Protesting the austerity bill in Athens on February 12, 2012. Photo credit: Odysseas GP http://www.flickr.com/photos/odysseasgr/6868958183/
More than 45,000 protesters, some lobbing firebombs and clashing with tear gas-armed police, took to the streets of Athens on Sunday as the Greek Parliament voted 199 to 74 to pass a deeply unpopular austerity bill on Sunday, in an effort to secure a second bailout of €130 billion from the European Union and the International Monetary Fund.
The bill, which promises €3.3 billion in swingeing cuts to pensions, wages, and jobs and was effectively a vote to stay in the euro, is part of Greece’s on-going attempts to prove that it can and will stick to the terms of the multi-billion euro bailout package. But it remains to be seen whether EU finance ministers actually believe Greece will follow through – especially as Athens burns and popular unrest spreads to other Greek cities. As The Telegraph reported, “The controversial loan and austerity package sets out €3.3 billion in wage, pension and job cuts for this year alone, adding to the pain of years of recession, high employment, lower wages and high unemployment.” But without it and the next bailout, Greece will likely default on its debt and make and ignominious exit from the eurozone – a scenario that many say will plunge Europe into another crisis.
Meanwhile, despite the troubling violence in Athens, banks and commodity stocks rose on the news of the deal, pushing the FTSE up, and oil surged to nearly $100 a barrel.
Greek premier Lucas Papademos is expected to change up his caretaker cabinet, now that the bill has passed, the Financial Times reported. Of course, he doesn’t have much choice: Six of his cabinet resigned in protest of the spending bill.
Investors still skeptical. Though the euro rose on news of the Greek bill’s passing, investors remains worried, Reuters reported – Greece still has a number of obstacles to overcome to avoid default. “A Greek agreement for austerity was always going to be short term positive for the euro,” Paul Robson, currency strategist at RBS, told the news agency. Reported Reuters, “Part of the wariness among traders to push the euro higher is uncertainty over whether private creditors will agree to write down the value of their Greek holdings. Doubts persist whether the necessary near 100 percent acceptance can be achieved without triggering a credit default.”
These cuts will worsen the Greek situation – kick Greece out. Wolfgang Münchau, writing at the Financial Times, argued that this round of austerity measures and the largely futile bailout will deepen the Greek depression, requiring yet another round of trimming. “This is not even the most pessimistic scenario. It still assumes that Greek politics remains broadly supportive,” a tenuous assumption at best, said Münchau. Far better would be to force Greece – and Portugal, which is nearly as bad shape – out of the eurozone: “I personally believe it would be best to recognize the desolate state of both countries, let both default inside the monetary union, and then use a sufficiently increased rescue fund to help them to rebuild themselves, and to ringfence the rest at the same time. This will be very expensive. But to ignore reality for another two years will be ruinous.”
Greece sees tougher terms than post-WWII Germany did. Ambrose Evans-Pritchard, writing at The Telegraph, pointed out that in 1953, post-World War II Germany got a better deal – significant debt forgiveness – than Greece is getting now. Greece’s PM Papademos declared that a default would result in a “disastrous adventure”, and living standards would crumb;e – but, argued Evans-Pritchard, “remaining in EMU is also a disastrous adventure, and living standards will certainly collapse.” Greece is paying the price for German public opinion, and it’s the first of what may be several victims of “a mad ideological experiment that shackled together economies with different growth rates, wage bargaining systems, productivity patterns, sensitivity to interest rates, and inflation proclivities – without fiscal transfers or sufficient labor mobility to cushion the effects”. Even worse, EU politics are badly damaged by Germany’s finger-wagging refusals and strict code of austerity.
The EU is doomed. Democracy is about to perish in the land where it began, declared Christopher Booker, columnist at The Telegraph, and Greece “should now be the beacon which alerts the world to the fact that the EU is extinguishing democracy – part of a wider tragedy that will eventually lead to the extinction of the EU itself.” The EU was a mad, bad idea to begin with and now, as UK pensioners’ money pours into the bottomless pit of European debt, its demise is even worse than its naysayers could have imagined. “And even now the end game has hardly begun.”
What kind of Europe do we want? The Greek tragedy highlights an even bigger question for the European Union, claimed Maria Margaronis in The Guardian: “What kind of Europe do we want? This next bailout and the austerity it requires will do nothing resurrect Greece’s finances and do a lot to worsen the depression in the country; but a default is an unknown and significant risk that may do the same. “All eyes are fixed on Athens, but the way out of the crisis requires a choice about what kind of Europe we want. The one we have now, with its deep structural inequalities and its rigid adherence to a failed economic ideology, protects neither democracy nor human rights. Stiff-necked and punitive, it prefers to eat its children.”
