Wednesday, 15 February 2012


There are signs not just in Greece and Portugal, but across Southern and Eastern Europe that popular uprisings may be inevitable in spring-to-summer 2012.  Following the second bailout package of Greece, it now seems inevitable that Portugal too will need one as well. Portugal's government has asked Germany for a second bailout, but the Merkel government is waiting to see what happens with Greece, assuming it survives politically to remain in the eurozone before the end of the year.

It is now obvious even to the most casual observer that the IMF-EU austerity measures have reduced Greece from a semi-developed to an underdeveloped country, given that under austerity in the past two years GDP declined by an astonishing 13%, and it is expected to drop an additional 5-8% in 2012, for a combined three-year total of more than 20%. Portugal will follow the footsteps of Greece, and considering that the rating agencies Moody's Fitch and Standard and Poor's have either downgraded or about to downgrade Spain, Italy, Slovakia, Malta, Belgium, Slovenia, Poland, UK, France, and Austria, Europe is in for a very rough year.

No one should be surprised that uprisings will erupt across Europe this spring and summer, unless there is a shift in the existing policy of impoverishing the debtor EU members, so that Germany may enjoy an easy ride toward regional hegemony. There are of course economists, politicians, journalists and university professors acting as apologists for neo-liberal capitalism that is creating wretchedness across Europe, and not just in southern Europe but across most of the continent. A close examination as the IMF-EU package for Greece exposes the criminal policies of the IMF-EU led by Germany as completely non-functioning policies that have the exact opposite result of what the IMF and Germany proclaim is the goal.

1. As a result of IMF-EU austerity, Greece has official unemployment rate at 21% in January 2012 (unofficially at 25%), or double what it was before the IMF-EU imposed austerity.

2. Poverty is officially at 27.7% (unofficially at one-third of the population), of ten percentage points higher than it was before the IMF-EU austerity.

3. Wages, benefits, and social security have dropped by 40%, including the cuts now imminent, and living standards have dropped by 50% owing to compensation cuts and higher taxes.

4. Public debt has risen from 120% of GDP before the IMF-EU austerity to 160% today and expected to rise at roughly 200% if austerity without economic development continues.

5. The three leftist political parties enjoyed around 15% of the vote before the IMF-EU austerity, while according to public opinion polls those parties now enjoy 40% of popular support.

6. Small businesses, which employ the vast majority of the labor force, will be closing at a rate of 5000 per month this year, on top of roughly 100,000 small businesses, employing 250,000 people, going bankrupt since the IMF-EU came in the country. This has resulted in everything from loan-sharking operations targeting businesspeople to skyrocketing mental illnesses and suicides.

7. Inflation rate was about 5% before IMF-EU austerity and despite massive cuts in wages, benefits, and social security, inflation remains at roughly 3.3% after two years of a sharp drop in GDP and living standards.

8. While tax collection has improved, the tax burden since IMF-EU austerity has fallen on the salaried sector and social security recipients, not on the tax evaders, especially the millionaires who owe billions to the government. Tax evasion continues unabated while tax receipts have dropped owing to the sharp drop in GDP, which went from $350 billion in 2008 to under $300 billion in 2011, and expected to drop an additional 5% to 8% in 2012, bring GDP to between $285 and $275 billion.

9. Greece currently ranks 170th in the world in terms of investment, and dropping, considering that the few thousand wealthy families and individuals have taken out of the country most of the capital estimated at around $800 billion. New investment is at a standstill, because investors are waiting for more sharp downturn in asset values and for greater incentives by the government to invest.

10. Budgetary deficit continues to remain at double-digit figures, hovering at just under 10% in 2011, despite the infamous "Greek statistics" manufactured to make the budget appear better than it is. The budgetary deficit will remain very high in 2012 as productivity remains low and horizontal taxes increase while taxes on those who owe and the wealthy remain an elusive goal.

11. Despite the austerity measures that are intended to achieve balance of payments equilibrium, Greek exports increased by $4 billion in 2011 over the previous year, but imports increased by $5 billion, thus adding to the balance of payments deficit.

12. Of the 130 billion euros in new loans, in addition to the previous 160 billion euros, roughly 80% goes back to creditors to service past debts, 15% for Greek banks, and 5% to pay existing government obligations to domestic and foreign creditors for purchases of everything from defense equipment to pharmaceuticals. Not one euro of the roughly 300 billion in bailout has gone for economic development or social programs.

13. Although IMF and EU promised that their policies were intended to lower costs, the exact opposite has taken place. The IMF-EU conditionality has entailed that Greece accept a minimum wage of roughly 400 euros and social security benefits averaging about 500 euros. Part of the reason is that asset values, including the telephone, electric, water, waste, oil, airport, off-track betting and lottery, and other public assets become much cheaper by lowering wages and benefits once foreign investors purchase them, as it is mandatory that they must be sold to private investors.

The above 13 points illustrate how the IMF and EU have underdeveloped Greece, depriving it of capital to develop its natural resources and take advantage of its highly-educated human labor resources. Greece was semi-developed, living off borrowed money, and enjoying the expansion of a middle class economy under the liberal credit system of the past three decades.

Failing to invest assets productively, the utterly corrupt Greek political class in collaboration with the Greek capitalists and middle class diverted resources from production to consumption and parasitic investments. Taking advantage of the considerable wealth in the Greek middle class, foreign financial institutions, mostly German and French, sought to absorb the capital from the Greek middle class to strengthen the core economies, a strategy that has been around for more than two centuries of imperialism.

The lessons learned here are not whether Greece remains or leaves the eurozone, for that is not significant, as is the reality that capital has been drained by the domestic and foreign capitalists, leaving the country roughly at the same underdeveloped status as it was in the 1960s. The lesson here is that Greece is the canary in the mine, and that other countries should fly as far away from austerity as they can to save their people.

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