The European Union and the International Monetary Fund have approved a nearly $1 trillion package to stop Greece’s debt crisis from spilling beyond its borders into the rest of the eurozone. Stocks surged in Europe, Asia and the United States Monday after EU leaders agreed to a $960 billion package to contain Greece’s financial troubles. Meanwhile, the austerity measures demanded by the IMF and the European Union as a condition of their loan are continuing to exact their toll. Greece’s two main unions have continued to hold protests against the reforms. In a statement, one of the unions said, “The crisis should be paid by…all those who looted public finances.” Last week nearly 100,000 people participated in a mass demonstration and a twenty-four-hour general strike against the austerity measures.
MARK WEISBROT: Well, I think Tariq is right in terms of the injustice of trying to restructure these economies on the basis on, you know, really punishing the workers and the vast majority of people. But there’s also an irrationality to it, even from the point of view of the bondholders themselves and the financial sector and the, you know, whole system, because what they’re doing is they’re making the recession worse in Greece. And this is quite deliberate.
The economic theory which they’re using is called an internal devaluation, because they’re keeping the euro, and they want to keep the euro, and so what they’re trying to do is create enough unemployment so that wages and prices will fall, and then Greece can become competitive, even keeping the same nominal exchange rate with the euro. So this is a process that goes on quite a long time, and it’s very brutal, and it doesn’t usually work. In fact, the projections from the Greek government say that, you know, their debt is now 115 percent of GDP, and if they go through the program and it works, then two-and-a-half years from now they have a debt of 149 percent of GDP. So this is really irrational, and you can really see the irrational—irrationality of the financial markets, because they’re demanding more cuts, which of course make the economy worse. And the same is true for Spain and Portugal and Ireland and Italy, which all have similar problems, and they’re all being pushed further into recession by this kind of program. So it’s really wrong.
And, you know, I was debating the former finance minister of Greece, who was responsible for the so-called reforms of the 1990s, which prepared Greece to adopt the euro. And he ended up saying, “Well, we can’t leave the euro, because Greece is culturally incapable of managing its own economic affairs.” And so, this is the kind of attitude I think you have. And they’re punishing Greece. I wouldn’t call it a bailout; I think they’re more being thrown overboard. And they’re doing it—you know, it’s really not even rational from the point of view of trying to resolve the crisis, because you’re still—you’re making it worse there, and you’re making it worse in Spain and in Portugal and in Ireland, as well, and also Italy. So this is a problem they’re going to have to resolve, and they’re not resolving it.
http://www.democracynow.org/2010/5/11/the_people_of_greece_are_fighting