More austerity may please the Germans, but it is an unnecessary
tragedy for Greece and it won't pay down its debt.
The Greek Parliament did what it had to do on Thursday. Lawmakers
narrowly approved a $23 billion package of austerity measures,
including further spending cuts to social services, pensions and
public salaries, as well as tax increases demanded by Greece's
European lenders. In return, the troika of official creditors -- the
European Commission, the European Central Bank and the International
Monetary Fund -- promise to consider, but not guarantee, reducing
the interest rates they charge Greece for bailout loans and
unlocking a $40 billion payment Athens needs to avoid a default on
its debts.
No responsible Greek lawmaker could have ignored the terrible
consequences of voting no. But no one can dismiss the threat to
social stability from these cuts. Even Prime Minister Antonis
Samaras, who fought to push the package through Parliament,
characterized the cuts it imposed as "unfair."
The fact is, just about everything in this austerity package has
been tried before and failed. These steps will do nothing to make
Greece's debts more payable, bring its budgets closer to balance or
help make the structural reforms it needs to revive its economy.
Instead they will almost certainly further shrink an economy that
has already shrunk by 25 percent over the past few years, making
fiscal improvement nearly impossible.
Greece cannot pay off its debts when it is shutting down its
economy. It has to put people back to work. The only way forward is
through more debt write-offs and more low-interest European loans,
as well as by opening up job markets.
But measures that extend and deepen Greece's severe recession are
certain to intensify public opposition to labor market reforms that
could increase an unemployment rate already over 25 percent. And
imposing new fuel taxes and health care charges will hurt ordinary
people and make a tax system that is scandalously unfair even more
so.
Ordinary Greeks are losing confidence in a political system they
feel has failed to protect them. Greek lawmakers know this but feel
compelled to do as their European creditors ask. And, we suspect,
many of those creditors also know that more austerity is not the
answer. But so far, they have been unwilling to challenge the leader
of Europe's biggest economy, Chancellor Angela Merkel of Germany,
who continues to believe that only economic punishment will push
Greeks to reform. It may be a winning political formula in Germany,
where Ms. Merkel stands for re-election next year. But it is a
profound, and profoundly unnecessary, tragedy for Greece.
