From the TUC

Hypocrisy of Eurozone leaders refusing to admit austerity has failed Greece

08 Jul 2015, by in International

It’s difficult to write anything about the Greek crisis without it being immediately out of date although the crisis itself, and the suffering of the Greek people, continues unabated. After the stunning 22% “no” majority in Sunday’s Greek referendum (like Britain’s election result, you should immediately distrust any analysis which begins “I always knew this was going to happen…”), unions and economists have demanded that the Eurozone leaders reach an agreement with Greece which protects what is left of social justice, and for once puts the economy on the road to  sustainable recovery. In particular, the IMF’s game-changing admission – leaked, because Eurozone leaders knew it was plebiscitary dynamite and wanted it held back – that Greece’s unsustainable debt was, indeed, unsustainable, increases the urgency of debt rescheduling and relief.

The ETUC’s immediate response was followed on Tuesday by a more explicit and powerful joint letter from European trade union leaders (including Frances O’Grady, even though we’re not in the Eurozone, and more importantly, the leader of the generally pro-PASOK Greek private sector union movement GSEE.) The ITUC, stressing the need for debt relief, and UniEUROPA have also weighed in, among others.

The ETUC joint letter calls for a “socially fair and economically sustainable agreement” and says:

“Greek people have voted against austerity, unemployment, and poverty that made Greek debt unsustainable.  They have not voted against the EU or against the Euro. 

“We consider that this referendum is a clear signal that policies imposed during the last five years are socially unbearable and an economic failure.  People must not be penalised for the way they voted.”

Meanwhile top economists have reiterated their support for a change of course by the EU. A letter in the Guardian yesterday from Thomas Piketty, Dani Rodrik, Jeffrey Sachs, Simon Wren-Lewis and a former senior German finance ministry official, says that:

“The medicine prescribed by the German finance ministry and Brussels has bled the patient, not cured the disease.” 

“Today we need to restructure and reduce Greek debt, give the economy breathing room to recover, and allow Greece to pay off a reduced burden of debt over a long period of time. Now is the time for a humane rethink of the punitive and failed programme of austerity of recent years and to agree to a major reduction of Greece’s debts in conjunction with much-needed reforms in Greece.”

Meanwhile Eurozone leaders continue to demand more detail from the Greek government on the cuts it is prepared to make, including – in public at least – requirements to tackle clientilism and tax evasion by the rich that the left-wing Greek Syriza government would have no objection to (having been elected on precisely that platform), were the call over a realistic time period, given the failure of the Eurozone to secure such changes from Syriza’s predecessors. Syriza is hypocritically condemned for not achieving in five months what previous governments failed to make any progress on in five years of rather less insistent Eurozone demands.

7 Responses to Hypocrisy of Eurozone leaders refusing to admit austerity has failed Greece

  1. Gabi
    Jul 8th 2015, 9:38 am

    Can you explain why the previous programs failed, as facts showed that Greece was starting to recover, posed slight growth, while still aprox maintaining in the last years huge public sector spending regarding wages and pensions? I believe that EU mistake was, at maximum, not monitoring and triggering signals about how the money was spend. This was the only mistake, especially after knowing the history of Greece manipulating the numbers and indicators. I see a lot of leftish retoric with no practical ground but rather emotional. Speaking about emotions, yes, even the EU “terrorists” will give humanitarian aid to Greece, but this is completely different from loans.

  2. Mike Davis
    Jul 8th 2015, 10:34 am

    Owen is spot on. The debt repayment programme timetable was impossible to meet. Debt to GDP rose from 120% in 2010 to 180% in 2015. No evidence there of recovery. And at what huge social cost: 25% adult unemployment and almost 60% youth unemployment. Pensions and wages cut by over 25 per cent for most ordinary workers while the rich and super rich shipping oligarchs avoided tax. Meanwhile 92% of the bailout loans have gone straight back to the banks, not to the Greek people or government. It is an untenable situation as Owen tellingly explains. Debt forgiveness and restructuring is the only way help reboot the economy. Only when people are in work are they able to pay taxes and boost treasury coffers. The politics of austerity are failing the people of Greece and Europe. that’s why there was such a massive vote for change.

