Greece: The Downsizing of a Country

By Panagiotis Sotiris*,

originally written for Greek Left Review 

The current Greek government came to power, after the June 17 election, in the name of “renegotiating” the terms of the “Memoranda of Understanding” with the EU – IMF – ECB Troika. This proved to be one of the most short-lived promises ever to be made.

During the past two months, two parallel processes have been going on. On the one hand, we have the real policy process, where the representatives of the Troika dictate budget cuts, austerity measures, and profound policy changes. On the other hand, we have the tragicomedy of the political scene, with successive meetings between the heads of the government coalition parties, the constant “drawing of lines not to be crossed”, only to be forgotten the next day, and a whole façade of “trying hard” to avoid even harsher measures, whereas it is more than obvious that most of the measures had been agreed on from the beginning. To add insult to injury, the Greek Prime Minister, made a promise that this would be the “last austerity package”.

The Greek government has put together a set of austerity measures that will lead to an 11.9 billion euros reduction in public spending in the next two years. This package has been presented to the Troika representatives in order to be approved by them so that 31 billion euros of bail-out funds will be released and the Greek state saved from bankruptcy. It includes:

  • Cuts in the funding of Ministries, that will make them almost impossible to function properly.

  • A slashing in social spending, that includes reductions in family benefits, in special unemployment benefits for seasonal workers and other social benefits, including funding for travel expenses for patients receiving dialysis.

  • A new wave of personnel reductions in the public sector, by forcing thousands of civil servants close to retirement age to enter “pre-retirement status” at reduced wages, by not rehiring public sector employees on limited term contracts (e.g. substitute teachers or adjunct faculty), and by reducing the total number of public sector institutions.

  • New cuts in pensions and public sector wages. The cuts in pensions will not simply deteriorate the quality of life for senior citizens. They will deprive families of an income that was instrumental in sustaining forms of intergenerational solidarity.

  • A massive new wave of privatizations.

  • Cuts in health spending, in a period when Greece is very close to a humanitarian crisis. These cuts will jeopardize the ability of many hospitals and clinics to function properly and will lead to a deterioration of the quality of health services and a reduction in total health coverage.

  • The reduction of the total number of Universities, University departments and Higher Education Institutions, through a process of “spatial restructuring” of Higher Education.

  • The freeze in hiring in all levels of education, mass lay-offs of adjunct faculty, new education budget cuts – including the abolition of the gratis provision of university textbooks –, and increased tuition for graduate courses.

  • Reduced funding for culture and the Arts

Apart from the budget cuts, there is also a new series of “reforms”. A leaked memo sent from the Troika representatives to the Ministry of Labour has been most revealing. Apart from the demand for a new reduction of the minimum wage (which has already been reduced from 751 to 586 euros), the Troika demands a complete dismantling of whatever has been left of labour market regulation:

  • Abolishing the 5-day working week and re-introducing the 6-day working week

  • Reducing the minimum time of rest between shifts to only 11 hours

  • Reduced penalties for labour law violations and limits to the ability of the Labour Inspectorate of the Ministry of Labour to intervene in favour of employees.

  • Reduced employers’ social contributions along with reduced pensions.

Although this austerity package seems devastating, it is not enough for the Troika representatives. Especially, they have questioned many of the proposed measures, especially those that project a reduction in public spending as a result of restructuring the public sector. Instead they have insisted on more ‘tangible’ cuts demanding mass lay-offs of civil servants and public sector employees, extra cuts in social benefits, wages and pensions, increased taxation by abolishing almost all forms of tax exemption for low incomes, and raising the retirement age to 67. This has led to a new round of negotiations between the Greek government and the Troika and also within the government coalition.

At the same time, as a result of the austerity measures adopted so far and the supervision of the Troika, the Greek social landscape is close to a zone of destruction:

  • Greece is going through the fifth consecutive year of recession, and it is almost certain that 2013 will also be a year of recession. Total GDP reduction since 2008 will reach 22% in the end of 2012.

  • Official unemployment reached 24.4% in June 2012. Youth unemployment is at 55%, but even more worrying is the sharp increase of those in their most productive ages: 21% in the 35-44 age cohort. It is certain than in the next months real unemployment will exceed 30%.

  • The purchasing power of the average wage is back to its 2003 level and that of the minimum wage to that of the late 1970s. According to OECD the total reduction of real wages, as a result of wage cuts and increased taxation, was 25.3%.

  • 25.4% of salaried employees can be characterized as “working poor”.

  • “Internal devaluation” has already reached, in terms of relative labour cost, 23%.

  • There has been an increase in all forms of social problems associated with social insecurity and increased poverty, including a sharp increase in the number of suicides and suicide attempts, directly related to the economic crisis.

  • Greece is witnessing the third mass wave of migration of its modern history, this time mainly in the form of a brain-drain, since the majority of Greeks seeking employment abroad are highly qualified.

