Greece: A nation with its back to the wall?

greece

In an omen of things to come to other poorer countries of Western Europe, the Greek government of George Papandreou, of the center-left Pan Hellenic Socialist Party (PASOK), finds itself trapped between the intransigence of its creditors, to whom it owes an amount estimated at 150 percent of the Greek gross domestic product, and public anger at plummeting living standards.

A Der Spiegel report says that an auditing team of European and international lending agencies has found that Greece has not succeeded in meeting any of the goals set as conditions for a $157 billion bailout last March. Greece is due to receive a major payment on the bailout by June, but if the goals have not been met, this money will not be delivered. The Greek government denies that it has not met the goals.

If the goals are not met, Greece will not be able to raise further credits to pay its bills. Meanwhile, massive demonstrations continue in Syntagma Square, in front of the Parliament in Athens. The demonstrations were initiated by the Greek Communist Party, other left groups and labor unions, but are now getting an extra boost from the kind of youth-focused, social media mobilizations which recently have produced such impressive results in Egypt, Tunisia and Spain. Protesters oppose austerity and privatization measures that the government has been implementing, while also demanding jobs.

Among the demands is for the debt to be paid down by higher taxes on the rich. Participation of Greece in the Euro currency zone is seen as part of the problem by many, because it means that Greece as a sovereign state cannot work its way out of its difficulties by measures such as devaluing its currency, which would attract more tourists and make Greek exports more attractive.

Last week, the Greek government, which has not been able to get either the left- or right-wing opposition to support its austerity program, suggested that a restructuring of the country's debt might be a partial solution. Such a restructuring would mean reducing payments to creditors and stretching them out over a longer period of time.

But the "troika" of international and European institutions that have been pressing Greece to carry out even more drastic austerity and privatization measures, consisting of the European Commission, the European Central Bank and the International Monetary Fund, appears to be firmly opposed to such restructuring.

A drastic solution would be for Greece to exercise the "Argentine option" of stiffing its creditors and going it alone, perhaps even withdrawing from the Euro currency. Argentina was in worse shape than Greece when the late Nestor Kirchner was elected president in 2001. Kirchner, from the left-wing of the Justicialist (Peronist) Party, allowed his country to default on its international debts in 2003, using the money that would otherwise have gone to pay off foreign banks and speculators to build up the living standards, and purchasing power, of the Argentine people. The result of this policy was a sharp increase in Argentina's economic fortunes, which are still on the upswing. And in the end the IMF had to back down and accept restructuring of the Argentine debt.

In an interesting exchange, Nobel Prize winning economics columnist Paul Krugman and Mark Weisbrot of the Center for Economic and Policy Research have discussed the possibility of Greece taking the Argentine option of defaulting, and also of dropping out of the Euro currency. One objection Krugman raises is that in Argentina in 2003, the national currency was still in circulation, where as the Greek drachma has long since been replaced by the Euro. However, Weisbrot thinks that the fact that Greece is a much wealthier country than Argentina would make up for the difficulty of dumping the Euro and returning to the drachma.

Greece is one of a growing list of poorer European countries whose dream of reaching wealth and stability through integration with their wealthier neighbors is turning into a nightmare. Others include Portugal, Ireland, Italy and Spain, with Iceland, Belgium and Finland perhaps also in trouble. These countries were enticed into joining the European Union and the Euro currency by promises that every effort would be made to raise them to the same level of prosperity as France, Germany and Britain. Now this is breaking down, and the poorer European Union countries may be finding themselves trapped in an unequal relationship in which their sovereign rights are preempted by wealthier countries and by European and international banking elites.

For Greece to thumb its nose at these elites and win would set a precedent for many other nations.

Image: Greek demonstration against austerity measures. Christina Kekka // CC 2.0

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  • thanks emile this is one of the best analysis of the battle in europe between the working class and the imf and moody's and standard and poors (who obviously represent finance capital.) in solidarity jim

    Posted by jim, 06/01/2011 7:21pm (3 years ago)

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