Wednesday, May 29, 2013

Why has austerity led to disaster in Greece?

Greece is in sharp economic free-fall. “20% real decline since 2008” (as reported on 30th April 2013). In 2012 the real value of government revenues and spending reached a ten-year low.  However, because of the sharp economic contractions, government revenues and spending as a share of GDP reached an all-time high (44.7% of GDP and 54.8% of GDP respectively).  The high level of government spending is speculated by some to have nothing to do with interest rates…social benefits are noted as the highest portion of Greece’s government expenditure (46% of primary spending in 2012) whilst wages represented 25%, goods and services 9.8% and ‘other items’ (includes recapitalisation of Greece’s banks) 19%.

Maria Markantonatou describes the terrible social consequences of a financial austerity program that hasn't solved the national fiscal and debt problems after all.  Unemployment rose to 25.4% in August 2012 whilst those still in paid employment experienced a very rapid deterioration in their pay and conditions.  Jobs have become very insecure and many do not provide enough income for basic sustenance. Homelessness increased by 25% within a two year period (2009-2011). Others report that children and families are going hungry and long queues in Greece for food give-aways are viewed on recent television reports.

Markantonatou has postulated on the reasons why austerity programs were introduced in the first instance.  She writes that:

·       national economies are being treated as banks,

·       banks are regarded as the most important of social institutions,

·       there's been a retreat of regulation from the mid 1970s,

·       basic social provision has been financialised (social security and health insurance),

·       a belief that lower wages makes a nation more competitive and attracts investors,

·       states have prioritised the strengthening of the global financial system and its rescue [over a wide range of other solutions.]  See:

Diagnosis, Treatment, and Effects of the Crisis in Greece.  A “Special Case” or a “Test Case”?

States now cede their ability to create currency and then, having no control over the levers of finance, attempt to bail out large corporations.  How can this scenario be interpreted other than a radical handover of sovereignty to unelected and unaccountable entities.  Or is it that states are, in the absence of justice, simply "vast systems of robbery".

1 comment:

  1. First paragraph details, see: Greece’s Persistent State—and Budget Deficit
    Tuesday, April 30, 2013