A demonstration outside parliament against austerity measures. Credit: Apostolis Fotiadis/IPS.

By Apostolis Fotiadis
ATHENS, Aug 9 2013 (IPS)

Greece has started unravelling its civil sector further in an attempt to persuade the Troika – the European Central Bank, the International Monetary Fund and the European Commission – to commit more bailout money by next October.

The Troika wants the Greek government to fire 4,000 employees and suspend 12,500 civil sector jobs by the end of September. Another 12,500 jobs will have to go by the end of 2013.

Prime Minister Antonis Samaras has ordered his ministers to rush the dismantling of ineffective public structure and to provide lists of people to be fired or suspended. Suspension means a waiting period of eight months during which 75 percent of wages are paid. At the end of the period the employee is sacked unless another position has been created to fill.

The sudden closure of public television in June was a first step in this direction; 2,000 workers were fired. Technical schools providing career opportunities to low income family kids have been abolished, and another 2,000 teacher jobs suspended. In all 2,200 school guards and 3,500 municipal police have also been suspended.

Themistocles Kotsyfakis, a teacher in a technical school for the manufacture of medical equipment, has found himself on the suspension list. “This is not reform, no study has been provided for the results of these measures, and no evaluation has taken place regarding who will go and who will stay,” he told IPS.

“Many of us will be fired, [no one] has guaranteed anything for our future and [no one] has provided an estimate of where we could be transferred. Suspension is a step that leads to unemployment.”

While the government strives to reach the agreed quota, minister for health Spyridwn Georgiadis has shortlisted six ineffective hospitals in the broader Athens area for closure. About 1,250 medical staff will be suspended.

Xaralampos Farantos, a surgeon at the General Hospital in Patisia, downtown Athens, which is on the list, told IPS that the ineffectiveness the minister refers to has been artificially created.

“All these shortlisted hospitals have been left without adequate medical personnel for a long period of time, due to previous agreements with the Troika regarding employment in the civil sector,” he told IPS.

“The hospitals then opted out of the emergency services scheme and because of new fees for admission and treatment (an austerity measure), patients avoided them.

“Then the new smaller numbers of admissions were interpreted as proof of our ineffectiveness and became the reason for our shortlisting. A dishonest method indeed.”

After the hospitals, the government is eyeing three underdeveloped military companies and a public nickel producer for liquidation or privatisation. That will add another 2,000 fired workers to its quota.

The en masse sacrifice of civil sector jobs comes amid warnings that the Greek fiscal consolidation plan is not going to work. The IMF has admitted mistakes and miscalculations over the cost of austerity and its capacity to bring the economy back on track.“Many of us will be fired, [no one] has guaranteed anything for our future and [no one] has provided an estimate of where we could be transferred. Suspension is a step that leads to unemployment.” -- Themistocles Kotsyfakis, a teacher in a Greek technical school

The fund admitted in May that it had breached three of four of its key guidelines in joining the European Union-led rescue package, and that the measures were mostly designed to win time to rescue the euro instead of helping Greece recover.

The current bailout package set aside for Greece will run out of cash around spring 2014. The country will still be in disarray then, with unemployment above 30 percent. The economy will have contracted more than 27 percent since the beginning of the crisis.

The future of Greece is meanwhile sliding into brinkmanship among western leaders. While the IMF and the U.S. have advocated more development and job creation policies possibly including a major debt write-off, Europe under German leadership stands still in favour of austerity.

German finance minister Wolfgang Schauble denies that the austerity programme is failing and on a visit to Athens last month prepared Greece for a new austerity programme after spring 2014.

Concerns are spreading fast that the Greek state might implode under the burden of austerity, and analysts suggest that Germany and the European Union have a Plan B. This would include transferring basic state functions and policy making to representatives of Greece’s international creditors.

Political analyst Giannis Kiboyropoulos told IPS that the first obvious sign of such a scenario was circulated end of July in a report by the Kielo Institute for the World Economy.

“German technocrats, after mentioning an obvious danger of the collapse of reforms in Greece propose a debt committee independent of political pressures that would handle public administration, the labour market, privatisations, transport, energy, the retail market as well as entrepreneurial policies,” Kiboyropoulos said.

He said that as these scenarios emerge “the Troika’s representatives in Greece have warned of extending their control over institutions responsible for privatisations and banks recapitalisation. One should not treat this as a mere coincidence.”

Greeks protesting against austerity measures. Credit: Apostolis Fotiadis/IPS

By Mario Soares
LISBON, May 27 2013 (IPS)

The economic crisis began in the United States under the administration of then-President George W. Bush, following the collapse of the Lehman Brothers Bank. It came as a result of unregulated globalisation and a neoliberal ideology that places usurious markets, offshore bank accounts, and money for the sake of money, above state power. It is an ideology that ignores citizens, even as they starve.

