This is Europe…

The Greek crisis rumbles on, demonstrating the full absurdity of the orthodoxy. The question is whether those who cleave to the orthodoxy actually believe that it will work, or are merely paying lip service to the idea. If the former then they’re gravely deluded, if the latter then they’re open to charges of rank hypocrisy.

Take the news last week before the Greek Parliament voted for the latest round of conditions.

Just hours after Greece gave in to painful new job and spending cuts, European ministers declared that Athens did not go far enough and demanded more within a week in exchange for a €130 billion bailout to stave off bankruptcy.
The ministers gave the debt-ridden country until the middle of next week to find an extra €325 million in savings, pass the cuts through a divided parliament, and get written guarantees that they will be implemented even after the elections of a new government in April, said Jean-Claude Juncker, the Luxembourg prime minister who chaired yesterday’s meeting of finance chiefs of the 17 euro countries.

Though…

Even debt inspectors conceded that the new measures would keep the country in a recession for a fifth straight year.

And…

Other European officials warned that more severe steps still might be necessary.
“Greece still has its homework cut out,” Jan Kees de Jager, the Dutch finance minister, said after the meeting. “A lot of measures need to be clarified and taken.”

It’s ‘homework cut out’?

What precisely has Greece already done that has been insufficient?

Consider, from Wiki, their first measures in February 2010.

First austerity package
The first round came with the signing of the memorandums with the IMF and the ECB concerning a loan of 80 billion euro. The package was implemented on 9 February 2010 and included a freeze in the salaries of all government employees, a 10% cut in bonuses, as well as cuts in overtime workers, public employees and work-related travels.[55]

Perhaps that wasn’t severe enough. What of the second – just two months later?

Second austerity package (Economy Protection Bill)
On 5 March 2010, amid new fears of bankruptcy, the Greek parliament passed the Economy Protection Bill, which was expected to save another €4.8 billion.[56] The measures include (in addition to the above):[57] 30% cuts in Christmas, Easter and leave of absence bonuses, a further 12% cut in public bonuses, a 7% cut in the salaries of public and private employees, a rise of VAT from 4.5% to 5%, from 9% to 10% and from 19% to 21%, a rise of tax on petrol to 15%, a rise in the (already existing) taxes on imported cars of up to 10%–30%, among others.
On 23 April 2010, after realizing the second austerity package failed to improve the country’s economic position, the Greek government requested that the EU/International Monetary Fund (IMF) bailout package be activated.[58] Greece needed money before 19 May, or it would face a debt roll over of $11.3bn.[59][60][61] The IMF had said it was “prepared to move expeditiously on this request”.[62]
Shortly after the European Commission, the IMF and ECB set up a tripartite committee (the Troika) to prepare an appropriate programme of economic policies underlying a massive loan. The Troika was led by Servaas Deroose, from the European Commission, and included also Poul Thomsen (IMF) and Klaus Masuch (ECB) as junior partners. In return the Greek government agreed to implement further measures.[63]

That seems more like it. But wait. There was a third round in May of that same year.

Third austerity package
On 1 May 2010, Prime Minister George Papandreou announced a new round of austerity measures, which have been described as “unprecedented”.[64] The proposed changes, which aim to save €38 billion through 2012, represent the biggest government overhaul in a generation.[65] The bill was submitted to Parliament on 4 May and approved on separate votes on 29 June and 30 June.[66][67] It was met with a nationwide general strike and massive protests the following day, with three people being killed, dozens injured, and 107 arrested.[65]
The measures include:[68][69][70]
▪ An 8% cut on public sector allowances (in addition to the two previous austerity packages) and a 3% pay cut for DEKO (public sector utilities) employees.
▪ Public sector limit of €1,000 introduced to bi-annual bonus, abolished entirely for those earning over €3,000 a month.
▪ Limit of €500 per month to 13th and 14th month salaries of public employees; abolished for employees receiving over €3,000 a month.
▪ Limit of €800 per month to 13th and 14th month pension installments; abolished for pensioners receiving over €2,500 a month.
▪ Return of a special tax on high pensions.[which?]
▪ Extraordinary taxes imposed on company profits.
▪ Rise in the value of property (and thus higher taxes).
▪ Rise of an additional 10% for all imported cars.
▪ Changes were planned to the laws governing lay-offs and overtime pay.[specify]
▪ Increases in value added tax to 23% (from 19%), 11% (from 9%) and 5.5% (from 4%).
▪ 10% rise in luxury taxes and sin taxes on alcohol, cigarettes, and fuel.
▪ Equalization of men’s and women’s pension age limits.
▪ General pension age has not changed, but a mechanism has been introduced to scale them to life expectancy changes.
▪ A financial stability fund has been created.[specify]
▪ Average retirement age for public sector workers will be increased from 61 to 65.[71]
▪ The number of public-owned companies shall be reduced from 6,000 to 2,000.[71]
▪ The number of municipalities shall shrink from 1,000 to 400.[71]
On 2 May 2010, a loan agreement was reached between Greece, the other eurozone countries, and the International Monetary Fund. The deal consisted of an immediate €45 billion in loans to be provided in 2010, with more funds available later. A total of €110 billion has been agreed.[72][73] The interest for the eurozone loans is 5%, considered to be a rather high level for any bailout loan. The European Monetary Union loans will be pari passu and not senior like those of the IMF. In fact the seniority of the IMF loans themselves has no legal basis but is respected nonetheless. The loans should cover Greece’s funding needs for the next three years (estimated at €30 billion for the rest of 2010 and €40 billion each for 2011 and 2012).[54] According to EU officials, France and Germany[74] demanded that their military dealings with Greece be a condition of their participation in the financial rescue.[75]
As of 12 May 2010 the deficit was down 40 percent from the previous year.[71]

No. Not enough.

