Greece and the EU’s obsession with austerity

Published: March 11, 2013
Greek protesters raise arms in front of parliament building during a rally against an austerity package. PHOTO: REUTERS

Greek protesters raise arms in front of parliament building during a rally against an austerity package. PHOTO: REUTERS

MUNICH: The policies of the International Monetary Fund (IMF), the European Central Bank and the European Union – also known as the ‘Troika’ – are failing to resolve the fundamental economic and social issues engulfing the European Union (EU). In Greece, particularly, the Troika is aiming to reduce debt by 220% by 2020, and is planning to achieve this target through deeps cuts in social spending (pensions, education, healthcare, etc) and steep tax hikes, which it claims will make the economy more competitive. Although the policy framework is labeled as a ‘rescue package’, the term could be nothing further from reality when taking into account the economic, social and political developments that have been taking place since 2009.

Economic crises

Since the Troika implemented the so called rescue programme in Greece four years ago, unemployment has spiked to 30% from 9%, 61% of the youth workforce is currently out of work, 3.9 million out of 11 million people are living below the poverty line and the economy continues to contract by 5-6% annually. The national debt has simultaneously increased from 262.32 billion Euros in 2008 to 343.81 billion Euros in 2012. Although minor improvements were made in the fiscal budget of 2012, these came at the expense of the public, and not due to an increase in revenue from activities that would exhibit economic improvement. Exports, incomes, wages, competitiveness, efficiency are stagnating, if not falling, at an alarming rate.

Social crises

An improvement in the fiscal budget by slashing spending has ignited a humanitarian and social crisis. In 2008, Greece ranked 18th in the Human Development Index – as of 2012, it has fallen to 29th place, with sharper downgrades expected in the coming years. In 2012, 40,000 people were reported homeless and 470,000 households without an income. This has led to a dramatic rise in medical services provided by NGOs, and it is reported that 250,000 rations are provided daily by the Church of Greece. The situation has deteriorated to an extent that patients have to bring their own toilet paper, soaps and other essential supplies to hospitals. Vangelis Papamichalis, a neurologist at the Regional Hospital of Serres in northern Greece and a member of the doctors’ union, states that: “We run out of surgical gloves, syringes, vials for blood samples and needles to sew stitches, among other things.”

Political crises

The policies of the EU have caused immense economic and social disruptions and have created an extreme political climate. Anti-EU and anti-German sentiment is rising, and extreme right and left wing parties are quickly garnering political support. In the last election, 52% of Greeks voted for anti-austerity parties; however, due to stark ideological differences, they failed to form a coalition government. These parties are entertaining the option of exiting the EU and breaking the terms of the rescue package, a move that is strongly opposed and condemned by Brussels. In the past, such moves were quickly put down. In November 2011, faced with growing pressure from Brussels and from pro-austerity interests in Athens, former Greek prime minister George Papandreou resigned right after he considered the possibility of a referendum in which the Greeks would democratically decide whether to accept the EU’s rescue package.

If the current political climate prevails, anti-austerity parties will eventually take office in the near future and will not hesitate to avail the options, unilaterally, to either exit the EU or reject the terms of the rescue package. This would be a complete catastrophe for Brussels, as it could unleash a domino effect in which other countries would follow suit and default on their obligations as well.

With overwhelming evidence that clearly reveals a catastrophe in almost every facet of the Greek nation, the question naturally arises: what are the policies, if not taken at face value, aiming to really achieve?

Despite the call for alternative economic policies at this crucial stage, Brussels is obsessed with the current policy framework and is aiming to implement them with even greater force.

The writer is a freelance Journalist and works for Muffathalle 

Published in The Express Tribune, March 11th, 2013.

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Reader Comments (1)

  • Imran Sikander
    Mar 19, 2013 - 5:10AM

    Great analysis & quick to pinpoint to the underlying problems rather playing around the bush, would really like to hear a proposal of possible solutions, if there are any that in which EU could be saved ?

    In my opinion, it has a lot to do with the Banking sector’s irresponsibility that hasn’t been cleansed, their behavior is that of a child they need to satisfy their candy needs or they’ll deprive others of it.


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