gracchusdixit

Greece, where the first seeds of democracy were sown more than two thousand years ago, is known around the world as a land of azure seas and bright, sunlit skies.  When the sun rose over Athens Monday morning, however, the mood was anything but bright.  The banks did not open as they usually do.  They were shuttered and closed, and will stay that way for another week.

It is then that the Greek people will go to the polls to decide their future in a national referendum.  They will be voting whether to accept the latest round of “reforms” demanded by the so-called “troika” of financial institutions—the International Monetary Fund, the European Commission, and the European Central Bank—that have it in their power to make or break the Greek economy.  If the Greeks say yes, Greece will remain within the European Union and retain the euro as it currency.  If they say no, Greece will default on its debts, abandon the euro, and almost certainly leave the EU.

Neither of these choices is in any way palatable.

By accepting the terms the troika demands, Greece will get another financial lifeline.  But that lifeline will do little to help the Greeks themselves.  Most of the money will go to pay the country’s creditors—primarily banks and bondholders in Germany and France—condemning the Greeks to more years of austerity, unemployment, and depression.

Should Greece reject the troika’s demands, it will go its own way, shedding its burden of debt, but shunned by investors and the financial institutions of Europe.  Years, perhaps decades, will pass before the country is able to get on its feet again, if it ever does.

Let it be said that Greece needed genuine economic reform and needs still more.  Its bureaucracy was bloated, many of its industries were inefficient, and its tax regime was riddled with corruption.  Nonetheless, during the last five years, Greece has done everything the “troika” has demanded.  It has slashed spending, sold off public assets to private investors, and all but eliminated its budget deficit.  The Greek people were told that, if their government did these things, all would be well, growth would return, and prosperity would follow.

That didn’t happen.  Instead, the austerity measures imposed by the “troika” have devastated the Greek economy, as such measures have done to so many other countries in the past.   Overall unemployment is 25 percent, youth unemployment exceeds 60 percent, and economic activity has shriveled.  Now, Greece can no longer pay even the interest on its debts for the simple reason that it doesn’t have the money.

None of this has been enough to persuade the bankers in Brussels, Berlin, and Paris to change their minds let alone abandon the economic “medicine” that is poisoning the Greek economy.  The latest “reforms” demanded by the troika call for Greece to privatize its airports, sell off its publicly owned electric company, and expand the VAT, or sales tax, to include basic necessities like food and heating oil—a burden that will fall on those who can least afford it.  Worse yet, Greece’s creditors are calling for more than a balanced budget.  They are demanding a surplus, a bigger surplus next year, and an even bigger surplus in the years to come.  This is something that no nation in the midst of a full-scale depression has ever been able, or asked, to do.

And it won’t solve the problem.  Whether Europe’s power brokers like it or not, the sad truth is that Greece is bankrupt.  The only practical and decent solution is to write off part or all of its debt, let the banks to swallow their losses, and give the Greeks a chance to begin all over again.  We did this for Germany after the First World War, and we did it again after the Second.  There is no reason it cannot be done again, for Greece.  And if it were done, the impact on the global financial system would be very close to nil.  The Greek economy is half the size of Connecticut’s and one twentieth the size of California’s.  Its debts scarcely equal the net worth of the Walmart heirs, who could pay the interest on that debt without noticing it.

In truth, the motives of the troika have nothing to do with practical economics or common decency.  They are entirely political.

Six months ago, the Greeks elected a socialist government, which vowed to end the austerity that has crippled the country.  To people like Jean-Claude Junker, the head of the European Commission, this state of affairs cannot be allowed to stand.  He has accused the Greek prime minister of “betrayal” for daring to call a referendum instead of passively accepting the dictates of the EC and other members of the troika.  Junker and the European financial elite are quite simply out to topple the democratically elected government of Greece, not because it is wrong but because it is defiantly right.

No one knows how the Greeks will vote next week.  All we do know is that the Hobson’s Choice they are being forced to make is unpalatable, unnecessary, and morally reprehensible.  For the people of Greece, for the survival of democratic government in the land where democracy was born, the days ahead promise despair rather than hope, darkness rather than light.