Labour must make the case for an alternative to failed austerity economics

10th February, 2015 2:12 pm

Greece’s new Prime Minister Alexis Tsipras addressed the Greek Parliament for the first time on Sunday and pledged to end austerity, stating, ‘The first priority of this government is tackling the big wounds of the bailout, tackling the humanitarian crisis, just as we promised to do before the elections.’

Labour Assembly Against Austerity

Last week, the Tories were confronted by the growing reality of opposition to austerity when George Osborne met new Greek finance minister Yanis Varoufakis from Syriza, as part of his Europe-wide diplomatic tour.

The party’s election has already changed the debate on austerity and debt across the world.

Syriza’s key demands are for an agreement to hold a European Debt Conference, and to write-off the greater part of public debt’s nominal value, include a growth clause in the repayment of the remaining part and to include a moratorium in debt servicing to save funds for growth.

We on the left should welcome that and show solidarity with Syriza.

The people of Greece have been asked to pay a huge price and suffer unbearable attacks on living standards over the past five years in order to bailout failed bankers.

Greece’s bailout by the Troika of the European Union, European Central Bank and International Monetary Fund has been to the tune of €254bn over the past five years but over 90% went to creditors including British, German and Dutch banks.

But the huge debt has to be paid for by Greek taxpayers. Attached to the bailout were conditions that have wrecked the Greek economy and resulted in social crisis. GDP remains 25% down on its 2009 figure and the impact on ordinary people has meant unemployment remains at around 26%, with youth unemployment still over 50%.

Poverty has risen as pay and employment has been slashed. Public sector pay cuts have reportedly made up for around a tenth of austerity measures, with a 10% pay cut introduced in 2010. While in 2011 saw the government attacked collective bargaining agreements and cut the minimum wage by 22%. The decline of health services, spread of soup kitchens and the smell of woodfire as the cost of heating oil goes out of reach are well documented.

This is a crisis caused by a neo-liberal economic agenda that prioritises saving failed bankers at the expense of ordinary people.

As negotiations begin for the next phase of the bailout, as the current terms end on 28th February, it is now widely accepted amongst economists that Syriza’s demands need to be met.

The list of economists supporting Greek debt relief is growing. Reza Moghadam, former head of the IMF European department wrote, ‘Europe should offer substantial debt relief’. Nobel prize-winning economist Joseph Stiglitz and a group of economists in the Financial Times, urged debt reduction, an increase in the grace period and finance for investment.

Fellow Nobel winner Paul Krugman, wrote, ‘If the troika had been truly realistic, it would have acknowledged that it was demanding the impossible … the program they imposed on Greece never made sense. It had no chance of working.’ A Bloomberg poll of economists found that 87% believed a Tsipras government, either alone or in coalition, would result in debt relief for Greece.

The UK Government should support Greek debt relief and a moratorium on payments to allow the Greek people to live in dignity and the Greek economy to recover and grow again.

The success of Syriza has challenged that existing orthodoxy and the anti-austerity mood is spreading across Europe. Discussing an end to austerity and investment for growth are now becoming common currency in economic circles. We now need to be putting forward these arguments within the Labour Party and make the case for an alternative to failed austerity economics.

The Greek Solidarity Campaign will be holding protests on 11th and 15th February and the Labour Assembly Against Austerity are hosting a meeting on Greece on 25th February with Owen Jones and Peter Hain.

 Katy Clark is the MP for North Ayrshire and Arran

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  • Dave Postles

    ‘The success of Syriza has challenged that existing orthodoxy and the anti-austerity mood is spreading across Europe.’
    … but the Home Guard has erected the defences at Dover – Captain Balls at the front with his wooden rifle and we all know that Osborne doesn’t like it up him.

  • Sheik Rhat el Anrhol

    Syriza has now blinked – surprise, surprise.

    • SilentHunter

      Shouldn’t you be at ConservativeHome? :o)

  • Tommo

    Didn’t the Labour Party MPs all vote for the current economic policy following a debate in the House of Commons only a month or two ago?

