund was insisting on its pound of flesh, and was backed by Angela Merkel, the German chancellor. Indeed, she went further, suggesting that there should be no further bailouts for Greece until repayment of debts were made. One reason for her obduracy may have been that the Germans had invested heavily in Greece during those profligate years before the economic crash – and she wanted that money back. Some critics, however, have made the point that past German governments have had a poor record in paying back their own debts!

RELUCTANCE:
So, reluctantly, the deal was signed and equally reluctantly endorsed by the Greek Parliament. Tsipras was forced to rely heavily on opposition parties to push the measures through. His own Syriza party split on the issue, with its former Finance Minister, Yanis  Varoufakis, voting against.
It may be a done deal, but there are now warnings that things are likely to get worse for the Greek economy before getting better (always assuming that they do). According to one influential Greek “think tank”, there is likely to be a sharp drop back into recession. Meanwhile, since this article was written, Alexis Tsipras has resigned as Prime Minister, a move that may well provoke an early general election.

So, it looks like there are more hard and uncertain times ahead for the people of Greece – but there’s only so far one can go in punishing an entire population for “crimes” that they never committed. It’s also a sad, sour, reflection on attitudes within the European Union, where one of its own members is treated like a pariah state. This attitude was not meant to be part of the vision of those who came together to form the bonds that led to the founding of the Common Market as it was initially known.

*Footnote: “The Global Minotaur”, by Yanis Varoufakis   (Zed Books, £8.99), has just been re-published in an updated edition. We hope to review it in the next Clarion.

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