Occupation, Extraction, and Austerity

A Greek Tragedy

Occupation, Extraction, and Austerity : A Greek Tragedy - Morgan Graham

Some causes of the Greek debt crisis were within the grasp of the Troika and the Greek government, allowing for course correction, while others are still largely uncontrolled, threatening Greek recovery and the prosperity of the broader Eurozone. The economic and political problems still plaguing Greece are complex ones, not readily solved with austerity measures and increased transparency. These lasting issues are driven primarily by internal failings and Greece’s relations with the EU, but are also, at times, rooted in Greece’s historical relations with the US.

After manipulating figures to reflect budget deficits under 3% of GDP and forging lower inflation levels, Greece was admitted to the eurozone in 2001. By swapping the drachma for the euro, Greeks could borrow at less than a third of the rate to which they were accustomed. With low interest rates and a pool of lenders, Greece went on a borrowing and spending spree. With some help from investment banks like Goldman Sachs, Greece was able to hide its true level of indebtedness – until Georgios Papandreou’s Pasok government replaced the New Democracy in 2009 and came clean.

This revelation left a series of problems in its wake. The deficit was not 3% of GDP but rather 15%. The government spent excess capital on everything from the Olympics, to infrastructure, and even public sector wages, which skyrocketed and became almost three times that of the private sector. This was all made possible because the euro was the ultimate moral hazard opportunity: Greece could spend recklessly knowing that it was backed by the EU.

Greece has made several steps to counter these tendencies. The 2014 Greek budget was released in December and reports a surplus. Naturally, some are calling it too optimistic. There is certainly bound to be mistrust in Greek reporting for years to come, however progress is being made. Austerity measures – which included mass layoffs – have tackled public sector spending.

Greece still faces lasting issues. Tax evasions and bribes became commonplace in Greece. Beyond the fact that equal prosecution would be nearly impossible because nearly everyone was doing it, according to one Vanity Fair article, this culture of cheating was also made easier because it takes Greek courts take up to 15 years to resolve tax cases. The origins of this self-interested behavior can be traced back to the Greek Civil War. The US government supported the partisans, and then continued to prop up the right wing, which created a harsh tax system and undermined most social services that could have been put in place.

Austerity measures, which often cut social services, have been tough at best on the Greek people at best, penalizing those in the lowest income brackets. The government will be hard-pressed to ensure that citizens will now, of all times, be willing give up their personal prosperity to come clean for the greater good of the state. This issue is further compounded by the fact that outsiders – especially Germany – are imposing these measures. Greeks are lashing out, still harboring deep resentment for their treatment in WWII, with Angela Merkel being portrayed in Nazi in uniform some papers. Subjugated to German control once again, albeit in another form, some Greeks are forced to confront a traumatic wound that has not yet healed.

Greece is the second-largest defense spender (as a percent of GDP) among the 27 NATO countries, after the US, which is incredible considering they barely offer any troops in NATO or EU missions. This is a legacy of the Marshall Plan, whereby funds for Greece went straight to the army to buy equipment from the US to fight against Communism. This distorted the Greek economy and built an unnecessarily large defense industry. Only now is the Troika turning its attention to three government-owned defense companies that together have billions of euros in debts.

In addition to solving these lasting issues from the crisis, Greece faces new ones, borne from the very solutions in place to solve them: austerity measures. The populace wants the euro, but it does not want the tough conditions attached. Beyond protests in Athens, of particular concern is the Golden Dawn, an extreme-right-wing, neo-Nazi political party. Gaining in opinion polls, it has recently been implicated in the fatal stabbing of an anti-fascist rapper, as well as the reactionary murder of two of its own members. Police believe the members of Golden Dawn were murdered by descendants of another party: the ‘November 17’ gang, a leftist group who blames the US and Britain for their role in defeating the Communists in the civil war. With political violence sparking from both the far left and far right, this is much more a fault of internal failings than of US historical dealings. While a mass conflict is not imminent, these groups are cause for future concern.

The biggest barrier to recovery may be the euro itself. Some analysts argue that leaving the eurozone would enable Greece to recover by developing competitiveness with a free-floating drachma. Currently, being part of the strong eurozone makes Greece uncompetitive. Unlike Germany, which exports sophisticated manufactured goods, Greece relies more on tourism, and lacks a significant competitive industrial advantage. Conversely, even devaluing its currency will only get Greece so far. Today it looks as though a ‘Grexit’ is less and less likely. Greece needs to find a way to protect itself from an internalized core-periphery system in which it appears to be the poster child of dependency theory within the developed world. As we continue our EU experiment, if a common currency is maintained across the EU, significant structural reform like governance and a banking system at the EU level are possibilities that should be explored.