Perhaps the most pertinent comment about the Greek crisis was actually made decades ago by that little-known economic genius Eric Morecambe, when he famously asked “what’s a Grecian urn?” The updated answer for many Greeks is “not nearly enough to live on” and much closer to the original “about ten bob a week” than should be the case in Europe in 2011.
Some picturesque rioting apart, far too little of the coverage of what is happening to Greece has focused on the people. Decent, hardworking people. Families. Pensioners. Instead we have seen and heard endless pseudo-intelligent economist-speak about debt ratios, default and bailout packages. What this actually means is suffering, unemployment and poverty for huge sections of the Greek population. The unemployment rate, in a country with only a modest social security system, hit 16% in the first quarter of 2011. It is almost certainly already worse and will get worse still. Another 150000 state employees will be sacked as part of this week’s latest package of cuts. Plenty more will follow as part of the desperate privatisations to come and the effects of a plunging economy on the private sector.
Many of those still in work have had their wages slashed twice already and will see further reductions. Over one million Greeks (the total population is 11 million) are now trying to survive on an income of less than €400 a month. That might get you through a few good happy hours in Faliraki but try supporting a family on it when the cost of living is skyrocketing due to the austerity programmes, which, amongst other things, include all manner of sales tax rises.
These austerity programmes are being imposed on the Greek government by the International Monetary Fund (IMF) and the rest of the EU. Of course, they are pouring billions of Euros in, albeit grudgingly, and those stumping up do have the right to set the terms. After all, as most of the media, economists and politicians keep telling us, this is being done in the interests of “saving Greece”. In reality, “saving Greece” might be a secondary consideration but it is far from the main motivation. What is actually taking place is a massive attempt by the funding countries to ensure, once again, that their incompetent banks get the money back from their lousy investments.
As we have already seen in the UK, Ireland and elsewhere, it is the ordinary people who are expected to pay the crushing price when everything collapses.
Apart from the greedy bankers, the people who benefitted most from the bad loans were Greece’s political and business elites, who took advantage of the low interest rates that came with Euro membership to obtain money for projects designed to boost their political power and personal wealth. Few ordinary people could possibly have had access to the information that would have made them aware of what was going on and few received anything like as much of the benefit of these unsustainable schemes as the rich and powerful. But, as we have already seen in the UK, Ireland and elsewhere, it is the ordinary people who are expected to pay the crushing price when everything collapses.
Worse still, it is not clear that the Greek people’s sacrifice will turn out to be worth it. For all the savings in the national budget, the indications are that the cuts and price rises are only succeeding in shrinking the Greek economy, making it ever more impossible to repay the debt and causing it to rise further. As Samuel Brittan in the Financial Times, amongst others, have pointed out it is inevitable that Greece will, sooner or later, have to renege on some of its debts and lengthen the repayment terms on the rest. This may mean Greece also has to leave the Euro and reinstate its own national currency. As has been known for some time, Greece did not meet the economic criteria and should not have been allowed to join the Euro in the first place. It is probably time to correct this error. Bowing to the inevitable now will give Greece the time and space to reform itself with less counterproductive pressure from outside agencies motivated by other concerns. This will still be painful for the Greek people but not in a way that is more gratuitous than necessary.
Contrary to much of the hysteria around, this is not likely to be too damaging for everyone else either and will not bring the whole Euro currency crashing down. The financial losses would be relatively small in relation to the scale of Europe’s overall economy. Nor would they be much larger, if at all, than continuing to pour money into the lost cause of enabling Greece to pay its debts in full and on time.
The Euro will survive because most of the people who use it want it to survive. European businesses like being able to trade around Europe without incurring losses due to unpredictable exchange rate fluctuations and most people on mainland Europe prefer being able to cross borders without the hassle and cost of constantly exchanging currencies. The departure of one small, peripheral country from the Euro will not change that and in the long-term the currency will be strengthened by being seen to stick to the rules underpinning participation in it.
Ultimately, quite a lot of us have enjoyed a holiday in Greece and now it is time to give the Greeks a break too.
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