Collateral Financial and Economic Damage Debased

04/07/2015 02:15 pm ET | Updated Jun 07, 2015

As policies of blind austerity remain entrenched in Europe

Conservatively estimated, close to two billion people worldwide (concerned citizens in Europe, the US, China, India and elsewhere) are by now becoming apprehensive contemplating the Eurogroup and the Greek government yet again at loggerheads with each other. Their interminable haggling expected to intensify, at the next encounter on 24 April in Riga, Latvia, over what the "necessary and sufficient" conditions are for keeping Europe's timeless muse solvent and within the (stagnating) eurozone. Both unrepentant for their own brazen violation of the founding principles -- unity and solidarity -- of the European Union itself. With their persistent negotiators all along equally unaware that the spectacle of their "frolics" -- while visibly dodging a far more important issue -- everywhere else are correctly seen as a potential threat to growth and prosperity worldwide.

Isn't the missing-link-cum-key here the strikingly observable yet certainly ignored collateral damage to the Greek economy and social fabric of the country from the continuing (poorly researched) massive austerity policy imposed by the EU -- nearly for six full years -- responsible for the unprecedented damage caused in human and economic terms? However not professionally ascertained and duly deducted from the country's owing sovereign debt -- still inaccurately presumed to stand today at €350b. Even worse, no one really focuses these days on the forces which determine the volume of aggregate effective demand -- an insufficiency of which leads to stagnating income and high loss of work (widespread unemployment and steadily diminishing competitiveness) such as we see in Greece today. Elsewhere in Europe as well, this truth has been confirmed on solid grounds already. Because whenever it has been put into practice, current economic austerity policy precisely displayed such dire consequences.

Just as, in other words, after bombing "selectively," say, a city in contemporary style, as in several parts of the world in the past, the so-called "unintended" collateral damage that frequently occurs (killing innocent people or destroying infrastructure such as bridges, road networks, hospitals etc.) should generally activate a civilized commitment to professionally compensate the damage; so it must be, too, where a whole country has been incessantly bombarded with the wrong (bad) economic policies as those externally imposed in the case of Greece. Characteristically leaving behind albeit "unintended" freak levels of unemployment alongside a collapsing level of national income that has been literally eviscerating salaries, pensions etc. Also driving ordinary tax-paying citizens, by the thousands, to commit suicide: among them lawyers, doctors and other professionals, including talented people from all levels of (failed) businesses. Made worse by inadequate, almost non-existent, public investment expenditure further contributing to the country's rising indebtedness.

The mind boggles. Because no one seems willing to appreciate, whether in Berlin, Brussels or Athens, that the situation could easily be normalized at this stage if the Greek sovereign debt were accordingly adjusted in real terms to compensate for such "unintended" damage. It would probably not exceed today the reasonably sustainable/serviceable level of €150b. Shouldn't, therefore, this fundamental truth be institutionally recognized next by a special European conference or synod urgently convened? Instead of prominently prevaricating and as a rule always avoiding this pivotal issue? As common sense would also suggest, of course, with both sides wholesomely represented.


Nicos E. Devletoglou, Emeritus Professor of Economics, University of Athens, is author of the books Academia in Anarchy: An Economic Diagnosis (Basic Books) written jointly with Nobel Prize Laureate in Economics James Buchanan; and Consumer Behaviour: An Experiment in Analytical Economics (Harper and Row).