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January 16, 2012
From all accounts the effects of the imposed neoliberal austerity (a purging of the rottenness from the system) has resulted in Greece's economy being in shambles, its society in turmoil, and its finances ruined. Yet more cuts are coming even though a reform process based on a pillar of fiscal austerity alone risks becoming self-defeating since the economy shrinks, government revenue falls, and the debt is harder to repay.
Crisis management is the new normal in the EU, but as the EU lacks good mechanisms for crisis management, the European future looks bleak.
Greece is on its knees and its future looks to be one of fiscal bondage and discipline in a world where the economic centre has shift to east Asia-- notably India and China. The EU is now deep in recession and is likely to remain so for some time. Many sovereign states in the EU owe large amounts of debt and are likely unable to pay it all back. They desperately need economic growth but are forced to cut spending, hurting their near-term growth.
Merkel bnd Sarkozy's (or 'Merkozy's' ) austerity policies are imposed through EU summits, and the technocratic European Commission, and the non-European IMF, onto other EU countries. There is little democratic legitimacy in this.
In the Financial Times Wolfgang Munchau says that:
The eurozone itself has fallen into a spiral of downgrades, falling economic output, rising debt and further downgrades ... With each turn of the spiral, the financial and political costs of an effective resolution increase ... We have moved past the point where electorates and their representatives are willing to pay the ever-rising costs of repairing the system...Expectations are changing quickly, and so is the acceptance of a violent ending.
As Paul Krugman observes in his Keynes Was Right European nations like Greece and Ireland, who that have had to impose savage fiscal austerity as a condition for receiving emergency loans, have suffered Depression-level economic slumps, with real G.D.P. in both countries down by double digits.
However, it is unlikely that Keynesian aggregate demand management alone will lead to long-run sustained growth because the economic engines in the EU need a major overhaul to ensure long term growth that emerges from being connected to the economic centre of the global economy.
But its not just an economic crisis in the EU. The failing economic policies are now intertwining with democratic crisis and political fracturing across the EU, as the economic crisis becomes a deep crisis of European Union itself .
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I'm surprised at your link to the American Prospect article to illustrate the Greeks' predicament. That article is just a ranting condemnation of Greek politicians, Greek unions, Greek students, Greek public servants and just plain Greeks.
The author condemns everything Greek, and leaves the reader with the strong impression that Greece's predicament is entirely the fault of the Greeks and that they deserve their misery. It is an awful article.