WHY THE GREEK RESCUE PACKAGE IS A SERIOUSLY FLAWED FINANCIAL PLAN ?

The Greek rescue package is a seriously flawed financial plan. First, it is conditioned upon the successful implementation of a structural adjustment programme that contains harsh austerity measures [tax increases, higher property taxes, increase in VAT rates cutting the public sector wage bill, cuts in social benefits, increase social contributions receipts, close/merge public entities and subsidies, cuts in public investment spending, defense cuts, cuts in healthcare spending, cuts in subsidies to local government, privatisations]. These measures will hurt workers, pensioners and the poor and dismantle an already scant welfare system. Greece already ranks among the most unequal societies in the world, with 20 percent of the population living below poverty level, and its social services resemble those of an undeveloped rather than those of a developed country.

Further, the austerity measures of wage cuts, pension reductions and sharp tax hikes will depress spending and lead to severe job losses for an economy that is already facing a 16.2%  unemployment rates. It is estimated that unemployment will increase by an additional 6 percent because of austerity measures and the GDP is expected to shrink by at least 3% this year.

In sum, Greece is being asked to implement an amazing harsh structural adjustment programme which will only make the economy worse off and cause immense human suffering but will still end up with an unmanageable sovereign debt crisis. Expect more rioting in Greece with the austerity measures are implemented. The wrath of the people is not directly simply against the austerity measures but against the ruling system itself as the economic and financial crisis has finally brought to the surface all the perversions and deformities of a political culture that thrives on graft and corruption, thanks to the existence of a paternalistic state where kickbacks constitute routine practice for the provision of public services.

The public anger over corruption and administrative inefficiency is certainly justified even if it comes from the same citizenry that has allowed the two major political parties to retain their monopoly of political power by voting largely on the basis of clientelist expectations.

The capitalist class in Greece has always been dependent on the state, but the debt crisis has now generated irresolvable contractions within the specific dynamics of the socio-econiomic and politico-economic context of Greek capaitalist development that the economic and fiscal crisis has given rise to a strikingly severe political crisis, perhaps not very dissimilar to those political crises that have led in the past to the emergence of authoritarian regimes.

Greece 'rescue package' will sink its economy deeper into recession and cause severe social disruption. This will create a political crisis of possibly colossal dimensions. The country will have an extremely hard time making the adjustment and debt restructuring or default will become unevitable.

There is the prospect that within two to three years Greece's membership in the eurozone will reach a dramatic end (and perhaps for some other member states as well) as a two-track Europe cannot provide the financial stability needed for the Euro. Such a development will have adverse short term effects, but it will also provide an opportunity for the launching of a new political economy whereby society is organized not around economic but rather on social terms.