Syrizia off to quick start austerity rolled back on many fronts preliminary discussions underway on restructuring debt

The new Government in Greece has wasted no time in reversing austerity measures and proposing legislation and administrative measures to help the poor and the destitute. They have announced ten bills which restore the minimum wage, restore food aid programs, rehire workers laid off by the previous Government and a number of other comparable measures designed to promote aggregate demand, a restoration of dignity and hope among all of those people so badly hurt by the previous austerity obsessed government. They have also announced that the old corrupt ways of rewarding the wealthiest people with tax concessions, exemptions and contracts has come to an end.

In specific measures they have raised the minimum wage back to its pre austerity level of 751 euros  from the 580 euros per month the previous government had imposed (490 euros for workers under 25). They have abolished the one euro prescription drug fee and the five euro public hospital fee; they have announced they will rehire 1000s of laid off teachers, school guards and cleaners who were fired by the previous government to reduce the size of the public sector; they have restored the 13th month payment for low income pensioners; they have announced they will grant Greek citizenship to the children of migrants who have been raised in Greece and in an important symbolic act they have removed the barricades from the front of the Greek Parliament.

On the foreign policy front the new Government has also refused to go along with strengthened EU sanctions against Russia over the Ukraine without a new debate. It remains to be seen whether this foreign policy shift will be permanent or is simply a gambit in the negotiations that Greece wants over its debt structure including their demand for a haircut on the outstanding debt. A large chunk of the debt was used to bail out the banks and hedge funds who were exposed as opposed to actual transfers to the Greek government to finance any sort of new public spending. Some commentators in the FT notably Martin Wolf have called for sensible compromise and statesmanship on the part of the EU negotiators pointing out that the EU cannot expect Greece and the new government to accept to service an impossibly heavy debt load for decades.

The correct solution lies in further lengthening the term of the debt from its current average of 16 years to twice or thrice as long, refinancing it at lower interest rates and some sort of relief through a haircut on part of it.Given the very low interest rates that now prevail, the potential possibility of using more of the QE mandate to help with Greek finances it is possible to see more fiscal room on the Greek expenditure side . As well a separate infrastructure fund financed by special funds would be a very useful option.


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.
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