A note on the Greek Crisis

After the latest negotiations for a further tranche of bailout money, which were followed by rioting in Athens and other Greek cities (12/2/2012), the question remains. What will happen to Greece? And why is this small country, which produces no more than 2% of the EU’s GDP grabbing the headlines?

Capitalism, which is back on the agenda since the 2008 subprime mortgage crisis in the US, is supposed to be the best system we’ve known to date. But as Edward  Heath (British PM of the 70s) was saying, capitalism with a human face, not rule of the markets with politicians as their pawns. And Heath was a Tory, not Labour politician. Of course, it was Thatcherism and Reaganomics that triumphed in the end and have shaped our modern world. The EU and German fixation with bringing down the deficit at all costs is very ideological in nature but has a veritable foundation. The argument is familiar to all: ‘we can’t live beyond our means’. Underlying that is the fact that an economy has to be productive, meaning people need to work and not abuse the social welfare system, all valid arguments.

The political elite in Greece (ex finance minister Papakonstantinou on BBC, Newsnight 14/2/2012  one bright example), as in most of Europe, belongs to the school of thought, known as neoliberalism. This way of doing politics is highly discredited now and it is extremely difficult to maintain otherwise in global forums. It is because of the shortsightedness and frankly, collusion, of the political class with creating the financial crisis in the banking sector of the economy that people are asked to stomach cuts on salaries, education, social services and benefits (in Greece as well as around the world UK/US). The crisis in Greece is not separate from the global recession. Although there are particular cultural and institutional problems in Greece (e.g. clientalism and corruption), that does not change the basis of the unfairness of the policies of austerity, which are a global problem.

In the US where this crisis started as a housing market bubble, the government had promised (Bush and then Obama) that they would bail out the banks and then bail out homeowners who were faced with foreclosure. Only the first measure of this plan was taken. In the UK, the banks (RBS, Northern Rock) also received bailouts and were effectively nationalized (money from the public purse) and nothing was done in order to reimburse the state funds apart from vague promises about returns in the future. In the meantime, the same bankers still have exorbitant bonuses. In Greece itself, a banker is now prime minister by decree (called a technocrat in Greek doublespeak). The least European elites could do, would be to impose a common tax regime on the mammoth banks and hedge funds, find a way of clamping down on tax havens and support industry, production and the REAL economy. That is the only constitutional way of avoiding more corruption and violence. Why are they unable to do those simple, constitutional (non-radical) things?

Although the recession is global, Greece has been especially hard-hit. According to Eurostat, the highest shares of the population living in households that had been in arrears with their mortgage were found in Greece. According to research by the Bank of Greece in 2007, 6 out of 10 Greek households had been in arrears with their mortgage, 7 out of 10 had been in arrears with consumer loans, 1 out of 2 had been in arrears with credit cards. Apart from credit, 7 out of 10 households had been in arrears with rent and 6 out of 10 had been in arrears with utility bills. The number of households on credit exceeded 51%; that means 2.15 million people were on some kind of credit. As far as wages and unemployment are concerned, 50% of the waged used to get less than 1030 euros gross pre-crisis. The basic wage in Greece had already been one of the lowest in Europe (50% of the EE15 wages) before the latest agreement to slash 22% off the minimum wage. Unemployment reached 20.9% in December with youth unemployment closer to 50%. The rest of the world is not far behind, with youth unemployment being just as bad in Spain and reaching 22% in the UK, 23% in the US and nearly 90% in some Arab countries (Davos 2012).

Bearing those numbers in mind, it is hard to deny that the risk of social upheaval is relevant to the depth of austerity. Following the same logic, it is questionable whether the fence around Greece will avert similar social unrest elsewhere just as it is uncertain whether it can contain contagion of the crisis. Of course, the bailout terms in Greece’s case are uniquely draconian but their effects are not unfamiliar. Greece is a very pro-European country and the people have held out as long as they have because of their faith in a European solution (some kind of Marshal plan from above). This has not materialized and the mood seems to be changing, with the latest polls suggesting that nearly half of the population thinks Greece should opt out of the euro. The policies of austerity have to be overturned at the European level but if nobody undertakes that, Greece will just keep borrowing and borrowing with extreme results-already there and recognized by all. On the other hand, support has to be given to local industry in order to get back to the path of growth. If Europe is to work at all it has to function as a single political entity that is the expression of the people of Europe and not some autocratic club of bankers. Unfortunately, my reading of history is that, this is an impossibility unless there is some kind of popular movement from below.

The case of Greece has to stand as one more, sad reminder that war can be waged by financial means. But whereas in the past it was usually the case of the IMF going to Africa and Latin America to extract their pound of flesh, this hits a little closer to home. It is easy to forget that enormous profits have been made on the short selling of Greek debt during this time. It should also be noted that the mass media in Greece has functioned as little more than state propaganda, in favor of cuts, sowing discord and confusion about the real issues. In my opinion, what is happening in Greece is an international protection racket that has domestically given rise to the extremes of the political spectrum. In the process, it is probable that laws and tenets of the constitution have been broken. It only remains to be seen whether this ‘formula’ could ever be ‘justified’ in a country that does not have some of the acute structural or cultural problems of Greece. In other words, can markets target the capitalist core or is there a 'home bias'; and in today's globalized world who is the capitalist core? In the end, the best bulwark for democracy against chaos is the welfare state and it seems otherworldly that it should be attacked at a time of crisis by governments and corporate media.