The Guest Blog

Guest Post by Yannis Kechagiaras, Msc graduate in international relations, LSE.

The Greek nation sends out a distress signal: we cannot bear the burden of new cuts on salaries, wages, pensions, allowances; we cannot pay out more special contributions and irregular taxes; we cannot afford saving the state. Greek people are literally cash-strapped: around thirty per cent of Greeks cannot afford paying for their monthly expenses of most necessary goods, such as bread, milk and cloths, on account of the new measures and their corollaries in real market: an increasingly shrinking economy with a total unemployment rate approximating 23%, according to latest unofficial estimates. And youth unemployment coming to around 46%. Conditions in the main street are ever bleaker: urban places, mainly parts of Athens, face the risk of confronting a humanitarian crisis –heightened by thousands of starving homeless migrants from Africa and Asia- over the next months or year irrespective of any political development. It is indicative that in 2011 suicides in Greece increased by 40%, according to Wall Street Journal.

It becomes obvious that Greek citizens cannot and will not fund their share of the bail out of the Greek state. For family revenues within the following months will drastically decrease, since the recent bailout package agreement -among others- imposed retroactive cuts in all private sector salaries of 22%, when fiscal measures of the previous year remain severely unchanged, say VAT reached 23% and public services have been constantly increasing their tariffs. Even before the implementation of these fresh measures, provided in the agreement, EU officials and the agreement itself have made clear that new measures will soon (June 2012) appear. Amongst them, complete abolition of a taxable minimum for low income taxpayers which will eventually destroy the working class that the same measures are going to establish: the ‘generation of semi-employed’ of two hundred euro with a taxable annual income of 2400 euro. As a result, the provisions of the agreement are clearly leading to the establishment of a serf society in Greece. Besides, these measures are designed to stay irrespective of even if Greece manages to nullify its sovereign debt.

The analysis that has just been made could easily conjure up conditions of a state of sub-Saharan Africa, but paradoxically it describes a member state of the European Union and the eurozone, the putative most robust economic and monetary regional integration on the globe and ever in modern history. While conditions resulting in an economically exhausted society such as Somalia or Nazi-occupied Greece of 1941-1944, are mainly politically and socially-oriented, if the Greek nation and all the rest European nations do not take seriously what is in the offing at the economic level, then it will be the first time that we will regard a reverse current whereby total economic devastation will wreak political and societal havoc.

It is true that the Greek state was on the verge of default since 2009 with an external public debt of 127% of its GDP. At the time, the Greek state was indeed cash-strapped but the Greek society was attaining a growth of 0% (+2,1% in 2007) with an unprecedented -since 1991- low unemployment rate of between 7,6% and 9,3%. Two years later, the EU and the Greek government boast that they have attained a selective default instead of a disorderly default by establishing a protection net for banks’ viability and international bondholders. The idea of inhibiting a possible default in 2009 led the IMF, the ECB and the Greek government to resort to an outrageous and irrational method: treating a derailed public debt with issuing heaviest loans with onerous interest rates (a sort of economic cannibalism). This utmost neoliberal remedy has had as result a Greek public debt from 127% in 2009 to 175% of GDP today (according to the Peterson Institute) and –if everything performs exemplarily- 120.5% in 2020.

But was Greece an exceptional or a sui generis case that deserved this remedy? The answer is definitely no, for two obvious reasons. If we have a cursory glance at statistical graphs of all peripheral countries of the eurozone, we will see that all these states followed the same course during the years in the eurozone regarding their sovereign debt. The only difference was that Greece had always a bigger public borrowing rate, while, say Spain, had a bigger private borrowing rate. The second reason is Greece’s overall economic outlook. The size of Greece constitutes a negligible piece of a global financial puzzle: in 2010, the Gross World Product (what all nations produce annually) accounted for 57.5 trillion dollars, while the private and public debts of all states were reaching 63 trillion dollars. It is a matter of fact that most of nation states have been faced with a severe structural crisis since the 1990s.

Many domestic state malfunctions, say corruption and maladministration, coincided with a growing parasitic unregulated financial market acting against both irresponsible states and householders. Within this context, it seems that after the 2008 mortgage crisis, while the US dollar was starting losing some of its post-WWII global economic image and discussions about its replacement by a safer euro were taking place, all of a sudden, financial markets targeted the most strapped for cash state of eurozone –Greece; this was a wonderful investment of medium term, since this targeting would bring medium term gains from other sovereign debts as well, over the following years, on the grounds of a possible financial domino.

Under these circumstances, the Greek nation has become a sheer scapegoat: after all, although in 2009, Greece was not a sui generis case, now it is. With an insufficient and tasteless European and Greek leadership and with explicitly communicating tubes between the European Union politics ‘kitchen’ and the private international financial markets ‘saloon’, the most important players of the game acted at least in a disastrous fashion. It seems that the kitchen staff two years now is waiting at the living room for customers’ cooking in the kitchen. Greece has become a case without precedent: its loss of any power in monetary and economic policy and the strangling of its real economy lead to a humiliating dead-end for all Europeans. It is in the interest of all European peoples to act. It is in their interest that Greece does not become a failed state, whereby authorities cannot control the political, social and economic situation.

There are two sustainable solutions at present. One would be a well organised and controlled exit of Greece from the eurozone. On this occasion, the European Commission should undertake a heavy load with its competencies in community policies. The other option would be a federation or a real unification of eurozone member states’ fiscal, monetary and economic policy. On this occasion, all economic benefits and sovereign debts will burden equally all eurozone partners as opposed to a multi-speed Europe. But with an obvious remark that the decision making centre should become Brussels not Berlin. One way or another, it seems that Berlin does not intend to share its benefits and debts, at least unless the former are bigger than the latter. However, there are no magical remedies and it is an illusion for some European politicians to think of a win-win solution in this painful complicated riddle.

For North Europeans, this crisis might seem to signal a wonderful opportunity for deeper institutional integration of an erstwhile federal aspiration, for Greek Europeans this is a matter of life and death. Greeks want to rehabilitate their national pride, the earth beneath their feet. It provokes no surprise that after many decades of Greeks being overwhelmingly a staunch supporter of an integrated Europe, for the first time in European Union history, the majority of the people has become euro-skeptic according to polls by giving more space for the far edges of the political spectrum. Under these crucial conditions, I cannot help but plead the European nations and our partners for not leaving Greek people alone turning Greece to a quasi failed state. Greece has proved many times, even in the twentieth century, that from this corner of Europe, history has taken a different turn, most of times to the good of human kind. But, time and tide wait for no man. Let this time be again an opportunity for the future of our home Europe.


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  1. The Greek solution is drama and blaming external parties. I wish they would share a more Kantian spirit and hang those who are actually responsible for financial forgery.

    We know how it will end, because of their irresponsible behaviour they would ruin their nation. Guilty are the others of course, the creditors, who in the wicked logic have a vital interest to ruin the small nation.

    The Germans do not want to get too much screwed up. As simple as that. They require compliance, yes we agreed but of course nenenene. But of course, feel free to depict Greece as a victim and a scapegoat if that suits you. Markets don’t lie, they are brutally honest.

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