We are on the eve of the second election in Greece and many establishment voices in a co-ordinated campaign are raising the prospect of total disaster should the Greek electorate choose the left wing coalition Syriza which while committed to keeping the euro is also determined to renegotiate the terms of the financial bailout. Its critics argue that this is a totally unrealistic agenda which promises to plunge Greece into disaster. But what exactly do these establishment voices offer to Greece as an alternative. The answer for the moment is unequivocally dogmatic. More of the same horrible and counterproductive austerity that has led Greece into deep economic depression. Learning absolutely nothing from the events of the great depression, the rise of fascism and the catastrophe of the second world war these established conservative voices insist that all will be well for Greece if it sticks to the euro and above all sticks to the program of privatization, welfare state cuts and other neo-liberal and neo-con policy prescriptions. Greece has tried this approach for the last year and what has been the result. Not the drop in wages and rise in employment that these politicians and their economic advisers have claimed would be the result but the deepening of the depression.
It is absolutely incredible that this old discredited approach from the 1930s is back as cutting edge policy advice. Greece cannot recover under conditions of austerity.Real wages cannot fall far enough to restore employment without doing irreparable harm to Greek society. These conditions need to be lifted and softened.
There is another way that would encourage growth and recovery and restore hope. I have explained it several times. But few are listening. Buy a significant chunk of the Greek debt through the European central bank. Suspend the interest payment for a limited period of time.Soften the austerity constraints. Encourage stimulus and growth through stimulating aggregate demand, eliminating corruption , ensuring that where ever possible taxes are paid , introduce specially targeted employment programs in infrastructure , education, and local enterprise. Create a secondary LETS or drachma employment currency as part of rebuilding social infrastructure.Set up a fund in which other European partners can participate which has as its objective hiring unemployed Greeks and restoring hope and some income. Allow employers to pay new hires in this currency or a combination of it and the euro to stimulate trade and commerce as recovery begins. Develop a chain of drachma employment banks that permit accounts in this secondary currency. Adjust welfare benefits to realistic levels over a gradual time period.
Another way is possible for the old way does not work.