Tragically for the Greek people the Greek Parliament by a narrow  majority vote -155 to 138- has approved the austerity package demanded of Greece by the IMF and the leadership of the European union in exchange for an additional injection of loan funds sufficient for Greece to avoid bankruptcy in the short run. The tragedy is that the degree of austerity, privatization and public sector cuts demanded will guarantee that the Greek economy will be further locked into its downward spiral and depressed state for a long time to come. In addition the violent clashes in the very heart of Athens involving the widespread use of dangerous CS gas against both peaceful protestors and violent agitators and agent provocateurs will send the image world wide that Greece and historic Athens in particular is not a safe place for tourists to visit, thereby further damaging the fragile Greek economy.

The policy of demanding growth killing austerity, privatization at fire sale prices and cuts in public sector employment is the most toxic prescription that one could force feed an economy wracked by the collapse of  aggregate demand and high unemployment and still suffering from the consequences of the crisis in the financial markets and bad terms of trade with an overvalued currency. Clearly Europe’s political and economic elite has learned absolutely nothing from the terrible errors of the 1930s. They are simply repeating them. It is very unlikely that the Papandreou government will long survive the economic depression that will paralyze Greece in the months to come. The total size of the Greek debt in terms of bonds outstanding is only a small percentage of the Euro zone GDP.($ 460  billion versus 16.2 trillion)

Had the European central bank been an up to date modern institution and the European union dedicated to the prosperity of its member states it would have temporarily absorbed enough of the debt in order to give Greece time to recover and permit it to reduce its debt over time in an orderly fashion once growth had resumed and unemployment was falling. Instead it has foolishly forced Greece into this terrible position. All of Europe will pay a price for this profound policy error.