Greece is a victim of the payday loan sharks of northern Europe
Stephen King, HSBC Group Chief Economist, has an excellent article (£) in the Financial Times today exposing the contradictions in the myth that the eurozone’s problems can be solved by bullying Greece into what Greek union confederations GSEE and ADEDY tell us is more and more economic misery. Whatever got Greece into the mess it’s in, harsher and harsher loan repayment terms won’t get it out of that mess.
The German-led governments of northern Europe are acting like the payday loan sharks that Stella Creasy MP is campaigning against, preying on precisely the poorest on the European estate, who are least able to pay them back. The troika – the ECB, Commission and IMF – are the thuggish enforcers sent to tell the recalcitrant Greeks to slash and burn their welfare state and indeed their entire economy. And where Greece goes, even France may follow (after Ireland, Italy, Portugal and Spain, who are all in the same boat as Greece, but not yet the bit that’s sinking fastest.)
Stephen King points out that if Greece and the other peripheral economies are to escape their debtor status, Angela Merkel’s German government will have to abandon its increasingly smug creditor status too. For every lender, there has to be a borrower, but if that borrower isn’t earning enough to pay the debts, then the creditor is in trouble too.
The Greek economy shrank by 7% last year, and will carry on shrinking as unemployment is forced up and wages forced down. In the US, that’s what led to the sub-prime crisis and, shortly afterwards, a global financial and economic crisis.
What would help? I fear that last year’s solution – eurobonds that would have spread the debt and given Greece a longer term path to recovery and repayment – may now be too late, although it’s still a sound policy and worth trying. The German trade union movement (DGB) is calling for a new Marshall Plan for southern Europe, using the huge surpluses built up by the rich to invest in jobs and growth.
It’s not yet too late to grow Greece back to financial health. But a generation of young Greeks (and Spaniards, where youth unemployment is also touching 50%) is teetering on the brink of being sacrificed on the altar of austerity.