The Greek Economic Crisis

The events in Greece are a microcosm of the economic fragility of the world economy. The residents of

Greece were tired of the austerity agenda from the EU. Therefore, there was an election that recently

ended. The historic election allowed the Syriza party to win the elections on January 25, 2015. The

current Prime Minister of the Syriza Party is Alexix Tsipras. The current Finance Minister currently is

Yanis Varoufakis (a former economic adviser to the corrupt neo-liberal PASOK leader George

Papandreou). People had high hopes that this new Greek government would be imaginative, creative,

and progressive, so the needs of the Greek people would be met. So far, unfortunately, that has not been

the case. The reason is that both men so far have reneged on every major and minor electoral program

that they ran on. They have embraced more retrograde actions and relations with the “troika.” They are

allying with the IMF, etc. Tsipras and Varoufakis have repudiated their promise to reject the dictates of the

“troika.” Syriza, during the campaign, had promised to write off all or most of the Greek debt. In

government, Tsipras and Varoufakis immediately assured the Troika that they recognized and promised

to meet all of their debt obligations. Syriza had promised to prioritize humanitarian spending over austerity

– raising the minimum wage, rehiring public employees in health and education and raising pension

payments. After two weeks of servile groveling, the ‘re-formed’ Tsipras and Varoufakis prioritized

austerity – making debt payments and ‘postponing’ even the most meager anti-poverty spending. When

the Troika lent the Syriza regime $2 billion to feed hungry Greeks, Tsipras lauded his overseers and

promised to submit a multi-billion euro list of regressive ‘reforms’. Both men have promised to tackle

depression level unemployment (which is 26 percent nationally and 55 percent for the youth).

Yet, both men are talking debt payments and didn’t so far allocate any funds for creating jobs. Syriza

promised to re-examine the previous rightwing regime’s dubious privatization of lucrative public

enterprises and to stop on going future privatizations. Tsipras and Varoufakis have disavowed that

promise. They have approved many privatizations and made overtures to procure new privatization

“partners” in lucrative tax concessions (which is selling out more public firms). Syriza came to power

under their promises to renounce the country’s 327 billion euro debt, kick out the Troika bailiffs. On

February 20, Syriza signed an agreement with the EU which repudiated its pledges to end austerity and

abolish the EU austerity Memorandum. Four days after this capitulation, Syriza announced plans for new

budget cuts, privatizations, health care cuts and increases in the effective retirement age. Yet, Varoufakis

doesn’t want the disintegration of the Eurozone. He even said that he wants alliances “even with right-

wingers.” When Günther Jauch insinuated his guest had insulted Schäuble, Varoufakis sang a veritable

hymn of praise to the German finance minister—one of the main architects of the austerity diktat in

Greece, and therefore one of the most hated politicians in Germany and Europe. These actions represent

a total capitulation to the banks. Still, Greek workers are still courageous in battling the actions of the

Euro banks.

Events in Early July 2015

The serious economic crisis in Greece continues. There have been failed negotiations among Greek

political leaders and the EU on how to solve the debt crisis in Greece. Eurozone finance ministers

rejected another offer from the Syriza-led government in Greece to impose austerity measures in return

for a new €30 billion bailout from the European Union (EU). Without more funding, Greece missed

repaying the latest tranche of its loan from the International Monetary Fund or the IMF. Greek Prime

Minister Alexis Tsipras has been dealing with trying to maneuver the demands of the EU, the European

Central Bank (ECB), and the IMF. The Greek daily Kathimerini claimed that Tsipras was ready to fly to

Brussels to discuss a new offer from EU President Jean-Claude Juncker. He reportedly had phoned

Juncker, ECB head Mario Draghi and European Parliament President Martin Schultz, while Syriza MPs

were ringing his office urging acceptance of any deal offered. Juncker held out the possibility of debt relief

only if Tsipras campaigned for a yes vote on the upcoming referendum on the demands from the troika

and agreed to terms first set out in a November 2012 agreement. Later, German Chancellor Angela

Merkel said that she hasn’t heard of any changes since the ultimatum which was delivered on Friday.

