Greek workers have begun a 3-day general strike in protest against further austerity measures that are being proposed in return for more bailout money from their European creditors.
Even the Wall Street Journal admits that the proposed package of fiscal retrenchment measures is unsustainable, as it could come to 5 percent of Greece’s gross domestic product.
Eurozone finance ministers are holding a special meeting on Monday to debate the problem. Few expect a solution. One is needed at the latest by July, when Greece will default on bond debts unless a deal unlocks fresh bailout aid. The number causing the most grief is 3.5% of GDP: the primary-surplus target written in last year’s Greek bailout agreement. “The IMF thinks the primary objective should be lower. That would help Greece,” says David Mackie, chief European economist at J.P. Morgan.
Aiming for a smaller surplus would allow for less austerity, and for the Greek economy to breathe, IMF officials have argued for months. But it would also entail restructuring European loans to Greece, so that its debt doesn’t spiral ever higher. At a minimum, the IMF wants Europe to postpone Greece’s payment obligations by decades.
Eurozone governments led by Germany don’t want to take a hit on their Greek bailout loans, which total €205 billion ($234 billion) so far. Berlin is insisting the primary-surplus goal can’t be changed.
The fact is, since 2010, a succession of Greek governments have enacted spending cuts and tax increases worth a total of 32.3 percent of GDP, “a scale of austerity far beyond that seen in any other European country during the financial-crisis era.”
Greek workers are saying no more—and even the Wall Street Journal, which still considers the previous austerity measures to have been “inevitable,” can’t find a policymaker or economist who “argues that further belt-tightening on that scale is what Greece’s economy needs at this point.”