[Marxism] The Soup Kitchens of Athens

Louis Proyect lnp3 at panix.com
Wed Jun 1 08:55:20 MDT 2016

NY Times Op-Ed, June 1 2016
The Soup Kitchens of Athens

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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