So, Tsipras announced a referendum for July 5. Tsipras’s offer shows that his call for a referendum on EU

austerity over the weekend like us his Tuesday call for a “no” vote on the referendum is a cynical political

tactic. Tsipras has already said that, even if the “no” vote won, he would use it to continue negotiating

with the EU. Yesterday, less than 24 hours after supposedly throwing down the gauntlet, he was taking

out his beggar’s cap and seeking to negotiate EU loans in exchange for austerity policies opposed by the

Greek people. Syriza came into office, because the Greek people were tired of the harsh austerity

demands of the European Union. Syriza wanted an agreement that preserves the framework of the

bailouts. The Greek bourgeoisie and the petty-bourgeoisie want a referendum as well. “From the first

moment, we made clear that the decision to hold a referendum is not the end but the continuation of

negotiations for better terms for the Greek people,” the Syriza government said in a statement. “The

Greek government will until the end seek a viable agreement within the euro.”

The proposal from a new bailout made in a letter from Tsipras is about Syriza trying to promote an

austerity program to submit to Greek creditors. Debt relief to make Greek capitalism viability is not

freedom. It involves borrowing an additional €30 billion, covering a two-year period, from the Eurozone’s

€500 billion European Stability Mechanism, bypassing the IMF, and allowing for some debt relief. Though

unspecified, the proposal would mean accepting the vast bulk of austerity measures demanded by the

EU. An EU source told Reuters that the Greek proposals were “closer” to what was being demanded of

them. Malta’s Prime Minister Joseph Muscat later reported that Greece was willing to suspend Sunday’s

planned referendum if an agreement was reached, or to “ask the people to vote ‘yes’ instead of ‘no’.” The

US wants all parties to make a sustainable solution. The US is concerned about the global markets.

Greece is offering new bailout concessions.

The July Referendum and other Events

The 2015 Greek bailout referendum was about asking the Greek people if thy would agree to or not agree

to an agreement plan submitted by the European Commission, the European Central Bank, and the IMF

to the Euro group (on June 25, 2015). People were asked to accept the plan or not. The Greek citizenry

overwhelmingly rejected the referendum in the realm of 61.31% saying no and 38.69% saying yes. So,

the people rejected the bailout condition being proposed by the European Commission (EC), the IMF, and

the European Central Bank (ECB). The referendum was voted on in July 5, 2015. This no vote repudiated

the agenda of the EU’s austerity agenda. This agenda has been pushed all across Europe not just in

Greece since the 2008 economic crisis. The people have shown political courage despite threats from the

EU (with some in Berlin wanting a yes vote. German Social Democrat and Vice Chancellor Sigmar

Gabriel said that by holding the referendum, Syriza had “torn down the last bridges across which Europe

and Greece could move towards a compromise”), the U.S. government, and the Greek ruling class. We

see the Greek youth, the Greek workers, and other activists standing up against the overt assault on jobs,

wages, and pensions.

By Timothy

Appendix A: Economic Facts

1. Taxes were far higher on top incomes in the three decades after World War II than they’ve been

since. The distribution of income was far more equal. The American economy grew faster in those

years than it’s grown since tax rates were slashed in 1981.

2. Over the past four decades, changes in technology, increases in international competition, etc. in

the labor market (like the decline of union and a falling real minimum wage) have reduce job

opportunities and wages for some American workers and expanded opportunities and incomes for

others. Income have stagnated and even declined for some at lower and middle income Americans.

Income at the top has risen.

3. Economic inequality has grown. Tax rates for the wealthiest Americans have declined over the past

decades while tax rates for non-wealthy Americans have remained constant. In 1960, the top 1

percent of Americans earned about 10 percent of all income in the USA and paid 22 percent of all

federal taxes. The federal tax system today is becoming less progressive. In addition to federal taxes,

families face state and local tax systems that are, on net, regressive. For instance, families in the

bottom 20 percent of the income distribution face state and local tax rates of 12 percent compared

to only 8 percent among the top 1 percent of families. Here is a trade on a trade deal:

“…I used to believe in "free trade" agreements, until I took a hard look at the numbers. NAFTA cost

U.S. workers almost 700,000 jobs. Since the Korea–U.S. Free Trade Agreement, America's trade deficit

with Korea has grown more than 80 percent, the equivalent of a loss of more than 70,000 additional

U.S. jobs. Since China’s admission to the World Trade Organization, the U.S. goods trade deficit with

China increased $23.9 billion (7.5 percent) to $342.6 billion.

