Party of the European Left –transform! europe

“Together we can put an end to the problems of debt and austerity in Europe !”

“Connecting the debt crisis with the question of the crisis in the financial system and neoliberal policies. The Troika intervention. The ECB and the Banking Union”

Elena Papadopoulou, NPIBrussels, 10 April 2014

Selected indicators of the Greek economy 2007-2013

Selected indicators of the Greek Economy 2007-2013 

2013   2012 2011 2010 2009 2008 2007GDP growth (%), in constant prices -2,6 Q4 -6,4 -7,1 -4,9 -3,1 -0,2 3,6GDP current prices 181.710 Q4 193,7 208,5 222,2 231,1 233,2 223,2Private consumption (2005 constant prices) -8,7 Q1 -9,1 -7,7 -6,2 -1,6 4,3 3,6Public consumption (constant prices 2005) -7 Q1 -4,2 -5,2 -8,7 4,9 -2,6 7,1Current account balance (% of GDP) -2,3 -5,3 -11,7 -12,8 -14,4Exports of goods and services 2,5 Q1 -2,4 0,3 5,2 -19,4 1,7 7,1Imports of goods and services -7,8 Q1 -13,8 -7,3 -6,2 -20,2 0,9 14,5General Government Balance - - -10 -9,6 -10,8 -15,6 -9,9 -6,8General Government Primary Balance [0.4] - -5 -2,4 -4,9 -10,5 -4,8 -2

Gross sovereign debt (% of GDP) 175,2

(321,5 bn €) 156,9 170,3 148,3 129,7 112,9 107,2

Unempoyment (%) 28,0M11 2013 26,4 21 14,8 10,2 8,9 8,9

Evolution of Greek sovereign debt – MoU scenario

1

Public debt (% of GDP)

Linear ()

Targets according to the MoU (July 2013- March 2014)

General Government Balance 2013 2014 2015 2016

%of GDP 0.0 1.5 3.0 4.5

Bn € 0 2.7 5.7 8.9

GDP growth rate -3.9 0.6 2.9 3.7

FAILURE OF THE THREE MAIN RECIPIES OF ECONOMIC ORTHODOXY

Excessive sovereign debt can be repaid by primary budget surpluses

Austerity can be expansionary and constitute the way out of the crisis

Reducing unit labour costs is the way to restore competitiveness

Kicking the can down the road

Could the problem of the Greek debt be resolved earlier?

Debt crisis is not an isolated event.

Strongly connected to the systemic crisis of the capitalist system and more specifically

Facet of the global financial crisis in the conditions of the architecture of the Eurozone and in the context of the neoliberal transformation of the European economies after ‘70s.

But

Debt as an excuse to tighten the neo-liberal economic order within a conservative federalist framework

Greek debt still not viable: further write-off only after primary surpluses and the completion of "structural reforms"

Alternative would have helped preserve the European social model and changed the neo-liberal agenda.

Contesting the “Greek exceptionality”

Main arguments of the “exceptionality” narrative about the Greek fiscal crisis:

Government profligacy and populist politics

Lived too long beyond our means

Oversized public sector

Rent-seeking redistribution coalitions marginalize “productive” entrepreneurs

So

Austerity response to the crisis as an opportunity to carry out the reforms that should have been implemented long ago to recalibrate the economy in order to marginalize the former groups and enhance the latter.

Economic consequences (L-shaped recovery)

Flows are going the wrong way

Problems accentuated by the architecture of the EU and the eurozone (no fiscal transfers, breakdown of monetary transmission mechanism, role and scope of the ECB, Banking Union not moving forward)

Danger of disinflation

German strategy of keeping surpluses while the South must keep in balance

Jobless growth (equilibrium with high unemployment)

Markets can't kick start the economy with automatic mechanisms

Neoliberal project destroys the capacities and institutional tools for policy against a stagnating economy

Conclusions

1. The debt crisis as part of the systemic crisis of the capitalist system in the context of the neoliberal European integration

New restructuring inevitable

Cancel big part, repay the remaining with growth clause

Debt Conference ala London 1953

2. The problem of production reconstruction and rethinking about industrial policy in the context of the challenges of our time