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A Dangerous Delusion


Last week, the Greek Finance Minister Yannis Stournaras wrote a delusional opinion piece for The Guardian in which he argued that his country’s heavily-indebted economy is finally beginning to emerge from the depths of a four-year depression. “Greece has come a long way since 2009,” he wrote. “After four years of fiscal consolidation and structural reforms, the Greek economy is beginning to show the first encouraging signs of rebalancing and recovery. Greece now faces the future with more optimism as it develops its new growth model.”

I’m not so sure if Mr Stournaras’ sense of optimism would be shared by the old lady begging for change on the local square every day. Or the poor man digging for food in the garbage container around the corner. Or the droves of drug addicts hanging around the neighborhood sinking needles into their veins in broad daylight. Or the 1 million uninsured people who don’t have access to healthcare anymore. Or the half-a-million children living in poverty. Or the thousands of migrants trapped in subhuman conditions in detention centers around the country. Or the young people, 60% of whom unemployed, who don’t see a future for themselves anymore.  Or the PhDs waiting tables for a minimum wage of an abysmal 500 euros. Or the 150.000 recent graduates who have understandably chosen to find employment abroad. Or my friends who stayed but who need to work two or three jobs just to make ends meet, and who often don’t even get paid, waiting for their salary for months, if they receive it at all.

As I read Mr Stournaras’ piece, I was reminded of another piece of text I had read that same very morning as part of my comparative-historical research on international debt crises — a passage I would like to share here because it seemed to directly speak to the neoliberal delusions of the Greek Finance Minister and the European financial establishment more generally:

“The great international debt crisis, which has made headlines over the last years, has receded back to the financial sections in recent months. If we are to believe financial editors and their sources, whether private bankers or government officials, the greatest threats to the existing international monetary network are now safely behind us. There were casualties and damages, of course, to bank earnings, to living standards in the debtor countries, and to the public treasuries of creditor countries, which have had to help directly with fresh loans and indirectly by adding to the resources of the International Monetary Fund (IMF)… But there were no major defaults and no collapse.

Given the dire warnings of impending disaster that were so much in vogue when the crisis first broke, it is understandable that a self-congratulatory mood had broken out in the world’s financial centers … But the rejoicing may be premature. The truth is that the debtor nations have been adding to their debt, not reducing it. Default has been staved off, but only by stratagems that have made conditions much worse in many countries. The [debtor] countries are being forced to increase their exports and borrow more in order to service their debts. Their citizens have had to tighten their belts; investment in domestic industries has suffered; and imports have been cut to the bone. The long-term prospects for real growth, then, have worsened. If conditions do not soon ameliorate, economic distress may give way to political turmoil.”

Now the most remarkable thing is that this text wasn’t written by a Greek leftist in response to Mr Stournaras — it was written some three decades ago by the American journalist M.J. Rossant, Director of the Twentieth Century Fund, a bourgeois think tank in New York, in his foreword to a book by Financial Times correspondent Anatole Kaletsky about the Latin American debt crisis of the 1980s. Hardly radical, in other words. The foreword was written in January 1985, three years after the outbreak of the crisis. After that, Latin America remained stuck in its debt trap for at least another five years until some of the debt was finally restructured. Throughout the continent, the 1980s rightly became known as la década perdida — the lost decade.

But how applicable do these words sound today, in the European context? A deceptive sense of calm may have returned to global financial markets in the wake of Mario Draghi’s pledge that he, as President of the European Central Bank, would “do whatever it takes” to save the euro. Immediate default may have been staved off. The bankers, once again, may have gotten away with it. But for the countries on the European periphery, the debt problem has merely been shoved onto the long-term. Sooner or later, there will have to be a moment of reckoning for creditors and debtors alike as the social, economic and political contradictions of the debt resurface anew.

In the past four years of crisis, Greece lost 30% of its GDP, undoubtedly constituting the single greatest collapse experienced by any developed capitalist country since WWII. This staggering fall was bound to come to an end sometime — after all, you can’t keep falling forever: sooner or later everything will slam into the ground. Greece has now hit rock bottom and is experiencing what Wall Street traders morbidly refer to as “the bounce of a dead cat.” What we are looking at, then, is not an economic recovery but a prolonged period of suffering and stagnation. Once again, we find ourselves in the middle of a lost decade. And, just as then, if conditions do not ameliorate, economic distress may soon give way to political turmoil.

Jerome Roos is a PhD candidate in International Political Economy at the European University Institute and founding editor of ROAR Magazine.

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