    I seem to remember it caused a bit of a fuss

    • treborc1

      Ah yes but you do not understand why they did it to end the austerity, see what you do is you vote for it, but in another way. Or that is what labour is using as the most lame excuse I have ever heard.

  • Sheik Rhat el Anrhol

    There seems to be some confusion here between the notion of the `failure’ of austerity and the notion that people don’t like it much.

    Two rather different things Ms Clark.

    They always seem to use the more or less meaningless word `neo-liberal’ when they want people to think that they might know something about economics, which they rarely do.

    • Doug Smith

      You’ll have more debt to fund when debtor nations have had their economies destroyed by the unaccountable, austerity imposing EU elite.

    • Not magical. You have to be a slightly smarter than the average bear to understand it all though. You have to stop thinking in terms of the economy in the way you think about your personal finances.

      Incidentally it’s not “socialist economics”. Its the capitalist economics of the 21st century. Currencies are totally fiat. There’s no gold or silver involved any longer. They are just the IOUs of government.

      The task, for socialists, is to understand how capitalism works better than the capitalists. Have they created the mess called the Eurozone deliberately or is it that they just don’t understand how their own system works? Which would be worse?

      From a rational point of view, anyone can see that there should be no conflict between the people of Greece and Germany. The Germans must surely understand that the Greeks can only repay their debts when they are all working. That’s just like you and I. If we had a problem repaying our loans, would a responsible bank manager suggest we stopped working and signed on the dole?

      The Troika haven’t just suggested that, they’ve forced the Greeks to do that. Does that make any kind of sense at all?

      • David Battley

        Have you noticed how no one even bothers to point out the manifold flaws in these arguments anymore?

      • Sheik Rhat el Anrhol

        I was trying to be funny about `socialist economics’. There is of course no such thing.

        First you say `You have to stop thinking about the economy in the way you think about your personal finances.’

        and then a little later on you say ` That’s just like you and I. If we had a problem repaying our loans, would a responsible bank manager suggest we stopped working and signed on the dole? And paid the interest on the first lot of loans by taking out other loans?’

        Any inconsistency there?

        My point is sound:- Written off debts still have to be funded from other countries’ taxation, The debts do not just go away. Greek debts were caused by mass fecklessness, fraud and dishonesty.

        I have no sympathy at all with them.

        If you want to fund them, I am sure their central bank will be only too pleased to hear from you.

        • Yes there is a danger of some inconsistency, and the possibility of getting the wrong answer if we push the household analogy too far. There isn’t in this case. Because we are thinking about resources rather than money. Resources can either come from labour power or natural sources. Its always easier to think in terms of resources.

          Writing off the Greek debts isn’t the way to go. Especially, as you say, if the burden of writing them off falls on to the shoulders of others. Also we have to remember that for every irresponsible borrower there is an irresponsible lender. It wasn’t the Greeks who were bailed out in 2012, it was the private lenders. That was a bad move. But totally consistent with 21st century capitalism. There’ll be no austerity imposed on private banks who run up bad debts.

          So, naturally the German taxpayers are nervous about being saddled with Greek debts which were transferred from the banks. They needn’t be. It just needs an modicum of common sense. The Greeks obviously can’t pay in euros ‘cos they don’t have anywhere near enough. So how can they pay? The answer should be obvious.

          Unless we want to start a war it won’t be transferring Crete to German sovereignty! That’s entirely a matter for those who live in Crete. They can’t be bought and sold. So what else have the Greeks to offer?

          • SilentHunter

            I hope the German people remember that they were “let off”a third of their war reparation debt by the victors of the second world war, when they come to decide about their stance over the Greeks.

          • Yes, but I don’t think it makes any sense to rake up the issue of WW2. Most Germans weren’t even born then.

            The problem arises in the economics of the present time. For reasons best known to themselves, the Germans prefer to run export surpluses, year after year. This means they are happy to swap more goods and services for fewer GSs and take in IOUs of their customers (ie money) to make up the difference.

