The Troika and the euro — the epitome of neoliberal stupidity

23 June, 2015 at 10:18 | Posted in Economics | 2 Comments

According to the dominant German narrative there is no alternative to the policies that the Troika imposes upon Greece. In this view, the Greek population wants to change course when only about half of the work required by the Troika has been done. Why this “impatience”? The German public and its leading politicians are not willing to realise the extent of the damage that austerity policies has caused in Greece up to now. To put it succinctly: Greece has gone through a Great Depression. Since the start of the crisis in 2008, real gross domestic product (GDP) fell by exactly as much as the United States GDP fell during the Great Depression in the 1930s. As a reminder, even today still, many economists are trying to work out how it was possible for such a blatant failure of economic policy to occur.

10827910_431645290321991_9219904879729906019_oGreece lost a full 25 per cent of its GDP since 2009. No other European country ever faced such a manmade catastrophe in peacetime. Six years after adjustment policies came into place, the unemployment rate in Greece is 26 per cent and poverty has taken grip of large parts of the population. Unemployment has recently started to decrease somewhat, but not because growth prospects improve, but because many give up on the search for employment. At this moment of time there is no perspective for a recovery in the near future. Adjustment policies are necessarily painful, opined the German Finance minister in Davos. But what is their plan? Do they want Greece to go through another great depressions in the name of competitiveness? In view of what we heard after the election in the German media and from German politicians, it is not clear what the worst attribute of German politics at the moment might be, sheer stupidity or cold callousness …

Germany makes a grave mistake if it believes that Germany and some other Northern European countries will be able to prescribe neoliberal policies to the new Greek government as easily as they did in 2010. There will be a standoff. The result will be even more destruction and more resentment towards Germany. German politicians would prove intelligence and vision if they would hold back instead of pouring yet more oil onto the fire.

Heiner Flassbeck

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  1. For those who are interested, Yves Smith of Naked Capitalism has been doing an incredible job following this issue. She provides a lot of material from various sources and her own astute analysis. Highly recommended if you want to know what’s going on with so many moving parts.

  2. Strangest of all is that it is Germany that presses this policy. Haven’t they ever heard of Brüning?


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