At the time – between 2007 and 2009 – I wrote some books: “A Changing World”, “In Praise of Politics”, “Fighting for a Better World” and “Inside the Hurricane”, addressing in all of them my concerns about the risk of a neoliberal contagion of the euro and the European Union (EU) itself.

Mário Soares, former president and prime minister of Portugal. Credit: IPS

U.S. President Ronald Reagan and British Prime Minister Margaret Thatcher championed these disastrous neoliberal politics – which were later continued by the pseudo-labourite Tony Blair – whose negative consequences are now evident to all.

In view of the profound links between Europe and the United States, the spread of U.S. neoliberalism to the EU and particularly to the eurozone was inevitable. When the EU crisis began, chancellor Angela Merkel already headed Germany. In spite of being a Lutheran, Merkel was also a former militant of the East German Communist Party. After the fall of the Berlin Wall she stood in opposition to the German reunification to which European states contributed.

As is well known, the first victim of the crisis was Greece, the cradle of our civilization and thus a country that deserved better treatment. It got the opposite.

The German chancellor, a longtime ally of ultra-conservative liberals, heeded market demands. The situation in Greece, where German banks occupied a privileged position, deteriorated until the country was able to pay the exorbitant sum demanded by the Troika, a body comprised of Greece’s major creditors: the European Central Bank (ECB), the International Monetary Fund (IMF) and the European Commission (EC).

In the meantime, in the absence of financial assistance, the so-called peripheral states of the eurozone plunged into crisis. Ireland, Portugal, Spain, Italy (Europe’s third largest economy) and Cyprus were followed by the recent and surprising Dutch collapse. France is the latest addition to the list.

It all boils down to the criminal policy of austerity imposed by Germany, the IMF, the European Commission under the presidency of Jose Manuel Durão Barroso and, with greater discretion, Mario Draghi’s European Central Bank.

It has become more than evident that austerity favours merely usurious markets and those behind them. Austerity obliterates states and their respective populations, not only in the so-called “peripheral”, southern states, as was recklessly claimed. Take a look at the Netherlands, France and Germany. The crisis was bound to hit Germany as many economists, including Nobel Prize-winners Joseph Stiglitz and Paul Krugman, had predicted.

Currently Germany is struggling due to a policy of austerity that has shrunk many of its markets in the European states, which account for 50 percent of its exports. If austerity is maintained, Germany itself will enter a recession.

European public opinion has understood both the necessity and urgency of a break not only with current policy, but also with a political class that has proven incompetent.

The current ruling parties within the EU are mostly ultra-conservative and incapable of grasping the critical situation. Truth be told, the parties that built the EU – the socialists, the social democrats, the Labourites, and the Christian democrats, are no longer in power.

The sole exceptions are France and now Italy, where President Giorgio Napolitano was re-elected in spite of his age, and where we find a new prime minister in the figure of Enrico Letta. Both Letta and French President Francois Hollande have openly declared their opposition to austerity and their intention to restore the role of states in controlling markets, and not the other way around.

Hence, the citizens of all European countries have vociferously expressed their opposition to Troikas, the markets, pseudo-politicians and those governments committed to austerity.

It should be noted that the welfare state (a product of the postwar era), democracy as we conceived it, as well as the rule of law are all being jeopardised, creating the need for a profound and immediate political shift.

We face a straightforward dilemma: either we fight against unemployment, widespread poverty, recession and in defense of the welfare state in its broader sense, or, if we wait too long, the EU will fall into the abyss.

And not only would it be tragic for the U.S. to lose its only faithful ally, but many nations of the world would suffer: China, Russia, Japan, Brazil, India, Mexico and so on.

I am hopeful this won’t be the case. The world surely does not wish the disappearance of the European Union, the most original political project of all times and the one that brought so many benefits to its peoples. Its collapse could open the door to a global conflict. Its demise would represent an unacceptable regression of civilization, one that would set us more than a century back. May common sense and courage prevail.

(END/COPYRIGHT IPS)

Excerpt:

Protestors at a Jan. 17 rally sing songs against Malawi’s president, Joyce Banda. Credit: Mabvuto Banda/IPS

By Mabvuto Banda
LILONGWE, Jan 22 2013 (IPS)

She has taken a personal pay cut, promised reforms, resumed aid flows from Western donors and put her predecessor’s private jet up for sale.

Malawi’s president Joyce Banda seems to be making all the right moves to win over the hearts and minds of this impoverished southern African nation’s roughly 14 million people.

With over 65 percent of the population living below the poverty line, 1.4 million children involved in child labour and 74 percent of the country scratching out a living on less than 1.25 dollars a day, Malawi is desperate for change, and Banda has been the face of it for nearly a year.

