Making headlines around financial markets and international news is the announcement of Greek Prime Minister George Papandreou that he has proposed holding a national referendum for Greece to accept the terms of the most recent bailout package that was put forward last week:
Opinion polls in Greece show that most people do not support the austerity deal.Mr Papandreou told a meeting of his governing Socialist party that Greek people would have the final say on the package, which is designed to reduce Greek debt by about 100bn euros. “The command of the Greek people will bind us”, he was quoted as saying by AFP news agency. He set no date for the referendum, but indicated that it would be held after details of the deal have been finalised with the EU and the country’s creditors.
The austerity package in question, or, in more frank terms, the characteristics of further imposed economic suicide in question, involve:
- New pay and promotion system covering all 700,000 civil servants
- Further cuts in public sector wages and many bonuses scrapped
- Some 30,000 public sector workers suspended, wages cut to 60% and face lay off after a year
- Wage bargaining suspended
- Monthly pensions above 1,000 euros to be cut 20% above that threshold
- Other cuts in pensions and lump-sum retirement pay
- Tax-free threshold lowered to 5,000 euros a year from 8,000
Not one euro, not one cent of this package, involves any kind of shared sacrifice from the wealthy. It’s simply the debasement of public sector workers (who needs teachers?) and of course, slashing pensions and retiree benefits. Because taking money out of the pockets of helpless old people is fair and responsible. Such a package will only further depress economic growth in Greece, as every single other “rescue” package has done.
This package will, like the others, only further shrink the economy because it will reduce public spending and therefore aggregate demand, thus worsening employment and growth, especially in the climate of continued weak private sector demand. Greece has been in recession due to mass unemployment which resulted from the collapse of their housing bubble, and cutting government spending only aggravates this dynamic. Even the IMF, as of September 2011, has forecast continued high unemployment and negative growth in its Global Report, Autumn 2011:
- 18.5% unemployment (2nd only to Spain’s forecast of 19.7%)
- -2% growth
And by implementing more austerity, these figures will only be aggravated, since reduced government spending, or, increased government savings on domestic purchases of goods, services, and social transfers, serve only to increase private sector deficits. These are accounting identities and there is no way around them.
Although, according to the BBC article linked above, Papandreou supports this package, it is only just and fair that the Greek people, for once, directly decide whether they will allow foreign banks to collude with their politicians in order to depress their economy and impose years and years of unemployment, social unrest, lower living standards, and mass emigration upon Greek society. And not only just to keep a currency that was fraught with structural flaws since the beginning, but to prop up the mostly French and German banks who lent so irresponsibly to Greece.
A defeat of the package via national referendum sets the stage for Greece to default and withdraw from the Euro. It is not a given yet, and there’s still a chance that fear-mongering by Europe’s financial elites in Germany and France will combine with the collaborators in Greece’s political leadership to scare the public into accepting the austerity deal and stay within the Eurozone.
But with today’s news, there’s at least a little hope. A default is not without precedent, just ask Argentina. Or, if the Greeks want to see what debt forgiveness is all about, they can look at the greatest debt transgressor of the 20th Century: Germany.
Moving forward, will Italy, Ireland, and Portugal follow suit?