Sen. Bernie Sanders (I-Vt.) attacked the International Monetary Fund and European authorities on Wednesday for imposing what he called excessive austerity measures on Greece in negotiations over the country’s debt payments. [Click here for the Huffington Post site, or read on]
Sen. Bernie Sanders (I-Vt.) attacked the International Monetary Fund and European authorities on Wednesday for imposing what he called excessive austerity measures on Greece in negotiations over the country’s debt payments.
“It is unacceptable that the International Monetary Fund and European policymakers have refused to work with the Greek government on a sensible plan to improve its economy and pay back its debt,” Sanders said in an exclusive statement to The Huffington Post. “At a time of grotesque wealth inequality, the pensions of the people in Greece should not be cut even further to pay back some of the largest banks and wealthiest financiers in the world.”
Sanders, a 2016 Democratic presidential candidate and veteran progressive lawmaker, called the loans-for-austerity policies that the IMF and eurozone nations have imposed on Greece an “abysmal failure,” and demanded that the United States and other world powers grant Greece new debt-repayment terms that would allow its economy to recover from the damage it has sustained since 2008.
“Instead of trying to force the Greek government and its people into even more economic pain and suffering, international leaders throughout the world, including the United States, should enable Greece to enact pro-growth policies that improve the lives of all of its people, not just the wealthy few,” Sanders said.
Sanders appeared to single out the IMF, the creditor over which the United States has the most direct influence. The U.S. controls more votes in IMF decisions than any other nation.
“If Greece’s economy is going to succeed, these austerity policies must end,” Sanders said. “The IMF must give the Greek government the flexibility and time that it needs to grow its economy in a fair way.”
Sanders has for months been urging the United States to use its influence to secure better terms for Greece. In February, when negotiations between Greece and its so-called troika of creditors — the IMF, the European Central Bank and the European Commission, representing the eurozone nations — had reached a standstill, Sanders asked the Federal Reserve to leverage its financial support for the ECB during the 2008 crisis to get the central bank to ease up on Greece. At the time, Sanders accused Greece’s creditors of stiffing Greece’s Syriza-led government in an attempt to bring a friendlier government to power. Syriza, a left-populist party, won national elections in January on the promise that it would secure relief from austerity in negotiations with Greece’s creditors.
Sanders’ latest appeal comes at an even more urgent time for Greece, with the country’s membership in the eurozone in greater danger than ever before. On Tuesday, Greece missed a deadline to repay 1.6 billion euros’ worth of debt to the IMF. The IMF has said it now considers Greece in arrears, though it will consider the country’s request for an extension. Also on Tuesday, the bailout package from Greece’s creditors expired. At the last minute, the Greek government had asked for a new two-year loan from eurozone nations to make the IMF payment, but the other nations refused the request.
Without new rescue loans, Greece will be unable to make upcoming payments to its creditors or even keep its government running. The country’s creditors have indicated that Greece could still regain access to needed rescue loans. But on Wednesday, eurozone finance ministers made clear that they will only resume negotiations after Greece holds a July 5 referendum vote on the creditors’ latest bailout proposal.
Greek Prime Minister Alexis Tsipras announced the referendum vote on Saturday after rejecting the creditors’ latest offer. Now he is asking Greek citizens to vote “no” on the referendum, arguing that this will strengthen his hand at the negotiating table. Other European leaders have insisted, however, that a “no” vote will simply amount to a rejection of Greece’s membership in the eurozone, and will close the door on future lending. In the meantime, the ECB has halted its emergency liquidity injections to Greek banks, prompting Greece to institute capital controls that limit bank withdrawals to 60 euros a day.
Sanders is both the first member of Congress and the first presidential candidate to publicly weigh in on the most recent round of negotiations between Greece and its creditors. (The campaigns of Hillary Clinton, Lincoln Chafee and Martin O’Malley, the other three declared Democratic presidential candidates, did not immediately respond to requests for comment.) His statement will likely be hailed as a positive step by the progressive U.S. activists who have been calling on members of Congress to pressure the IMF to offer Greece better terms. As of Wednesday evening, a MoveOn petition initiated by Robert Naiman of the group Just Foreign Policy, asking Congress to “oppose [the] IMF assault on Greek democracy,” had more than 8,000 signatures. The Working Families Party has launched a similar petition campaign.
And the substance of Sanders’ criticism is shared by a broad array of economists who argue that the rapid fiscal tightening imposed on Greece has pushed it into an economic depression and trapped it in an endless cycle of debt. As a condition of two bailouts in the past five years totaling 240 billion euros, Greece’s international creditors have demanded massive spending cuts, tax increases and other reforms. (As of January, only 11 percent of those bailout funds has been used to finance government operations, according to an analysis by the news site MacroPolis. The rest of the funds have gone toward paying or servicing Greece’s debts.)
While the austerity regime has allowed Greece to meet short-term obligations to its creditors, it has devastated the country’s economy. Greece’s GDP has shrunk by over 25 percent since 2008. Over a quarter of the population is now unemployed, and one-third of Greek citizens are living in poverty. The country’s public debt stands at 177 percent the size of its economy — a level that is widely believed to be unsustainable.
It’s not clear what impact, if any, Sanders’ statement will have on the Greek crisis, since the United States — notwithstanding its controlling votes at the IMF — has remained largely on the sidelines during the current impasse. Treasury Secretary Jack Lew has been in close consultation with his eurozone and Greek counterparts throughout negotiations, but he’s refrained from specific prescriptions, instead making broad appeals for both sides to compromise. Peter Doyle, a former senior manager at the IMF, criticized the approach in an interview with HuffPost on Wednesday, arguing that the Obama administration should have vetoed a redlined document the creditors presented to Greece on June 26 that was viewed as especially humiliating.
As recently as February, President Barack Obama was arguing that excessive austerity policies can prevent struggling countries from recovering economically.
“You cannot keep on squeezing countries that are in the midst of depression,” the president said then, a remark that was widely interpreted as an admonishment to Germany. “At some point, there has to be a growth strategy in order for them to pay off their debts to eliminate some of their deficits.”
At a Tuesday press conference, Obama made no such appeals. Instead, he used the occasion to downplay the impact of the Greek crisis on the U.S. economy, calling the threat of a Greek default and eurozone departure an “issue of substantial concern,” but one that is “primarily of concern to Europe.”
Sanders, for his part, argues that the United States has an interest in helping Greece attain economic relief in order to safeguard the country’s democracy. He cites the rise of Nazism in Germany after World War I as an example of how austerity-stricken economies are susceptible to authoritarian takeovers.
“Let us not forget, after World War I, the Allies imposed oppressive austerity on Germany as part of the Versailles Treaty,” Sanders said in the statement to HuffPost. “As a result, unemployment skyrocketed, the people suffered, and the policies of austerity gave rise to the Nazi Party. We cannot let a situation like that ever happen again.”
The statements, views, and opinions expressed in this article are solely those of the author and do not necessarily represent those of EMerging Equity.
Courtesy of Yanis Varoufakis