The assumption on the part of some analysts is that preventing Greece from exiting the eurozone would somehow insulate Italy and the rest of the debtor nations. Other analysts maintain that the sooner Greece exists the sooner Europe would stabilize. The more pessimistic among analysts note that no matter what the EU does, the eurozone is doomed to fail.
Another assumption floated in media and political circles of northwest Europe and US is that the political cultures in southern Europe are at the root of the problem with the existing public debt crisis. The fact that Belgium and France are now entering the arena of deep structural reforms that are close to austerity measures dispels the myth about 'Southern European culture,' a myth that some analysts tried to advance, largely as a distraction from the systemic causes of capitalism's crisis.
On 4 November 2011, Greek Prime Minister George Papandreou indicated that he would step down from power to allow for a transitional technocratic government to take over until elections tentatively scheduled for 19 February 2012. The interim prime minister is Lucas Papademos, former European Central Bank deputy, and a strong advocate of the IMF-EU austerity program. Just to make sure that Greece complies with austerity, the IMF and EU demanded that the two major political parties in Greece sign the IMF-EU agreement of 27 October 2011 that locks in Greece into conditionality necessary to receive the next tranche as well as future IMF-EU loan installments.
The assumption on the part of the IMF, as well as Germany, France and US is that greater political consensus would lessen public resistance to the harsh austerity measures that would transfer hundreds of billions of euros from Greece to its creditors in the next three decades. But is the assumption correct that political consensus would lessen public opposition to austerity and to neo-liberal policies, or do many people in Greece and in most countries around the world know that the political agenda is driven by financial interests and that economic power takes precedence over political power? Will French citizens be convinced that an estimated 100 billion euro cut by their government for the next four years is intended to help the people or the financial system?
The causes for the fall of the Greek government is not the IMF, or Germany, but austerity that has been responsible for the fall of governments and regimes in many countries, especially in Latin America, Africa and Asia in the past fifty years. How did Greece go from ranking 27th richest country in the world just three years ago, to the poster child of debtor nation?
How did Greece, whose GDP is only 2% of the eurozone GDP, become the focus of world economic instability, a country that many government leaders and financial analysts equate with the Lehman Brothers disaster that the global recession of 2008? Is it because the international financial system is so intertwined, or is it a case that even a small debtor nation must be forced into neo-liberal conformity under austerity?
How did Greece become the first in a series of eurozone members to falter financially, and to threaten the very existence of the European Union and the common currency, the world's strongest in the world's largest bloc economy? A synoptic perspective may help the reader understand how and why we arrived at this point where now Greece has passed the baton to Italy for which there is not sufficient bailout money to save, and which country can mark the complete transformation or demise of the eurozone.
In November 2009, shortly after he was elected, Greek Prime Minister George Papandreou, (PASOK - Socialist party leader), began to sound the alarm about how previous governments had falsified public debt statistics, and how public finances were out of control owing to endemic corruption. Although Papandreou ran on a platform of 'money exists', he began changing the tune to there is a serious deficit problem and it must be fixed by combating official corruption, a goal with which many agreed as long as their role in corruption was not impacted.
At the time of the announcement, Greece was fighting to achieve positive GDP growth amid a global recession, and trying to survive a eurozone that was rapidly divided between the northern surplus creditor members that Germany led, and the south (Portugal, Italy, Greece and Spain - PIGS) that included Ireland and Belgium as peripheral anomalies.
Not just his own supporters, but even political opponents applauded his apparent candor and the desire to start a campaign to contain corruption in a country that operated on the basis of official and public sector corruption as various scandals demonstrated; scandals involving billions of euros, scandals involving multinational corporations like Siemens and Goldman Sachs, as well as smaller scandals involving tax collectors, tax-evading doctors and monasteries operating more like corporations than spiritual institutions. All of this exposed Greece to the entire world as a country where baksheesh capitalism reigned supreme and permeated both public and private sectors.
It soon became apparent, however, that the public debt problem was not a matter of cleaning up corruption and much larger than the government had estimated, and Papandreou began seeking EU and IMF assistance in order to deal with it, against the background of rising bond rates and repeated downgrades by Moody's, Fitch and Standard and Poor's. In May 2010, the IMF-EU extended 110 billion euros and formally imposed austerity measures on Greece, with the publicly-stated goal that this was a temporary affair intended to bring fiscal discipline and the road back to growth.
Despite the IMF-EU promises, the Greek economy sank deeper into recession as unemployment rose sharply along with the public debt that went from 130% of GDP to 165% in a year-and-a-half under austerity. Meanwhile, the markets signaled that Greece would formally default and exit the eurozone within a year or two, if not months. In July 2011, the IMF-EU carved another deal that included an additional 130 billion euros, more austerity measures, and longer period of time before the country recovers sufficiently to begin borrowing from the private sector.
In October 2011, the IMF-EU decided to trim half of the 209 billion euro public debt, although the total was 360 billion.The haircut deal that IMF-EU carved for Greece on 27 October 2011 entails massive cuts in public spending, substantial rise in indirect taxes that hits the middle class and workers, rapid privatization of public enterprises, labor laws that permit lowering of minimum wage and in essence end collective bargaining, and more attractive terms for foreign investment.
A few thousand people who own most of the wealth, owe an estimated 41 billion billion euros in taxes, while most of them have taken out of the country several hundred billions to avoid paying taxes. In calling for a referendum, he prime minister accused the wealthy and the mass media that they own of trying to undermine his efforts to clean corruption and end the culture of baksheesh capitalism
The New Democracy Party is now part of the transitional government, which entails that it will be weakened along with PASOK, thus strengthening the leftist parties that if they were united would probably receive between 30 and 40 percent of the vote, the highest in the country's history. Elections scheduled for 19 February 2012 would prove that neither of the two leading parties have a popular mandate to govern and would in all likelihood need to form a coalition.
Even more dangerous is the fraud that the IMF and EU have perpetrated by arguing Greece must reach aggregate public debt at 120% of GDP by 2020. Given that Italy currently suffers public debt at 120% of GDP, but it had to adopt rigid austerity measures without having IMF-EU observers as of 9 November 2011, why would Greece be 'solvent' in 2020 by suffering the same debt to GDP ratio as Italy does today?
The question is how domestic and foreign economic interests - financial elites behind PASOK and New Democracy Party - would operate when the political climate becomes even more polarized in 2012 as social tensions manifest themselves in labor strikes and other forms of popular protests. Would the state rely increasingly on the police and military while watering down human and civil rights in the name of protecting the austerity measures? And would this also be the fate that waits other EU members, including Portugal, Spain, Italy, Ireland, Belgium and France?
Is Europe experiencing a crisis of 'democracy' as we have known it in the post-Cold War era, and all because the majority of the people no longer have faith in the ruling political parties - right and center - and in the parliamentary system serving the public interest, but instead serving financial elites at the expense of the vast majority of the people?