[Marxism] The Soup Kitchens of Athens
lnp3 at panix.com
Wed Jun 1 08:55:20 MDT 2016
NY Times Op-Ed, June 1 2016
The Soup Kitchens of Athens
By YANIS VAROUFAKIS
ATHENS — After last summer, when the clash between Greece’s Syriza
government and the insolvent state’s creditors ended, the world’s media
moved on. Greece’s rebellion against the austerity measures imposed on
it was snuffed out in July 2015 when Prime Minister Alexis Tsipras folded.
Greece’s disappearance from the financial headlines since then has been
seen as a sign that its economy has stabilized. Sadly, it has not.
Lest we forget, Greece had by 2015 already endured years of austerity.
By 2013, more than a third of Greeks were living below the poverty line.
By 2014, government wages and pensions had been cut 12 times in four years.
In comparative terms, by the proportion of national income diverted to
reducing budget deficits, Greece had absorbed austerity measures almost
nine times the magnitude of those imposed in Italy and about three times
Portugal’s. The result? Between 2009 and 2014, Italy’s economy grew by a
paltry 2 percent and Portugal’s contracted by 1 percent; in the same
period, Greece’s national income dwindled by a catastrophic 26.6 percent
— about the same as for America in the depths of the Great Depression.
The result was a humanitarian disaster only a 21st-century John
Steinbeck could adequately describe.
Against this background, Greek voters elected my then party, Syriza, in
January 2015 to negotiate an end to self-defeating austerity in exchange
for serious reforms. With the state now living within its means, I
strove, as the country’s new finance minister, to convince our European
and institutional lenders that their interest and ours would best be
served by reducing tax rates and avoiding further cuts to already much
reduced pensions. As a compromise, I even promised a “deficit brake” —
automatic tax hikes that would kick in if government revenues did not
pick up within an agreed period.
My pleas fell on deaf ears, and I resigned. Greece’s creditors insisted
instead on even higher sales taxes, as well as new cuts in pensions and
wages. The Greek government’s capitulation to the creditors even
involved a preposterous obligation that all Greek companies should pay,
immediately and in full, their estimated tax for the next year. The
cruel screw of austerity turned again.
Once the new measures were implemented, incomes in Greece, which had
picked up slightly while we put austerity on hold, began to fall again.
The bank closures that were forced by Greece’s creditors to make our
government yield, and the new austerity that followed, revived the
recession. This increased the number of nonperforming loans on banks’
balance sheets — an astounding 45 percent of all loans — with the effect
of denying credit to potentially profitable export-oriented firms. In
2014, close to half of Greek families had no adult in employment, while
the cuts in public spending mean that for the past two years less than
10 percent of the jobless receive any unemployment benefit.
Behind the grim numbers, an ugly reality looms, one that gets uglier by
the day. Small businesses have been crushed by punitive taxes, and a
wave of home foreclosures is on the horizon. Greece’s hospitals are
running out of basic necessities, while our universities cannot even
afford to provide toilet paper in their restrooms. In Athens these days,
only the soup kitchens are flourishing.
Amid this endless suffering, have any lessons been learned? It seems not.
Greece’s economic misery seemed set to provoke a new standoff recently —
except that, this time, it was between the International Monetary Fund
and the European Union’s Brussels-Berlin nexus. Chancellor Angela Merkel
of Germany is reluctant to confess to the Bundestag that Greece’s
bailout loans were always unsustainable. To maintain the fantasy that
they will be repaid as planned under the terms of last year’s deal,
Berlin has insisted on setting a ludicrous target for Greece’s budget
surplus. (That target is 3.5 percent of gross domestic product every
year starting in 2018 — roughly equivalent, as a percentage of G.D.P.,
to America’s military budget, but in Greece’s case, purely to service
its foreign debt.)
The German condition amounts to imposing permanently escalating
austerity on Greece. The I.M.F. protested, correctly, that there was no
level of austerity that could achieve this target.
In past weeks, there were indications that the fund was ready to insist
on debt relief for Greece, allowing a lower budget surplus target and
therefore less austerity. Unfortunately, last week’s meeting of the
so-called Eurogroup — an informal body of eurozone finance ministers
together with officials from the European Central Bank and the I.M.F. —
dashed these hopes. With the I.M.F.’s managing director, Christine
Lagarde, notably absent, her stand-in capitulated to the Brussels-Berlin
axis, postponing any debt relief until 2018 at the earliest.
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Earlier this month, Athens had obediently introduced a fresh round of
tax increases and pension cuts — the sales tax in Greece now stands at
24 percent. The I.M.F.’s view is that these measures will fail to attain
the impossible surplus target. The fund is right about that, but the new
solution it has condoned is as bizarre as it is counterproductive.
Instead of reducing the surplus target, the I.M.F.’s representative at
the Eurogroup meeting, Poul M. Thomsen, consented to the extraordinary
decision to retrieve from the trash basket of last year’s negotiations
the deficit brake that I had proposed in exchange for an end to
austerity. The idea is that if the 3.5 percent surplus target is missed
— and it will be — then new tax increases and spending cuts will kick in
automatically. So, the very instrument that I had proposed as a
substitute for austerity will now become its supplement. The mechanism
will merely intensify Greece’s austerity-driven recession.
Reason demands an end to this loop of doom. What Greece needs is a
realistic restructuring of its debt and a primary surplus target of no
more than 1.5 percent of national income. The government should also
continue with reforms that target oligopolies in areas of the economy
like supermarkets and the energy sector, as well as inefficiency and
corruption in public administration.
Instead, the odd principle of imposing the greatest austerity for
Europe’s most depressed economy lives on, spreading new misery through
Greece and needlessly holding back recovery in Europe’s monetary union.
Yanis Varoufakis, a former finance minister of Greece, is a professor of
economics at the University of Athens.
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