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Greece’s ‘Austerity’ Plan Is Anything But

Posted By Daniel Flynn On February 10, 2012 @ 12:21 am In Daily Mailer,FrontPage | 14 Comments

Heretofore, debt-defaulting Greece has operated on Raiders of the Lost Ark-logic: “You throw me the idol; I’ll throw you the whip.” Its European Union and International Monetary Fund sugar daddies have tired of sending cash without budget reforms in return. On Thursday, they rejected Greece’s newest amorphous pledge of budget cuts later for billions now. Burned before by big promises with no fulfillment, the Eurogroup sent a clear message to the Greeks through its chair Jean-Claude Juncker: “no disbursement before implementation.”

But with Greece already forcing creditors to take a haircut, and refusing to make good on its pledged reforms, why would European nations agree to throw more good money after bad?

A coalition of Greek political leaders came to an agreement on Thursday to narrow the chasm between revenues and receipts in hopes of paving the way for $172 billion in new loans from the European Union. But EU finance ministers balked at the proposal that contained very little in specified cuts for non-defense-related government expenditures. The European finance ministers demanded from the troubled nation $325 billion in new cuts and parliament’s preapproval of the plan before it will agree to a further bailout. Greece, which is already de facto in default since other nations are paying its creditors, stands to legally default on March 20 if it doesn’t receive a cash infusion.

The refusal to implement promised budgetary and economic structural reforms is a tacit admission that Greek politicians believe the debt crisis just isn’t their fault. This is a popular sentiment within Greece, muted only when going abroad with hat in hand. Foreign bankers, EU bureaucrats, and American capitalists are favorite scapegoats according to internal Greek rhetoric. If outsiders are to blame for the crisis, why should Greeks reform their economic system? It’s everyone else who has the problem, after all, not Greece.

This attitude manifests itself in periodic temper-tantrum street protests and strikes by state workers. Government officials behave similarly in refusing to cut state jobs and services lest they alienate voters and find themselves out of a job. The procrastination seems to be based on the hope that the EU will inflate the currency—as Greece so often did when it controlled its money in the past—and print away the nation’s debts. Given that one in ten Greeks, and one in four employed Greeks, calls government boss, the country’s political leaders have made it nearly impossible to institute meaningful reform. The politicians have bribed the populace into supporting big government, and the populace’s dependence on the behemoth state has made it politically suicidal for politicians to cut into it. Not doing what is personal political suicide is surely national political suicide.

“That’s enough, we can’t take it anymore,” chanted protestors in Athens on Tuesday. The mantra is that there is nothing left to cut. The media is only too willing to repeat it. The New York Times characterized the initial rejected agreement as “a package of harsh austerity measures,” while the UK’s Independent claimed that the “austerity drive has sent unemployment to a record high of 18.2 per cent and the country’s finances into a spiral of recession.”

But Europe’s finance ministers know something that journalists do not. There hasn’t been an austerity drive. Sacrifices have been demanded of taxpayers, such as a 217 percent rise in property taxes. And this deprivation has resulted in three years of negative growth—with a debt-to-GDP ratio set to approach 160 percent this year. But there has been no state austerity program. Greece’s government increased its spending by six percent last year. What is austere about that?

Is there nothing left to cut? Child care is free in Greece. So is university education. Private colleges, and home schooling, are forbidden. The dole is a constitutional right. So is health care, which is provided by the state. The government picks up the tab on trips to the dentist and eye doctor. The country’s 2010 budget identified 74 state-owned enterprises worth 44 billion euros. Workers retire at an average age of 53, with decades of pensions acting as a severe burden on taxpayers.

“Nothing left to cut” is the rhetoric. Reality is closer to “Nothing has been cut.”

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