  3. Gabi
    Jul 8th 2015, 12:33 pm

    Right. But that was exactly the aim/definition of the bailout loans – to be able to still be in the game by paying your historic debts to the creditors (banks and others) and meanwhile doing the reforms, be more cautious about spending, reforming the inefficient parts of the economy, improve tax collection and try to get back to growth. Obviously there will be temporary higher unemplyment and wages cut, but if you do the right things, you will improve. By the way, regarding wide agreed unsustenability of the debt, Juncker said last night that he had told Tsipras in the previous negotiations that debt relief will be part of further discussions in October. How come that Tsipras never told this to Greek people? And how come that yesterday came without a written proposal? He had one week to have a scenario prepared as he did say after the referendum that an agreeement will be reached in 48 hours. This does not make any sense. There are two scenarios: Syriza government is totally unprepared and demagogue or there is a hidden political and geopolitical agenda that will unveil (hopefully not!) in the future.

  4. Owen Tudor

    Owen Tudor
    Jul 8th 2015, 9:39 pm

    Gabi, you raise a number of issues that I won’t be able to do justice to in one quick reply, but see Simon Wren-Lewis’ Mainly Macro blog for a lot of detail (there are others who also do a good job.) Firstly, the recovery that had begun when Syriza took over was minimal compared with the 25% reduction in GDP caused by austerity, and was choked off not by public spending (Greece was running a budget surplus by the beginning of 2015, ie raising more in tax than it was spending, which is really, really rare in a recession!) but by the decisions of the previous NDP government to set a series of repayment traps for Syriza in early 2015. The NDP knew they were on the way out and on at least one occasion TURNED DOWN an offer to extend a loan, insisting that repayment should be early in the new Syriza administration. As for Juncker saying there would be debt relief in the future, (a) Syriza’s suspicion is that such relief will only be available once they have been driven from power or forced into actions that mean they implode, and (b) Juncker may offer debt relief, but it is Germany that decides, so his words are warm but unreliable.

  5. Craig Lewis
    Jul 9th 2015, 8:04 am

    It’s also not the case that Tsipras hid Junker’s offer from the Greek people. It was reported widely on Greek TV (I live in Greece). The point was that restructuring would only be “considered” once the Syriza government accepted the Troika’s demands for further harsh austerity. Tsipras had no popular mandate to accept policies that would plunge the economy into a further spiral of depression. Something which was massively reinforced a few days later in the referendum. A referendum which incidentally Junker dismissed contemptuously as “a democratic circus”.

  6. Gabi
    Jul 9th 2015, 8:13 am

    Owen, thank you for the reply. Most of the countries in the Southern and Eastern of Europe, and maybe in Western Europe as well, see such kind of politics, when a government set for going out is leaving traps for the incoming. The incoming knows it very well and should be prepared for this. This should not be an excuse. Obviously, the problem is historical and not a 5 months one. I can understand logical arguments, like debt is not sustainable, but we are finding ourselves in a mess and what do we do? We use patriotic retoric and aggresive approach towards those that we need to find a solution with. It is not working even in day to day life, what about high politics when sometime egos are huge. Anyhow thank you for the time.

  7. Gabi
    Jul 9th 2015, 10:23 am

    Probably I missed the discussion in Greece about debt restructuring. In the end, how can you deliver rapid growth, when you are in a bankrupcy situation, without austerity, or prudence or moderation or restructuring or reshaping or reforming or resizing, just to use other words, as austerity is not anymore an acceptable word. Moreover, what guarantees are that a new government with a social approach, can bring quick growth and that we will not find ourselves in the same situation in 3 years from now, knowing the last two centuries Hellenic history?