Fourth austerity package (Mid-term plan)
2011 saw the introduction of further austerity. In the midst of public discontent, massive protests and a 24-hour-strike throughout Greece,[76][77] the parliament debated on whether or not to pass a new austerity bill, known in Greece as the “mesoprothesmo” (the mid-term [plan]).[78][79] The government’s intent to pass further austerity measures was met with discontent from within the government and parliament as well,[79] but was eventually passed with 155 votes in favor[78][79] (a marginal 5-seat majority). Horst Reichenbach headed up the task force overseeing Greek implementation of austerity and structural adjustment.[80]
The new measures included:[81][82] raise 50 billion euros by denationalizing companies and selling national property, an increase in taxes for anyone with a yearly income of over 8,000 euro, extra tax for anyone with a yearly income of over 12,000 euro, an increase in VAT in the housing industry, an extra tax of 2% for combating unemployment, an increase in taxes for pensioners by means of lower pensions ranging from 6% to 14% from the previous 4% to 10%, the creation of a specialized government body with the sole responsibility of exploiting national property, and others.
On 11 August 2011 the government introduced more taxes, this time targeted at people owning immovable property.[83] The new tax, which is to be paid through the owner’s electricity bill,[83] will affect 7.5 million Public Power Corporation accounts[83] and ranges from 3 to 20 euro per square meter.[84] The tax will apply for 2011–2012 and is expected to raise 4 billion Euro in revenue.[83]

But even that wasn’t enough. Further measures from October are detailed here…

Jan Kees de Jager, is remarkably short sighted if he doesn’t see the scope for very very negative outcomes in relation to these measures in a state which well within living memory was notable for the intervention of its armed forces at times of national crisis. Which leads to another question. Have we ever seen a modern European country in the contemporary period have its citizens demanded to carry such economic burdens? And this at the behest of the European Union?

As Christopher Humphrys wrote from Greece in the Telegraph, an usually sober enough platform, late last year:

But we are only at the start of this crisis. What will happen next year when unemployment doubles and people lose their homes? The Communist calls for revolution don’t look nearly as far-fetched as they did six months ago. While civil war doesn’t look likely, a return to the military days must be a possibility. If the Greek people reject their entire political system and the state falls apart, what will be left? The great danger is that the people are being pushed so far that the unthinkable becomes possible.

At the very least this is playing with fire. It’s also highly instructive to see the different tack taken between the participation of LAOS in the current Greek coalition and the FPÖ in Austria in the early 2000s. Then outrage at a far-right party in government, now did that issue even register on the radar?

And as the Guardian notes late last week:

With unemployment soaring in Greece, revenue sources drying up, recession deepening, and social unrest increasing, there is pessimism and resentment on both sides, a sense that the austerity cannot work, and that a default is more of a question of when, not if.

The solution to this is so blindingly obvious it is appalling that it isn’t being fixed upon by the European Commission and European leaders. Austerity as a means of ‘solving’ a structural problem like the one Greece faces – and indeed of the scale Greece faces, is simply not a viable course. What this requires is actual transfers from centre to periphery regardless of the political costs to governments in the centre [though it is the tardiness, indeed antagonism to doing this that shows up the hollowness of the European project in its contemporary manifestation. Merkel, and Sarkozy to a lesser extent, are not courageous enough to put continent over nation [indeed it brings to mind the quote from Kissinger which Timothy Garton-Ash related recently in the Guardian that Germany was too large for Europe, too small for the world]. Say what one will about the United States it has a fairly complex means of ironing out some of the disparities across its length and breadth through the federal government. No such luck for us ‘sophisticated’ Europeans.

The absurdity of all this is summed up in the second last paragraph of the Guardian piece:

The €130bn, even if agreed, is unlikely to be enough to achieve the goal of returning Greek debt to sustainable levels, given the country’s deteriorating fiscal position.

The Irish Times this Monday asks the following:

The key question that has not been answered in the loan negotiations with Greece is how to generate sustainable long-term growth from further austerity measures that already have depressed demand and tax revenues, and raised unemployment levels. How to shrink an economy into growth in a country without a real industrial base and that – unlike Ireland – has a limited capacity for export-led growth, has yet to be demonstrated. The risk remains that the radical fiscal surgery now proposed – however well intentioned – kills, rather than cures, the Greek patient.

The comparison with Ireland is telling albeit evasive. Export led growth here is driven by multi-nationals, not by indigenous private enterprise. In that area the indices are pointed downwards. Those austerity measures ‘depressing demand and tax revenues, and raising unemployment levels’ in Greece are doing precisely the same in Ireland and with no respite in sight.

And Cliff Taylor in the Sunday Business Post is hardly any less gloomy.

Everyone can now see that even with a deal the Greek debt position is dire. With a debt-to-GDP ratio close to 160 per cent of GDP, and the economy collapsing, it will be a long way back for Greece, whatever happens. under the EU/IMF plan – including some fairly implausible assumptions about growth resuming in 2013 – this debt-to-GDP ratio will come down to 120 per cent by the end of the decade, just about where (highly indebted) Ireland and Italy are now.

And now comes the news that Moody’s believes that:

…the region’s weak economy could undermine austerity drives by governments to fix their finances.

Which begs the question what is, or has this been, about? A ‘solution’ that cannot solve, agreements that cannot be agreed. An orthodoxy whose central premise is so self-evidently incorrect. And in Greece an ‘experiment’ in a polity that saw a military dictatorship three decades ago.