Don’t blame it on the Greeks

Illustration by Manos Symeonakis

Greece’s debt crisis has given people license to blame its inhabitants for all kinds of things, so it was heartening last week to hear a leading European politician say, “You can’t blame the Greeks.” The comment by Ed Miliband, the British Labour Party’s leader, was for domestic consumption, as part of an attack on his country’s Conservative government, rather than as an expression of support for his fellow socialists at PASOK. But it was a timely reminder that the Greek crisis is not taking place in a vacuum and that the country’s experiences and dilemmas are being replicated in other parts of the world.

“Your austerity rhetoric has led to the lowest levels of consumer confidence in history in this country,” Miliband told British Prime Minister David Cameron in Parliament after he revealed that the economy had grown by just 0.5 percent of gross domestic product during the first quarter of the year. “You’ve been prime minister for a year,” the Labour leader added. “You can’t blame the Greeks, you can’t blame the Bank of England, you can’t blame the last government, you can’t even blame the snow.”

Miliband argued that since the economy shrank by 0.5 percent of GDP in the previous quarter, Britain had effectively experienced no growth for the last six months. This gave the opposition leader, and a number of economists, fodder for their argument that the Conservatives have been too zealous with their deficit-cutting austerity measures.

It is an argument Greeks are familiar with. But here the debate about the measures adopted by the government at the behest of the European Union and the International Monetary Fund is stilted and stifled, due mostly to a lack of political maturity and the fear of questioning those who extended a helping hand when we were teetering on the edge.

Some of the similarities between Britain and Greece are striking. Also last week, the European Commission’s statistics agency, Eurostat, confirmed that the two countries had almost identical public deficits in 2010. Greece’s stood at 10.5 percent of GDP, Britain’s at 10.4 percent. In fact, Britain’s deficit was the third largest in the EU. The proximity of its figure to Greece’s would have made interesting reading in Athens, which has been made to feel like a pariah by its EU partners for letting its deficit escalate.

Like Greece, a number of Britain’s key economic sectors, such as construction, are suffering. Meanwhile, business sentiment is on the slide and the conservatives’ spending cuts and redundancies in the public sector seem to be taking their toll on households. “In this uncertain climate, it’s hard to see how current policies can help the UK economy get back on its feet,” said the deputy general secretary of the Trades Union Congress (TUC), Frances O’Grady. “It’s time for ministers to rethink their damaging cuts and focus on creating jobs and future growth instead,” she added, echoing what unionists in Athens have been saying for the past few months.

Although their deficits may be almost identical and their economic challenges similar, there are key differences in the situations faced by Greece and the UK. Apart from having a much more productive and robust economy than Greece, Britain also has the advantage of possessing a much lower public debt. Last week’s Eurostat figures confirmed that Britain’s debt stands at 80 percent of GDP, compared to 142.8 percent for Greece. Unlike the UK, Greece is currently chasing its tail: spending more than it raises in revenues by some distance while also owing much more than it could ever hope to pay back. So, its public debt is growing much faster than its economy is capable of.

To make matters worse, Greece has to somehow convince lenders that this equation does not equal disaster if it’s to have any hope of returning to the international markets. Currently, Athens is reliant on loan installments from Brussels and Washington as well as issuing short-term bonds. But short-term money comes at a huge price for Greece because it needs to keep rolling over its debt, which is maturing much faster than other EU countries. Perhaps it’s only fitting that since many of Greece’s problems are of its own making, it should also be dealing with consequences that are unique within the EU.

However, similarities and differences aside, Britain’s difficulties provide Greece with a very notable lesson in constructive democracy. A plurality of opinions is emerging in the UK about how the government should deal with its economic quandaries. It’s not just the Labour opposition and the unions that are querying the tactic of stripping away large chunks of the public sector in one fell swoop and turning off the public investment tap. A growing number of economists are also expressing concern that the deficit-cutting measures are choking the British economy.

Writing in UK daily newspaper The Guardian, economic consultant Michael Burke expressed doubt about the Conservative government’s decision to slam the public investment programs into reverse. “This directly subtracts from growth but it also further discourages the private sector from making its own investments,” according to the expert. “The result is a downward spiral of activity, which will lead to falling employment and lower tax revenues, undermining the idea that this is at all necessary to reduce the deficit. As with other countries where these policies have already been tried and failed, the deficit will widen as a result.”

Ian Brinkley, a director at the Work Foundation, argued that the government would do well to rethink its decision to spend less on construction projects. “If the chancellor was minded to go for a plan B to keep the economic recovery on track, he could do worse than reinstate some of the planned public investment cuts in social housing, school buildings and the road repair and maintenance budgets.”

This type of debate can only help Britain, making its public more aware of the options available, forcing its politicians to be more accountable for the decisions they take and, hopefully, ensuring that policies are properly thought through. It is the type of debate that was killed in its infancy in Greece. Once the government put pen to paper on the EU-IMF memorandum, Greece was bound by the strict terms of the loan agreement. What’s worse is that this only led to a petty polarized row over the terms of the deal. There was no serious policy discussion from any of the parties, just point scoring. It’s one of the reasons that the public debate about how Greece should get back on track has been muted. Fearing being drawn into one partisan camp or another or of being left exposed in an ideological no man’s land, experts and commentators have shied away from offering opinions that challenge the status quo.

So, we have a perilous situation for a democracy where alternative points of view are being kept quiet, dismissed or drowned out. Even though there is plenty of evidence to indicate that all is not well with the memorandum, no coherent or convincing alternatives are being formulated. This absence will be all the more painful should the current EU- and IMF-led strategy not work. It will be of little comfort to Greece if in a few years time, people stand on the ruins of the country’s economy and say, “You can’t blame the Greeks.”

Nick Malkoutzis

One response to “Don’t blame it on the Greeks

  1. Pingback: Don’t blame it on the Greeks » Greece on WEB

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