Jonathan Stevenson

Greece: The Never-Ending Austerity Story?

Jonathan Stevenson
Greece: The Never-Ending Austerity Story?

IT SEEMS A LONG TIME AGO THAT THE GREEK PEOPLE delivered the kind of referendum result we could all celebrate, voting ‘OXI’ to austerity by a landslide last July.

Of course, an even harsher austerity programme was subsequently imposed by European powers. Under this programme Greece must inflict even more severe harm on its economy so as to unlock the new loans needed to keep making payments on its debts. Today the Tsipras government, from the highs of early 2015, faces a much reduced mandate: to attempt to administer ‘austerity with social justice’.

The latest pound of flesh was extracted in May, when Greek MPs passed a €5.4 billion package of tax increases and pension cuts – the seventh set of pension cuts since 2010. In return, Greece received the latest €7.5 billion of new bailout loans, enough to cover the €7.2 billion of debt payments due in the rest of 2016, but little else.

That’s just for starters. Each tranche of the up to €86 billion bailout over three years comes with further austerity medicine prescribed. The next dose, due in the autumn, is set to include major changes to trade union laws, including on collective bargaining, redundancy and industrial action – changes the Governor of the Bank of Greece, far from a Syriza ally, has called ‘unrealistic and socially unobtainable’.

But the ideological centrepiece of the bailout is a €50 billion fund to be filled by the privatisation of state assets, from the ports of Thessaloniki and Piraeus, to 14 regional airports, the electricity grid, and further items to be identified. With a deadline of 2018 to make the sales, and very limited scope to call them off, it’s the very definition of a fire sale.

The impact of the first six years of austerity has already been stark. The Greek economy has contracted by more than a quarter – a scale of recession not seen since the Great Depression – while the number of Greeks facing material deprivation now stands at more than 20%. Government expenditure has been cut from €128 billion in 2009 to €87 billion in 2015, with programmes like free school meals and medical care on some Greek islands now reliant on crowdfunding appeals to attract resources. As Business Insider put it: ‘The existing austerity programme has failed about as completely as it is possible for a set of economic measures to fail.’

On top of this, since the turn of the year, Greece has become a centre of the refugee crisis in Europe. 120,000 refugees arrived in January and February alone, and tens of thousands remain stranded following the closure of onward borders. Ordinary Greeks have responded with extraordinary generosity, donating supplies and volunteering in their thousands at impromptu welcome centres, as I witnessed on a Greece Solidarity Campaign delegation in March.

Yet the Tsipras government has been forced to sign the outrageous EU-Turkey agreement, obliging Greece to deport Syrians to Turkey without considering their asylum claims. Medecins Sans Frontieres has announced it will reject all funding from the EU and EU member states over the deal, which it said was ‘jeopardising the very concept of the refugee’.

The only thing that could break the spiral is the prospect of a reduction in Greece’s now €350 billion debt. In May, European leaders finally agreed to discuss the question, after the IMF – concerned for the damage to its reputation of the previous bailouts – threatened not to join the third programme.

Yet the menu of possible short, medium and long term ‘debt relief’ measures now being discussed do not envisage any debt actually being cancelled, just rescheduled. And the bulk of the decisions have been deferred until after the German elections in late 2017.

It is the same ‘kicking the can down the road’ approach to dealing with a debt crisis that was tried in much of Latin America and sub-Saharan Africa in the 1980s and ’90s. It failed then too, leading to two lost decades of development, with poverty and inequality deepening.

All this leaves the Greek left in something of a bind. On the one hand, Syriza hopes to win enough on debt to argue there is light at the end of the tunnel, and get some wriggle room to implement its ‘parallel programme’ of social justice. On the other, there is growing popular protest against every additional austerity measure, alongside the conservative New Democracy Party recovering in the polls.

Things look just as likely to get worse as get better. Ultimately, it is Berlin and its allies in the Eurogroup which effectively run Greece, and debt is their instrument of control. The only ways out remain a change in the balance of European forces, or a new attempt to face down Greece’s creditors, this time with the threat of a euro exit (despite its consequences) genuinely on the table. Both at once would probably be needed – and neither is easily achieved. But then, the dilemmas of how to take on the neoliberal EU are not confined to Greece.