Friday, June 01, 2012

Greece, Europe and the US: Depression and austerity take their toll

One of the effects of depressions in to exacerbate social tensions, for better or worse. On the "worse" side of the ledger, Racial violence on the rise in cash-strapped Greece Euronews 01/06/2012 (with video):

Giorgos Tsarbopoulos, head of UNHCR Greece, said: “The economic situation’s created a climate where slogans and xenophobic rhetoric and easy solutions that are not solutions of course of ‘kick them out, let’s take the law into our own hands’ can more easily be propagated in a population which faces problems regarding security and public order.”

Over recent weeks, the government has been herding illegal immigrants into new detention camps. But a shortage of funds is making it harder to either repatriate them or process asylum requests.
The left coalition Syriza headed by Alexis Tsipras is currently showing a lead in the polls for the June 17 parliamentary elections in Greece, as reported in Syriza launches new programme Athens News 06/01/2012. (As of this writing, there is an ad at the bottom of the website saying, "Be ready for martial law". ?!?) Tsipris is saying explicitly that he will abandon the austerity agreement currently in force between Greece and the Troika (EU, ECB, IMF), the agreement known as the "bailout memorandum":

Tsipras said he would ... introduce measures to relieve the debt burden of overborrowed households and cut valued added tax (VAT), especially on basic food items.

He also said that the bailout memorandum should be abandoned, saying it had failed to take the country out of its economic crisis and would prevent it from having access to financial markets this decade.

"The first action of the government of the left will be the annulment of the memorandum and the implement laws," he said.
Maria Petrakis and Natalie Weeks for Bloomberg News report Tsipris as saying (Tsipras Vows To Cancel Bailout As Make-Or-Break Greek Vote Looms 06/01/2012):

"The choice for Greeks on June 17 is one: bailout or Syriza’s government program,” Tsipras said, presenting his campaign platform in Athens today. “You either implement the bailout or you cancel it. There is no such thing as a more or less evil bailout, a more or less inappropriate medicine.”
The "bailout" funds provided by the Troika to Greece have been for the benefit of creditors. Certainly not for the people of Greece: "The cuts required for 240 billion euros ($306 billion) of aid over the past two years have driven the country into the worst recession since World War II."

And they quote Tsipris as using words that seem designed to shift the blame for a Greek exit from the euro to the brutal conditions insisted upon by Angela Merkel and the Troika:

Tsipras has said he’ll try to keep Greece in the euro while pledging to cancel austerity measures. He said today the bailout terms were designed to drive Greece out of the euro area.

"It is a mechanism of definitive bankruptcy and propelling the country into a voluntary departure from the euro area, the only exit that is institutionally viable," he said. "This false dilemma of 'bailout or drachma' hides the real equation that the bailout leads to the return of the drachma."
Tispras seems to have in mind something like the Argentina route after the crisis of 2001-2, which is really about the only realistic option open to Greece unless the Greeks are willing to have their society devastated by Angienomics.

Bloomberg Businessweek has a sketch of Tsipras and his newfound popularity (Stephan Faris, Alexis Tsipras's Conquest of Greece 05/30/2012) that is framed in the first paragraph this way: "The headquarters of the Greek political party that could bring down the European economy lies in a rundown neighborhood in central Athens." This is the stock view from the neoliberal consensus. After their monumental failures in dealing with the European banking and sovereign debt crises, when the euro fails - it's the left's fault! As Cenk Uygur of The Young Turks might say, OF COURSE! Or, it's the Commies' fault:

The party’s very name, Syriza - The Coalition of the Radical Left  -  describes where its members see themselves on the political spectrum: on the fringes. Just outside Tsipras’s office hangs a photograph of a crowd celebrating the 1959 Cuban revolution; elsewhere, the hammer and sickle is a common sight.
Faris doesn't bother to inform his readers that the Greek Communist Party is not part of the Syriza coalition.

How scary does Bloomberg Businessweek want Tispras to sound to its readers? "It's as if the protesters of Occupy Wall Street suddenly had a shot not only at sweeping Congress but at taking the White House, too." Oh, NOOO-OOO!!!

This is one of my problems with Bloomberg Businessweek right now. You have to get past the fourth paragraph before you start getting some substantive reporting. With more decent journalism, you wouldn't have to work so hard separating polemical hoo-hah from substance. And even after the substantial reporting starts, we still get jabs like this: "He [Tsipras] had just returned from a trip to Paris and Berlin, during which he had been told that the last time the far left had gotten so much attention in France was when Fidel Castro came to visit." Faris also treats us to a sort of Barack-hung-out-with-terrorists-and-Michelle-hates-America type polemic here:

Tsipras entered politics at the age of 15, when a group of older students heard him speaking at a school assembly and, recognizing his talent, recruited him into the pro-Soviet communist party. ... It was during this time that Tsipras met his girlfriend, Betty Baziana, with whom he still lives. They have one child and are expecting another in July.
And they aren't even married! Those free-love Commies! (The current President of Germany, Joachim Gauck, and the current President of France, François Hollande, also live with partners to whom they are not formally married.) The actual substance comes in sections like this:

Critics in the media have sometimes called Syriza the party of the young, poor, and jobless. In a country where unemployment is 22 percent—and youth joblessness is well over twice that—that’s not a bad base to have. And yet the party’s appeal is far broader. The results of the May 6 elections, if anything, understate the magnitude of the protest vote. Some 19 percent of the electorate cast their ballots for small parties that failed to breach the 3 percent minimum needed to enter Parliament, while 35 percent didn’t vote at all.

Polls show Greeks are pulled by two seemingly contradictory desires. Roughly two-thirds of the country opposes the bailout conditions. Yet nearly 80 percent say they want to stay in the euro. ...

