Greece’s financial nightmare has lasted five years now. There’s no sign of real relief—for a very specific reason
by DAVID DAYEN
Europe wants Greece to suffer: The truth about the never-ending financial crisis & the cult of extreme austerity
(Credit: AP/Yorgos Karahalis)
For someone who writes about economics, the situation in Greece offers two enticing elements: the ability to spin out moments of high drama, and the probability it will endlessly repeat forever. We’ve experienced five years (really, here’s one of my first stories on Greece, from April 2010) of wondering whether the deeply indebted country will exit the euro or submit to more painful conditions from its European creditors. Two governments – the center-right and the center-left – took the latter option, and paid dearly for it. Now the far-left Syriza appears poised to do the same, after delivering a new proposal to unlock bailout funds.
Meanwhile, the prospects for ordinary Greek citizens never changes, adding a nightmarish “Groundhog Day” touch to the proceedings. Regardless of whether the country is spiraling into near-default or praising a debt deal, unemployment has remained over 25 percent for the past three years. Half a decade into the Great Depression, there was at least some semblance of a brighter day; in Greece there are only gradations of misery. And what could break this terrible cycle is the only thing the political system and the public imagination cannot seem to contemplate: leaving the euro.
What has been happening in Greece has been a long exercise in sadism by European elites, who care only about keeping their political project alive, regardless of how those who must deal with the consequences are affected. Three governments ago, Greece rang up a series of debts that they have no practical ability to pay back. The structure of the eurozone, 19 countries sharing a common currency, encouraged this debt buildup, which manifested through capital flows from the wealthier north to the southern periphery. With a single currency, investors chased higher returns in countries where capital was scarcer; this was part of the core euro design. When the investors pulled out and the debts came due, the northern states, led by Germany, pretended this didn’t happen and demanded their money back.
The European Union, the European Central Bank and the International Monetary Fund – the “troika” for short – forced Greece and other debtor nations into a bailout program, where they would run budget surpluses, even in the midst of a depression, and repay debts over the long-term. But the troika had another mission. They wanted to suck the oxygen out of any anti-austerity movement in Europe, and knuckle every country under their dictates. Therefore, the troika’s entire goal with Syriza, who entered office in January, has been not only to grant them concessions in negotiations, but to directly humiliate them and force them into a series of bad choices, as a lesson to all other Eurozone countries.
The latest proposal from Syriza, after months of delays and rejections, reflects this forced grovel. The government, which faces default if they don’t pay the IMF 1.6 billion euro by the end of the month, has committed to higher contributions for their pension plan, including from retirees. They will significantly ramp up their value-added tax (VAT), which acts like a sales tax, hitting those of modest means the hardest. Because Syriza didn’t cut pension payouts any further, and maintained the same VAT for selected items, they are claiming that they didn’t cross any of their red lines.
But despite some modest tax increases on corporate profits and luxury yachts, the bottom line is that Syriza agreed to future austerity measures indefinitely. Under the plan, they would maintain a budgetary surplus at 1 percent of gross domestic product for 2015. The surplus would steadily rise to 2 percent next year, 3 percent in 2017 and as high as 3.5 percent by 2018, as a condition for getting their bailout funds. It’s possible that these targets are “made to be missed,” as writer Daniel Davies puts it. And the surplus for 2015, at least, is less than first proposed. But since conditions have worsened in Greece since negotiations began in February, and the current budget deficit is higher, they’re still assenting to the same level of budget cuts to hit the target. And this is before the troika tweaks the deal more to their liking.