For many Americans, Greece evokes idyllic islands, feta cheese, and “Western civ.” The details of its financial crisis strike them as complex and obscure. We need, however, to understand that the Greek situation concerns us directly. Since the Republicans took over the state government in 2012, North Carolinians have suffered from a noxious combination of public service cuts and a rollback of democracy. These are precisely the policies many Greeks are currently resisting. Their struggle and ours are different fronts of the same war.
Let’s briefly recall the basics of the Greek crisis. The 2008 financial meltdown hit Greece hard. A year later, a new government announced that Greece had been underreporting its budget deficits for years. Alarmed financial institutions jacked up interest rates on Greek government loans. Soon, as its economy teetered on the edge of collapse, the country was facing the prospect of bankruptcy and expulsion from the Eurozone (the 19 countries that share the euro as their currency).
Of course, the Greek state bears considerable responsibility for these circumstances. It is bedeviled with corruption, cronyism, and a woefully ineffective tax collection system. Historically speaking, however, Greece’s debt was not especially high. As Paul Krugman notes, Greek’s debt was 130% of its GDP, roughly the same ratio as the United States faced in 1946.
The crisis was the result, moreover, of European leaders’ decision to include relatively poor and underdeveloped countries (at least by European standards) like Greece in the Eurozone, which was formed in 1999. Greece thus gained access to lower interest rates in the Eurozone than it would have independently, allowing it to borrow money at the cheaper rates offered to prosperous countries like Germany. When Greece’s actual situation was exposed, however, its borrowing costs skyrocketed, plunging the country into a crisis from which it has yet to recover.
The real problem, however, began when the European Union, the European Central Bank, and the International Monetary Fund (which are known as the “troika”) imposed conditions on the Greeks in exchange for two bailouts that saved the country from defaulting on its debt. These conditions were based on the principle of “austerity,” or fiscal belt-tightening. Rich European countries—notably Germany—agreed to lend Greece money. In exchange Greece committed to slash government jobs and salaries, cut pensions and social welfare benefits, sell state companies to the highest bidder, and raise taxes on working people.
Austerity has been devastating for Greek society. Unemployment rose to 25% of the workforce, while the youth unemployment rate is hovering around 50%. A scourge of homeless is afflicting the country: the government estimates that there are 20,000 homeless in Athens alone. The combined effects of unemployment and drastic budget cuts has spawned a public health crisis, with drug shortages and increased reliance on emergency rooms. According to The Lancet, HIV infections have risen sharply, while, between 2012 and 2013, the number of tuberculosis cases doubled. Many Greeks have reacted by taking their own lives: between 2010 and 2013, one study shows, the suicide rate rose by 35%.
So what, then, does Greece’s situation have to do with us? Clearly things are not nearly as dire here. But they could have been—and that is the first lesson of the Greek crisis. Austerity is one of the worse policies you can pursue in a recession. Taking money from the hands of consumers by cutting public budgets strangles an economy at precisely the moment when it needs mouth-to-mouth resuscitation. This is particularly true when austerity is combined with tight monetary policies, which exists in Greece since it does not control its own currency. Greece can’t dig itself out of the hole because while austerity policies do cut deficits, they also smother the economy: since the crisis began, Greek GDP has shrunk by 20%.
One of the main reasons why the United States was spared this kind of social chaos after 2008 is because President Obama largely rejected austerity and favored stimulus (coordinated with the Federal Reserve’s policy of quantitative easing, or “easy money”) instead. The promoters of austerity were the Republicans, both in the Congress and at the state level. The austerity measures Congressional Republicans managed to pass—the automatic spending cuts known as sequestration, cuts in unemployment benefits affecting millions of people, the slashing of Food Stamps—are the same bitter and counter-productive medicine the Europeans have required Greece to take. North Carolina’s Governor Pat McCrory is a model student of German chancellor Angela Merkel, raising taxes on the bottom 80% of the population, repealing a tax credit for 900,000 working families, gutting pre-Kindergarten education, and blocking Medicare expansion, among other measures. If we have avoided Greece’s fate, it’s no thanks to austerity’s champions in the GOP.
Secondly, the Greek crisis reminds us that “free markets” aren’t nearly as free as they’re cracked up to be. If anything, they can be downright authoritarian. The priority of European leaders and the troika has been forcing austerity onto Greece, regardless of the will of its people. One Greek politician calls austerity a “postmodern occupation”—an occupation by bankers, not troops. In January, the Greeks brought the anti-austerity party Syriza and its leader, Alexis Tsipras. When Tsipras, negotiating with the troika to avoid default when a new round of loans came due on June 30, decided to submit the package to a national referendum on July 5, European leaders were outraged that the Greek leader chose to consult his people rather than to bow to European diktats. Some European leaders openly encouraged the Greeks to defy their government, effectively advocating regime change in a sovereign state.
In North Carolina, we see the same connection between austerity and contempt for democracy. The same legislature that has slashed public spending and past costs onto working families has gerrymandered legislative districts to ensure its survival and passed breathtakingly arrogant laws suppressing the ability of minorities and young people to vote. The connections between austerity and anti-democratic instincts are complex, but boil down to one basic fact: given the chance to vote, most working people would reject the extreme laissez-faire advocated by the moneyed interests in favor of investing in the common good. In the minds of the Art Pope and Koch Brothers, if democracy isn’t good for profits, so much the worse for democracy.
Whatever you think of Syriza’s politics, the fact that 61% of the Greek people voted oxi—“no”—to Europe’s demands for new austerity (thus backing Tspiras’ government) was an unqualified triumph of democracy over economic blackmail. This is the third lesson of the crisis. Even as European Central Bank capped credit lines to Greek, forcing the government to close banks and impose a daily 60 euro limit on withdrawals from ATMs, the Greeks, in the words of one government official, “overcame fear, they set aside their pecuniary interests, they ignored the fact their savings could not be accessed, and they gave a resounding, majestic no to what was in the end an awful ultimatum on behalf of our European partners.”
Despite the Greeks’ resistance, the country’s creditors have not relented: in recent days, Tsipras has signed what he acknowledges is a “bad deal”—i.e., a degree of austerity—to avoid defaulting. The struggle, in short, continues.
In Greece, North Carolina, and across the globe, powerful economic interests favor free market policies and austerity measures that would gut social welfare, privatize public services, and attack the rights of working people, regardless of the human toll. Though struggles will always have a local dimension, globalization means they also have much in common: Greeks who voted oxi on July 5 speak the same political language as North Carolinians who show up at Moral Mondays. The Greek crisis is our crisis, too.
Dr. Michael C. Behrent is an Associate Professor in the Department of History at Appalachian State University in Boone.