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Expert Comment: 'Greece: the politics of poverty and protest'

Greek flag Wednesday 25 April 2012

Dr. Michael Holmes, Senior Lecturer in the Department of Politics, History, Media and Communication at Liverpool Hope University

On Sunday 12 February, the Greek parliament voted in favour of further stringent cutbacks to add to the already very deep cuts in public expenditure that have gone through over the past two years. Their reward is the release of a €130 billion bailout from the European Central Bank (ECB) and the International Monetary Fund (IMF) coupled with a write-down of about €100 billion of the debt owed by the country.

On the face of it, this seems to be a simple case of a country that had allowed its public finances to spiral out of control and that now must get its house back in order. The austerity programme, while harsh, is necessary because Greeks were living beyond their means. Therefore, the huge protests in Greece against the cutbacks are at best deluded and at worst an excuse for violence and vandalism. But this overlooks a number of other perspectives.

First of all, the bailout money is not destined for the pockets of any ordinary Greek citizens. Instead, virtually all of it will be transferred back to banks in other European countries – including in the UK – that had loaned money to Greece.  Arguably, these banks are guilty of reckless lending, and should have been much more cautious about providing loans to Greece. Instead, a get-rich-quick mood took hold, fuelled by extensive deregulation of financial services throughout the EU. Therefore, while there are two groups at fault – the Greek borrowers and the bank lenders – only one group is paying the cost.

Secondly, we need to look at why Greece’s books got so badly out of kilter. This came about partly through over-payment, but there was also a very serious problem of tax evasion amongst many high earners in Greece. This fuelled a lavish spending boom, and much of that expenditure went on high-quality imports – so other EU states that are currently criticising Greece’s profligacy have in fact benefited considerably from that spending. Indeed, this still continues, with signs of a mini-boom in the London property market as rich Greeks have withdrawn assets from their own country and invested in housing in the UK.

The two preceding arguments highlight an underlying philosophical question: what is an economy for? Increasingly, we seem to live in a world where society is expected to serve the needs of economy, whereas surely economy should serve the means of society? This is not an excuse for inefficiency, but it is an argument that a society where people are being forced into poverty, forced into hunger, forced into ill-health in order to ensure that very rich financial institutions remain very rich has completely lost its way.

There is also no guarantee that the austerity plans will work. Indeed, the predominant economic opinion is that the cutbacks and recession will only make it harder for Greece to repay the money it owes, so a short-term solution that suits the needs of banks is being imposed without any consideration of its long-term consequences. And one of those long-term consequences has to be a serious undermining of democracy. Already, the democratically-elected Greek Prime Minister has been forced to stand aside to make way for a government imposed by the EU, with no attempt to find an alternative solution through public consultation.

What do I expect to see? I expect to see Greece leaving the euro, either voluntarily or being forced out. I expect that will be a prelude to a number of other countries having to exit the single currency, at least temporarily. But this will not of itself solve the current crisis. At this stage, the financial crisis is at danger of becoming a much deeper crisis of confidence in democratic political systems. For this to be dealt with, we need to apply a core democratic value in both the political and economic spheres – the idea that democracy promotes the common good. At present, the common good is being sacrificed for the good of the few.

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