by Kevin Ovenden
Morning Star | 20 February, 2017
GRINDING austerity and mounting social crisis. Industrial output falling in the last quarter. A €7 billion euro debt repayment in five months’ time. No money in the government coffers to meet it. European Union institutions holding back promised instalments of a previous bailout until further assaults on working people are rammed through.
If that all seems familiar, it is because that snapshot of Greece today is eerily similar to exactly this time two years ago.
It was on February 20 2015 that the freshly elected Syriza government in Greece came to an interim agreement with the EU and eurozone in Brussels to seek a negotiated path to easing the country’s 1930s-style crisis while sticking within the rules set by the European institutions.
The agreement was little more than a stay of execution and a debilitating one at that. The Greek government pledged not “to take any unilateral measures” that might conflict with the demands of the creditors.
The sharks in Brussels did not reciprocate. They used the succeeding four months to grind down Alexis Tsipras’s government.
They tightened the economic squeeze until it reached levels of financial terrorism in June designed to force him to overturn a 62 per cent referendum result rejecting the demands for more austerity. And that he did.
Two years on, the finance ministers of the 19 countries that are part of the eurozone meet again today.
When the meeting was scheduled it was expected to be signing off on the latest “review” of the implementation of the third memorandum of austerity measures demanded by the latest bailout agreed last year.
But officials warned last week that that was not going to happen and that there would be no release of the next tranche of cash to Athens.
The mechanism of the bailout is itself a travesty of democracy. It gives the European monitors a direct power over the Greek government and its decisions that goes way beyond the pressure of the money markets that any modern state is subject to.
In order to receive bailout cash, which is recycled through debt repayments back into the European banking system not into the Greek economy, the government in Athens has to persuade European bureaucrats that it is doing enough to cut spending, privatise and deregulate.
What is being demanded now goes further. It is that the parliament in Athens passes in advance “contingency measures” as well as further immediate austerity.
The contingency measures would mean that if at some future point the European institutions decided that targets were not being met then the measures would immediately come in on their initiative.
There would be no decision by a Greek government, no vote by its parliament. This is the most stunning curtailment of sovereignty and democracy.
German or French finance officials will decide to implement a cut to Greek pensioners no matter what people in Greece wish or vote for.
And everybody knows that what is being demanded would mean years more of such cuts and the pauperisation of Greek society as whole.
We know that because it is what just about every serious economist from the IMF to the European Central Bank says so.
The reason is that the mountain of Greek government debt is simply unpayable. It stands at 175 per cent of national economic output.
The IMF says that even if further austerity is inflicted, the debt burden will rise. That’s because the impact of squeezing the economy — the target is to have a budget surplus in 18 months’ time of 3.5 per cent and to sustain it — in order to pay the debt will be to crush economic activity further.
It is an impossible situation and it has led to a deepening rift between the IMF and the European institutions.
The IMF is saying that there will have to be debt relief if Greece is to have any chance of recovering. That, or there will have to be an even bigger structural adjustment.
German finance minister Wolfgang Schaeuble, however, speaking for the European institutions, has said: “There can be no debt relief within the eurozone.”
To do so would open up the question of the much bigger debt of Spain or Italy and others across the EU where governments stepped in, as in Greece, to bail out the banks following the 2008 crash.
The IMF is refusing to be part of the bailout unless there is some movement in the European position.
But the room for manoeuvre and for kicking the can down the road, which has been the EU’s method of dealing with the last eight years of crisis, is far narrower now than it was two years ago.
The EU had hoped to find some stopgap to prevent this escalating phase of the Greek crisis from running on into the timetable of major elections in Europe this year. It has failed to do that.
The crisis is spiralling into next month when the Dutch general election takes place, the French presidential election the following month and the run-up to the German election in September.
Political turmoil in each of those three core EU states cuts against their governments yielding an inch over squeezing Greece.
And the EU itself has been shaken by Britain’s decision to leave it last year. It is concerned above all to hold together on the basis of the existing failed economic model.
Tsipras’s government also enjoys less leeway at home. At the second election in 2015, in September, people were prepared to give it the benefit of the doubt.
The new austerity measures were yet to hit and, while unhappy at the government’s capitulation to the lenders, most people were hopeful that the axe might be blunted and that the government would deliver the debt relief it promised at the election. That sentiment has now given way to great bitterness.
The government parties have plummeted in the polls. Every indicator shows a deep alienation from the political system, which Syriza’s election two years ago was meant to stabilise. The centre-right New Democracy is up in the polls but well short of its historic levels.
Meanwhile the social and economic crises have a remorseless logic of their own. They are leading to more speculation among financial commentators of a possible “Grexit” later this year.
More importantly, they are posing more sharply than two years ago this question for working people: We cannot survive unless the debt is lifted.
If that cannot happen within the eurozone, then isn’t it time to repudiate the debt, rupture with the euro and EU and take the emergency economic measures necessary to prevent a complete social disaster?