Greeks Riot Over ECB Austerity Bailout

by John M. Curtis
(310) 204-8700

Copyright June 28, 2011
All Rights Reserved.                                         

        Faced with a brutal austerity program from the European Central Bank, Greeks took to the streets protesting what’s become indentured servitude to the European Union.  When Greece joined the euro in 1999, they were promised nothing but prosperity—sharing the bounty of a prosperous Europe.  While the currency escalated in value the Greek economy began to go downhill.  Inflated euros paralyzed the Greek economy by creating a hyper-valued currency, largely linked to the old German Deutsch Mark.  While Germany made a seamless transition to the euro, other less industrialized countries went through painful growing pains, realizing the over-valued currency made it difficult to transact ordinary business.  No one, certainly not in Greece, could have imagined that the euro would bankrupt the Geek economy and force a proud nation to get on its knees and beg the ECB for cash.

             Expanding a free market in Europe was supposed to raise the standards of living in Europe’s less industrialized countries.  Once coinage rights were taken away from countries subscribing to the euro, less industrialized countries began to run out of cash.  By the end of 2009, Greece ran budget deficits at 15.4% of GDP, five times that permitted by the ECB.  On April 23, 2010 Greece entered into a EU/IMF bailout plan, designed to deal with Greece’s rising debt and cash-flow problems.  It’s first installment of 45 billion euros resulted in a downgrade by Standard & Poors of Greece’s debt to BBB, or junk status, forcing the ECB to charge disproportionately high interest rates, further weakening Greece’s ability to repay the loans.  Today’s Athens riots relate to the ECB forcing Greece to accept draconic austerity measures in order to receive another 12 billion euro bailout program

              Brussels-based European Union officials have one thing in mind settling Greece’s insolvency:  Preventing a contagion that sweeps over the euro-zone.  Putting a lid on the Greek crisis helps contain other economically depressed countries from bailouts out of the euro.  Getting Greece to sign on the dotted line changes nothing about the euro’s unfeasibility.  “I trust that the Greek political leaders are fully aware of the responsibility that lies on their shoulders to avoid default,” said European Monetary Affairs Commissioner Olli Rehn.  Rehn knows full well that it’s virtually impossible for Greece to repay the ECB’s high interest rate loans.  It’s easy for those in Brussels or Frankfurt to lecture the Greeks on more sacrifice.  Greek citizens already feel beaten down by high interest rates and spending cuts, reduced government salaries, pensions, health care and other social safety net benefits.

              Torching fast-food restaurants, coffee houses and outdoor cafes, rioters rejected the government’s plan to acquiesce to EU demands.  Calling for general strikes of municipal services, Greek citizens expressed outrage over the government’s attempts to impose more austerity measures.  “The situation that the workers are going through is tragic and we are near poverty levels,” said Spyros Linardopoulos, a professor with the PAME union, blockading the port of Piraeus.  “The government has declared war and to this war we will answer back with war,” said Linardopoulos, showing that rank-and-file Greeks won’t take the government’s program lying down.  Greek Prime Minister Papandreou knows he’s walking a razor’s edge accepting the ECB bailout offer while implementing draconic austerity measures.  Greeks blame the government and EU for today’s economic hardships.

             Billionaire investor George Soros believes the Greek government has done no contingency planning about getting off the failed euro.  Papering over the cracks, the EU and ECB hope they can squelch the PR crisis rather than fix the problems.  Greece’s problems stem from the basic fact that average workers can’t earn enough to keep pace with an ever-escalating euro.  If EU and ECB officials acted more responsibly, they’d accept that the euro can no longer serve as the currency of Europe.  Papandreou knows that accepting Frankfurt’s austerity measures could incite a revolution.  Greek citizens have had it with the government’s excuses, blaming workers for a lack of productivity rather than fingering the euro as an untenable currency.  Given Greece’s manufacturing and service economy, the euro is too inflated—and difficult to earn—for it to serve as a representative national currency.

             Whether the EU and ECB’s new Band-aid works to stave off more economic hardship, Greeks must decide what to do with the euro.  All indications point to the euro’s unfeasibility in Greece.  Borrowing more high-interest money from Frankfurt does nothing to fix the Greek economy, now hopelessly dependent on EU bailouts.  More rioting won’t satisfy rank-and-file citizens, hoping to severe Greece’s relationship with the euro.  “We don’t owe any money.  It’s the others who stole it,” said 69-year-old demonstrator Atonis Vrahas, rejecting the EU and ECB bailout.  “We’re resisting for a better society for the sake of our children and grandchildren,” refusing more indebtedness to the ECB.  Whatever the Greek parliament decides to do, they must do more than borrow high interest money from Frankfurt.  Greeks must face the music that the euro failed as a common currency.

John M. Curtis writes politically neutral commentary analyzing spin in national and global news.  He's editor of OnlineColumnist.com.and author of Dodging the Bullet and Operation Charisma.

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