Friday, 13 May 2011


The choice between reform or revolution was simple for millions of Muslims in the first four months of 2011. That same choice is now before Greeks who are between East and West in every sense amid an austerity program that has more darkness at the end of the tunnel. In the absence of reform that would lift the middle class and labor from the current abyss, Greece may be facing the prospect of social uprisings after a series of labor strikes and popular demonstrations in 2011.

That Greece is a member of the EU entails political stability and peace with its neighbors, presumably because the European Powers would never allow Greece to destabilize Europe, or diminish its global competitiveness. From May 2010 until May 2011, however, the EU in cooperation with the IMF have been the instruments of sociopolitical instability in Greece, with inadvertent consequences for the rest of Europe. By imposing an austerity program that the economy cannot possibly support, the EU made the political decision to bankrupt Greece. In essence, Greece is reduced into a client state and economic dependency of France and Germany. Is this the message that EU wishes to send to the debtor EU members and to associate members waiting for full membership?

The scenario of EU slowly and deliberately bankrupting Greece has wider ramifications for all of EU whose currency has become the object of speculation to the degree that people I do not even know contact me to ask if I think that the country is going bankrupt so they too can make some money by betting on failure of Greece and the ensuing decline of the euro. Regrettably, some media outlets, the latest SPIEGEL/ONLINE, are not only playing to the tune of speculators, but assisting them to make some money in the process.

Putting aside journalistic ethics, which I am sure readers realize have been replaced by the almighty profit motive, the question is one of social responsibility, not toward Greece, but all of Europe and its trading partners. Has the media fed by opportunistic politicians and speculators reached the point where they incite chaos at the expense of the multitudes so that a tiny few can make a bit more money? 

On 11 May 2011, Greece had national strikes that left a number of people injured, and one in very critical condition. While the demonstrations were taking place, the EU/IMF representatives were negotiating with an otherwise directionless and above all incompetent and highly opportunistic finance ministry group about adherence to austerity as precondition for receiving the next 'tranche' of 12 billion euros as part of the total 110 billion.

IMF and EU are also discussing extending improved loan terms and most likely additional loans to avoid restructuring, at least for now. Restructuring is likely inevitable as the debt is currently 150% of GDP and if the current course of borrowing/austerity continues the only result will be more than 50% of the population falling below poverty level, and a debt ballooned to the degree that it would be impossible to service it.
One option for the Greek regime is to sell off public assets to buy time for debt restructuring.

German Chancellor Angela Merkel insists that Greece cannot receive any new loans until it cuts the budget even more - meaning lowering pensions, wages and benefits for public employees - and it privatizes just about everything of any value. Even if Athens were to privatize 50 to 70 billion of public assets and dismiss a quarter of the public service workers, lower salaries and pensions even further, the numbers still do not add up, and Greece would be in deeper debt and a good deal poorer. In addition to the existing IMF-EU loan of 110 billion euros offered in various tranches, Greece will need 27 billion for 2012 and 32 billion for 2013 to meet service obligations- in short money that is not there and figures currently underestimated that could be larger than 80 billion euros for those two years, or one-third of GDP.

The ultimate goal of the EU creditors and IMF is for foreign investors to take control of all lucrative assets in Greece. Germans are suggesting that as much as 200 billion of sales in Greek assets should take care of the problem. Would it not be far better for all parties concerned to simply surrender the nation to Germany and France and let them do what they like with it? After all, national capital has left Greece to the tune of at least 60 billion euros. The preeminence of foreign capital reigns supreme, with national capital (in a comprador role) subordinate and the state struggling to save whatever strength it took to build since the fall of the military dictatorship in 1974.

France's Finance Minister Christine Lagarde has tried to be conciliatory and cautious for the sake of EU more than for Greece, arguing that Greece cannot resort to debt restructuring. In case of restructuring it will be mostly German and French banks as well as German and French corporate interests that dominate in the Greek economy taking the plunge. Fear about Greece becoming another Lehman Brothers-type of trigger prevail.

The Greek national economy exists only in name, whereas in reality it is an appendage of the Franco-German international corporate network. While there is no 'ideal' solution for the Germans and the French governments and corporate interests (followed by British, US, Chinese, Arab, Russian and Italian) that have a stake in the Greek economy, is there an ideal solution for the Greeks who must work to pay foreign creditors for past debts?

Greek leaders - politicians, trade unionists, and civic leaders of all stripes - are divided politically and more atomistic, chaotic, corrupt to the core, and extraordinarily irrational in their approach to a plausible solution. Unlike Catholic Argentina steeped in a Catholic communitarian tradition and faced with disastrous IMF austerity in 2001, contemporary Greek society immersed in consumerism finds it difficult to arrive at a consensus when the country is facing disaster. I am not blaming the average citizen who is frightened and is currently running for cover with dismissive attitude toward the rest of society. It is the corrupt and decadent political and economic elites who have stolen the wealth of the nation that are at fault, and beyond their responsibility it is a structurally flawed political economy.

One reason that a government whose approval rating is around 20% remains in power is because the opposition from left to right is so pitifully divided, and determined to remain so no matter the consequences for the country as a whole. Public opinion polls indicate that such divisions and lack of commitment (apathy, confusion, alienation, nihilism) by the public has turned inward and each person tries to make it just another day, hoping the nightmare will end soon, hoping a secular messiah comes to the rescue.

What can the Greeks do? Stay the course, reform, revolution? A few among the more serious economists who are looking at the situation from a theoretical perspective argue that Greece ought to leave the euro. They contend that Greece could go the route of Argentina (2001) when it declared bankruptcy. Argentina managed to bounce back gradually after some tremendous hardships initially.

Greece is not Argentina because it is an integral part of the EU and it is unlikely to survive no matter how much it tries to forge stronger commercial ties with the Balkans, Russia, China and the Middle East. This does not mean that Greece should not pursue more multilateral commercial relations, but it is really an appendage of the Franco-German economy and as such it will suffer a great deal more than Argentina that de-linked its currency from the dollar.

Another scenario is to stick it out with the IMF/EU and let living standards drop to the level of the 1960s when Greece was one of the poorest countries on earth. In practice, that is where things are headed, but it is very difficult to impoverish a nation and expect no reaction from the broader masses. A third scenario is some type of debt renegotiation or restructuring that may or may not be, depending on the terms, a better deal than staying the course. A fourth scenario is a political coalition that comes to an understanding with the national and foreign capitalists, with the EU and IMF, and creditors that own most of the assets in the country. This scenario envisions postponing the pain of debt for future generations.

Another scenario is massive investment by national and foreign capitalists to prop up the economy, that would allow the state to begin paying debt obligations. This scenario would mean drop in unemployment that currently stands at 16% and could easily top 20% before the year is out. The last scenario is revolution. Revolution is where the country may be headed if the austerity regime lingers on and the Chinese water torture process continues.

In case of intermittent social uprisings, anything is possible, from a military coup, to civil war, to a successful coalition of disparate progressive forces emerging to form a new government that defaults on the debt and begins the process of negotiating with foreign creditors for new loans as part of a deal to massively reduce past debt. The people of Greece hold many cards in their pocket but they, like investors, creditors, and EU governments are governed by fear and self interest that prevents them from doing anything risky. In this case, however, the status quo is risky.

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