Trade deals the fail to address currency manipulation or to effectively address labor standards --

while protecting the intellectual property of global corporate investors and the financial asset of Wall

Street -- aren't even about trade, since tariffs are already very low. They're really about enhancing

corporate and financial profits at the expense of American workers. That's why I urge you to tell your

representatives in Washington not to give the President fast-track authority to negotiate the Trans

Pacific Partnership." -Robert Reich

4. Black poverty fell 43% from 1959 to 1973 when the War on Poverty programs exploded in America

(and overall poverty was cut in half). Progress only stalled after those programs began to be scaled

back (in real dollar terms) after the mid-1970s. As for the Great Society programs, the data is clear: in

the years between 1965 and 1973, poverty rates plummeted, and especially in urban areas, by about

38 percent (when the economy was strong too). As for the Model Cities, the Model Cities program

was scrapped less than a decade after its launch. During its heyday, conditions actually were

improving in those communities. But once they were eliminated, obviously they cannot continue to

benefit those areas, nor can those areas’ subsequent problems be blamed on the programs, since the

programs no longer functioned.

Sadly, by the mid-1970s, virtually all the innovative programs of the Great Society had been cut or

eliminated, leaving only cash assistance (which began to decline relative to inflation and was never

sufficient to pull folks from poverty), food stamps and limited housing support as the main props of

the so-called welfare state. In the case of food assistance, its goal was not to end poverty, but far

more narrowly, to reduce food insecurity. From 1964 to 1968, union membership in the public sector

expanded by 2 million, and Blacks and women made up a disproportionate number of the new

members. Unionization and strike action were successful in waging a real war on poverty, as workers

resisted government wage controls and the corrosive impact of inflation.

5. Since the end of WWII, there have been 16 complete 4 year Presidential terms, seven Democratic

and nine Republican. Growth of real GDP averaged 4.35% per annum under the Democratic

presidents but only 2.54% under the Republicans. That partisan growth gap of 1.8 percentage points

is large by any standard - it implies that real GDP grew by 18.6% during a typical Democratic four-

year term, but only by 10.6% during a typical Republican term - and it is statistically significant

despite the relative paucity of data. Growth has always slowed down when a Republican president

replaced a Democrat and always sped up when a Democrat replaced a Republican. There are no

exceptions.

6. The financial crisis began in 2007. There were deregulated financial markets that seized up through

the creation of excessive debt and were reactivated via dramatic government interventions using

about $2 trillion of taxpayers’ money for bailouts.

7. The lowest 20 percent in income spends just over $22,000 a year, while the richest 20 percent has

nearly $100,000 to spend. That makes sense, given that they have more money overall: about

$167,000 a year before taxes compared to under $10,000 for the poor.

8. The poverty rate as it fell from 15 percent in 2012 to 14.5 percent in 2013, but there was no

statistically significant improvement in the number of Americans living in poverty. Furthermore, low-

and middle-income workers have seen little to no income growth over the past decade, as the gains

from economic growth have gone largely to the wealthiest Americans.

9. In the late 1960s, a full-time worker earning the minimum wage could lift a family of three out of

poverty. Had the minimum wage back then been indexed to inflation, it would be $10.86 per hour

today, compared to the current federal minimum wage of $7.25 per hour. Raising the minimum wage

to $10.10 per hour and indexing it to inflation would lift more than 4 million Americans out of

poverty. Nearly one in five children would see their parent get a raise. Recent action taken by cities

and states—such as Seattle, Washington; California; Connecticut; and New Jersey—shows that

boosting the minimum wage reduces poverty and increases wages.

10. One of our nation’s most effective anti-poverty tools, the Earned Income Tax Credit, or EITC,

helped more than 6.5 million Americans—including 3.3 million children— to avoid poverty in 2012.

It’s also an investment that pays long-term dividends. Children who receive the EITC are more likely

to graduate high school and to have higher earnings in adulthood.

11. Our national poverty rate fell 42 percent during the War on Poverty, from 1964 to 1973. And that

trend continues today: The poverty rate fell from 26 percent in 1967 to 16 percent in 2012 when

safety net programs are taken into account. Our economy and social fabric have changed

significantly in the past 50 years. Demographic shifts, rising income inequality, and insufficient access

to jobs and education pose new policy challenges. Before 1963, and the creation of Medicare and

Medicaid, one in five Americans had never seen a doctor. By 1970, this proportion had shrunk to one

in twelve. Infant mortality rates fell by one-third between 1965 and 1972; among African Americans,

infant mortality rates were reduced by half.

12. Only 63.4 percent of American households owned their homes in the second quarter of 2015.

This was a decline of 1.1 percentage points over only twelve months, and 5.8 percentage points less

than the peak of 69.2 percent reached in 2004.

A Very Important Message