Huge unrest in Greece after technocrats manage to coerce the Parliament to agree to more austerity measures demanded by the troika — European Central Bank, the European Commission, and the International Monetary Fund — even when many believers the austerity is being imposed as a way to get northern Europeans to accept the costs of salvaging Greece, even while the austerity measures are not linked with turning Greece’s troubled economy around. And, even after all that, consensus seems to be shifting toward the inevitable failure of these measures:
Niki Kitsantonis and Rachel Donadio via NYTimes.com
The new austerity measures include, among others, a 22 percent cut in the benchmark minimum wage and 150,000 government layoffs by 2015 — a bitter prospect in a country ravaged by five years of recession and with unemployment at 21 percent and rising.
But the chaos on the streets of Athens, where more than 80,000 people turned out to protest on Sunday, and in other cities across Greece reflected a growing dread — certainly among Greeks, but also among economists and perhaps even European officials — that the sharp belt-tightening and the bailout money it brings will still not be enough to keep the country from going over a precipice.
Angry protesters in the capital threw rocks at the police, who fired back with tear gas. After nightfall, demonstrators threw Molotov cocktails, setting fire to more than 40 buildings, including a historic theater in downtown Athens, the worst damage in the city since May 2010, when three people were killed when protesters firebombed a bank. There were clashes in Salonika in the north, Patra in the west, Volos in central Greece, and on the islands of Crete and Corfu.
Greece and its foreign lenders are locked in a dangerous brinkmanship over the future of the nation and the euro. Until recently, a Greek default and exit from the euro zone was seen as unthinkable. Now, though experts say that the European Union is not prepared for a default and does not want one, the dynamic has shifted from trying to save Greece to trying to contain the damage if it turns out to be unsalvageable.
“They’re trying to lay the ground for it, trying to limit the contagion from it,” said Simon Tilford, the chief economist at the Center for European Reform, a research institute in London. Still, he added, letting Greece go would set a dangerous precedent, and it would be “fanciful” to think otherwise.
Greece’s limping economy yields large trade and budget deficits, and none but the European Central Bank, the European Commission and the International Monetary Fund — known collectively as the troika — are willing to lend the nation the money it needs to stay afloat. The troika is demanding more concessions to placate Germany and other northern European countries, where the bailout of Greece is a hard sell to voters. For its part, Greece is trying to preserve social and political cohesion in the face of growing unrest, political extremism and a devastated economy that is expected to worsen with more austerity. And the feeling is growing here and abroad that the troika’s strategy for Greece is failing.
The likely outcome — because the alternatives are completely unsustainable for the presumed duration of the big payback of all these loans, devalued or not — is that the technocratic government will be voted out of office in April, and a populist movement will win office on a platform of default and exiting the Eurozone (and probably the EU). And continued riots and unrest until then.
At least with a default, and the return to a devalued Drachma, the Greeks can begin to turn their economy around. This will immediately increase productivity and exports. And while there will be enormous disruption in the economy, it will be a disruption of their own making, and one that will force a great deal of the pain onto investors and banks, and will not solely be borne on the backs of Greek citizens.