Greece's debt crisis must signal an end to EU austerity

#CriticalThinking

Picture of Reiner Hoffmann
Reiner Hoffmann

Chairman, German Trade Union Confederation (DGB)

Five years after the sovereign debt crisis first sprang to life in Greece, voters there handed Syriza’s party leader Alexis Tsipras a clear election victory. They were reacting to years of failed policy and economic pain, and delivered a “No” to the austerity policies that have led the country to social and humanitarian catastrophe.

The austerity measures that have ravaged the Greek economy turned recession into full-blown depression. The country has lost a quarter of its economic output, and now a third of the population live in poverty. Social security has been hugely reduced, the minimum wage has sunk by 22% and collective bargaining and other protective rights for employees have been greatly weakened. To top it all, the lower income groups have had to bear the brunt of higher taxes. Unemployment stands at around 27% overall, and youth unemployment at over 50%. More than 800,000 people in Greece are no longer covered by collective healthcare, and are able to access medical treatment only in cases of emergency.

Democracy in the EU must be strengthened as this is the only way that Greek confidence in Europe can be restored

Syriza’s core promise of “a return to dignity” resonated with voters, even those who don’t regularly vote for the left. We in the west of Europe should take the outcome of the Greek elections in late January very seriously indeed; they signal a demand for a change in the present political course and for a new social beginning. Greece’s electorate has asked its government to lead the country out of crisis and install a socially just policy. To date, wealthier Greek citizens have not borne any of the costs incurred through the crisis. Democracy in the EU must be strengthened as this is the only way that Greek confidence in Europe can be restored. We need structures that will deliver an effective financial administration, potent measures in the fight against corruption, and a functioning labour market. The rights of labour unions and workers must be fully restored and space for socially fair arrangements must be reinstated.

What we are witnessing in Greece is a climax of the clash between austerity and growth, a final confrontation between the two sets of ideas and policies that have gripped Europe since the start of the global financial crisis in 2008.

Greece wants sustainable growth. It has agreed to a four month extension to the stability programme with its EU creditors. Whether the crisis is finally over is uncertain as there will be several milestones over the next four months that could yet lead to further deadlock in Greece’s relations with the EU and the eurozone. Some analysts seem fixated on whether the four-month extension is a victory for the new government or a climb down from campaign promises, but that is to miss the point. The focus must be on jointly building a lasting path out of the crisis that leads towards an economic rebound.

Europe needs a pan-European investment campaign

Greece needs to breathe again. Wiping out its debts will take more than three to five years because this is a long-distance race, not the sprint the Troika wants. John Monks, the former General Secretary of the European Trade Union Confederation (ETUC), has compared the demands for budget cuts to an economic Treaty of Versailles and has warned that driving a country to ruin cannot possibly be a sustainable strategy.

We at Germany’s DGB Trade Union Federation insist that there must be a comprehensive solution for all debtor countries. We want fresh negotiations within the framework of a European conference on debt for all those in crisis so as to restore sustainability and stabilise the eurozone. We also reject all talk of a ‘Grexit’ because it would be damaging to all if Greece quit the monetary union. Because of the potential domino effect, it would simply aggravate the problems of Europe and the eurozone.

The focus must be on jointly building a lasting path out of the crisis

The crisis over Greek debt should be turned into a catalyst for sweeping change in Europe – change that will end austerity. Swiss novelist Max Frisch summed it up neatly when he wrote A crisis is a productive state. You simply have to get rid of its aftertaste of catastrophe.” The Barroso Commission that stepped down last autumn, together with the EU’s member states, had neither the vision to capitalise on that productive state nor the initiative to correct the design flaws in their crisis strategy to abolish its aftertaste of catastrophe.

We in the DGB are now asking the EU for a clear departure from the anti-social politics of austerity that have aggravated the crisis. Europe needs a pan-European investment campaign, and Jean-Claude Juncker’s €315bn plan is a good first step. It sends an important political message that for the first time in a long while we’re talking about investment-led growth. Juncker has in effect taken up the drive backed by the ETUC and the DGB for a Marshall Plan for Europe. That plan could of course be more ambitious, and we’re therefore demanding improvements and extra funding via the member states to ensure it will have a genuine impact. For Europe’s trade unions, investments in the real economy are the priority, and here at least is a chance to start them.

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