€urosclerosis: The Greeks are revolting

From


Greece Nears Wage Cut Agreement as Strike Looms


By ALKMAN GRANITSAS, STELIOS BOURAS and COSTAS PARIS

ATHENS—The three party leaders backing the interim government of Greek Prime Minister Lucas Papademos were close to an agreement to cut the private-sector minimum wage by an average of around 20%, two senior government officials said Monday, as signs of popular protest loomed.

Pressure on Greece has been piling up from its euro-zone partners to accept a new round of painful austerity if the country is to get a €130 billion ($171 billion) bailout loan that will keep the country from defaulting next month when €14.4 billion in bonds have to be redeemed.

Germany and France urged Greek leaders on Monday to “live up to their responsibilities” by agreeing to the new cutbacks.

“We think that the elements of the agreement have never been so close, both for public and private creditors,” French President Nicolas Sarkozy said at a press conference after meeting German Chancellor Angela Merkel. “Time is pressing, now we must conclude.”

Much more at the link. The Greek people are planning strikes and protests, because after living better than their productivity could support for decades, they may be forced to actually live within their means now, and pay back part — not all — of what they borrowed to live beyond their means for all of those years.

Greece is a democracy, and the unrest caused by being forced to live within their means might result in the government being overthrown and the austerity plans canceled, in which case Greece would wind up defaulting on its debts, and the Greek people would still have to live within their means, because nobody with any sense would lend them more money to enable them to live beyond their means again. It is entirely the choice of the Greeks: do they want to live under austere conditions in a hated but orderly manner, or do they want to live under austere conditions under chaos? The option the public want, to continue to live beyond their productive capacity, does not exist.

3 Comments

  1. Right now, the Greeks have two choices, neither of them pleasant ones. We face those two choices as well, but aren’t in quite as bad a shape as the Greeks: we can cut our overspending now, before we get in as bad a situation as the Greeks, or we can listen to the Paul Krugmans of the world, keep overspending, until we are in Greece’s situation.

    Former Secretary of Labor Robert Reich wrote:

    Government should extend unemployment benefits, and not cut spending until the nation’s rate of unemployment is down to 5 percent. Then, and only then, should we move toward budget austerity.

    The job situation is better than it was but it’s still awful. The jobs deficit is still our number one economic problem. Forget the budget deficit until we tame it.

    And if we followed his policy prescriptions, and we did get down to 5% unemployment, and then proposed serious austerity measures, he’d be the first one to scream that we couldn’t do that, because it would hurt people, it would throw people out of work. When the economy was doing very well, and the deficit was declining, in 1996, Dr Reich, then President Clinton’s Secretary of Labor, absolutely opposed the Welfare Reform Act. He never wants to cut spending, never wants to cut programs or taxes.

  2. “Right now, the Greeks have two choices, neither of them pleasant ones. We face those two choices as well, but aren’t in quite as bad a shape as the Greeks: we can cut our overspending now, before we get in as bad a situation as the Greeks, or we can listen to the Paul Krugmans of the world, keep overspending, until we are in Greece’s situation.”

    http://www.nytimes.com/2011/12/02/opinion/krugman-killing-the-euro.html

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    How did things go so wrong? The answer you hear all the time is that the euro crisis was caused by fiscal irresponsibility. Turn on your TV and you’re very likely to find some pundit declaring that if America doesn’t slash spending we’ll end up like Greece. Greeeeeece!

    But the truth is nearly the opposite. Although Europe’s leaders continue to insist that the problem is too much spending in debtor nations, the real problem is too little spending in Europe as a whole. And their efforts to fix matters by demanding ever harsher austerity have played a major role in making the situation worse.
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    And it’s probably no coincidence that April was also when the euro crisis entered its new, dire phase. Never mind Greece, whose economy is to Europe roughly as greater Miami is to the United States. At this point, markets have lost faith in the euro as a whole, driving up interest rates even for countries like Austria and Finland, hardly known for profligacy. And it’s not hard to see why. The combination of austerity-for-all and a central bank morbidly obsessed with inflation makes it essentially impossible for indebted countries to escape from their debt trap and is, therefore, a recipe for widespread debt defaults, bank runs and general financial collapse.

    I hope, for our sake as well as theirs, that the Europeans will change course before it’s too late. But, to be honest, I don’t believe they will. In fact, what’s much more likely is that we will follow them down the path to ruin.

    For in America, as in Europe, the economy is being dragged down by troubled debtors — in our case, mainly homeowners. And here, too, we desperately need expansionary fiscal and monetary policies to support the economy as these debtors struggle back to financial health. Yet, as in Europe, public discourse is dominated by deficit scolds and inflation obsessives.
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