Failing to learn from Greece
Zorba the Greek isn't dancing the sirtaki much nowadays. Instead, he's taking part in stormy protests against what have been dubbed his government's 'barbaric cuts,' which were approved late last week.
Zorba the Greek isn't dancing the sirtaki much nowadays. Instead, he's taking part in stormy protests against what have been dubbed his government's "barbaric cuts," which were approved late last week. Thousands took to the streets, surrounded the parliament building in Athens and stormed the Labor Ministry. The police didn't hesitate to fire tear gas and throw stun grenades. After that, strikes stopped train and bus services, air-traffic controllers grounded dozens of flights, schools closed down and the employees of the government electricity company threatened that they would soon shut off power.
This was the Greek public sector's response to the government's austerity plan, passed by parliament. This was no less than the third budget cut, the first two having failed to convince the world that the Greek government was serious about reducing its budget deficit from 12.7 percent to 8.7 percent of gross domestic product.
This time, the government announced 4.8 billion euros worth of belt-tightening, on top of a previous 11 billion euros. The money is to come from additional slashes in public-sector salaries, a 30 percent cut in holiday bonuses, a pension freeze, and hikes in value added tax from 19 percent to 21 percent and in duties on alcohol, tobacco and fuel.
The problem, as the Keynesian model teaches, is that during recessions such as the one in Greece (unemployment above 10 percent and negative growth), government spending should be increased and taxes reduced to stimulate the economy. So why is Greece doing the opposite? Doesn't it fear a deepening of the recession?
Yes it does, but it has no choice. With so large a debt - 300 billion euros, or 120 percent of GDP, the highest in the European Union - and a huge balance of payments deficit, Greece could find itself with no one willing to lend it one more euro. Then it would be unable to pay or service its old debts and suffer the worst fate of all: bankruptcy.
So is it any wonder that many people have trouble believing in Prime Minister George Papandreou and his socialist government? Last year Papandreou ran a stunningly populist election campaign, promising all good things including increases in public-sector wages, unemployment benefits and the education budget. Everyone loved him and he won. But now Greece is paying the price and Papandreou is hated by all sides because he is not only not keeping his promise to lighten the load, he has to do the exact opposite - make the burden heavier. And that hurts.
Among those who don't believe in him are the Germans, so they're not allowing Chancellor Angela Merkel to lend Greece a helping hand. "Let them eat what they cooked up for themselves," say the Germans. Two German politicians even suggested that Greece sell a few of its islands to cover some of its debts. The tabloid Bild Zeitung urged the Greeks to adopt the German work ethic - get up early, work hard until you're 67, don't expect 14 monthly salaries a year, don't pay a bribe to get a hospital bed, don't claim subsidies on olive trees that don't exist, and don't cheat the tax man. But the Greeks don't want to give up their easy lives.
This Greek lesson is something that Prime Minister Benjamin Netanyahu and Finance Minister Yuval Steinitz do not want to learn. They, too, want to live well. They, too, want to be loved, right now. They, too, want to increase spending rapidly and "do good by the people," in the immortal words of Menachem Begin. Because, as Steinitz has claimed without blinking, "the public sector is already lean enough." And without blushing, the "new" Netanyahu declares that he needs more funds "to improve public services."
How touching. How kind they are. Just like Papandreou.