            Consequently Germany has lots of money, mainly held in the form of treasury bonds of its customer countries. It can’t spend these, as to do so would make it a net importer rather than a net exporter.

            So, Germany doesn’t need Greek money. Even if Greece could somehow find the money to pay off its debts, it woudn’t make the individual German taxpayer any better off as any payments would just be stored in their Bundesbank. It would, though, make Greeks much poorer and also everone who trades with Greece, ironically including the Germans themselves.

            That’s the issue that needs resolving. Giving Greece another dollop of money may help for a year or two but then the fundamental problem will resurface. Spain is probably next in line to rock the euro boat.

        • SilentHunter

          “…I have no sympathy at all with them…”

          Well I think we get that.

          Does that include their children and grandchildren who had no say in the matter but will still have to pay for the mistakes their parents & grandparents made?

          “Mistakes” made because they trusted their government to govern in the people’s interests rather than the narrow financial interests of corrupt politicians.

          I suppose you “have no sympathy” for folk who are mugged in the street; on the basis that it’s their fault for being on the street in the first place.

          I have no sympathy for the 1%; and they will “richly” deserve all that’s coming their way when the dam of inequality . . . bursts!

          • Sheik Rhat el Anrhol

            If we live in a democracy we must all take responsibility for the government we elect and the consequences of electing a weak and feckless Government representing the interests of a weak and feckless electorate.

            You pays your penny and takes your choice or not, as the case may be.

            Socialists hate those people who live in their imagination as the `rich’ – who are actually just an excuse for the haters’ personal failure. That is what socialism really is and why the united kingdom is moving away from it simply because the electorate has outgrown such fifth form naivety.

            You can hate `the rich’ or me if you like but the world is moving on.

          • SilentHunter

            Ah yes! the simplistic binary approach.

            The “either / or” argument.

            If you’re against corrupt bankers then you must be a socialist rather than someone interested in honesty.

            No one “hates” the rich who pay their taxes . . . but then, so many of them don’t which forces the rest of us to pay more.

            It’s a matter of equity and fairness.

            Why would I “hate you” personally since I’m sure that you pay all your taxes without evasion.

            You do, don’t you? ;o)

          • SilentHunter

            Ah yes! the simplistic binary approach.

            The “either / or” argument.

            If you’re against corrupt bankers then you must be a socialist rather than someone interested in honesty.

            No one “hates” the rich who pay their taxes . . . but then, so many of them don’t which forces the rest of us to pay more.

            It’s a matter of equity and fairness.

            Why would I “hate you” personally since I’m sure that you pay all your taxes without evasion.

            You do, don’t you? ;o)

          • David Battley

            Out of interest, do you realise that you are part of the world’s 1%?

          • SilentHunter

            How so? Please explain.

    • SilentHunter

      Who benefits from “debt”?

      It’s the people rich enough to provide funds for this; and they don’t do it for any altruistic motives . . . they do it to make a profit from that debt, just like the banks do.

      Those in charge of “debt” (the rich) call the shots as to the interest on the debt and the when it has to be paid. They don’t do this to suit the debtor, they do it to suit themselves and to wring out every drop of money from the debtor.

      The ultimate aim of the rich “providers” of debt and the bankers is to keep us all in a state of “permanent debt” . . . therefore they make credit easy to get into, but very difficult to get out of it once you’re in.

      Debt is an artificial device used by the rich to make themselves richer and the rest of us poorer . . . it’s all about the transfer of funds from US to THEM.

      By defaulting on these “debts” . . . the rich will not have their income stream anymore and WE can finally break their stranglehold on the economy and peoples lives.

      Forgive me if I don’t “buy into” your standard mantra that the bozo’s in the banks actually give a flying fark about the rest of us and that doom and destruction will fall upon us if we dare to point out that the Financial Emperors are walking around . . . naked.

      • Sheik Rhat el Anrhol

        Banks are not altruistic organisations. They are simply businesses who exist for their shareholders (the pension funds in the main) to lend and borrow for a turn.

