Why Won’t Greece Take a Deal?

Ultimately, it’s about pride.

By John Kiriakou

Greece is in dire straits. As a Greek American, it hurts to watch.

Without emergency loans from its European partners, Greece will default on its debts and likely be forced out of the Eurozone. That means tougher times ahead for Greece, Europe, and international financial markets.

In exchange for a short-term loan, European powers led by Germany want the Greek government to impose brutal new austerity measures on its people. So why won’t Greece take the deal?

First, some background: Past Greek governments are largely to blame for the country’s fiscal woes.

In 1981, Greek Prime Minister Andreas Papandreou famously told his finance minister to “spend it all.” And that’s exactly what he did.

Greece became the first European country to allow all workers to retire with a full pension at the age of 55. A worker in a “dangerous industry” could retire even earlier. But “dangerous industries” ended up including everybody from hairdressers to radio disc jockeys.

In the meantime, the government hired everybody who wanted or needed a job. The public sector ballooned to unsustainable levels, and practically everybody was retiring early at full pension.

Later on, conservative governments jumped on the bandwagon too, handing fat government benefits to their supporters. Tax evasion ran rampant and the entire political system was corrupted.

The system was bound to collapse, and collapse it did. A few years ago, Greece’s neighbors and the International Monetary Fund loaned the country money to make ends meet.

But instead of eating the losses on their banks’ bad investments, the Europeans — and especially the Germans — demanded harsh austerity cuts that shredded Greece’s social safety net, gutted the public sector, and plunged the country deeper into despair.

Fed up with the resulting poverty and unemployment, Greeks rejected their mainstream political parties in the last election and replaced them with the left-wing Syriza party. Led by Prime Minister Alexis Tsipras, Syriza campaigned on protecting Greece’s now-huge underclass from Europe’s dictates.

Why would the Greeks risk losing everything by not continuing with a well-defined program of pension cuts and layoffs?

The answer isn’t hard to understand.

First, Syriza rejects balancing the budget on the backs of the poor. Over 40 percent of Greeks now live at or under the poverty level. Middle-class people who worked all their lives have been thrown out of their jobs and have no hopes of getting another. Unemployment for young Greeks hovers around a whopping 50 percent.

Tellingly, suicides in Greece are up over 35 percent since the economy fell apart in 2009, and a “brain drain” of educated professionals to other countries is running apace.

Second, Europeans are ignoring the concept of saving face. The European ultimatum to Greece doesn’t respect the country’s election results or allow the government to claim even a partial victory. Add in the Greeks’ lingering resentment toward the Germans over Nazi atrocities in World War II, and you get an even more difficult situation.

There’s still hope for a last-minute breakthrough. If that doesn’t happen, though, the money will dry up and the Greek economy will fall further apart. Yet compared to endless austerity, that might not be the end of the world.

It may be ugly for a while: Stock markets will slide, Greece will have to re-invent its currency, and the economic depression Greece has endured may last several years longer. But the Greeks will survive, and so will everybody else.

And despite their pain, the poor will know that their government did this for them. The Greek people will know that they weren’t beholden to the Germans or to the International Monetary Fund.

It’s not just about the money. It’s about pride.

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OtherWords columnist John Kiriakou is an associate fellow at the Institute for Policy Studies. He’s a former CIA counterterrorism officer and former senior investigator for the Senate Foreign Relations Committee. OtherWords.org.

IMF Report Admits IMF’s Obsession with Capitalism Is Killing Prosperity

“By releasing this report, the IMF has shown that ‘trickle-down’ economics is dead; you cannot rely on the spoils of the extremely wealthy to benefit the rest of us.”

By Jon Queally

In light of how the International Monetary Fund has spent most of its existence parading around the world telling governments to make their economies more friendly for multinational corporations by suppressing wages, restricting pensions, liberalizing industries, and more or less advocating they ignore the popular will of workers and the less fortunate—all in the name of market capitalism and endless economic growth—a new report released by the IMF on Monday contains an ironic warning: stop doing all that.

