The latest news is, they’ve settled on a package of 120 billion euros (about $160 billion) to save the Greek economy. And the other PIIGS (Portugal, Italy, Ireland, and Spain). And the European Union. Not to mention the global economy.
That’s what all the pundits are writing about: the problem of “contagion” and whether or not Greece has the “discipline” to get its fiscal house in order. Or, alternatively, whether Greece will be forced to default and leave the Eurozone. And, if so, what the effects will be on other countries.
What they’re mostly not discussing are the conditions that will be imposed in Greece to receive the bailout funds. And who will benefit from the bailout.
Only one commentator, Daniel Gros, has had the temerity to outline the proposed austerity measures. The goal, within Greece, is to lower unit labor costs—to boost profits (in the export sector) and guarantee higher profits (by lowering the fiscal deficit). The goal, outside of Greece, is to repay the bankers that hold Greek debt. Both sides were only too willing until now to shift the burden onto public debt. The Greek state didn’t tax employers for government programs. And bankers throughout Western Europe made handsome profits on Greek debt.
That Ponzi scheme came to an abrupt end (although one could see it coming years ago), and the new deal is going to shift the burden of “adjustment” onto Greek workers. Now. And massively.
Gros explains that unit labor costs need to be cut by 10 percent. To do that, the Greek government and Greek employers will be called on to lower nominal wages (in both the public and private sectors), extend working hours and years, change the tax structure (lower social security taxes and higher value-added taxes), cut social programs. That’s the plan—for Greece and, by extension, for the other countries that are threatening default.
It’s capitalism’s way of saving the PIIGS and its own porcine elites.