October 17, 2013
Austerity politics have always been considered as a strong remedy against macroeconomic instability and a pathway towards consolidating public finances. In a global context, austerity politics have almost always been accompanied with bailout plans and foreign assistance -i.e. loans- that have been provided by other member-states -i.e. member-states of the IMF- or by private funds that develop a mentality of bargain or decide to risk considerable amounts to finance indebted states. In both cases, the risk of downturn is scarcely uncontrollable, as security swaps guarantee the reception of at least the amount of interest rates linked with a certain loan. Even if a certain economy defaults, there is the paying off clause which minimizes the cost of lending. But what about the people themselves? Is there any mechanism that could establish a minimum safety net when economy goes insane?
Greece presents a unique phenomenon where economy values irresistibly much more than human life. It is not the only case historically, but it is timely plausible to believe that Greece’s social conditions are far from being compared to what other overdebted member-states of Eurozone are experiencing. A recent study presented in the mayor’s council in capital Athens a couple of days ago showed that poverty rates in the municipality of Athens, which consists of something around 30% of the country’s population, are increasing in weekly basis. While the overall rate of the country is reaching 25%, Athens’s poverty rate is 30%. It is an astonishing rate for which all authorities involved are more prone to describe it and declare their will to fight against it than really try to find viable solutions.
A couple of years ago, the President of the Doctors of the World in Athens, an NGO providing free health services for the impoverished people, made a fierce statement that Greece is “in a state of humanitarian crisis“. I have long written about this statement and how this could shake the political authorities to get involved with the issue more thoroughly, but to my great surprise these words never really counted for anyone except for the doctors and the entire staff that voluntarily offer their services to deprived people. It is certain that neither the Greek leadership nor the European Union understand and evaluate the real conditions for the major part of the Greek society.
It goes without doubt that the politics themselves have been entrapped into a policy that leads to deadlock. Austerity should have a short-term applicability as it is a heavy-digested remedy that aims to consolidate the state and its public debt from anomalies occurred in the international economy. What Greece has actually achieved is literally a more impoverished and desperate society, with almost all parts of it being entrenched with economic and social insecurity. Stuck in austerity and additional measures and cuts that further weaken the economic performance and deprive people from the public good of work and the right to freely choose their destiny, Greece has turned to be a carcass where economic experiments are implemented as if the entire country is a huge laboratory.
The Greek political system is additionally hypnotized by the repeated reprimands of the European Commission and the International Monetary Fund about the failures of the economic policy. Every three months troika is coming to evaluate the development of the Greek program and every three months there is always the same drama: Is Greece ready to move on without any foreign aid? Is the state close to bankruptcy? Is the government able to avoid defaulting? Should the political leadership take further cuts and taxes and is the Greek society ready to assume the additional burden?
Many political and economic analysts have predicted that Greece will not survive such pressures and declare default. None of these predictions proved to be true. Still, the Greek government is ready to take further measures and increase direct taxes, as the evaluation report of troika unveils a budget shortfall of about 6 billion euros. Many are wondering where all these money go. Nobody from the government can provide a specific assessment and the story goes on. Probably they do not really know; Probably they do not have the capacity mechanism to monitor; Probably they have no intention to inform the public and the media on that.
At the end of the day, I dare to point out that a certain kind of economic terrorism is exerted in Greece three years now. Even the less qualified economist would reckon for the need Greece to declare default without any direct effect on the economic stability of Eurozone. A country which possess such a small portion of the European and global economic market would not trigger any significant backlash against Eurozone. But the fundamental problem lies exactly here: if Greece declares default, the credibility cost of Eurozone would be immense and the respective chain of reactions unbearable..Dimitris Rapidis