        Wringing your hands because you see yourself as someone on the wrong end of the financial spectrum is not the fault of the banks but is your fault.

        Becoming a socialist in the hope that someone will give you some of the banks’ money is fantasy but you are free to indulge in such wistfulness if you wish but the world moves on.

        • SilentHunter

          No . . . Banks have been proven to be run for the benefit of a very small minority of rich individuals who pay no tax on their “unearned” earnings.

          The money they had to start with was not theirs . . . it was ours, given to them at the turn of the last century by a succession of “bought” politicians.
          Every “crash” they manufacture is designed to transfer yet more power and money to themselves at our expense via the same mechanism of buying politicians.

          This latest one is no different.

          I suspect you’re one of the “useful idiots” that cheerleads for them in the hope that, like any good Kappo, you won’t have to suffer the fate of the rest of us when the time comes and can in the meantime benefit from the crumbs they throw to you.

          We don’t want anyone else’s money . . . we just want OUR money, back! And that time is fast approaching, so tell me, do you thing the 1% will be able to rely upon their secret police and private security guards when the 99% come looking for them?

          • Sheik Rhat el Anrhol

            Well you certainly have a wonderful imagination. I have no idea who has been telling you these things.

            Banks are owned by their shareholders. If you have a funded pension, you probably own a good slice of a few of them yourself.

          • SilentHunter

            You really shouldn’t judge others by your own levels of greed and complacency. Some of us care more for humanitarian issues rather than fixating upon the acquisition of money.

            Just grabbing what you can get your hands on without any thought for the impact of your actions upon others is not something I would wish to associate myself with.

            But you carry on! Enjoy it while you can.

          • Sheik Rhat el Anrhol

            Tbere is a very strict rule that if anyone boasts of their altruistic proclivities, it is always time to count the spoons.

          • SilentHunter

            Again; you’re judging others by your own standard. :o)

        • SilentHunter

          No . . . Banks have been proven to be run for the benefit of a very small minority of rich individuals who pay no tax on their “unearned” earnings.

          The money they had to start with was not theirs . . . it was ours, given to them at the turn of the last century by a succession of “bought” politicians.
          Every “crash” they manufacture is designed to transfer yet more power and money to themselves at our expense via the same mechanism of buying politicians.

          This latest one is no different.

          I suspect you’re one of the “useful idiots” that cheerleads for them in the hope that, like any good Kappo, you won’t have to suffer the fate of the rest of us when the time comes and can in the meantime benefit from the crumbs they throw to you.

          We don’t want anyone else’s money . . . we just want OUR money, back! And that time is fast approaching, so tell me, do you thing the 1% will be able to rely upon their secret police and private security guards when the 99% come looking for them?

      • BenM_Kent

        Most owners of sovereign debt are pension funds and the like who have ownership of such as a key part of their overall through life investment strategy and also see it is a safe haven – especially in countries with their own currency.

        This is a long winded way of saying we owe this money to ourselves. Which makes the anti debt hysteria of the last 5 years all the more remarkable. We want the debt!

        Yes, governments can – and probably should – print the money it needs and fund projects directly that way (rather than indulging in QE). There is no danger of hyper inflation. There just isn’t the demand out there.

        • SilentHunter

          Who runs the pension funds?

          Hmmm?

          • Sheik Rhat el Anrhol

            The pension funds are owned in trust by their members who employ administrators (and sometimes investment managers) on their behalf

          • SilentHunter

            I didn’t ask who owns them . . . I asked who ran them.

            Nice try at conflation there! :o)

          • Sheik Rhat el Anrhol

            You are asking me for a pensions tutorial? My chargeout was 400 pounds per hour.

          • SilentHunter

            That doesn’t surprise me.

            Did you do knock 10% off for your parents? lol

        • SilentHunter

          Who runs the pension funds?

          Hmmm?

      • BenM_Kent

        Most owners of sovereign debt are pension funds and the like who have ownership of such as a key part of their overall through life investment strategy and also see it is a safe haven – especially in countries with their own currency.

