Greece and Austerity

COSTAS LAPAVITSAS, PROF. ECONOMICS, UNIV. OF LONDON: It's a pleasure.

JAY: So Greece is sort of off the front pages, at least in North America, but the situation, I assume, is getting worse. So what's happening?

LAPAVITSAS: Well, the situation is definitely getting worse in real terms. What is happening is that the country is now forced to engage in a new bout of cuts, basically, a new bout of austerity. Basically, the country will have to reduce public spending by perhaps €13.5 billion up to 2014. This is a very large sum for the Greek economy, a large proportion of its GDP. So the country's being forced to do that. And to achieve this target, the government will now have to cut wages, pensions of public servants, and it will have to effectively fire a large number of civil servants, up to 150,000 people, to 2014.

Now, this is what the government has to do, it's being forced to do by the European Union. And I want to stress the complete absurdity of this in economic terms. This is a country that's in its fifth year of recession. This recession is probably the most severe recession in the history of Greece, and it's definitely—it's basically a depression. Income from the—national income from the beginning of the crisis has contracted by about 20 percent. The Greeks have seen their livelihood devastated. Everything is on a downward path, with the possible exception of exports, which are not doing terribly well, but they're not falling, at any rate.

Now, in the midst of this depression, the European Union is forcing the Greek government to implement vast cuts, additional cuts, in order to achieve a primary surplus by 2014. This is nonsense economics. It's absurd. It's absolutely absurd.

JAY: Now, I see in the news on Thursday that Hollande is meeting with—the French president is meeting with Merkel from Germany. And when Hollande was elected, he had all kinds of rhetoric against austerity and that there needs to be a different way of dealing with this. But then the statement today with Merkel seems to be they're on quite the same page, at least when it comes to Greece, that there's no point giving Greece more time and Greece has to implement the, quote-unquote, "reforms".

LAPAVITSAS: Yeah, I don't think there's any—there's no difference between France and Germany on this. The election of Hollande was trumpeted as a major step that would change the outlook of the European Union. No such thing was really in the offing, for those who understood what Mr. Hollande is all about, and that's how it's standing out. So there is no change of policy with regard to Greece.

Greece is now forced to apply enormous austerity on top of the austerity that is already applied, and in an economy that's in the midst of a depression. This is, as I say, absurd economics. This is the economics of the madhouse. What is going to happen now is that everything is going to get even worse. Unemployment will get even higher, will break the 25 percent mark in Greece. Unemployment among the youth will go to incredible figures. The country's being devastated, basically, and it will continue to be devastated if these measures are actually applied.
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