BATTERED GREECE VOTES
Economists Are Calling For An End To Greece's Austerity Nightmare
Government Insolvent; Banks Closed; Hospitals Low On Food & Drugs; ATM Withdrawals Limited to $25; Butchers Can’t Pay For Beef; Cash Scarce; National Default.
If one could envision a Twenty-First Century Hell, today's Greece might just be the perfect model. After years of austerity following the Crash of 2008, round after round of cuts and cutbacks to conform to the IMF's and EU's loan demands, the people of Greece will vote today to determine if they agree with the current set of proposed cuts facing the nation or if they've had enough and reject their creditors demands. The following is excepted from a Huffington Post article about how many economists view the situation facing the Greek people.
A tense standoff between the Greek government and its international creditors reached a breaking point this week. On Tuesday, Greece became the first developed country ever to miss a debt repayment to the International Monetary Fund. Meanwhile, the government is preparing to hold a national referendum on a new proposed bailout deal.
Creditors are insisting that Greece implement spending cuts and tax increases in order to seal a new agreement on bailout funds. Greek Prime Minister Alexis Tsipras says these demands, along with the dire warnings about Greece's future in the eurozone, constitute "blackmail" against his government, which was elected in January on an anti-austerity platform.
There is consensus on one point: Greece's economy is a shambles. The country's employment, wages and gross domestic product have nosedived since the financial crisis of 2008, and have barely recovered despite two major bailouts from international creditors starting in 2010.
Many economists blame the austerity policies for the Greek economy's failure to recover. “I can think of no depression, ever, that has been so deliberate and had such catastrophic consequences,” Joseph Stiglitz, a Nobel laureate in economics, wrote on The WorldPost this week. Stiglitz argues that the so-called troika of international lenders to Greece -- the IMF, European Central Bank and European Commission -- has failed to acknowledge this in its negotiations over a new bailout:
According to Stiglitz, international creditors have been pushing faulty models on the developing world for years, and Greece is just the latest iteration.
“The disparity between what the Troika thought would happen and what has emerged has been striking -- and not because Greece didn't do what it was supposed to, but because it did, and the models were very, very flawed,”
Financial analyst Clive Crook asked in a piece for Bloomberg why the failure of austerity policies in Greece is not even on the international creditors’ agenda as they push for a new deal.
“Yes, the program had failed," Crook wrote. "No, it wouldn't achieve debt sustainability. Absolutely, it was pointlessly grinding down Greek living standards even further. What did that have to do with it?”
University of Maryland business professor Peter Morici argues that there is no evidence that more austerity will lift Greece out of its predicament.
"Neither Germany's finance ministry, nor any other European government or competent private institution, has tabled a credible analysis demonstrating how more austerity and labor-market reforms (read more layoffs and wage cuts) will instigate growth and not result in even bigger losses for bondholders down the road," he wrote for CNBC. "Another round of austerity would only further pummel the Greek economy, and impose economic deprivation that European leaders should be ashamed to engineer."
Other economists point out that Greece has been trapped in a vicious debt cycle. Money loaned to Greece has gone to pay off private creditors, rather than to Greek government coffers.
“The rescue that took place in the banking sector was really more of a rescue of northern European financial institutions that had overexposed themselves to Greece,” Vicky Pryce, chief economic adviser at the analytics firm Centre for Economics and Business Research and author of a book on the Greek economy, told The WorldPost. “The concern about this particular debt is that all it did is it transferred this large burden to the Greeks."
Jared Bernstein, a former economic advisor to President Barack Obama, argues that Europe could have helped the Greek economy in a smarter and more sustainable way. While Greek profligacy was partly to blame, the creditors' policies have also been disastrous, he wrote for MSNBC.
One reason Greek government debt grew so quickly was that Germany, the Eurozone’s powerhouse economy that’s been imposing austerity on the Greeks, used the money from its trade surpluses not to buy imports from weaker peripheral economies, like Greece, thereby helping to foster more balanced growth and less debt in the region. Instead, they bought Greek debt, financing the run-up we’re dealing with today.
“The troika clearly did a reverse Corleone -- they made Tsipras an offer he can’t accept, and presumably did this knowingly,” economist and Nobel laureate Paul Krugman wrote of the creditors' final bailout offer. “So the ultimatum was, in effect, a move to replace the Greek government
Former Treasury Secretary Larry Summers warned in an article last month that Greece is a failed state in waiting. Greeks have "imposed more austerity on themselves than any industrialized country has suffered since the Depression," he argued, calling for an agreement that takes this into account as well as the legitimate concerns of creditors.
Frankly, I think the following chart pretty much says it all.
Greece’s economy is in a shambles and Greek citizens have suffered round after round of layoffs, pension cuts and public service cuts. Sure, no question that past Greek governments could and should have done a better job in implementing economic policies that were more reasonable and practical over the past decades.
But what all the above economists and the chart do NOT say, is that Northern Europe sees Greece and Greeks as a Second Class Country full of Second Class Citizens. While such an attitude also applies to other Southern Tier EU nations such as Portugal, Spain and Italy that also have stumbling economies and huge unemployment far worse than nearly every other Northern Tier EU nation. This, for me, is the underlying reason why the IMF, the European Central Back and the European Commission have been so tough on Greece – they want to teach the no-account, low class Southerners a lesson they will never forget.
Germany and the rest of northern Europe will be delighted to see Greece fail.