Monday, 3 May 2010


The Guardian reports that
"George Papandreou had to make one the toughest speeches by a European prime minister today, announcing he had bowed to the demands of the EU and IMF and agreed harsh economic reforms to avert bankruptcy in Greece.

At an emergency meeting of his cabinet, the first held on a Sunday morning, the socialist leader effectively conceded defeat in the battle to deal with the debt crisis without international aid.

Papandreou told Greeks, who have taken to the streets in protest against the austerity drive, that they had to chose between a rescue or an economic collapse."

European countries stepped into uncharted territory tonight, deciding on the first bailout of a single currency member state by agreeing a three-year package worth ¤110bn (£95bn) to rescue Greece from financial meltdown in return for pledges on the most drastic overhaul of a European economy ever attempted.

"It's not an easy day," added George Papaconstantinou, the Greek finance minister who earlier put his country's dilemma starkly: "The choice is collapse or salvation."

A day after May Day protests rocked Greece, the prime minister, George Papandreou, outlined his commitments to the EU and the IMF, making clear his programme envisaged the biggest shake-up of Greece's welfare state ever contemplated. A homemade bomb later exploded outside an HSBC branch in Athens.

With Greece's debt relegated to junk status and the country staring at Europe's first sovereign debt default without the bailout, European leaders sought to put the months of foot-dragging and squabbling behind them to try to shore up the euro and prevent the debt crisis rippling across to Portugal, Spain and Italy.
And Ireland......and the UK? And France and Germany and.....

Britain is arguably better placed than Greece, having the freedom to devalue if necessary. the UK spending cuts and tax rises have not yet been made. That reaction is yet to come, and presently the UK is electing a new government amidst complaints that the main contenders have not spelt out what cuts they will be making, nor what taxes they will be raising. Whoever is elected will struggle for support to push through their savage cuts because no-one at present knows what they are electing. If nobody is standing on a platform of savage cuts, then who will support them when the time comes for the sacrifice? This could create major social unrest, and propel UK into a position much closer to that of Greece. And then we'd be faced with the same choice as Greece - capitulation to the markets or disaster. (If that can be called a choice.)

And should the contagion spread to Spain, Ireland, Italy, UK then who will bail out these economies when there'll be less finance available, and the amounts required might be far larger?

Social unrest seems only to make the position more critical, as perhaps illustrated by the Greek experience. Seemingly if we protest at savage cuts our credit rating suffers and therefore our borrowing costs rise, imperilling us all the more causing cuts needing to become even deeper. Wow - that's some discipline. The "free" market---there's no choice.
Rehn said that the "systematic, specific, and rigorous" bailout plan came with strings attached tightly, including quarterly monitoring of Greek austerity measures. He revealed the deal required Greece to slash its soaring budget deficit by 6.5% this year alone, a staggering feat if it can be achieved.

In return for the lifeline, Papandreou has committed to the most ambitious and draconian reshaping of Greece's welfare state ever attempted. Spending cuts amounting to more than €36bn or 11% of national GDP are to be made over the next three years. Wages, pensions, and benefits in Greece's bloated public sector will be cut, and large VAT and other tax rises will be imposed. The retirement age is to be raised. The savage programme will inevitably deepen Greece's recession.Faced with strong public hostility and possible threats to the longevity of his government, Papandreou is squeezed between intense opposition at home and the pressure of the Germans, the IMF, and the other Europeans. Scepticism is high as to whether he will be able to deliver on the terms of the pact.
Shit! What a disaster. Coming soon to a High Street near you.....

ETA - And isn't the Greek capitulation essentially the policy Ron Paul recommends for America? He'd go much further of course, but his position is essentially one of proposing fiscal "responsibility" along the lines of what Greece has submitted to, isn't it? ie the neo-liberal idea of supremacy of "free-markets" and "market discipline" and all the rest of it. Ron Paul and the other free-market fundamentalists want the disaster to occur - as some semi-mystical(?) cleansing process - and they attack the proponents of bailout and Keynesianism for wanting to avoid disaster! Ron Paul and co recommend implementing the policies the Greek people reject and which cause such grief as to cause rioting. The Greeks consider it a disaster - but Ron Paul and co (the neo-libs) recommend these policies - to avert disaster! The very policies they suggest to avoid disaster are themselves disastrous. At least the Greeks seem to think so......

ETA2 - The Guardian has added:
Unions have been quick to react to the move, announcing walkouts, including a general strike that will paralyse the country on Wednesday.

"These policies are totally unfair. They place all the burden on the have-nots to pay the price of this crisis and not the plutocracy," said Yannis Papangopoulos, who heads the Confederation of Greek Workers. "There will be a social explosion once they begin to bite."
Oh good.

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