Although the most important shift in the political landscape has been a shift to the Left, a the same this social, political and cultural crisis, along with deep rooted authoritarian, anti-communist, racist and sexist ideological practices (plus the cynical endorsement of anti-immigrant rhetoric by all systemic political parties and the Media), has facilitated the rise of the neo-fascist Golden Dawn. It is also a warning sign that unless the Left is present and active in order to articulate anger and despair into struggle, solidarity and emancipatory projects, the space is open for the far-right to increase its political presence and shift the balance of forces to the right.

At the same time, despite the restructuring of debt in the spring of 2012, Greece will probably have unsustainable debt levels in the next years. According to estimates by the Center of Planning and Economic Research (an openly pro-business think-tank), in almost all possible scenarios Greece will not reach the Debt/GDP target of 120% by 2020. We have entered a vicious circle where increased debt leads to austerity measures which in turn lead to recession and consequently reduced public revenue in a vicious circle of austerity and debt that seems like a “death spiral” for society.

Moreover, Spain’s debt crisis and the rise in the cost of Italian debt, have made evident that we are not talking simply about a Greek crisis but about a crisis of the Eurozone itself, a manifestation of the inherent contradictions of the monetary and financial architecture of the Euro as a single currency in an area marked by divergences in productivity and competitiveness. The current attempt by the European Central Bank to answer these problems through increased ECB involvement in the form of massive buying of state debt, may buy some time, but does is unable to tackle to answer the structural contradictions of the Eurozone. Nor is it possible to deal with the current crisis simply through “stability mechanisms” that will impose extreme austerity in exchange for solvency. Moreover, it is obvious that despite all the “reassuring” statements about the willingness to keep Greece within the Eurozone and the desire to avoid a image of acute crisis, especially in the run-up to the American elections, international economic organizations are more prepared than ever to stand the cost of a potential Greek exit, or to even to use such an exit as evidence of the European Union’s willingness to “punish” those that do not accept its norms.

The dominant discourse treats this process not as social devastation but as part of a broader social structural adjustment process. Especially, the rhetoric of the Troika is almost neo-colonial in its zeal to rebuild a society along aggressively neoliberal lines. However, what is missing from this rhetoric is that we are not simply talking about pro-market reforms in order for the economy the return to new “growth dynamics”, but about a much more profound change in the social and economic paradigm. The sharp deterioration in living standards, the forced changes in consumption practices and the new poverty, lead to what can be described “a society of reduced expectations”. This goes along with the shrinkage of the knowledge base of Greek economy and the forced downgrading of its productive capabilities, through the attacks on Higher Education, the flight of scientists and the shift towards renewable energy, agricultural exports and tourism as the main export sectors at the expense of other sectors based on technology and highly qualified labour. The massive wave of privatizations that the government is planning will not bring a mass influx of investments, nor will it stop processes of de-industrialization. It will only lead to increased cost, worsening of the quality of services, reduced personnel along with the loss of sovereignty over crucial natural resources.

This process can be described as the “downsizing of a country”. In the end Greece will emerge as a poorer country, with a diminished productive base, with reduced sovereignty, with a political class accustomed to almost neo-colonial forms of supervision and with a Greek bourgeoisie ready to accept a subaltern position in the new emerging European division of labour and to see its erstwhile ambition to play a more important economic and political role in the region curtailed in exchange for a violent change in the balance of forces with labour.

It is obvious that Greek society is at a crossroads. The forces of capital have opted for a process of extreme historical backwardness, not only economically, but also socially and politically, exemplified in the embracing of aspects of the neo-fascist agenda of the “Golden Dawn” (authoritarianism, “law and order”, anti-immigrant policies).

It is up to the forces of labour and the Left to offer a different road and a true exit strategy from the current impasse. However, this cannot be done in terms of “left governance” within the limits set by the European Union, its embedded neoliberalism and its current authoritarian mutation. A potential failure of a “left government” will only lead to even more reactionary solutions, especially if we take into consideration that the neo-fascist Golden Dawn is currently a rising force within the broader right and centre-right political bloc.

Contrary to the positions of “Left Europeanism” we must insist that a “Eurozone with a human face” is impossible with the current balance of forces. What is needed is a radial break with the vicious circle of debt, the exit from the Eurozone as a necessary step in reclaiming monetary sovereignty and democratic control over the economy, and a coherent radical alternative narrative of social justice and reconstruction of productive capabilities along socialist lines.

This cannot be accomplished simply through waiting for the inevitable collapse of the current government. Building a strong movement of struggle and extending all forms of solidarity in a society that is struggling to survive are not simply ways to put pressure on the government. They are the only way to restore confidence in the possibility of radical alternatives and make people realize that they can not only survive social devastation but also collectively build their own future.

On September 26 a General Strike has been called by the trade unions. Let’s hope that it will be only the beginning of a broader social uprising that will stop this cynical attempt at “downsizing” a society.

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