There is a wide debate on the next referendum in Greece. It’s hard to summarise the different economic, social and political problems that are all equally important: all require an intervention that must reverse a route that looks set to wreck safe. Below I have singled out the points that I consider the most important ones.
The austerity policies have been inspired by the same ideological neoclassical paradigm that has failed all predictions of the economic crisis that erupted in 2007/2008. Economists Carmen Reinhart and Kenneth Rogoff base these policies on a famous article, among the most cited in recent years. This has highlighted the existence, in many countries, of a correlation between a high debt/GDP ratio (over 90%) and low growth. The article by Reinhart and Rogoff was shown to be flawed by serious methodological problems and even from a simple mistake in the spreadsheet. Yet this study is among those used to justify the austerity measures and the need to “put in order the accounts” in the different countries. Despite the data, analyzed properly, show no correlation between debt and GDP, and therefore do not justify in any way austerity policies, these have not changed, and indeed are continually restated.
Despite this situation Greece followed the recipes of austerity policies: Greece has sent down a heavy dose of bitter medicine, but too much is likely to kill the patient. And what lenders want at the negotiating table? A little more of the same medicine. The problem is, of course, the medicine.
According to former Italian Prime Minister Mario Monti Greece “it is the most complete manifestation of the great success of the euro.” Greece after five years the “rescue” of the Troika (European Bank, European Commission and IMF) is still in recession, has an unemployment rate of around 30% rising to 55% for young people, has suffered a drop in GDP 25% and 30% of its population lives below the poverty level of the European Union.
The austerity measures have caused a real humanitarian emergency. In a scientific paper published by the journal The Lancet, impressive data were presented: in Greece after forty years reappeared malaria, 70% of respondents in a survey said they did not have enough money to buy medicine, suicides increased by 45%, the underweight babies increased by 19% while the stillbirth increased by 21%.
Since the crisis began, five years ago the biggest brain drain in Western advanced economy in modern times took place, with over 200,000 Greeks who have left the country. More than half went to the United Kingdom and Germany, accounting for a huge movement of skilled labor, formed at the expense of the country of origin, which must therefore enrich the countries of destination. This wave of young people, together with those from the other countries of southern Europe, is a skilled workforce that competes with the local thus lowering labor costs. On the other hand this depletion of human resources is undermining the remaining possibility of a resumption of the country in the future more or less distant.
But the damage did not end there. The bailout of Greece was designed only to save creditors, banks in most of the old continent and not Greece (source IMF). In fact, an independent study has shown that for the less than 77% of all aid provided to Greece between May 2010 and June 2013 ended the financial sector and not to the people or the Greek State. In parallel with the exhibition of French and German banks it became public debt (see page 15 of this document of the Greek Parliament).
These simple facts, easily verifiable, show the absurdity of the austerity policies that have the effect of depressing the economy both now and in the future. Various “economists”, like Italian Francesco Giavazzi, that move to cry “the Greeks have chosen poverty, leave them to their fate“, with arguments that can be easily falsified, simply make clear once again if it were needed, how economics is only used to shore up political and ideological choices. The discussion is actually all politics but the reference that is lost is the ethical one: only the outrage rising from the unnecessary suffering conditions of the majority of Greek people, can shows us which side to take.
The Italian version of this post was published on Il Fatto Quotidiano.
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