this article is from issue 45 of the journal Soundings written in May 2010.
The stories that we tell about the economy are part of the political battle. In April 2010 the leaders of the Euroland countries agreed an `emergency bailout’ of Greece, lending the fiscally stricken country billions of euros to prevent it defaulting on its debts and reaping untold havoc on the European banking system. The future of the euro itself was questioned. Now Greece is expected to `take its medicine’ by dealing with its deficit through a combination of spending cuts and the liberalisation of its economy. But the medicine suggested by financial markets, other European governments and much of the media may well prove poisonous, and to involve enormous economic and social costs.
There are many questions that must be asked. How did this situation arise? Who is to blame? What should happen now? And on whom should the costs fall? The emerging consensus appears to be to blame a profligate Greek state for overspending in the good years, and to suggest that the only answer is spending cuts and austerity, paid for by the Greek people.
But perhaps a more important question to ask would be how this narrative came to hold sway – and whether or not this widely believed narrative itself has an impact on the developing situation. And here the recent work of George Akerlof and Robert Shiller has much to offer: their recent book Animal Spirits (Princeton 2009) points to the importance of behavioural economics, and the ways in which perception influences reality. Recognising the central importance of stories in macroeconomics is crucial to understanding the drivers of the Greek crisis, and to understanding the route ahead. Read the rest of this entry »
We reject these cuts as simply malicious ideological vandalism, hitting the most vulnerable the hardest. Join us in the fight
It is time to organise a broad movement of active resistance to the Con-Dem government’s budget intentions. They plan the most savage spending cuts since the 1930s, which will wreck the lives of millions by devastating our jobs, pay, pensions, NHS, education, transport, postal and other services.
The government claims the cuts are unavoidable because the welfare state has been too generous. This is nonsense. Ordinary people are being forced to pay for the bankers’ profligacy.
The £11bn welfare cuts, rise in VAT to 20%, and 25% reductions across government departments target the most vulnerable – disabled people, single parents, those on housing benefit, black and other ethnic minority communities, students, migrant workers, LGBT people and pensioners.
Women are expected to bear 75% of the burden. The poorest will be hit six times harder than the richest. Internal Treasury documents estimate 1.3 million job losses in public and private sectors.
We reject this malicious vandalism and resolve to campaign for a radical alternative, with the level of determination shown by trade unionists and social movements in Greece and other European countries. Read the rest of this entry »
by Panagiotis Sotiris*
During the past months Greece has been the most dramatic example of the current sovereign debt crisis and the first to be forced to introduce an extensive set of policy changes. The package of measures negotiated by the Greek government with the EU, the ECB, and the IMF represent the most aggressive attempt in Europe to violently and rapidly implement ‘structural reforms’ that the forces of capital have been trying for decades to introduce. This has led to an impressive wave of social unrest, that will not be easily subdued especially if we consider that the full impact of the measures has yet to be felt. That is why both the crisis and the measures have acted as a litmus test for the Greek Left and its ability to act as the leading force of social protest and resistance.
The political ‘explosion’ that took place in Greece was a symptom of a systemic and deep-rooted legitimation crisis of the Greek state. This essay examines some of the causes of this crisis, how the political space in which this explosion occurred was produced, and possibilities for continued political antagonisms and struggles. Events belie forecasts; to the extent that events are historic, they upset calculations. They may even overturn strategies that provided for their possible occurrence. Because of their conjunctural nature, events upset the structures which made them possible (Lefebvre, 1969: 7).
The dramatic upheavals in Greece, sparked by the December 2008 murder of a ﬁfteen-year-old student by the police, have been the focus of much interest and speculation. This ‘explosion’ has been one of the most acute challenges to the Greek political
establishment since the end of the Greek Civil War. Read the rest of this entry »
by Etienne Balibar*
1. This is only the beginning of the crisis
Within one single month, we have witnessed Prime Minister Papandreou of Greece announcing his country’s default, an expansive European rescue loan offered to him on the condition of devastating budget cuts, soon followed by the “downgraded rating” of the Portuguese and Spanish debts, a threat on the value and the very existence of the Euro, the creation (under strong US pressure) of a European security fund worth € 750 bn, the Central European Bank’s decision (against its rules) to redeem sovereign debts, and the announcement of budget austerity measures in several member states. Clearly, this is only the beginning. These latest episodes of a crisis which started two years ago with the collapsing of the US housing credit forecast others. They show that there is more than ever a risk of financial crash, provoked by the huge amount of rotten stocks which have been accumulated over the last decade through the combination of unwarranted loans and the transformation of credit default swaps into financial products by the banks. “Black Peter”, the sum total of unrecoverable debts, is running around fast, and the States can’t catch up. The speculation is now targeting the currencies and the public debts. But the Euro is the weak link in the chain, and so is Europe itself. There can be little doubt that catastrophic consequences are coming. Read the rest of this entry »
By Costas Douzinas
The Guardian, « Comment is free », Thursday 4 February 2010
Paul Bremer, the first post-war American viceroy, imposed on ravaged Iraq economic policies which the Economist called “a capitalist dream” regime. One is hard pressed to find a better phrase to describe the “stability” plan measures submitted by Greece and approved yesterday by the European Commission. The plan envisages a reduction of the country’s budget deficit from the current 12.7% of gross domestic product to 2.8 % in 2012, and promises immediate 10% cuts in ministerial budgets, a freeze on public sector recruitment, the abolition of various tax allowances and an increase in indirect taxation. As if this was not enough, Socialist prime minister George Papandreou announced on Tuesday, in a dramatic broadcast to the nation, further unprecedented austerity measures, including an immediate increase in fuel tax, an increase in the retirement age and cuts in civil service allowances amounting to 10% of salary for most civil servants and up to 40% for academics. As in Britain, universities are the first to be hit, seen as a secondary luxury despite the much trumpeted “knowledge economy”. Read the rest of this entry »