Debtors and creditors

637

The catastrophe unfolding in Greece is painful to watch, but in the impending tragedy are plenty of lessons for all. On July 5, the beleaguered country will vote whether it is willing to accept the conditions set on it by three powerful institutions, referred to as the `troika`, the European Commission, the European Central Bank, and the International Monetary Fund, for a bailout loan of 110 billion Euros to tide over its estimated debt total of 323 billion Euros. The terms set are extremely harsh. As knowledgeable analysts have noted, a `reform plan foisted on Greece five years ago has been abysmal, resulting in a 25% decline in the country`™s GDP.` They also note that the troika is still demanding Greece reach a budget surplus by 2018, and reserve 3.5 percent of its GDP for the repayment programme of their proposed loan. Without going into too much details of Greece`™s unenviable budgetary balance sheet, suffices it to say the situation is tragic for the country. On July 5, if the country says `yes` to the troika`™s plan, it would virtually be surrendering its financial sovereignty to these banks. If on the other hand it says `no` it would be courting chaos and impoverishment, for indeed Greece`™s economy is on the verge of total collapse. Besides its GDP declining at 25%, among other things unemployment has risen to 60% and pension funds having virtually disappeared. Understandably, there has been an upswing of suicides and during the last one year, and it is said over 3000 ended their lives.

The Greece situation has raised many interesting questions. These range from the philosophical, political, economic and administrative. It has also brought to the fore once again the antagonism between the socialist vision and the capitalist one. Left leaning Nobel Prize winning American economist, Joseph Stiglitz, for instance sees vendetta and claims that the Troika`™s bailout plan is not meant as assistance but punitive measures. Greece is ruled by a Leftist coalition known as Syriza and its Prime Minister Alexis Tsipras been quite irreverently pushing policies which is against the Capitalist ethos of creating wealth at any cost, including extreme social inequalities. This obviously did not go well with Capitalist Europe, therefore nobody is keen to rescue Greece in its time of crisis and instead endorse directly or indirectly, punishing and humiliating the country till it ultimately submits.

Another well known economist and columnist, Paul Krugman, agrees. Krugman, newspaper readers will recall has always been sceptical of the Euro Zone, saying it was unrealistic to presume different peoples with very different saving and spending habits can share purse. Much before the current Greece crisis he had predicted that it was unlikely for instance for the thrifty and financially prudent Germans, and the spendthrift, carefree Greeks to get along well sharing a single purse. If the EU was a single federal country, the problem would have been different. If one of its units landed in trouble, it would have become obligatory for the Union to come to its rescue. This would be something a situation in which an acute financial crisis befalls Manipur or any other states of India. Such a crisis would have made the Union of India obligatory to come to the rescue of the beleaguered state. But politically, EU is hardly near this arrangement.

Another observation is interesting. It says creditors cannot be made to solely define what justice should be, or the debtors bear all responsibilities of failure. German sociologist and philosopher, Jurgen Habermas, for instance stepped out into public space to ridicule how bankers are being allowed to define a nation and not the citizens. Creditors are not doing the debtors a favour out of charity, but earn handsome profits from loans they extend when the loan contracts succeed, so in situation where these contracts genuinely fail, they too, apart from the debtors, must be made to bear the cost. There are other more obvious lessons. Any economy, from the smallest unit of a family to that of a nation, runs on money they earn. For a nation, this revenue comes from taxes. Hence, an economy cannot afford not to earn, and equally important, it cannot afford to spend more than it earns. In the worries in the Northeast over the Centre`™s plan to end the special category status for Northeast states, is again this same equation. To be independent, an economy must be productive so that there will be a surplus for the government to build a tax coffer with which to run the economy. People in Manipur and the Northeast often forget this and think only in terms of what they are entitled to get and not also what they are obliged to give.

LEAVE A REPLY

Please enter your comment!
Please enter your name here