How much is enough, or not enough? The Greek drama is looking like a slow motion train crash. On the one hand, there are the irrational expectations of foreigners – be they eurozone finance ministers or the International Monetary Fund, the private banks or certain commentators, who would like austerity to go even further. On the other hand, there is a brave new government of Greece, which seems to be pushing its society to the limits. How far can one go?
I am afraid there is no more room to cut public spending: the government is already cutting the branch it is sitting on. Five years of recession have eroded the tax base so far that revenues will shrink further, even after the increase in tax rates. Austerity is recessionary, as even the IMF now acknowledges.
In three years of austerity Greece’s debt has risen from 113 per cent of gross domestic product to 163 per cent. Homelessness has jumped by 25 per cent. Unemployment has risen to 21 per cent, among the highest in the industrialised world, with 48 per cent of young people out of work. It is naïve to think they will watch TV, not demonstrate or fight in the streets. This policy is senseless.