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. [includes rush transcript]
This is a rush transcript. Copy may not be in its final form.
SHARIF ABDEL KOUDDOUS: Tariq Ali, we want to ask you to stay with us as we turn to the situation in Greece.
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 on Monday after EU leaders agreed to a $960 billion package to contain Greece’s financial troubles.
Greek Prime Minister George Papandreou said the problem was not just about Greece, but added, quote, "it is a global problem that has to do with the international financial system and there is a need for reforms and change in that system."
Meanwhile, the austerity measures demanded by the IMF and the European Union as a condition of their loan are continuing to exact their toll. On Monday, the Cabinet approved a sweeping overhaul of the country’s pension system. The Labor Minister Andreas Loverdos said the entire system would have collapsed without them.
AMY GOODMAN: But the two main unions have been holding protests against the reforms. In a statement, one of the unions said, quote, "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.
In addition to Tariq Ali in London, we’re joined in Washington, DC by Mark Weisbrot. He’s co-director of the Center for Economic and Policy Research and has written on the situation in Greece for the Guardian of London. His latest piece, pending publication, is called "The European Union’s Dangerous Game." But we’re going to begin with Tariq.
You were talking about the economy in London. Papandreou was saying this is not just about Greece; it’s about the economic system overall. Talk about what’s happening, though, in Greece and how it relates to where you are, Tariq.
TARIQ ALI: Well, Amy, it’s exploded in Greece, very violently, as many could have predicted, because trade unions in Greece have remained strong. They feel that a lot is at stake, and they know that if these measures, which should never be called reforms — if these measures, anti-working-class measures, are pushed through by the government, their living standards of the average citizen of Greece will just go right down. They will suffer. And people are asking, in Greece and elsewhere, “How come we are being victimized? All the cuts in public spending affect us; they don’t affect the rich. And why are the bankers not being punished? Well, why is this system, the system created by neoliberalism, of deregulation, of actually legalizing financial speculation, why is this not being stopped?”
And we see in Germany, just last night, the ruling coalition suffered very heavy defeats in regional polls, and there’s pressure on Angela Merkel, the — Angela Merkel, the German chancellor, to resign, because she’s now lost a majority in the Senate, and they can’t push through their so-called reforms. And the Social Democrats, who are now in opposition, are saying that the financial system has to be thoroughly reformed. It’s the strongest statement from a Social Democrat in Europe I’ve heard. And it’s an indication that the system is in a complete mess. The reason the EU are putting in so much money is to reassure the markets and to prevent them from carrying out — from similar things happening in Spain and Portugal, which are on the brink.
So the Greeks really — the people fighting on the streets of Greece are fighting for the whole of Europe. And they held up a huge banner a few days ago on the Acropolis, this historic building in the center of Greece, saying, "Europe, join us." And if the European workers’ movement were to join the Greeks, then we would have serious change.
AMY GOODMAN: Well, Tariq, I want to thank you for being with us. Tariq Ali, joining us from London, as we turn now to Mark Weisbrot in Washington, DC.
Mark, you’ve been writing about Greece, following it carefully. What do you assess has happened there, and what needs to take place?
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.
AMY GOODMAN: I wanted to turn to a clip of an interview I did with the Greek Prime Minister George Papandreou when we were in Copenhagen. He was there at the climate talks. And I asked him — the protests were just beginning then.
AMY GOODMAN: Prime Minister Papandreou, you have talked about the economy of Greece very much in trouble right now. There have been protests in the streets. What does the head of the Socialist International say to the Prime Minister of Greece — you have — being both?
PRIME MINISTER GEORGE PAPANDREOU: We have conversations every day. We — I would say that I need — on the one hand, we need to turn around our economy. I would say make this crisis an opportunity, moving towards a green economy. We need to make important structural changes, because we — I see the core of the problem in Greece as a state which was — had a lot of corruption, systemic corruption, a lot of clientelism —- that is, political favors, money to go into political favors. And this undermined the sense of citizenship and rule of law. We had, therefore, a lot of tax evasion. And that also -—
AMY GOODMAN: The euro economy — are you talking about pulling out?
PRIME MINISTER GEORGE PAPANDREOU: No, we’re not talking about pulling out of it. Actually, euro has helped us quite a bit in staving off some of the more negative possibilities of the crisis, the world crisis, the financial crisis. We are — so we have our homegrown problems. They are being made worse by the international financial recession, because if we had a higher GDP and tourism and so on, we wouldn’t be in this situation as badly. But we do have our own homegrown problems.
