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nettime's avid reader on Sun, 28 Jun 2015 10:31:59 +0200 (CEST)

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<nettime> Fwd: The Greek position

Greece Referendum: Why Tsipras Made the Right Move


By Marianna Fotaki, University of Warwick, Jun 28, 2015

Greece will hold a referendum on July 5 on whether the country should
accept the bailout offer of international creditors. The governmentâs
decision to reject what was on offer and call the referendum is
ultimately an attempt to take charge of its domestic policy and reaffirm
its credibility with voters.

Although Greece is hard strapped for cash this is clearly a political
decision with profound consequences for the future of the European
Union. It is also the right one.

This is not merely useful as a negotiating tactic for obtaining a better
deal with its creditors, as many commentators might suggest. The
coalition of the left, Syriza, had no choice but to oppose further
measures that would lock its economy into a deflationary spiral, the
trappings of which are destroying Greek society.

The Greek position

Elected with the mandate to end the savage austerity policies already
imposed, Syriza could hardly accept the further cuts demanded. These
include cuts in income support for pensioners below the poverty line and
a VAT hike of up to 23% on food staples. Even more onerous was the
demand that Greece should deliver a sustained primary budget surplus of
1% for 2016, gradually increasing to 3.5% in the following years when
its economy has already been contracting for six years.

By most counts the austerity policies imposed by Greeceâs creditors in
2010 in exchange for the bailout money (of â240 billion) have been an
abject economic and moral failure. The International Monetary Fund
itself has acknowledged âa notable failureâ in managing the terms of the
first Greek bailout, in setting overly optimistic expectations for the
countryâs economy and underestimating the effects of the austerity
measures it imposed.

The former IMF negotiator, Reza Moghadam, has acknowledged the fundâs
erroneous projections about Greek growth, inflation, fiscal effort and
social cohesion. The debt is now almost 180% of Greeceâs GDP, up from
120% when the bailout program began. And this is mainly due to the fact
that GDP has contracted by 25%, rather than the significantly lower
projections by the IMF. The shrinking of the economy and rising
unemployment levels have exceeded those that hit the US in the financial
crisis of the 1930s.

The human and social costs have been even more staggering in Greece.
Incomes have fallen by an average of 40%, and the unemployment rate
reached 26% in 2014 (and higher than 50% for youth). With hundreds of
thousands of people depending on soup kitchens, and thousands of
suicides in the years 2010-2015, the moral case for debt forgiveness
seems just as strong as the technical one based on economics.
The creditorsâ offer

Yet in the terms presented to Greece by their creditors there is no
commitment to reducing Greeceâs crippling debt (which all commentators
acknowledge is unrepayable). Nor is there any tangible proposal for
rebuilding the Greek economy.

Germany, France, and the EU, aided by the IMF and ECB, continue to
insist on implementing policies that have so manifestly failed Greece.
They do so to avoid having to justify the massive bailouts of their own
financial systems â shifting the burden from banks to taxpayers â if
Greece fails to make the repayments. The leading EU partners must not be
seen to act leniently towards Greece as this might encourage
anti-austerity parties Spain and elsewhere.
Broken Europe

But the social and political costs of these policies have put the
legitimacy of the entire European integration project in question. By
being locked into austerity policies, Europe is tearing itself apart.

This brings to the fore the faulty institutional framework that has
exacerbated these issues. European integration was conceived by a set of
elites, while many EU citizens have never fully embraced the idea: the
EU tends to be regarded as an economic entity rather than a cultural or
social one. The âever closer unionâ remains an aspiration, while EU
institutions patch up compromises between its most powerful members.

The ill-thought and haphazard implementation of the common currency is
perhaps the most costly compromise of all. The Greek government is
therefore right to ask for generous debt relief to allow the economy to
have a fresh start in exchange for reforms that will address the
perennial problems of corruption and inequality that bedevil Greek
The right decision

Greece has many problems â including unfair taxation (64% of taxes are
paid by salaried employees and pensioners), corrupt elites who have
governed the country for at least four decades with fellow European
governments repeatedly turning a blind eye to their flouting of rules,
and the oligarch-owned media which are neither independent nor free. But
accepting the bailout would only feed into the system that got Greece
into this crisis.

Meanwhile, the newcomer to Greek politics, Syriza, has been told it will
only receive the funds agreed under the previous bailout terms if it is
ready to implement further policies that will decimate the poor and
impoverish the middle class even more. Cutting pensions, many of which
are already below the eurozone average when almost one in two of them
are facing poverty, would be a mistake.

So would conceding to the firing of an additional 150,000 public sector
workers when their overall headcount has already been reduced by 161,000
since 2010 â a 19% reduction, according to the IMF.

Contrary to popular belief, the number of public sector employees as a
percentage of the workforce in Greece is 14% below the OCED average, but
austerity has had an even more disastrous impact on employment in the
private sector, with an estimated 400,000 businesses closing down in the
past five years.

No country has ever succeeded in emerging from financial crisis by means
of austerity. Further austerity would have made the impossibly bad
situation that Greece is in worse still. In rejecting the creditorsâ
further demands, the Greek government stands for the working people of
Greece â and Europe too.

*Marianna Fotaki is Network Fellow, Edmond J Safra Center for Ethics,
Harvard University and Professor of Business Ethics at University of
Warwick. This article first appeared on The Conversation.

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