Riding on a groundswell of popular support, the president came into office in April 2012 after the sudden death of her mercurial predecessor, Bingu wa Mutharika; but that popularity is eroding fast as she implements painful austerity policies to fix a sputtering economy.

The aid-dependent country teetered under the late Mutharika, whose squabbles with international donors led to a freeze in major assistance packages amounting to about 500 million dollars.

The cut in aid, which has traditionally accounted for 40 percent of the country’s budget, coincided with a steady decline in tobacco sales, Malawi’s main export earner, which have gone down by more than 50 percent since 2010.

In fact, experts here say that the high-level visit early this month by IMF Chief Christine Lagarde may have done more harm than good for Banda’s waning popularity.

Already the president has capitulated to unpopular reforms demanded by the IMF and other Western donors on whom Malawi is heavily dependent, such as devaluing the currency by 49 percent, increasing petroleum prices three times in her presidency and cutting off subsidies by moving to an automatic fuel price adjustment mechanism.

These reforms have had devastating domino effects on the country’s poor, affecting people like Shadreck Kumwembe, a primary school teacher who earns less than a dollar a day.

“My real income has halved in the last few months because of the devaluation, and yet food prices have been going up — I can’t afford to pay for everything,” Kumwembe, who also disclosed that he has not received his salary from the government in the last three months, told IPS.

Commodity prices have soared and pushed inflation to 33.3 percent in December – far higher than the government’s forecast of around 18 percent for 2012.

The latest data from the Centre for Social Concern, a local research institution focusing on the cost of living in urban Malawi, showed that since Banda took over, a family of six now needs an average of 200 dollars per month to meet basic food demands – bad news in a country where the minimum monthly wage is about 20 dollars.

On Jan. 17, just a few days after Lagarde’s visit, thousands of Malawians took to the streets peacefully in all three major cities of the country for the first large-scale protests under Banda, against what they described as “the IMF’s wrong economic prescriptions”.

“I blame IMF policies for all these high prices and job losses we are experiencing. Lagarde’s insistence that Malawi continues on this path underlines how out of touch the IMF is with reality,” said James Chivunde, a civil servant who joined the protests last week.

“Late President Mutharika refused to listen to them (IMF) to devalue the kwacha (the local currency) because he knew exactly how that was going to impact us,” Lloyd Phiri, another protestor, told IPS.

According to John Kapito, head of the watchdog known as the Consumers Association of Malawi, Banda has “transferred power” to the IMF and the World Bank.

“Like many leaders of poor countries, the problem with Joyce Banda is that she doesn’t think on her own. She is listening to everything that the IMF and the World Bank are telling her. She (agreed) to devalue the kwacha, agreed to remove subsidies on fuel without considering the impact of these decisions on the poor,” said Kapito, who helped organise the latest demonstrations.

Meanwhile, the IMF is adamant that the only way out of the cycle of poverty is for Malawi to continue to abide by the Fund’s prescriptions.

“There have been huge efforts undertaken by the Malawian government and the Malawi population and it is really important to stay the course,” Lagarde said during a press conference held in the capital Lilongwe on Jan. 5.

She assured that the country is at a tipping point, that soon inflation will start dropping and prompt the Reserve Bank of Malawi (RBM) to revisit the base lending rate.

“Investors will return and we are confident that growth will resume,” she added.

Some local economic experts are inclined to agree with these sentiments.

“There will be no quick fixes, but any U-turn from the current course will be disastrous,” said Ben Kalua, professor of economics at Chancellor College, part of the University of Malawi.

“What is needed is a credible and consistent policy aimed at making economic growth more inclusive by ensuring the development and protection of social safety nets and expanding access to financial services so that everybody, including the poor, has access to credit,” he said.

Executive director of the Malawi Economic Justice Network, Dalitso Kubalasa, also backed the IMF and blamed the late Mutharika for delaying implementation of economic reforms.

“We are now paying the cost of the previous administration’s (policies) but we have to stay the course to (solve) the economic problems,” Kubalasa told IPS.

While admitting that the government underestimated the impact of austerity policies on the masses, Finance Minister Ken Lipenga stressed that donor support is enabling the government to implement a fiscal budget that provides adequate resources for the delivery of social services and to increase resources allocated for cushioning the most vulnerable.

“We have introduced food for work programmes aimed at assisting the poorest in our communities to cope with the unintended effects of the reforms,” Lipenga told IPS.

But Banda’s waning popularity may affect successful implementation of the reforms as she prepares for an election next year. Her biggest test will come when the parliament convenes in February, when she will be forced to reckon with the fact that many members of her governing party are losing faith in her leadership.

