Why Greece matters

18 Jun

Photo by PIAZZA del POPOLO

– by Andrew Brady

Over the last few weeks some people may have witnessed us bleating on about the Greek economy ad nauseum – and if you haven’t we clearly haven’t been doing our job.

The reason why we have is because it is clear that there is a spectre haunting Europe at the moment – contagion. The Dutch Finance Minister has called for €1500bn to be put aside to prevent this developing in the eurozone particularly with Spain in mind.

At best we have an economic crisis imploding in several nation states exposing financial institutions across Europe to considerable losses undermining an already weak financial system.

Last November Ireland also received a €85 billion EU-IMF bailout while analysts predict that Portugal will need up to €80bn. With unemployment at 21 per cent everyone is asking will Spain be next to seek a bail out – and this should make us all sit upright!

Last year it was estimated that Britain’s banks have a combined exposure of £100bn to Greece, Portugal and Spain. German banks are estimated to have €24bn of exposure to Greece at the end of February while French banks had €37bn.

That’s why a Greek default is now being openly described as Europe‘s “Lehman Brothers moment” because of the debt that’s wrapped up in European financial institutions. There is a real and tangible nervousness on the back of the IMF/EU bailouts and the scale of the austerity measures of what will come next.

You don’t need to be an economist to appreciate the scale of this – in fact it’s better if you’re not – because the human story is being lost in the quicksand of financial statistics that even this piece is guilty of. In Greece alone there is a proposal to cut public sector workers by 20 per cent or equivalent to making 150,000 people redundant.

It is these human stories, which are transforming this pan-European crisis into not only an economic crisis but also a political and societal crisis. In Greece last week up to five million people participated in a General Strike as the Government forces through a new package of austerity measures to receive a new €110bn loan to prevent default.

In response to this understandable fury the unaccountable IMF once again piped up to say that countries were ‘playing with fire’ by failing to solve the issue of debt. The irony wasn’t lost when it is the very neo-liberal policies that they have espoused that got us into this mess in the first place and now is exacerbating the situation in the name of the deficit!

What has been one of the most staggering episodes so far in this Greek tragedy is that in order to finance the debt re-payments the Greek Government has agreed to appoint international advisers to roll-out a €50bn privatisation programme.

Luxembourg Prime Minister Jean-Claude Juncker, who is also chairman of the Eurogroup of euro-zone finance ministers, said that Greece should set up an agency to privatise state assets along the lines of the German institution that sold off East German enterprises in the 1990s.

So here we have a leader of another nation state informing another that they must sell state assets in order to receive money and telling them how they should repay it – and people wonder why the Greeks are taking to the streets – this should outrage us all!

The danger for Scotland and the UK as whole is the extent to which this will affect us. Will contagion spread undermining our own weak financial system (although CEOs see fit to award themselves a 36 per cent pay rise). Due to the austerity measures under way with a vengeance will we head into a vicious circle of falling wages, growing inequality, collapsing consumer confidence, stagnant demand, growing unemployment and social unrest as more and more people are excluded from the benefits of the few.

This road to ruin is repudiated by thoughtful commentators everywhere, not least by thirty-eight prominent American economists (including three Nobel laureates) who asserted in the Washington Post that one of the main reasons for economic slumps is the ‘erosion of workers ability’ to form unions and bargain collectively, ‘that shifted the wealth of our country from broadly-shared prosperity to growing inequality’.

It is to this issue we will turn next!

Part Two









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