And that is where I, as prime minister, am focusing on making these changes, but in doing so, helping out those that are unemployed, helping out those that have lower wages, helping out the middle class. So, they are not to blame for this crisis. And therefore, it’s a difficult path of making cuts, but at the same time making sure that we move on a path of growth and protecting those that are weaker in our society.
AMY GOODMAN: That’s Prime Minister George Papandreou when I was speaking to him in Copenhagen in December. He’s the prime minister of Greece, also the head of the Socialist International. Mark Weisbrot, your response?
MARK WEISBROT: Well, again, they’re making cuts. They’re making these reforms. If you want to reduce the size of the state sector, which I’m not sure it needs to be, but if you did, you don’t do that during a recession. We didn’t do that here, you know. I mean, you do have that problem. It’s similar in the state and local governments, and that’s, you know, one of the reasons why our stimulus program, again, which is the opposite of the policy that they’re prescribing for Greece and Spain and Portugal and Ireland, is — you know, our stimulus program gives money to the state and local governments so that they don’t make these kinds of cuts. We didn’t have nearly enough of that, and it’s one of the reasons why our recovery is as slow as it is and unemployment remains high. But at least we went in the right direction. They’re telling these countries to go in the actual opposite direction that we went in. And this is the fundamental problem. Once you go down that road, you don’t know where the end is going to be.
They did that in Latvia, for example, and in Estonia. These countries — Latvia has already lost more than 25 percent of its economy, and it still has a very slow and painful recovery ahead, if it recovers. Again, this is not the kind of — this makes really no economic sense. And they’re going to have to change. Something is going to have to give.
SHARIF ABDEL KOUDDOUS: And Mark Weisbrot, you’ve pointed to the experience of Baltic countries like Latvia, like Estonia, as — who have followed EU and IMF policy in the past, as a warning of what would happen to Greece in the future. Explain what you mean.
MARK WEISBROT: Well, the idea, again, is this internal devaluation process. So, instead of trying to grow your way out of a recession, which we’re trying to do — again, you know, not with a sufficient stimulus, but with some stimulus — they’re trying to actually shrink their way out. So the idea is, they literally shrink the economy and try and push down wages and prices. And that’s, of course, because, you know, in Latvia, Estonia, they have a currency that’s pegged to the euro, and in Greece they actually have the euro. And, you know, a lot of people have written about the fundamental problem of having these countries like Greece in the euro, because it’s an overvalued currency for them. And that is a problem. And, you know, that’s why, you know, they should really consider getting out of the euro as one option.
If the European Union and the IMF and the European Central Bank, which are the parties that they’re negotiating with, if they’re not willing to give them a program that allows them to grow out of it, but instead they’re telling them they have to shrink until some day the rest of the world economy will rescue them by, you know, providing demand for their exports or by a huge inflow of capital, which is not on the horizon, by the way — I mean, the European Union is only projected to grow by one percent over this year —- so if, in fact, you know, they’re not willing to allow them to grow out of the recession, then the Greek government should just not accept it, and they could devalue their currency and renegotiate their debt, which is what Argentina did, for example, at the end of 2001, and it was very successful for them. The economy shrank for only one quarter, and then it grew by 63 percent over the next six years. So -—
AMY GOODMAN: Finally, Mark, I wanted to ask —-
MARK WEISBROT: —- there are alternatives.
AMY GOODMAN: The alternatives, quickly?
MARK WEISBROT: Well, that’s one alternative, to get out of the euro and renegotiate your debt and start over, rather than dragging this out for years and ending up with a bigger debt than you’re starting out with right now.
AMY GOODMAN: I want to just finally ask you about Goldman Sachs, the New York Times reporting that Wall Street tactics akin to those that fostered the subprime mortgages in America have worsened the European financial crisis by enabling governments to hide their mounting debts. One deal created by Goldman Sachs helped Greece obscure billions in debt from the budget overseers in Brussels. Goldman Sachs is said to be the most important of more than a dozen banks used by the Greek government to manage its national debt using derivatives. Quickly comment on that.
MARK WEISBROT: No, I think it’s true, they did some of the same kind of accounting tricks that they did here. I don’t think it was a major cause of the problems we’re looking at, but it definitely was there.
AMY GOODMAN: Mark Weisbrot, we want to thank you for being with us, economist and co-director of the Center for Economic and Policy Research, joining us from Washington, DC.