(END)

The flood of economic woes devastating Greece and Portugal are evidence that the German prescription imposed by a troika of multilateral creditors is not working, and that both countries are heading into a blind alley, says economics professor Mario Olivares.

“National debt and fiscal deficit problems can only be overcome by economic growth,” Olivares, a Portuguese academic, told IPS.

The harsh austerity programmes prescribed by the International Monetary Fund (IMF), the European Union and the European Central Bank (ECB) are dragging Greece and Portugal into a downward economic spiral.

In these two southern European countries, and more recently in Spain and Italy as well, “growth and investment are being sacrificed, creating an alarming increase in unemployment,” said Olivares, head of the economics department at the School of Economics and Management (ISEG) of the Technical University of Lisbon.

“There is colossal pressure on the Greek economy, which has already seen a fall in GDP far greater than forecast, due to an adjustment model that isn’t working because, in spite of wage cuts, exports are not increasing,” he said.

The crisis in Spain, Portugal and Greece, “with cuts in consumption and public spending, as well as slower growth in Germany, the Netherlands, France and Belgium, change the scenario, because the expected increase in exports is not happening,” Olivares stressed.

In the case of Portugal, public accounts are being regulated with iron discipline in order to meet the fiscal deficit goals demanded by German Chancellor Angela Merkel, whom Olivares describes as “master of the EU” in contrast with the weakness of the European Commission, the bloc’s executive arm.

Economic analysts agree that the wage cuts, longer working hours, cancellation of several public holidays and tax hikes have led people in Portugal to spend less and save more, not to create a solid foundation for stability, but to sink further into poverty.

The recession deepened in the last quarter of 2011 because of contraction in household consumption and only modest investment, factors that brought about a 2.7 percent fall in GDP that quarter, and an annual average shrinkage of 1.5 percent of GDP with respect to 2010, according to the National Institute of Statistics (INE).

The INE report predicted that “acceleration of the recession in the last three months of 2011 will set a trend that will also blight 2012, during which we expect a new fall in private consumption.”

The most recent estimates forecast a three percent drop in Portugal’s GDP this year.

A crucial factor is that Portugal’s 20 largest companies invested 23 percent less in 2011 than in 2010, which severely affected economic growth and produced drastic job losses.

In its report released Feb. 15, INE said unemployment in the fourth quarter of 2011 reached 14 percent, the highest jobless rate in Portugal since records began to be kept. Youth unemployment is even worse, at 35.4 percent.

But the situation is much worse than the official figures suggest, as INE recognises only 770,000 unemployed persons within an economically active population of nearly 5.6 million – a figure that only includes unemployed persons who were available for work, and actively seeking work, during the survey period.

It does not include those who have given up looking for a job, nor people with part-time jobs.

Thus, the real number is almost 1.3 million people out of work, which gives an estimated unemployment rate of 22.6 percent.

Given the fear of contagion of the crisis in the rest of the EU and other parts of the world, IPS consulted Professor Andrés Malamud, who holds a doctorate in social and political sciences and is a research fellow at the Institute of Social Sciences of the University of Lisbon. Like Olivares, Malamud is not at all optimistic about the future.

“In the best-case scenario, the European economy is going to stagnate for several years. The most probable outlook is simply recession, accompanied by social unrest, political radicalisation and institutional fragmentation, with some countries leaving the eurozone and even the EU itself,” said Malamud.

Asked what repercussions such a situation might have in Latin America, he said it would depend on “how far the European economy falls, and whether China has a soft or a hard landing (gentler or more abrupt deceleration of growth).”

Malamud contrasted Brazil, the largest economy in Latin America, “which is adjusting quickly and preparing itself for the shake-up, with  Argentina, which is making tardy, inept adjustments that are unacknowledged in official discourse, as the government talks of ‘fine tuning’ the economy, not ‘adjustment.'”

Olivares, for his part, told IPS that “the European economy is feeling the effects of austerity, with several countries in recession, subjected to concrete austerity plans by the troika or of their own free will, because of higher interest rates on sovereign debt bonds.”

Credit rating agencies “are continuing to lower their ratings of countries and companies, which can be interpreted as a lack of confidence in the fundamental solution for the debt problem in countries in southern Europe, but also as a sign of sluggish economies.”

The repercussions that will be felt in the global economy and particularly in Latin America “have been, so far, a contribution to increased turmoil in financial markets, which in any case have benefited by speculation on sovereign debt bonds,” he said.
Latin America “is at a unique juncture since the 2009 crisis, as the region has gradually shifted its trade towards the Asia Pacific area.”

The region has plumped “primarily for China, its top trading partner at the moment, and has also received enormous amounts of investment from the Asian giant, so that the impact of a European recession can be faced with greater peace of mind,” Olivares concluded.