Austerity – the dark underbelly of Europe

With my recent writing around the effects of austerity on women’s employment, I read with great interest Australian writer, Christos Tsiolkas’ article, Greek Tragedy published in the Monthly, August edition.   The article is based on an interview with former Greek finance minister (January – July 2015) Yanis Varoufakis which took place not long after the referendum in Greece on 5 July. The referendum gave Greek voters the opportunity to say yes or no to the bailout conditions – essentially the austerity measures – proposed by the European Central Bank,  the IMF and the European Commission (the troika).

The article – and the interview itself – give an extraordinary ‘behind-the-scenes’ account of the post referendum compromise made by Aleksis Tsipras’ Syriza Party and great insight into European politics which have set Greece on such a socially and economically destructive path – and which have troubling implications more broadly.

Now my purpose here is not to regurgitate what is so plainly and well said in the article. But there are several themes that are worthy of  reflection – which is my purpose here.

The first of these was that there was effectively no social impact consideration of the terms and conditions of the bailout on the part of the troika – and this is where there have been devastating consequences with a rise in extreme poverty and even starvation – a humanitarian crisisThis is engendered by high unemployment, and drastic cuts to wages and pensions payments. Effectively, the values of the post WW2 social contract of an adequate social safety net, which European countries keenly implemented and endorsed has been trashed.

The second core theme is that the bailout conditions actually exacerbate economic decline making it harder for the Greek economy to get on course for growth. As part of the Eurozone, the Greek government can’t devalue its currency leaving it no avenues for attaining some sort of competitive advantage for its industries and exports. However, with such tight conditions on loan repayments and no avenues for borrowing for investment, Greece has little room to move to get the economy moving again. High rates of poverty and unemployment mean that there is reduced spending and consumpti0n, exacerbating the downward spiral. What business would want to go in there? What entrepreneurs in Greece would be confident to start something?

The third very troubling aspect of what happened in Greece, in terms of the bailout conditions, which Varoufakis was uniquely placed to observe, was how these were constructed and endorsed according to the interests of both other specific countries and clusters of countries in the Eurozone – as well as the career interests of some individuals. This aspect of what Varoufakis observed suggests a highly desensitized European – and international – polity to humanitarian values. This is also a serious set back to the values which European countries enthusiastically signed up to after the second world war.

Varoufakis says “ it is a very cynical, utilitarian view that in order to forge the future you have to sacrifice unproductive people who are good for nothing. Now, the smarter ones – and there are very few smart ones – can see all this is all rubbish. They could see that the program they were implementing would be catastrophic. But they were cynical. They thought,  I know which side my bread is buttered.”

With growing concern about the effects of global inequality on growth to international agencies such as the IMF and OECD as well as blocks such as the G20, it is hard to understand the mindset of the countries and institutions that are making life so hard for Greece.

But it is also worrying for what this means for the project of trying to address the tide of growing inequality through adequate social safety nets and inclusive growth.  I wrote for the Conversation on why there was such broad international agreement for economic policy to be embedded within a social impact framework. The Greek experience casts a dark shadow of the possibilities of achievement of any of it. Worse still it casts a dark shadow over the motivations and behaviours of institutions and countries that we would expect to provide some example and leadership in progressing these goals.

Postscript –  Christos Tsiolkas’ article in the Monthly, and his interview with Yanis Varoufakis,  doesn’t broach the issues raised by the refugee humanitarian crisis and Europe’s response which in the case of Germany has been particularly generous. In an interview transcript on his website, Varoufakis responds to the question:

Interviewer question: Germany will probably miss its goal of a balanced budget because of the rising costs for refugees. Given Germany’s hardline position in the negotiations with Greece in the summer, what do you think of its current refugee politics?

Varoufakis response: As a European, I am exceedingly proud of Chancellor Merkel for her principled stance on the question of refugees. This is an example of how misguided the criticism is of Germany as the source of problems for Europe, which is prevalent not just in Greece, but in France, in Italy, and in Spain. I believe Chancellor Merkel’s stance can be a harbinger of good things to come for Europe. When somebody knocks at your door who is hungry, who has been shot at, who is injured, you have a moral obligation – and I believe chancellor Merkel understands that – to open the door, whatever the cost, and take them in. By doing this, we are reconfirming our European humanism.


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