Markets Threaten Greek Democracy Ahead of Election

January 24th, 2015
in Op Ed

by John Weeks, The Conversation

Greece faces a decisive moment on January 25 in a snap election that could see major gains for the extreme left and right. But anyone worried about how Syriza on one side, or Golden Dawn on the other, might handle power, should consider a far more sinister force that has conspired to keep Greece away from recovery for years – the international markets.

Follow up:

If recent polls are accurate Syriza, an alliance of left-wing parties firmly opposed to the country’s harsh bailout terms, will take office. To do that, it has to first overcome the relentless, and staunchly anti-democratic, warnings being issued by some upholders of capitalism’s vested interests.

The coalition that currently mis-governs Greece has done its best for two years to implement dutifully draconian austerity packages. With support now flagging, it hopes to receive a renewed mandate for this at the ballot box. Its austerity packages are designed by pseudo-technocrats at the European Commission in Brussels and enthusiastically backed by the German Bundesbank.

The proclaimed purpose of Greece’s austerity measures does not even end at deficit elimination. The Greek government has been tasked not merely with balancing the books, but with generating a surplus too. The surplus would go to reduce the country’s public debt, which currently stands at almost 130% of GDP.

Ravaging of Greece

The global financial crisis of 2008 resulted in fiscal deficits throughout the world, with EU member states hit particularly hard. In 2009, the Greek fiscal deficit stood at -15.6% – the largest relative to GDP for any eurozone country. In absolute terms this 15.6 per cent represented about than €36 billion.

The deficit had dropped by a third by the end of 2010 to just under €24 billion. But this substantial decline failed to satisfy the austerity appetites of the European Commission, the German government or Bundesbank. By the end of 2014 the Greek fiscal balance was projected to drop to about -3% of GDP or €6.5 billion, as the chart below shows. The chart also shows one indicator of the enormous cost of that reduction in the public deficit; a drop in national income of 18% (26% lower than in 2008).

Preliminary estimates for 2014. &

These policies brought a reduction of the fiscal deficit by €17.4 billion, at a cost in national income of more than double that figure. No western European country has suffered such a collapse of GDP since the end of World War II. We cannot find one example of a developed capitalist country with a lower national income than it had four years previously in any year between 1945 and 2010.

There have been no signs of respite, though, from Greece’s austerity enforcers. The ideologues in the European Commission and the Bundesbank apparently remain committed to destroying the Greek economy in order to save it.

This ravaging of the economy is evidenced by almost every measure of human welfare in Greece, to the extent that some now refer to a “humanitarian crisis” in the country.

Total household consumption adjusted for inflation is now 20% lower than it was in 2010. And that measure includes rich households whose wealth could protect them from the brunt of austerity. The decline for households below the average income was certainly in excess of 25% and perhaps over 30%. Four in ten children are being brought up in poverty.

Preliminary estimates for 2014.

Greece’s level of unemployment challenges the imagination. It has stood at 25% or more for two years – the same as the rate in the US in the 1930s during the great depression. Since the end of World War II no European market economy suffered unemployment of half the current Greek rate.

Things are even worse for young people. Less than 50% were in employment in 2014, and that statistic excludes those in education. These employment figures are but the tip of a human disaster iceberg; health and education are both steadily worsening below the waterline of publicity.

Speculators vote with their money

It is little wonder that the only major party opposed to austerity, Syriza, enjoys a lead in the opinion polls. The only surprise is that this anti-austerity party did not win the election in 2012, though it did have the second largest number of seats.

The primary reason for the failure of anti-austerity parties to win the election was the systematic scare campaign carried out by the European media, enthusiastically aided and abetted by the European Commission and every major EU government without exception.

The source of this putative reign of terror would be none other than the infamous “financial markets”, and the warning is again pouring forth at full volume, alongside more threats from politicians of the eurozone.

These warnings have a real basis. The blue bars in the chart below show the index of the Athens stock market and the red bars the interest rate on Greek government bonds. From the beginning of 2012 interest rates rose and the stock market plunged, as the lords and ladies of finance quivered with anxiety that a democratic election might bring an end to austerity in Greece.

To the relief of speculators throughout Europe, Greek voters returned the right-of-centre government to carry on the lowering of living standards. The relief of speculators at escaping democratic accountability is shown in falling interest rates and a recovering Athens stock market over the next two years. But now the spectre of a citizen’s revolt again stirs anxiety. Interest rates have crept up over the past three months and stock prices declined. &

Democracy or dictatorship?

In the same election that anti-austerity Syriza won 71 seats, the overtly fascist Golden Dawn party won 18. Among the far-right parties that have thrived on a diet of austerity-depressed countries, Golden Dawn is perhaps the most dangerous. In October of last year the Greek public prosecutor ordered all Golden Dawn members of parliament to stand trial for inciting, supporting and carrying out acts of political violence.

Without doubt Golden Dawn and all parties like it, such as the Jobbik party in Hungary, are clear and immediate threats to democracy. But they do not present the biggest threat to the democratic process. Considerably more dangerous and infinitely more powerful are the eponymous financial markets. Always alert to any democratic revolt against their privilege to loot and plunder, speculators and the more superficially respectable international bankers have the power to bring down governments and pervert election results.

Europe and most countries of the world need radical measures to restrict – or better still eliminate – the power of finance. The choice is democracy, however flawed it might be, or the dictatorship of finance. It really is that simple.

The ConversationThis article was originally published on The Conversation. Read the original article.

Make a Comment

Econintersect wants your comments, data and opinion on the articles posted.  As the internet is a "war zone" of trolls, hackers and spammers - Econintersect must balance its defences against ease of commenting.  We have joined with Livefyre to manage our comment streams.

To comment, just click the "Sign In" button at the top-left corner of the comment box below. You can create a commenting account using your favorite social network such as Twitter, Facebook, Google+, LinkedIn or Open ID - or open a Livefyre account using your email address.



Analysis Blog
News Blog
Investing Blog
Opinion Blog
Precious Metals Blog
Markets Blog
Video of the Day


Asia / Pacific
Middle East / Africa
USA Government

RSS Feeds / Social Media

Combined Econintersect Feed

Free Newsletter

Marketplace - Books & More

Economic Forecast

Content Contribution



  Top Economics Site Contributor TalkMarkets Contributor Finance Blogs Free PageRank Checker Active Search Results Google+

This Web Page by Steven Hansen ---- Copyright 2010 - 2016 Econintersect LLC - all rights reserved