By John Weeks

Greek Government Calls an Election

It is rare that the direst warnings from the Left are flagrantly and unambiguously verified for all to see.  But reaction to the election of Syriza in the Greek election does so beyond the fantasies of Marxist paranoia.  Some background and context are necessary to understand how a democratic election can verify the dangers lurking within capitalism.

The coalition that mis-governed Greece until the end of January had done its best for two years to implement dutifully draconian austerity packages.  Design of the packages came from European Commission faux technocrats in Brussels, enthusiastically endorsed by the Bundesbank (the central bank of Germany) whose approach to the fiscal deficits of other EU countries is similar to the advice found in Exodus 22:18 (“Thou shall not suffer a witch to live”).

The proclaimed purpose of the austerity was not merely to balance the books of the Greek government, but to generate a surplus, which it did by causing the collapse of the economy.  Under the ancien régime the surplus would go to reduce the country’s public debt, which in net value is slightly less than 130% of gross national product (GDP).

The impossibility of substantial debt reduction through public buy-back seems not to have bothered the infamous troika (IMF, European Commission and European Central Bank) that assumed upon itself the job of monitoring compliance by its client government in Athens.  In any case, the new government has summarily dispensed of the services of this anti-democratic and technically incompetent body (and the Financial Times agrees with that judgment).

The global financial crisis of 2008 resulted in fiscal deficits throughout the world and especially in the member countries of the European Union.  In 2009 the Greek fiscal deficit was the largest relatively to GDP for any euro zone country, minus 15.6%.  In absolute terms this 15.6% represented about than €36 billion ($40 billon).  By the end of 2010 the deficit had dropped by one-third, to slightly less than €24 billion.

This substantial decline did not satisfy the European Commission and certainly not the German government or the Bundesbank.  By the end of this year the Greek fiscal balance will be down to about -3% of GDP or €6.5 billion, as the chart below shows.  The chart also shows one indicator of the enormous cost of that reduction in the public deficit, national income lower by almost 20%.

To put it bluntly, the policies reduced the fiscal deficit by at a cost in national income of more than double that amount.  Since the end of WWII no western European country has suffered such a collapse of GDP.  Even more, between 1945 and 2010 we cannot find one example of a developed capitalist country in any year with a lower national income than four years previously.

No doubt the ideologues in the European Commission and the Bundesbank would invoke a variation on the infamous quotation from an unidentified major in the US Army during the war in Vietnam, “it became necessary to destroy the Greek economy in order to save it”.

How the Austerity Ideologues Did It Greek fiscal balance as % of GDP and percentage changes in GDP compared to 2010, 2008-2014

Preliminary estimate of GDP for 2014.


This ravaging of the economy is evidenced by almost every measure of human welfare in Greece.  Compared to 2010 total household consumption adjusted for inflation was more than ten percent lower a year later and over twenty percent lower now (see chart below).  And this measure includes rich households whose wealth could protect them from the ravages of austerity (for example, by capital flight).  The decline for the households below average income was certainly in excess of 25% and perhaps over 30%.

Total Inflation-adjusted Household Consumption, 2008-2014

(2010 = 0)

Source is  Preliminary estimate for 2014.

The collapse in household consumption has an obvious witch’s familiar, a level of unemployment that challenges the imagination.  During the US great depression the unemployment rate rose to 25% in 1931.  In no European country with reliable statistics do we find a rate of 20%, either the 1920s or the 1930s.

The Greek unemployment has been 25% or more for two years, and 20% or more for over three years (see chart below), more than double the rate in 2010.  Since the end of WWII no European market economy suffered unemployment of half the current Greek rate (see study by the Peterson Institute for International Economics)

Shocking as the aggregate unemployment may be, it pales compared to the rate for those aged 15-25 (“youth unemployment”), over 50% for all of 2014 (a statistic that excludes those in education).  These statistics are but the tip of a human disaster iceberg, with worsening health and education and immigration below the waterline of publicity.

Unemployment rate by quarters (blue bars) and change from mid-2010 (red line), 2008-2014

Source is

Speculators Vote with Their Money

Is it any wonder that the only major party opposed to austerity, Syriza, won the election?  The only surprise is that Syriza did not win the election in 2012 (see my column written for that election), though it did have the second largest number of seats (71 compared to 129 for the New Democracy, the senior member of the coalition government).

The primary reason for the failure of anti-austerity parties to win the election was the systematic scare campaign carried out by the European media, enthusiastically aided and abetted by the European Commission and every major EU government without exception.

The vanguard of this putative reign of terror was none other than the infamous “financial markets”, and the warning is again poured forth at full volume, as well as more threats from politicians of the euro zone.  These warnings of the wraith of “market” have a real basis, as an inspection of the chart below shows.

The blue bars show the index of the Athens stock market and the red bars the interest rate on Greek government bonds.  From the beginning of 2012 interest rates rose and the stock market plunged, as the lords and ladies of finance quivered with anxiety that a democratic election might bring an end to austerity in Greece.

To the relief of speculators throughout Europe Greek voters returned the well-right-of-center government to carry on the lowering of living standards.  The relief of speculators at escaping democratic accountability is shown in falling interest rates and a recovering Athens stock market over the next two years.  But now the specter of a citizen’s revolt again stirs anxiety.  Interest rates crept up over the last three months of 2014 and into January and stocks prices declined as “markets” (aka speculators).faced a real threat to their privileges.

Interest rate on Greek government 10 year bonds (blue bars) and index of the Athens Stock Market (red bars, period average = 0), 2012-2014

Bank of Greece and

Democracy or Dictatorship in Greece?

In the same election that anti-austerity Syriza won 71 seats, the overtly fascist Golden Dawn party won 18, falling by one in the January election (with Syriza up to 149, just short of an out-right majority).  Among the far-Right parties that have thrived on a diet of austerity-depressed countries, the Golden Dawn is perhaps the most dangerous.  In October of last year the Greek public prosecutor ordered all Golden Dawn members of parliament to stand trial for inciting, supporting and carrying out acts of political violence.

Without doubt Golden Dawn and all parties similar to it, such as the Jobbik party in Hungary, are clear and immediate threats to democracy.  Considerably more dangerous and infinitely more powerful are the eponymous financial markets.  Always alert to any democratic revolt against their privilege to loot and plunder, speculators and the more superficially respectable international bankers have the power to bring down governments and pervert election results.

Most countries of the world and certainly those in Europe need radical measures to restrict or better still eliminate the power of finance.  The choice is democracy however flawed or the dictatorship of finance.  It really is that simple.  Whatever its deal with Brussels and Berlin, Syriza’s radicalism lies in its support of democracy, which for the lords and ladies of finance is about as far left as a party can go.

Golden Dawn — headline threat to Greek democracy. Source here.

Wall Street, NYC — The fundamental threat to democracy in Greece & elsewhere.

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John Weeks is Professor Emeritus and Senior Researcher at the Centre for Development Policy and Research, and Research on Money and Finance Group at the School of Oriental & African Studies at the University of London.