EU: Anxiety over Grexit

When a person with a history of bad habits is knocked down and struggling to survive, does the doctor give medication to resuscitate and strengthen her or drain out whatever little life is left in her by demanding that she instantly rehabilitate and become a better individual? A com-passionate and farsighted physician would first want to revive the patient with nutrients and supplements until she is able to stand on her feet again and then gradually coach her to reorganise her lifestyle.

But comatose Greece, whose classical dramatists fittingly invented the genre of tragedy, is being asphyxiated in the hands of a troika of sadistic and ruth-less creditors — the International Monetary Fund (IMF), the European Commission (EC) and the European Central Bank (ECB) — who are decreeing end-less cuts to public spending as prerequisites for yet another bailout.

Obsessed with the right-wing economic ideology of austerity, the troika is pushing Greece beyond the precipice by insisting that it further cut state spen-ding on social services, fire workers, privatise public functions, slash pensions, raise taxes, moderate wages, and increase its budget surplus from 1.5 per cent of GDP to 4.5 per cent.

Disturbingly, these “reforms” have been force-fed to Greece for the last five years in spite of zero evidence of their beneficial impact. Pseudo assumptions by creditors that putting the fiscal house of the Greek state in order will boost confidence of markets, spur exports and lead to a sustained rebound have boomeranged.

Greece’s GDP has shrunk by 25 per cent since 2010 and unemployment is stu-bbornly rooted at 26 per cent. Starvation, mass emigration, crime waves and suicide rates have risen alarmingly. Investment strategist Dhaval Joshi has shown that for every euro which the Greek government scrim-ped under the pressure of the creditors’ austerity rules, the Greek economy contracted by 1.20 euros. Essentially, the patient has been given marching orders to her own grave.

Nobel laureate Joseph Stiglitz sums up the disaster by alleging that “the troika badly misjudged the macroeconomic effects of the programme it impo-sed”, and slamming its forecasts as “wrong, repeatedly so and by an enormous amount.”

Yet, despite austerity proving to be a torture programme that fragile economies like Greece cannot bear anymore, the bitter pill continues to be pre-scribed by the troika in the name of “fiscal res-ponsibility”. The time-tested wisdom of economist John Maynard Keynes who advised stimulus spending by governments to tide over extreme crises even if deficits rise in the process, has been abandoned by the troika determined to in-capacitate the Greek state and impoverish its society.

Amid explosive social unrest against the troika in Greece (similar horror flicks of austerity-induced pain have played out in Portugal, Ireland, Spain, Italy and other sick European economies), the IMF itself admitted in 2013 that it had blundered by underestimating the posi-tive value of stimulus spending by governments during depressions.

However, belated accep-tance of Keynesian insights by the IMF, which is headquartered in Washington and takes its cues from the US government, has not chastened Europe’s rightist cheerleaders for austerity. The New York Times cites professor Paul De Grauwe of the London School of Economics as commenting that “there was a window of oppor-tunity to change course (on austerity) but the northern view of Germany, Holland and Finland has prevailed” because “that is where the power is, the power of the purse.”

German Chancellor Angela Merkel and her stern finance minister, Wolfgang Schaeuble, have an air of mastery over Greece owing to their domination of European policymaking and budgets. Together with Holland and Finland, they are deciding the bailout terms for teetering Greece with a coldblooded mindset of rewiring its statist political structure into a market-friendly one. To the Germans and their followers in the European Union (EU), the Greek patient is incorrigible and deserves to be put through merciless shock treatment.

Apart from right-wing voodoo economics, there is also a selfish materialistic motive behind the troika pounding Greece with austerity. Greece touched rock bottom in 2010 fol-lowing excessive government borrowing from Ger-man, Italian and French financial firms, which had pumped in tens of billions of Euros into Greece during the 2004-2009 period. The German-led bailout rounds of Greece, laden with austerity preconditions, were orchestrated to pay back German, French and Italian banks which had originally lent indiscriminately to Greece.

Financial analyst Christian Rickens exposed the troika’s agenda in Der Spiegel by stating “the bailout isn’t geared to the requirements of the people of Greece but to the needs of the international fin-ancial markets, meaning the banks.” Paolo Batista, executive director of the IMF, and an insider to the troika’s goings-on, has corroborated this view by demonstrating it “gave money to save German and French banks, not Greece.” In other words, the patient has to be squeezed so that the doctors can maintain their cosy and rewarding ties with the druggists.

Fed up with pliant mainstream political parties that were not standing up to this rip-off by the troika and the big banks lurking behind it, the people of Greece elected a radical Leftist party, Syriza, to power in January 2015. Ever since, a war has commenced between Athens and the troika. Callous to the aspirations of the Greek people, the EC and ECB are trying to show the anti-austerity Prime Minister of Greece, Alexis Tsipras, his place by rebuffing his brave effort to break out of what he slams as Greece’s “strangu-lation” and “humiliation”.

Talk of a “Grexit” (Greece quitting the Eurozone) and its unknown ripple effects is raising global economic anxiety once again. But more is at stake. As I contend in my book, Politics of the Global Economic Crisis: Regulation, Responsibility and Radicalism, the present times are marked not just by a crisis of capitalism but also a deficit of democracy.

The democratic legitimacy of the EU has eva-porated as Merkel and co. assert their financial lordship over the sovereign will of the Greek people. Eventually, better sense may prevail in the troika. Thanks to Syriza’s fightback, the ECB president, Mario Draghi, recently remarked that “social fairness” ought to be factored into Greece’s rescue. But the patient has been subjected to such excruciating waterboarding already that it will be a miracle if she pulls through.

The writer is a professor and dean of the Jindal School of International Affairs