Though it perpetuates the idea that economic growth is the master to whom all should bow, the new research—conducted by the IMF’s own economists and submitted under the title Causes and Consequences of Inequality (pdf)—argues that many of the policies promoted by the IMF have actually harmed nations by exacerbating widespread economic inequality. As many have noted, current disparities between the world’s richest and poorest represent a nearly unprecedented level of global inequality which the report described as the “defining challenge of our time.”

In order to strengthen economies, the report declares, nations should admit that “trickle-down” theories of wealth and prosperity do not work. In lieu of those, the study recommends raising wages and living standards for the bottom 20 percent, installing more progressive tax structures, improving worker protections, and instituting policies specifically designed to bolster the middle class.

“Fighting inequality is not just an issue of fairness but an economic necessity,” said Nicolas Mombrial of Oxfam International in response to the report. “And that’s not Oxfam speaking, but the International Monetary Fund.”

This is not the first time the IMF’s own research has bolstered the arguments of its biggest critics. According to the International Business Times, the new analysis on inequality “echoes previous IMF research that show that redistributive policies have a positive effect on countries’ economic output.”

But as the Guardian’s economics editor Larry Elliott notes, the new paper creates obvious “tension between the IMF’s economic analysis and the more hardline policy advice” it continually gives to countries seeking foreign assistance or development funds. With Greece as the most obvious example, Elliott cites details from the report and writes:

During its negotiations with Athens, the IMF has been seeking to weaken workers’ rights, but the research paper found that the easing of labor market regulations was associated with greater inequality and a boost to the incomes of the richest 10%.

“This result is consistent with forthcoming IMF work, which finds the weakening of unions is associated with a higher top 10% income share for a smaller sample of advanced economies,” said the study.

“Indeed, empirical estimations using more detailed data for Organization for Economic Cooperation and Development countries [34 of the world’s richest nations] suggest that, in line with other forthcoming IMF work, more lax hiring and firing regulations, lower minimum wages relative to the median wage, and less prevalent collective bargaining and trade unions are associated with higher market inequality.”

The study said there was growing evidence to suggest that rising influence of the rich and stagnant incomes of the poor and middle classes caused financial crises, hurting both short- and long-term growth.

No one should be fooled into thinking that the new research aims to alter the IMF’s central commitment to advancing the financial interests of the global elite.

In fact, part of the argument presented in the paper is that such enormous levels of global economic inequality could seriously undermine the institution’s public defense of capitalism’s overall supremacy. “For example,” the paper states, “[too much inequality] can lead to a backlash against growth-enhancing economic liberalization and fuel protectionist pressures against globalization and market-oriented reforms.”

According to a recent report by Oxfam International, almost half the world’s wealth is owned by one percent of the population, while the bottom half of the world’s population owns the same wealth as the richest 85 people in the world. For Oxfam’s Mombrial, who heads the international anti-poverty group’s office in Washington D.C., the IMF’s report is a welcome development that should put a nail in the coffin of the austerity-driven policies prescribed by governments and powerful financial institutions like the IMF, World Bank, and others.

“The IMF proves that making the rich richer does not work for growth, while focusing on the poor and the middle class does,” Mombrial said. “This reinforces Oxfam’s call on how we need to reduce the income gap between the haves and have-nots, and scrutinize why the richest 10 percent and top 1 percent have so much wealth. By releasing this report, the IMF has shown that ‘trickle-down’ economics is dead; you cannot rely on the spoils of the extremely wealthy to benefit the rest of us. Governments must urgently refocus their policies to close the gap between the richest and the rest if economies and societies are to grow.”

As Oxfam and other international campaigners have been saying it for decades, he concluded, “The IMF has set off the alarm for governments to wake up and start actively closing the inequality gap, not just between the rich and poor, but for the middle class too. Their message to them is pretty clear: if you want growth, you’d better invest in the poor, invest in essential services and promote redistributive tax policies.”

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