|Editor Brian Whitmer discussed Greek austerity measures in the March issue of The European Financial Forecast:
The Greek Bailout’s Fallacy Fall-Out
February saw another marathon round of negotiations result in yet another “final” Greek bailout. Let’s review some problems and fallacies that permeate mainstream press accounts.
Problem No. 1: austerity measures will increase under the deal, which will facilitate a depression.
The January 2011 EFF argued that, during a negative mood trend, every action authorities take will “not only fail to prevent deflation, [but] will actually work to serve its cause.” The strings attached to the new bailout capture this catch-22 perfectly. Greece must cut another €325 million from its budget, bringing its austerity package since 2010 to €3.3 billion. In order to receive the promised funds, Greece will cut health spending (€1.1 billion); public investment (€400 million); defense (€300 million); pensions (€300 million); central government expenses (€300 million); and public sector wages (€90 million), with the remainder of the cuts (€81 million) yet to be specified.
Meanwhile, in terms of labor reform, the deal requires Greece to reduce social security contributions, slash minimum wage floors and cut 150,000 people from its public-sector workforce by 2015. According to a spokesperson with Greece’s largest trade union, “The new cuts will dramatically cut the spending power of the average citizen and deepen the recession.” He’s right, which is why, in 2002, Conquer the Crash included a full chapter on “dependencies to avoid” during the depression. The most pertinent entry for the purposes of this discussion is No. 4: “Don’t rely incautiously on government’s obligations to you....” Predictably, Greek trade unions object to austerity, but protesting budget cuts at the center of a deflationary depression is like protesting gravity at the center of a black hole. Preparation is the key, and it helps to understand socionomics to best prepare for economic and social change.
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