THE BLOG

Austerity Policy or Tool ?

02/13/2015 12:29 pm ET | Updated Apr 13, 2015

In a few hours the Eurogroup, the finance ministers of the euro zone, will meet in Brussels to discuss their stance on the development of the Greek Sovereign Debt. At the helm of the Greek delegation the newly appointed minister of finance, Mr. Yannis Varoufakis, will pitch for the end of austerity measures in the Greek economy and the creation of an interim 'bridge program' until a new debt package is agreed.

Under this light it would be interesting to briefly examine the nature of austerity and the effects of its application on the Greek economy.

For six consecutive years Greece is plunged into a relentless financial crisis created by a massive sovereign debt and a severely damaged ability to borrow funds. Bound by the euro, the Greek economy does not have the options of currency devaluation, printing of money or default. It therefore finds itself trapped having adopted the German model of the Austerity policy dictated by its European partners and the International Monetary Fund (IMF) with devastating effects for both economy and social fabric.

Far from being a policy in itself, austerity is the result of European politicians surrendering politics to credit rating agencies, balance sheets, and theoretician economists whose approach to the real world resembled a mathematics master class. Though numbers are crucial in economics and the Economy is the driving force of society, one cannot act mechanically disregarding that the people are the fabric of this society.

Yet, for five years, the officials of the so-called Troika (the three institutions responsible for the Greek Sovereign Debt namely the I.M.F., the European Commission and the European Central Bank) have been visiting Greece for routine monitoring. Surrounded by security guards attitude numbers regardless of the cost and the consequences that their mathematics have on human lives.

In reality the Troika's role was limited to accounting and restoring fiscal discipline. In drawing up satisfactory balance sheets, its executives failed to notice the disastrous collateral damages that these policies inflicted on society: the reduction of the public sector for reduction's sake- without any proper evaluation of the necessity of the abrogated positions (resulting into administrative chaos), the relentless taxation that brought the middle class to its knees (costing 600.000 jobs in the private sector and nearly wiping out commerce), the wages reductions, the deregulation of the real estate market (the locomotive of the Greek economy until 2009) the rise of the V.A.T. that hurt tourism (Greece's main industry) for four years and a frenzy of compound interest on bank loans and mortgages leading to countless non-performing loans and foreclosures. The grim results of this list of wrongdoings are more than 10.000 registered suicides for which the Greek population blamed the Troika.

Lacking political know-how the Troika relied for political support on the various Greek administrations. Withholding the social consequences of many financial decisions, these administrations in turn used the Troika for their own ends. By making allusions about the Troika overstepping its advisory boundaries and turning into some sort of foreign intervention mechanism, administrations successfully diverted the focus of popular anger from their agendas onto the Troika. No wonder "Troika" has become one of the most repulsive words in the Greek language

Any politician opting this evening for the continuation of the Greek Austerity program should be aware of these facts and try finding a more viable and less amateurish solution for the future not only of Greece but of the entire Eurozone.

It was this seeming bottomless free-fall that pushed the Greek electoral in the January 26 general election into the arms of Syriza, the last pro-European political force in Greece with some clout. Greeks voted for a party that until three years ago could not muster more than 5% of the total vote. They also voted symbolically for renewal: a young man for prime minister(the youngest in the history of the modern Greek state) who rose against a corrupt establishment that led the country to the edge of the cliff and misled not only the nation but its European allies.

Mr Tsipras' of elected Prime Minister swaying a 35% of the Greek electorate. In less than two weeks from his election, and in his adherence to his stance of not implementing the disastrous Austerity program, he is experiencing an unprecedented meteoric rise in popularity. His Minister of Finance will be arriving this evening in Brussels backed by more than 75% of the Greek population. Members of the Eurogroup should take this fact very seriously into consideration. They will not be dealing with just a government representative but with an entire nation. And, unofficially, with the representative of many other nations crushed by the Austerity programs in their respective countries.

One of Austerity's most vivid supporters is German finance minister Wolfgang Schaeuble.
With one out of five teenagers in Germany living in poverty (according to the Federal Association for Catholic Youth Welfare) and access to education (a young person's passport to better living conditions) 'far from to a system that doesn't equal', Mr. Schaeuble has not much to boast about the results of Austerity in his country. Yet, from his perspective, Mr. Schaeuble is fully justified in defending Austerity. Viewing it strictly as a policy, the abandonment of Austerity would seem like a crashing personal defeat , one that could eventually lead to the collapse of neo-liberal structures. But one does not need to get a new car if only a spare part is required. Downgrading Austerity in the role of an obsolete financial instrument would facilitate a change of attitude for any politician and decompress this highly charged situation.

The dismissal by a member state of a dysfunctional financial tool should not be seen by the rest of Europe as an act of defiance but rather as a voice of reason. A bell sounding alarms rather than a knell calling for the annihilation of the Eurozone. A political act designed to assist the euro, still in its infancy, establish itself as a cornerstone of the European Union, instead of being considered a force of dissent. A manifestation of Europe's greatest virtue: that of constantly reinventing itself....