        This is a long winded way of saying we owe this money to ourselves. Which makes the anti debt hysteria of the last 5 years all the more remarkable. We want the debt!

        Yes, governments can – and probably should – print the money it needs and fund projects directly that way (rather than indulging in QE). There is no danger of hyper inflation. There just isn’t the demand out there.

  • David Pickering

    As part of the Troika bailout terms, Greece had to stop allowing people to retire at 53 years of age on pensions of 90% of their salaries. It doesn’t take an economic genius to work out that there was no way on earth that a hairdresser was going to fully fund a pension of 90% of their retirement salary in 37 years (even presuming they didn’t take time off to have children).

    The idea that that economic madness could be allowed to continue with bailout money is la la land. Austerity in Greece is gruesome, but pouring good money after bad is a non-starter.

    “The success of Syriza has challenged that existing orthodoxy and the anti-austerity mood is spreading across Europe”

    It is precisely because other Leftist parties are watching Greece o closely that the Troika cannot allow Syriza to have their demands met. That way lies Eurozone destruction.

    Syriza have not succeeded yet, and it won’t. The Troika is not going to allow any debt forgiveness, which is a key plank of Syriza’s demands. Either Syriza climbs down, and is crushed by the electorate, or it leaves the Eurozone, and gets crushed by the electorate.

    Either way, Syria is toast.

    • Doug Smith

      There’s another option you neglected to mention: the electorate gets crushed by the austerity imposing Troika/EU.

      That has to be the worst option.

      • MrSauce

        The new Greek finance minister made the observation that their problem was not insolvency, it was bankruptcy. I think he’s right.
        But whichever way you look at it, reality will hit the Greek economy, no matter who is in charge or whatever currency they use.

        • treborc1

          Bankruptcy for a country will be interesting because that is where Greece is heading.

      • David Pickering

        Doug, I think the Troika have already crushed the Greek people.

        Syria’s problem is it has made promises to the Greek people that it can’t possibly keep. I would be surprised it the Greek government makes it through the summer.

        • BillFrancisOConnor

          One day you’ll realise that there is a difference between Syria,which is a country, and SYRIZA, which is political party in Greece. However, given the general level of intelligence exhibited in your remarks on here, that might take some time, mightn’t it David?

          • David Pickering

            Thank you for taking the time to point out an obvious spelling mistake. You contributions to this site are always valued, and welcome.*

            The revolution is safe in your hands, comrade.

            *Fool attacks spelling mistake because he has no real argument.

          • BillFrancisOConnor

            The fact that you got Syria mixed up with SYRIZA speaks volumes particularly in respect of the degree of cogitation you give to your comments before submitting them on here.

          • David Pickering

            “The fact that you got Syria mixed up with SYRIZA”

            If you mean I failed to correct the auto-correct performed by my computer, and that speaks volumes about me, you’ve got me banged to rights on my heinous oversight.

            However, I repeat the point I made above, you are attacking a spelling mistake, because you have no real argument. You just hate people articulating views that are not in line with yours.

            When you get tired of correcting the spelling in the comments here on LabourList, I understand Tesco are looking for someone to make sure all the labels on their beans are facing the customer. I think you’ll be a shoe-in.

  • ebcd

    Greece is facing rising interest rates on its debt. If ECB issued bonds to cover all interest on all countries’ Euro Debt interest then that debt could be zero-rated. Governments would be required NOT to borrow one red cent AND to pay off debt at a set percentage of tax revenue.

    This would mean that Eurozone countries would be paying back capital and reducing their debt. Of course this may be seen as just kicking the can down the road but by the time a bonds crisis was looming, Euro Government Debt would be much reduced.

    If this seems fanciful, wait and see what Eurozone leaders come up with.

    • Dave Postles

      Frau Merkel sagt ‘Nein!’.

    • girlguide

      Greece is facing rising interest rates on its bonds, not its debt. Greece is paying interest on its bailout of only 1.5%.

