The Greek election, the euro and the necessity to escape austerity

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.


About haroldchorneyeconomist

I am Professor of political economy at Concordia university in Montréal, Québec, Canada. I received my B.A.Hons (econ.&poli sci) from the University of Manitoba. I also completed my M.A. degree in economics there. Went on to spend two years at the London School of Economics as a Ph.D. student in economics and then completed my Ph.D. in political economy at the University of Toronto. Was named a John W.Dafoe fellow, a CMHC fellow and a Canada Council fellow. I also was named a Woodrow Wilson fellow in 1968 after completing my first class honours undergraduate degree. Worked as an economist in the area of education, labour economics and as the senior economist with the Manitoba Housing and Renewal Corporation for the Government of Manitoba from 1972 to 1978. I also have worked as an economic consultant for MDT socio-economic consultants and have been consulted on urban planning, health policy, linguistic duality and public sector finance questions by the governments of Manitoba, Saskatchewan,the cities of Regina and Saskatoon, Ontario and the Federal government of Canada. I have also been consulted by senior leaders of the British Labour party, MPs from the Progressive Conservative party, the Liberal party and the New Democrats on economic policy questions. Members of the Government of France under the Presidency of Francois Mitterand discussed my work on public sector deficits. I have also run for elected office at the municipal level. I first began to write about quantitative easing as a useful policy option during the early 1980s.
This entry was posted in austerity, classical economics, deficit hysteria, European debt crisis, Greek sovereign debt crisis, treasury view, Uncategorized, unemployment. Bookmark the permalink.

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