“I don’t think any monetary union can work if there isn’t some kind of subsidy to poorer regions,” says Euclid Tsakalotos, a Syriza parliamentarian and an economist at the University of Athens. He says the cure to Greece’s depression is what Germany received after World War II, when its economy was in a shambles: a Marshall Plan to put it back on its feet, forgiveness for some of its debt, and a payment scheme that takes into account the state of the economy. “People say that we are responsible for the situation we find ourselves in,” says Tsakalotos. “OK, sure. But I think that Germany will find it hard to argue that in 1953 they were completely blameless.” ...

A growing number of Greeks have embraced Syriza’s message of defiance, including many who hardly resemble radical leftists. [my emphasis]
The polemical anti-Communism in that article - we used to call it "red-baiting" before the Republicans became the Reds) - is disturbing. One thing is that it's poor reporting. The average American reader of that story is likely to come away with the impression that Tsipras is a member of a "pro-Soviet" Communist Party which may be more or less identical with Syriza. In fact, Syriza's negotiations with the actual Greek Communist Party could be a significant feature of the negotiations to form a government later this month, something no one would get from Faris' article.

Secondly, reading an article like this with cheap scare talk about the radical left in Greece is a reminder that one of the first engagements of the Cold War was a concerted effort to suppress the Communist Party of Greece in 1946-49. (See, Greek Civil War n/d, accessed 0601/2012) Major Jeffrey C. Kotora, The Greek Civil War 1943-1949 04/26/1985; Greek Civil War Military History 06/12/2006) That was a case where the Greek Communist Party (KKE) of the time was mounting an armed insurgency against the postwar government formally regarded as legitimate by the wartime United Nations allies. And the rivalry with the Soviet Union was an overriding factor in the Truman Administration's response. Nothing similar is the case for Greece today. Still, US meddling in Greek politics on the side of Angela Merkel's austerity policies is a really bad idea. So these polemical flourishes in Faris' article caught my eye.

Interesting in that regard is that Tsipras is reported as saying that "his country is involved in a 'Cold War' over austerity measures with Germany and the U.K." (Ian Johnston, Leftist tipped to be next Greek leader warns of 'Cold War' over austerity MSNBC World News 05/25/2012)

No one really knows what a Greek exit from the euro would (will) cost. Eastern European nations not part of the eurozone are also bracing for fallout (Eastern Europe braces for Grexit Athens News 05/31/2012):

A harsh escalation of the euro crisis would hit growth in the east's export-dependent economies harder than other developing states, due to their close integration with their bigger neighbours and dependence on western European demand.

Another potential source of pain is deleveraging by the western-owned lenders that own around 70 percent of banking assets in the region.

A hit to exchange rates would cause payments on foreign currency loans held by Polish and Hungarian households to skyrocket, pushing up bad loans and intensifying losses.

Thomas Mucha reports for the Global Post in the melodrmatically titled Global economy: The darkness returns 06/01/2012:

The biggest economic report in the world's biggest economy landed with a thud Friday.

The US added only 69,000 jobs in May — the third straight month of anemic job growth. The US unemployment rate, meanwhile, ticked up to 8.2 percent, from 8.1 percent in April.
The Obama Administration expected to be having Morning In America 2.0 by 2012; it hasn't worked out so well.

Europe — the world's largest economic bloc with a combined annual gross domestic product of some $17 trillion — is in the midst of a serious economic decline triggered by the ongoing, and worsening, euro crisis.

That is, of course, tragic for the jobless masses in Spain, where the unemployment rate currently tops 20 percent. It is also very bad news for struggling people in Italy, Greece, Ireland, France and elsewhere across Europe. And it complicates the gargantuan political problems now facing German Chancellor Angela Merkel, new French President Francois Holland, and the rest of the EU's beleaguered leaders.

But Europe's woes don't stop at its borders.

US companies need that giant market, too. So do China's many exporters. Countries across eastern and central Europe are economically tied to the EU. And, of course, there are the banking problems associated with Europe's troubles, as the bottom lines of financial institutions worldwide are intimately connected with what eventually plays out there.

To make matters worse, China and India, which many economists hoped could help offset economic weakness in the US and Europe, are both showing signs of serious trouble.
Paul Krugman carries on his campaign against austerity madness in The Austerity Agenda New York Times 05/31/2012. He says that the discussions he's been having this week in Britain over that country's austerity economics all "began with a bad metaphor and ended with the revelation of ulterior motives." The bad metaphor is about belt-tightening. Krugman explain in that piece what is wrong with the idea that governments should cut spending during hard times, especially during depressions.

The ulterior motives have to do with ideology, the destructive neoliberal ideology that is generally hostile to government services: "Now, these assertions often go along with claims that the economic crisis itself demonstrates the need to shrink government. But that’s manifestly not true. Look at the countries in Europe that have weathered the storm best, and near the top of the list you’ll find big-government nations like Sweden and Austria." He concludes:

[T]he austerity drive in Britain isn’t really about debt and deficits at all; it’s about using deficit panic as an excuse to dismantle social programs. And this is, of course, exactly the same thing that has been happening in America.

In fairness to Britain’s conservatives, they aren’t quite as crude as their American counterparts. They don’t rail against the evils of deficits in one breath, then demand huge tax cuts for the wealthy in the next (although the Cameron government has, in fact, significantly cut the top tax rate). And, in general, they seem less determined than America’s right to aid the rich and punish the poor. Still, the direction of policy is the same — and so is the fundamental insincerity of the calls for austerity.

The big question here is whether the evident failure of austerity to produce an economic recovery will lead to a “Plan B.” Maybe. But my guess is that even if such a plan is announced, it won’t amount to much. For economic recovery was never the point; the drive for austerity was about using the crisis, not solving it. And it still is.
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