Greek democracy vs European Union

Joseph Stiglitz, a Nobel Laureate in economics and professor at Columbia University, was Chairman of President Bill Clinton's Council of Economic Advisers and former Chief Economist at the World Bank.   He wrote the following essay before the Greeks' dramatic  61%  No vote on the referendum that rejected the proposed bailout plan:

". . .  [T]he economics behind the program that the “troika” (the European Commission, the European Central Bank, and the International Monetary Fund) foisted on Greece five years ago has been abysmal, resulting in a 25% decline in the country’s GDP.  I can think of no depression, ever, that has been so deliberate and had such catastrophic consequences: Greece’s rate of youth unemployment, for example, now exceeds 60%.

"It is startling that the troika has refused to accept responsibility for any of this or admit how bad its forecasts and models have been. But what is even more surprising is that Europe’s leaders have not even learned. The troika is still demanding that Greece achieve a primary budget surplus (excluding interest payments) of 3.5% of GDP by 2018. 

"Economists around the world have condemned that target as punitive, because aiming for it will inevitably result in a deeper downturn. . . .

"We should be clear: almost none of the huge amount of money loaned to Greece has actually gone there. It has gone to pay out private-sector creditors – including German and French banks. Greece has gotten but a pittance, but it has paid a high price to preserve these countries’ banking systems. . . . 

"[I]t’s not about the money. It’s about using “deadlines” to force Greece to knuckle under, and to accept the unacceptable – not only austerity measures, but other regressive and punitive policies. . . . 

"Greece’s citizens voted for a government committed to ending austerity. . . .  That concern for popular legitimacy is incompatible with the politics of the eurozone, which was never a very democratic project. Most of its members’ governments did not seek their people’s approval to turn over their monetary sovereignty to the ECB. . . .

"Many European leaders want to see the end of Prime Minister Alexis Tsipras’s leftist government . . . that is so opposed to the types of policies that have done so much to increase inequality in so many advanced countries, and that is so committed to curbing the unbridled power of wealth. They seem to believe that they can eventually bring down the Greek government by bullying it into accepting an agreement that contravenes its mandate. . . .

"[A no vote in the referendum] would at least open the possibility that Greece, with its strong democratic tradition, might grasp its destiny in its own hands. Greeks might gain the opportunity to shape a future that, though perhaps not as prosperous as the past, is far more hopeful than the unconscionable torture of the present."

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As we now know, Greek voters did embrace democracy and self-determination -- or at least rejection of the draconian plan that the European troika is trying to force upon them.    So what happens now?   In a meeting Tuesday of EU foreign ministers and Greek Prime Minister Tsipris -- both sides made it clear that they are not knuckling under.   The EU is still demanding severe austerity measures in exchange for debt relief;   and Tspiris made it clear that he is negotiating and not knuckling under.    If they fail to reach an agreement tomorrow, Greece could go through a default and restructuring of debts -- essentially bankruptcy -- and Greece may leave the European Union and form its own curreency.

Greece will continue to have very hard economic times, either way;  but at least they would be in charge of their own destiny and would have honored a democratic process by their own elected government.    Why cannot conservative politicians admit to the repetitive proof that austerity just does not work to get out of an economic depression.  Economic stimulus and job creation is the answer.   Greece and Kansas are two of the best recent examples of how austerity backfires and just makes things worse.

Ralph