The Greeks have looked the IMF/ECB horse in the mouth, and voted a resounding “No” to the conditions offered by Europe for further fiscal support. The debate between Greece and her creditors though is not over leniency or hard work, but a demonstration of how the 2008 crash has thrown conventional economics into turmoil.
As Greece needs to rebuild its economy from the ground up, Germany and the Europeans insist that the way their economies flourished, using post-war accepted fiscal wisdom, is the only practical and normative way forward for the Mediterranean. Their strategy sits on 50s home-management style budgeting, cutting costs in extreme measures until growth returns.
|2010 cartoon from Latuff
Greek voters, as well as leading economists have rejected the plans, calling for more immediate action to halt the austerity programs which have brought no improvement to growth rates and begun a shortage of basic medicines and foodstuffs. Greece, backed by figures such as Joseph Stiglitz and Thomas Pikkety, say that their depression requires definite action. Stiglitz wrote in the Guardian
“I can think of no depression, ever, that has been so deliberate and had such catastrophic consequences: Greece’s rate of youth unemployment, for example, now exceeds 60%.
It is startling that the troika has refused to accept responsibility for any of this or admit how bad its forecasts and models have been. But what is even more surprising is that Europe’s leaders have not even learned.”
Economics aside, Greece’s Finance Minister Yanis Varoufakis stepped down despite a win for his camp, saying that negotiations would have a better chance of success in his absence. Personal relations between him and other European leaders have become untenable, with some saying they would not step into the room with him. This is a move that attempts to show all sides that Greece and its left wing coalition are not simply obstinate in their stance, but certain that a model of liberal spending and artificial props provide the best long term solution for rebuilding with hope for Greeks.
As Greece issues a new decree today to extend the bank holiday for a few more days and present new proposals on Tuesday, Germany and her coalition must accept that a struggling state within the Eurozone is better for all that a failed state on its borders. The game of chicken that has been played out seems to have Greek victor today.