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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