6 May 2010 Edition
Another View by Eoin Ó Broin
Sacrificing the Greeks
GREECE is in trouble. On May 19th, the government has to pay an €8.5 billion bill for money borrowed on the private markets 10 years ago.
But the Greek Government is broke and can’t borrow any more from the private sector to pay its debts.
It runs the risk of being the first developed capitalist economy to default on its debts in the current crisis.
As a member of the Eurozone, what happens in Greece will affect all member states in the euro.
A Greek debt default will damage the Eurozone in general. But it will have a particular impact on economies such as Ireland’s, with higher levels of debt and weaker signs of recovery.
If Greece defaults it could create a chain reaction as market confidence in Ireland, Spain and Portugal collapses. This would increase the cost of the Irish Government’s debt, making it more difficult for Ireland to pay its bills on time and increasing the likelihood of defaulting too.
So what has the EU decided to do?
In conjunction with the International Monetary Fund (IMF), the EU will lend Greece €110 billion over three years. In return, the Greek Government will make significant changes on taxation, public spending and public sector employment.
The EU/IMF wants the Greek Government to reduce its spending by 6.5% a year until 2014. With GDP currently at -2.5% and no sign of recovery, this means a probable 9% contraction in the Greek economy for the next three years.
The EU/IMF also wants the government to reduce the size of the public sector by replacing only 1 out of every 5 jobs vacated by retirees.
The EU/IMF is additionally insisting on across-the-board tax increases as Greece has a very low tax-take as a percentage of GDP.
MANY commentators are blaming widespread tax evasion and reckless government spending for the Greek debt crisis. The only solution, they argue, is to raise taxes and cut spending. The EU/IMF agrees.
Another view is that government spending was not the cause of the budget deficit but rather tax avoidance among Greek businesses and the rich.
Cutting public spending, reducing the public sector workforce and increasing the tax burden on ordinary workers will deepen the recession.
It will also punish low-income and middle-income earners for the actions of political, banking and business elites.
While the Greek tax-take needs to be increased, like the Southern Irish economy, it should be done by ending avoidance and making the wealthy and business pay their fair share.
Long-term recovery, in Greece as in Ireland, can only come through government investment in job creation and retraining the workforce.
This is what all the major European economies are currently doing, with stimulus packages being implemented by governments in Britain, France and Germany.
Of course, the EU/IMF package for Greece is not about tackling the structural problems of the Greek economy but rather the Greeks are being sacrificed in an attempt to prevent contagion to the rest of the Eurozone. So much for European solidarity.
An Phoblacht Magazine
AN PHOBLACHT MAGAZINE:
- The first edition of this new magazine will feature a 10 page special on the life and legacy of our leader Martin McGuinness to mark the first anniversary of his untimely passing.
- It will include a personal reminiscence by Gerry Adams and contributions from the McGuinness family.
- There will also be an exclusive interview with our new Uachtarán Mary Lou McDonald.