Why is Greece in such a catastrophic state? Who, between Brussels, the bankers, the politicians and the people, is really responsible? What’s the least worst option: staying in the euro, or Grexiting?
For three years, Greece’s plight — and the international response to it — has dominated headlines. An estimated one-third of the Greek population now lives below the poverty line. Plummeting salaries and pensions, never-ending tax hikes and ever-deeper spending cuts have pushed the country to the brink of economic and social collapse.
Lines outside soup kitchens are lengthening; the numbers of homeless people are mounting; medicine is in increasingly short supply. Many Greek people are suffering as they have not suffered outside of wartime. Yet how much do we really understand of the reasons for this crisis — and possible solutions to it?
As Greece heads into an election today that could determine not just its own future, but that of Europe’s single currency and prospects for recovery, the Guardian asked its readers to send their questions to Costas Lapavitsas, professor of economics at the School of African and Oriental Studies in London, radical and well-known media commentator, and author of Crisis in the Eurozone. He makes no bones about the fact that he believes Greece should cut its losses and withdraw from the euro, and that broader European austerity is likely to lead to a longer, deeper recession and the end of the monetary union. Ultimately, he feels the people of Europe must gain democratic control over their financial institutions, and ensure they are restructured in the best interests of the people, not the banks.
Readers’ questions — nearly 100 of them — have been condensed into 10, which will, hopefully, address most of the issues and concerns you raised.
1. Who is mainly to blame for Greece’s path to ruin — politicians, ordinary people, the policies of the EU and the eurozone, or something else? To what extent is this purely a Greek crisis?
Blaming Greece for the eurozone crisis has been a regular feature of public debate, often taking virulent forms — ie, Greek people are dishonest and lazy, Greek politicians are corrupt, the country is backward and so on. There is no doubt that Greek society has deep problems, but as explanations of the crisis, these arguments are puerile. Astonishingly, Greek officials have mouthed some of these stereotypes while negotiating with the EU.
The Greek path to ruin was determined by eurozone membership, similarly to other peripheral countries — Portugal, Ireland and Spain. The periphery adopted the euro hoping that it would lead to convergence with the more developed core, but the monetary union has structural flaws. Within its rigid framework and faced with frozen German wages, peripheral countries lost competitiveness. Huge external deficits resulted, which were financed by borrowing from the banks of the core.
Peripheral banks also took advantage of easy credit to expand domestic lending. By 2009, the peripheral economies were laden with vast debts, making them effectively insolvent. Core countries, reasonably enough, were reluctant to carry the costs of peripheral insolvency. This is the root cause of the eurozone crisis and Greece is simply the most acute case of peripheral failure.
2. Surely the “troika” of the EU, the IMF and the European Central Bank (ECB) have a point when they blame Greece’s problems on tax avoidance, cronyism and other forms of political corruption?