Wednesday, 7 November 2012

Easier to Preach than Implement

Don't know if you have seen it, but an article in Der Spiegel states that although Angela Merkel and Wolfgang Schäuble have forced almost every Southern nation in the EU to take harsh austerity measures, they do not plan to follow that recipe themselves. With less than a year until elections, Angela Merkel is planning on increasing government spending in the form of subsidies and pension raises. While this may be speculative as the German Chancellor has committed to presenting a balanced budget for 2013, it is in severe contrast with Schäuble's on austerity in the current G-20 summit in Mexico City.

You see, as in most philosophies and other principles and values, it is easier to preach and condemn people for not implementing them or even force people to apply them, than to use them yourself. The great socioeconomic experiment we are currently witnessing in Greece (and will soon witness in Cyprus as well) is indicative of people who are stuck in ideology and cannot understand simple economic reality. I am not talking about complex equations or ideas here: what I mean is the mere understanding that if you cut salaries and wages things will get worse than what they were. Any high school student could see and understand this. Sadly, we have no high school students in a position to apply policy.

If austerity measures were implemented to reduce structural problems the countries were facing, I would admit that, even though rapid implementation is never good, the measures were aimed at producing something good. Nevertheless, the measures are only aimed at reducing expenses and not addressing problems. As a result, they do nothing to improve a country's well-being. In contrast, what they do is deepen the gap between social classes, as the lower class assumes most of the burden.

The Greek domino effect. Source:
It would look like policymakers and politicians in the EU are not really reading any blogger articles. The EU blogosphere has been expressing its objections about this for months now. What seems to be even more amazing is that even though blogger voices against austerity have increased over time, nothing is being done to correct the situation. What I fear is not that a nation will be destroyed. It is the domino effects of this destruction that I fear the most. A Greek bankruptcy, or even a fall of the government, would most likely force the nation out of the Union and the common currency. And if this occurs then maybe Cyprus, Spain and Italy will also flee, thus rendering the EU a non-Mediterranean union. Although the ties between nations are strong, which can be evidently seen in the youth, they are nevertheless weaker in the older population. As the older generation rules, it will be more difficult not to follow suit if Greece exits the Union.

What is suggested above is not just a far-fetched scenario. It is one of extreme likelihood if the austerity measures are not passed through the Greek parliament. And I am not sure what is worse for the Greeks: the painful austerity plans or the fall of a government? In the long run obviously the second would yield worse results, but in the short run austerity will bring those of the Greeks still standing, to their knees. 

Unfortunately, Greece, as well as Cyprus in a few days, is at the mercy of its creditors. They tell the country how much it shall be lent, when and what is should do with the money. It is essentially being an unelected and uninvited government. Can you really blame the citizens for not liking the Troika and what it represents?

No comments:

Post a Comment