March 5, 2012
Here is an editorial titled “Austerity must have limits” by the editors of The Tablet, a London-based international Catholic weekly. It is dated Feb. 18.

Measured by the savagery of their effects on the very fabric of Greek society, the European Union’s present policies toward Greece demand to be called into question. Examining the economic logic behind those policies, however, leads to an even more alarming conclusion.

Among political and economic commentators of Left and Right, pro-European as well as Euro-sceptic, there are almost none who think that the treatment prescribed, austerity piled on austerity year after year, has the remotest chance of working. In other words, it is the destiny of Greece to suffer worse and worse – until what? Revolution? Famine? Anarchy? Civil war?

One parallel would be Germany after the First World War. The allied victors, bent on revenge, decided on a deliberate policy of beggaring Germany — already heading toward starvation because of the wartime blockade — by crippling its industry and commerce.

At the same time, they demanded swinging reparations payments. But, as John Maynard Keynes pointed out, the two approaches were incompatible. Either Germany was reduced to a land of hungry peasants, or it could keep its productive capacity intact to earn enough to pay the huge sums the allies demanded after Versailles; but not both.


European policy toward Greece is remarkably similar to the way Victorian Britain treated debt defaulters. Until their debts were paid they were locked up — thereby making sure they were never likely to earn enough to be released.

Greece’s situation is no more hopeful. Cuts in spending have forced its economy into severe recession with large falls in GDP year on year; rising unemployment increases the call on public spending, leading to more borrowing. The collapse in demand is closing businesses across the private sector, the very enterprises whose growth is needed if the deficit is to come down.

It is all very well to argue, as many northern European politicians have done, that Greece has brought its misfortunes on itself. There was certainly a reckless never-never land period in Greece after it first joined the euro — on a false prospectus, what is more — that meant some painful reckoning was inevitable and the extravagance in public spending had to be reversed.


But the application of repeated, almost punitive, doses of austerity was the only prescription that neo-liberal economists in the German Finance Ministry, as well as in the American credit-rating agencies, were prepared to envisage.

As each dose failed, another was applied. Now the Greek economy verges on collapse. It is hardly surprising there are riots.

Indeed, austerity has become the watchword across Europe. In contrast, the U.S., which refused to be bullied by the ratings agencies and chose a more balanced combination of government financial discipline and measures to encourage economic growth, has escaped that fate. Britain is bogged down in the same neo-liberal economic swamp as the rest of Europe.

In the short term, the Greeks need every bit of help to cope with the privations that are being visited upon them. Children must be fed and clothed, warmly housed and schooled; the sick must receive the care they need. The Greek Orthodox Church is feeding 250,000 people a day. But Europe must also rethink its grand strategy. It is not working, nor is it ever likely to. The revolution required is not in Athens but in Brussels and Berlin, and not in the streets, but in ideas and policies.