Austerity or Democracy

ATHENS/BERLIN | | griechenland

ATHENS/BERLIN (Own report) - At Berlin's insistence, Greece will not receive debt relief and will be forced to submit - contrary to the Greek population's "No" last Sunday - to Germany's austerity dictate, or exit the Eurozone. This is what the Eurogroup decided at its summit yesterday evening. Debt relief, as French Prime Minister Manuel Valls had been still considering yesterday afternoon, is out of the question, announced German Chancellor Angela Merkel following the meeting in Brussels. Athens will also have to present detailed austerity proposals by Thursday. European Commission President Jean-Claude Juncker explicitly declared, "if the Greek government is not doing what we expect" a "Grexit" will be initiated. According to insiders, cash will be available at Greek banks only for another two days. By withholding ECB emergency funding, Greece can be driven into collapse, at any time. Just prior to the summit, leading economists signed an appeal to Chancellor Merkel, asking her to stop the "never-ending austerity" - to no avail. In the meantime, even Washington has intervened in the debate. A special EU summit, convened for Sunday, will take the final decision on Greece's future.

Facing Grexit

Following yesterday evening's Eurogroup summit, Chancellor Merkel reiterated that Greece will receive no debt relief, as was demanded particularly by France - most recently by Prime Minister Manuel Valls yesterday afternoon. By Thursday, the Greek government will also have to submit detailed proposals of how it intends to comply with the austerity measures demanded by Berlin and Brussels. This means that Athens essentially has to disregard the will of the Greek population, which, in last Sunday's referendum, said "No" to that particular concept of austerity, but in fact, had rejected the entire German austerity dictate. In turn, Greece would receive a third "bailout package," under which it must continue to repay debts and interests to German and French banks. According to observers, Berlin and Brussels could make the small concession to Athens of extending the credit period - at least to be able to claim that this respects "the Greek people's dignity," as European Commission President Jean-Claude Juncker had declared yesterday. "If the Greek government is not doing what we expect, we have a Grexit scenario prepared in detail," said Juncker, and "we have a scenario" for "humanitarian aid" to handle a collapsing Greece.

ECB Holding the Key

Insiders confirmed yesterday that the European Central Bank (ECB) headquartered in Frankfurt (Main) is holding the key to Greek's future and could provoke Greece's total collapse. Greek banks only have enough cash for two more days. Cash could become "a real problem at the cash machines" already by tomorrow, a bank expert is quoted saying.[1] Greece is therefore completely dependent on the ECB, which, by withdrawing its emergency credits could force Greece inevitably into instant collapse.

Deadly Medicine

Just before the Eurogroup's summit, several prominent economists appealed to Chancellor Merkel in an open letter, asking that she take the Greek referendum as an opportunity for a course correction in the policy toward Greece. Among the signatories are Jeffrey Sachs, whose shock therapy is being held responsible for the serious economic collapse in Eastern Europe in the 1990s, and former State Secretary in the German Ministry of Finances, Heiner Flassbeck. "The never-ending austerity that Europe is force-feeding the Greek people is simply not working," write the economists. "As most of the world knew it would, the financial demands made by Europe have crushed the Greek economy ... and made the external debt crisis far worse." The "humanitarian impact" has been "colossal." For example "40 percent of children now live in poverty," the "infant mortality is sky-rocketing" because of the austerity policy. "The medicine prescribed by Berlin and Brussels has bled the patient," write the authors, not cured the disease. "It is having an impact on those, who were not even born at the beginning of the crisis."[2] This is why the austerity dictate must be ended.

An Important Partner

Washington has even become involved in the debate. Yesterday, Greece's Prime Minister Alexis Tsipras spoke by telephone to US Minister of Finances Jacob Lew and President Barack Obama. They spoke particularly about an accommodation loan, that Athens quickly needs, to bridge the gap until a third bail-out package begins, according to reports. Obama has "hopes" for an agreement that will definitely keep Greece in the Eurozone. Yesterday, Hillary Clinton also made similar demands. The EU must urgently "defuse" the crisis, says former Secretary of State and possible presidential candidate, Hillary Clinton. "I want to see a resolution." After all, Greece is "an important partner."[3]

Geostrategic Bridgehead

For the USA, Greece is in fact an extremely important NATO partner. The political scientist Johannes Varwick has emphasized this point. According to Varwick, for the West, Greece serves as a "geostrategic bridgehead to the Middle East," which was already "the reason" to have "Greece as a NATO partner in 1952." To this date, "nothing has changed" in this respect, explains Varwick. It must be absolutely "avoided that there is a dislocation on NATO's southeast flank," explains the political scientist. "That means that as a prerequisite, for a stable opposite shore, the European realm must first of all, be stabilized, and therefore Greece ..., even from a security policy standpoint, is a serious problem."[4] Western allies' support for Greece maintaining its expensive military budget is also due to its exposed geostrategic position. According to the SIPRI Institute in Stockholm, just last year, after the catastrophic cuts in pensions and social expenditures had long since been made, Greece invested a good 2.5 percent of its GDP in its military - much more than any of the other European NATO member countries. Last week, NATO Secretary General Jens Stoltenberg declared that this must continue to be the case: "That is important for all." Military spending were "not the reasons for the financial crisis in Greece."[5] The Tsipras government has agreed to maintain the higher-than-average military spending.

No Other Option

Sunday, the EU special summit will make its final decision on Greece's future. The Tsipras government either will then comply with the wishes of the Greek population, or again be forced to submit to the German-EU austerity dictate - possibly a bit veiled cosmetically. Berlin, as yesterday's Eurogroup summit has confirmed, leaves no other option open.

Please read also The First Defeat.

[1] Jetzt wird es ernst: Jean-Claude Juncker kündigt an: "Wir haben ein detailliertes 'Grexit'-Szenario". 07.07.2015.
[2] Heiner Flassbeck, Thomas Piketty, Jeffrey D. Sachs, Dani Rodrik, Simon Wren-Lewis: "Jetzt ist der Zeitpunkt, die gescheiterte Sparpolitik zu überdenken". 07.07.2015.
[3] Sondergipfel am Sonntag - Drittes Hilfspaket im Gespräch. 07.07.2015.
[4] "Griechenland hat zentrale Rolle für innere Sicherheit der EU". 30.06.2015.
[5] Lorenz Hemicker: "Rüstungsausgaben sind nicht das Problem". 01.07.2015.