Greece’s negotiations with its creditors are approaching a climax accompanied by dire headlines of impending collapse, but meanwhile most Americans feel that the economic drama unfolding across the Atlantic, while lamentable, is not really our problem. Three representatives from leftist European parties were in the United States this week to say otherwise and to explain the need to press the United States to play a more constructive role in resolving the crisis.
The three leftist party leaders – Yiannis Bournous, a member of the political secretariat of Greece’s ruling Syriza party; Pablo Bustinduy, secretary of international relations for Spain’s Podemos party; and Caren Lay, a member of the German Parliament in the Die Linke party – were in Washington on Tuesday to lobby members of Congress and to participate in a forum sponsored by the Center for Economic and Policy Research.
Bournous said there was an “urgent need for a change” from the austerity ideology now driving the negotiations between the Greek government and the “troika” composed of the International Monetary Fund, the European Central Bank and the European Commission.
He called what was happening in Greece “a violent redistribution of wealth from the bottom to the top” that is having dire consequences for the majority of Greek people. That country now faces conditions that Americans have not seen since the Great Depression: Their economy has shrunk by over 25 percent, one in four Greeks is unemployed, and two-thirds of pensioners live at or below the poverty line. Millions of formerly middle class people have fallen into poverty and found that the safety nets that were once there are pretty much gone. Also like the Great Depression, the suffering and poverty is completely unnecessary, brought about by misguided austerity policies and draconian bailout provisions. It’s as if we never learned anything from the events of 80 years ago.
Thus it is little wonder that Greeks voted last year for a new party, Syriza, that promised to stand up to and reverse the counterproductive austerity policies that impoverished the Greek middle class and perpetuated a vicious cycle of bailouts and recessions. But Greece’s economic policy now lies with the troika with which it is negotiating, not with its elected representatives. These three organizations offer to help pay off Greece’s creditors in exchange for concessions in the form of welfare cuts, deregulation, and privatization by the Greek government. The burden of these “structural reforms” lies not with the wealthy and corporations who initiated the downward spiral, but the poor and middle class who rely on these social programs. The alternative is default, which could result in Greece being booted from the European Union and spark a catastrophic collapse of the Greek economy that could shock world markets.
Bournous echoed the position of Greek Prime Minister Alexis Tsipras when he said that while the country was prepared to take some steps called for by the troika, such as run a slight budget surplus in order to pay down government debt, he said it was “insulting” for countries such as Germany to demand that Greece take such actions as cut already-reduced retiree pensions even further. “We are not going to go forward with an agreement that changes nothing” for struggling Greek people, he said.
The United States can influences the outcome of the Greek negotiations through its dominant voice in the International Monetary Fund, which is headquartered in Washington. The Federal Reserve and the U.S. government can also communicate their concerns to their counterparts at the ECB and the European Commission. The stakes are not only high for Greece but for Spain as well, where Bustinduy said “austerity policies have failed tremendously … all of the major economic indicators are worse” than they were before the 2008 global economic collapse.
The United States has an opportunity to support what Lay said is “a growing resistance to austerity politics, even in Germany,” where Chancellor Angela Merkel has been the chief enforcer of austerity economic dogma.
The stakes are not just financial – although the financial concerns are serious enough. If Greece runs out of money at the end of the month, there could be runs on Greek banks, its financial system could collapse, and the resulting financial panic could send waves across the Atlantic. The very talk of “Grexit” is already rippling negatively through European markets. No one is sure what will happen if June ends with no deal, but we are not all that interested in finding out.
But the political consequences could be even more chilling. Just as ineffectually addressed economic discontent led to the rise of extreme, tea-party conservatism in 2010, the unending suffering and hardship in Greece, Spain and elsewhere is already showing signs of leading increasingly desperate people to turn to demagogues and autocrats. The stagnation and decline of European prosperity has seen the rise of neo-Nazi and ultranationalist parties across Europe. The U.S. counts on a unified, stable European Union, but as Bournous of Syriza pointed out, if things keep going the way they are now, “instead of dealing with a democratic Europe you will be dealing with Marine Le Pen,” the leader of an ascendant far-right party in France.
Greece and its cohorts, Spain and Portugal, have been added to the expansive list of test subjects treated with the toxic medicine of austerity. They have been further impoverished far faster than they can have been able to pay down their debts, defeating a supposed key point of austerity policies. Instead of using these growing debt to GDP ratios as justification to demand more austerity, it’s time for the ECB, the IMF and the European Commission to realize that the best way to pay down debt is to let these countries grow their economies and repair the prospects of their decimated middle classes. It’s also about time we accepted that in the U.S., too.
This post has been updated to correctly identify the sponsor of the event, the Center for Economic and Policy Research.