Greeks vote No to austerity; Creditors threaten to pull the plug

After Greek voters on July 5 overwhelmingly voted No to harsher austerity measures demanded by their foreign creditors, European trade unions urged European leaders to reach a “sensible compromise” with the Greek government in order to end the current crisis in Greece.

The No vote came after Greek creditors on June 25 issued an ultimatum that Greece accept more austerity measures or be denied new loans needed to deal with the country’s current crisis.

After the No vote, Greece submitted a new loan request that Greek Prime Minister Alexis Tsipras told the European Parliament addresses some of the objections raised by Greece’s creditors and provides a path toward reaching a “viable agreement.”

Whether European leaders and Greece’s creditors are willing to reach a compromise agreement remains highly problematic.

They said that they will make a decision on the Greek proposal on Sunday (July 11) night.

Since January when Greek voters voted in a new government led by Syriza, or the Coalition of the Radical Left, Greeks have been trying to renegotiate the terms of loans made to the country in 2010 after a financial crisis caused their economy to implode.

In return for the loans, the European Commission, the European Central Bank, and the International Monetary Fund demanded that the country impose austerity measures that reduced social spending on health and human services, cut pensions, privatized government resources, and forced the government to reduce other services.

The result has been a disaster. Five years after the austerity measures were implemented the unemployment rate remains above 25 percent, 40 percent of Greece’s children live in poverty, people’s access to health care has been curtailed, spending on education has been reduced, and the promises of the renewal that austerity was supposed to bring have proved to be empty.

To make matters worse, much of the money from the loans has been used to service debt from previous loans.

“The money that was given to Greece never went to the people,” said Tsipras in his speech to the European Parliament. “The money was given to save Greek and European banks.”

European leaders and Greek creditors, however, have insisted that in return for any new loans, Greeks must double down on the failed austerity measures.

When creditors issued their June 25 ultimatum, The Greek government called for a referendum on whether to accept the creditors’ demands.

Greek voters voted No by a margin of 61 percent to 39 percent.

The No vote, said former Greek Finance Minister Yanis Varoufakis, restored dignity to the people of Greece.

The No vote was also “a loud yes to the vision of a Eurozone offering the prospect of social justice and shared prosperity for all Europeans,” writes Varoufakis on his blog.

The European Trade Union Confederation, whose members represent 60 million European workers, urged European leaders to respect the No vote.

“Greek people have voted against austerity, unemployment, and poverty that made Greek debt unsustainable.  They have not voted against the EU or against the Euro,” reads a letter from the confederation addressed to European leaders.

“EU leaders have now an unavoidable responsibility to find a sensible compromise,” continues the letter.

But so far the EU leaders including the bankers who lead the European Central Bank have shown no inclination to compromise.

Among the creditors, Germany has been the most intransigent about insisting on more austerity measures as a condition of debt relief.

Germany’s intransigence is ironic. In 1953, Germany was suffering from an unsustainable national debt resulting from its aggression that started World War II.

Its debt burden impoverished ordinary Germans trying to recover from the aftermath of the war and made an economic recovery unattainable.

Germany’s creditors recognized the problems created by unsustainable debt and agreed to forgive 50 percent of the German’s debt obligation.

The debt relief allowed Germany the breathing space needed to rebuild its economy, which became the largest in Europe.

One of the features that made the German economic recovery possible was the fact that the government created a strong system of social welfare and insurance and implemented labor laws that protected worker rights.

Today Germany is demanding that Greece slash its social spending and jettison laws that protect worker rights.

The Greeks on the other hand are asking for relief not dissimilar to the relief that creditors offered Germany in 1953.

“The splendid No vote (must be) invested immediately into a Yes (for) a proper resolution,” writes Varoufakis. “To an agreement that involves debt restructuring, less austerity, redistribution in favor of the needy, and real reforms.”

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