Tuesday, November 13, 2012

Europe Imposes More Austerity on Greece – Apparently Thinks There is Still Some Life to Kill in the Greek Economy

Another Nail in the Coffin that is Greek Society

Saving Bond Holders at All Costs (To Other of Course).

One has to admire European policy makers, really one does.  In the face of overwhelming evidence that their austerity policy towards Greece is not working they just keep piling it on.  Policy makers who have this much faith, this much belief that they are right when the evidence just keeps mounting against them must be praised for their consistency.  Of course they must be condemned for their ignorance, stupidity, short sightedness, cruelty and everything else.

Europe has just forced new policies through the Greek government, policies designed to just kill the remaining flickering light of the Greek economy.

Greek lawmakers narrowly approved a multibillion-euro austerity package early Thursday in an effort to win more bailout funds, but the measures also threaten to deepen the country's brutal recession and destabilize its fragile politics.

In the hours leading up to the vote, violent clashes erupted between riot police and protesters as tens of thousands gathered in the square outside Parliament to voice their opposition as politicians inside debated legislation that would impose deep cuts in pensions and public-sector wages and clear the way for laying off thousands of civil servants.

Exactly how firing thousands of workers will decrease an unemployment rate that is already one of the highest in the history of any developed nation was not explained.  What was explained was the necessity of European aid so Greece can pay interest and principal on its debts.

Prices of Greek government bonds have been relatively stable, as investors bet that the country's new austerity measures will pass, easing fears of a renewed standoff between Greece and the EU of the sort that prompted fears this year that Greece would leave the euro.

But some experts are still trying to impose logic in the arguments over policy that the policy is self defeating and will not accomplish its goals of restoring the Greek economy.

At issue is what economists call the fiscal multiplier: in this case, how much an economy will contract for every euro in spending cuts or tax increases. The issue has once again called into question whether the draconian austerity programs prescribed for Europe's vulnerable states—from Greece to Spain and Portugal—are the right recipe for getting ailing economies up and running again. Some economists said Greece's economy could shrink by between 6% and 9% next year after the new measures are implemented.

"In trying to fix the economy we are severely damaging society and causing political instability," said Panagiotis Petrakis, an economist at the University of Athens. That instability, in turn, "further weighs on the economy."

As for Greece itself, it is a long lived civilization and it should survive this attempt to kill it.  But unless the policy is reversed soon that will not be in the lifetime of any living today.

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