  • Steve Stubbs

    OK lets see. Borrow lots and lots and then scream when asked to pay it back. Demand the lenders forget about it. And continue to lend you more.

    I wonder if I can get away with that at my local bank?

    • Dave Postles

      Only if you are a multi-millionaire or a business wanting to leverage out another business and load it with debt.

      • Daniel Speight

        Or, of course, you are the bank in which case the government will give you so much money that the country ends up in recession. Then the government will give the bank’s retiring leaders government jobs and turn a blind eye to any help the bank has been giving in helping tax avoidance in Switzerland.

  • Doug Smith

    Well said, Katy.

    But Labour is pro-austerity just as it is pro-TTIP and anti-public ownership.

    I’m wondering, have you ever thought about joining a ‘people before profit’ anti-Establishment political party?

  • alans

    It’s simple economics, if you can’t pay, don’t borrow.Why should the hard working people of other countries continously bail out a country when they pay their pensioners such exhorbitant pensions and allow them to retire at 53.A good place to start would be for Greece to start raking in the taxes people should be paying.

  • robertcp

    I agree with Katy about Greece but the UK is not Greece, which should never have joined the Euro and is now unable to pay back its debts.

  • MrSauce

    If I didn’t know better, I would say that it looks like the Greeks have voted-in a government that has promised them a magic money tree.
    Again.
    Isn’t that what got them into this mess in the first place?

  • @Katy That’s more like it! Its a pity the Labour Party has adopted its own austerity program though!

    The Labour Party needs to discuss economics more than they do. Its not that difficult once we realise that the Government, as a currency issuer, is not like a household. It isn’t constrained by the revenue it receives from tax.

    Neo-liberals seem to consider that money either comes from taxation or borrowing. They don’t consider where it comes from before that. It doesn’t come from anywhere its created by government spending. Where else can it come from? God?

    Of course, if the government create/spend too much they’ll create too much inflation. On the other hand we need to consider what happens if they err towards austerity, and don’t create enough, as we see occur in Greece.

  • James Lawrence

    ‘The success of Syriza has challenged that existing orthodoxy and the anti-austerity mood is spreading across Europe.’ – with drivel like this is there any reason we’re not trusted with the economy.
    Just because people might not like austerity doesn’t mean there is an alternative.
    The Greeks – like us – have a budget deficit. That means they need to borrow money each year to pay there basic bills. If they don’t want to pay it back, guess what, they won’t get any more money and they’ll have to impose even deeper cuts than before.
    Sorry for the childlike explanation but it seems like it’s needed these days.
    Can we please forget about the last five years and put some adults back in charge

    • “Sorry for the childlike explanation ”

      There’s no need to apologise. If you’ve only got a child like brain that’s the only explanation you can offer.

    • is there any reason we’re not trusted with the economy. ?

      Who’s we? We as in the Labour Party

      Yes just a couple of days ago you wrote on the Telegraph website:

      “If you vote UKIP you will get Labour.For all their faults I’d much rather have the Tories than Miliband and all voting UKIP achieves is to split the Tory vote and make a Labour government more likely”

      Look pal. I don’t mind Tories coming on here and giving us the benefit of their opinion, but don’t f***ing well pretend to be one of us when you obviously arent!

      • James Lawrence

        The clue is in the ‘for all their faults’ not ‘our faults’ but ‘their faults’.
        You can be Labour and not believe in price fixing, class warfare, fairy tales about the NHS, etc, etc.
        I’d much rather have a centrist party in power than either the clowns in UKIP or currently at the helm of Labour.

  • Malcolm McCandless

    Katy why are you still a member of the Labour party?

  • SilentHunter

    Labour must make the case for an alternative to failed austerity economics

    So why did all those Labour MP’s obediently traipse into the voting lobbies with the Tories to vote in yet more austerity, only a few days ago?

    If you want to vote for an anti austerity party then vote Green or SNP . . . all the other parties support austerity . . . including Labour!

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