The Greek Disaster

Econintersect:  C. J. Polychroniou, a research associate and policy fellow at the Levy Economics Institute of Bard College, New York, has written a policy note with a grim opinion on the effects of the austerity regime associated with the European Union (EU), the European Central Bank (ECB) and International Monetary Fund (IMF) orchestrated bailout of Greece.

Polychroniou says that the result of the actions are “catastrophic”, “economy in free fall” and a “sinking into the abyss”.   He says that “Greece will soon be a nation inhabited primarily by low-educated, low-income workers, the elderly, and immigrants.”

From the publication notification from the Levy Economics Institute of Bard College:

As the decline in Greek GDP should indicate—a contraction of more than 20 percent since the onset of the sovereign debt crisis in late 2009—the economic situation in Greece today is catastrophic. The economy is in freefall, and the social consequences are being widely felt. The main reason for this awful situation is that the country has suffered for more than two years under a harsh austerity regime imposed by the European Union and the International Monetary Fund. The bailouts have proven to be a curse. The nation is literally under economic occupation and sinking deeper into the abyss—and there is very little reason to expect a turnaround in the foreseeable future.

Here is the complete press release:

BAILOUTS ARE RUINING, NOT SAVING, GREECE’S ECONOMY AND SOCIETY, NEW LEVY INSTITUTE STUDY SAYS

ANNANDALE-ON-HUDSON, N.Y. — The International Monetary Fund (IMF), the European Central Bank, and the European Commission—the “troika” responsible for the Greek structural adjustment program— are currently reviewing Greece’s progress on enacting reforms required for the country to receive its next installment of bailout funds. With Greece’s GDP contracting by more than 20 percent since the crisis started and unemployment now at 24 percent,, a new report from the Levy Economics Institute of Bard College argues that the harsh austerity measures required by the bailouts are devastating the country’s economy and creating a social disaster.

“The bailouts have proven to be a curse. The nation is literally under economic occupation and sinking deeper into the abyss, and there is very little reason to expect a turnaround in the foreseeable future,” writes Levy Research Associate and Policy Fellow C. J. Polychroniou in his new policy note, Greece’s Bailouts and the Economics of Social Disaster. “The economy is in freefall, and the social consequences are being widely felt. The main reason for this awful situation is that the country has suffered for more than two years under a harsh austerity regime imposed” by the European Union (EU) and the IMF.

Polychroniou contends that the austerity-based fiscal adjustment program, which began after the first bailout in May 2010, began to show catastrophic effects within a few months, with small-size businesses shutting down at record levels, surging unemployment, and declining state revenues, including huge drops in pension and social insurance funds. “The bailout deal of May 2010 turned out to be an EU/IMF fiasco and a Greek tragedy,” he writes. “Greece’s deficit shrunk, but so did everything else—and in much greater proportions: employment, tax revenues, investment, consumer demand, social and human services. The public debt increased substantially, and so did every index of economic misery and social malaise, including the spread of anti-immigrant extremism and waves of suicides related to economic hardship.”

Despite the economic and social freefall, the “troika” is asking the Greek government to come up with additional savings of 12 billion euros for the next two years. Polychroniou reports that more than 25,000 Greeks, mostly young and well educated, have already left the country to seek work in Germany. “If the economics of social disaster that the EU and the IMF have been imposing on Greece for the last two-and-a-half years continues much longer, Greece will soon be a nation inhabited primarily by low-educated, low-income workers, the elderly, and immigrants. This is a fate that no country, regardless of its past financial and economic sins, deserves—and the shame will be Europe’s alone.

John Lounsbury

Sources:

• Greece’s Bailouts and the Economics of Social Disaster (C. J. Polychroniou, Levy Economics Institute Policy Note, 2012/11)

• Greece’s Bailouts and the Economics of Social Disaster (Publication Notice, Levy Economics Institute,  11 September 2012)

More by C. J. Polychroniou

• Austerity destroys growth in Eurozone (BE Business Excellence)

• Europe in the Iron Grip of Neoliberal Fiscal Discipline and Anti-Labor Measures (Truthout.org)

• The Greek and European Crisis in Context (New Politics.org)