Thursday, February 9, 2012

The (real) Greek drama (II)

If we analyse the current state of affairs, we can argue that the Greek crisis has been dealt with the  wrong way. It's not just about money, but political courage and true solidarity if we really want to keep Greece in the euro area. Any scenario of Greece outside the euro area would be a catastrophe, particularly for the Greek people. It is also true that Greek politicians barely took action on tackling the crisis in the past two years.

But, more fundamentally, the whole debate about the Greek crisis highlights the weaknesses and flaws of the governance system, notably the impossibility under the current legal framework for the ECB to lend directly to member States at a low interest rate or to issue eurobonds to mutualize European debt. The German-French proposal of setting up a special account for Greece to offer creditors security will in the near future be discussed by the finance ministers of the euro zone. But the only way forward is to consider the idea of downsizing Greece's debt to an acceptable level.

In the meantime, the cacophony continues while people suffer from that situation.  Trade unions held a general strike to defend the interests of the middle class  which is now under siege. Wages dropped on average by 25% in the private sector. In return for the approval of the loan of  €130 billion , the "troika" (IMF-ECB-EU) has asked for more wage and expenditure cuts,  while the economy is in a recession for the fifth year and the debt-GDP ratio soared to 180% with yields at unprecedented levels. The economy has entered in a deflationary spiral where further austerity produces recession and impoverishment. 

We can be pessimistic about the possibilities of  the Greek government to reimburse 14,4 billion in debt before 20 March in order to avoid a default. But what the future will bring for Greece is difficult to predict; what is certain is that the process  the EU has gone through with Greece has created a "crisis of legitimacy". The EU is dependent on the support of its citizens and if they start questioning the legitimacy and integrity of the EU then its very foundation can be compromised.  We must not sacrify our European ideals of peace, prosperity and solidarity in the name of austerity. The Greek drama will then be ours.  

Tuesday, February 7, 2012

Record inequality between rich and poor

The OECD warns about the danger of rising inequality and its social costs. We have the greatest inequality since the 30s and societies face the risk of disappearing middle classes. But the greatest inequality is massive youth unemployment and a jobless generation which is a real scandal for rich, advanced economies.