THE BLOG

Are the European Authorities Destroying the Greek Economy in Order to 'Save' It?

04/08/2015 01:46 pm ET | Updated Jun 08, 2015

There is a tense standoff right now between the Greek government and the European authorities -- sometimes known as the Troika because it includes the European Commission, the European Central Bank (ECB), and the International Monetary Fund (IMF). ECB President Mario Draghi denied this week that his institution is trying to blackmail the Greek government.

But blackmail is actually an understatement of what the ECB and its European partners are doing to Greece. It has become increasingly clear that they are trying to harm the Greek economy in order to increase pressure on the new Greek government to agree to their demands.

The first sign that this was the European authorities' strategy came on February 4 -- just 10 days after the Syriza government was elected -- when the European Central bank cut off the main source of financing for Greek banks. This move was clearly made in bad faith, since there was no bureaucratic or other reason to do this; it was more than three weeks before the deadline for the decision. Predictably, the cut off spurred a huge outflow of capital from the Greek banking system, destabilizing the economy and sending financial markets plummeting. More intimidation followed, including a slightly veiled threat that Emergency Liquidity Assistance -- Greece's last credit lifeline from the ECB -- could also be cut. The European authorities appeared to be hoping that a "shock and awe" assault on the Greek economy would force the new government to immediately capitulate.

It didn't work out that way. The Syriza party had a mandate from the Greek electorate to improve their living standards after six years of Troika-induced depression and more than 25 percent unemployment. The new Greek government backed off its demand for a debt "haircut," and made other compromises, but wasn't going to simply surrender as if there had been no election. The European authorities finally blinked on February 20 and agreed to grant a four-month extension, through June, of the prior "bailout" agreement -- the quotes are necessary because most Greeks have not been "bailed out," but rather thrown overboard, having lost more than 25 percent of their national income since 2008.

This was published by Al Jazeera America on March 30, 2015. Click here to see the complete article.