Is Greece the future of the US?

Maybe, but not in the way conservatives think.

By Mike Andrew

“Greece is the future of the US,” conservatives warn, meaning that this country is headed for a similar economic and social melt-down unless our government slashes social spending, cuts taxes, lays off public sector workers, and balances its budget.

Riots in Athens and general strikes that have paralyzed Greece underscore exactly how serious all this is. Is this really the future of the US?

This is the first installment of a two-part article that will look at Greece’s economic crisis and what lessons the US can learn from it.

In Part I, we’ll see if the austerity measures forced on Greece by European banks have helped or hurt the Greek economy.

In Part II, we’ll look at a completely different approach to Greek economic development, one that was tried by the socialist PASOK party in the 1980s

When George Papandreou led PASOK back into power in 2009, after five years of right-wing government, he faced three very real problems.

First, the previous PASOK administration led by Kosta Simitis (1996-2004) had joined the Eurozone – a move opposed by the left wing of PASOK.

Second, the Simitis government took advantage of the easy credit opened up by participation in the Eurozone to borrow heavily from European banks.

Thus, when Papandreou came into office, his country was no longer in control of its own money supply and owed a lot of money to foreign banks.

To make matters worse, the right-wing New Democracy government that preceded Papandreou had cut income and social security taxes to benefit its base, and then cooked the books to conceal the real level of Greece’s budget deficit.

Instead of the official 3% of GDP budget deficit allowed by the EU, or the rumored “real” deficit of 6%, the actual rate turned out to be almost 13%.

Finally, the Greek economy suffered from persistently slow growth and high unemployment rates, especially among younger workers.

Greek workers work harder than most. According to the Organization for Economic Cooperation and Development, Greek workers work some 2,120 hours every year, compared to 1,760 for US workers, and a mere 1,430 a year for Germans.

The problem is that there are more Greeks who want to work these long hours than there are jobs available. That’s one of the reasons emigration has always been part of Greek life, as Greeks left for the US or Australia to find work.

One of the promises made by the EU to small and relatively poor countries like Greece was that with EU membership would help in growing their economies.

Nevertheless, when Papandreou went to the EU for a bailout, he found that the EU’s economic agenda was not a growth agenda at all, but a contraction agenda.

The EU demanded a program of spending cuts very similar to what Republicans demand here in the US.

The “size of government” is to be reduced by failing to replace government workers as they retire.

Wages of workers in state-owned industries are to be cut by 30% and there will be a cap on wages and bonuses.

Just to show how damaging this will be, the median household income in the US in 2009 was $50,221. A 30% cut in pay would be more than $15,000 cut out of that family’s budget.

The retirement age in Greece has already been increased from 52 to 59, and it will be raised to 65.

These measures have not yet been fully implemented but unemployment already hit new record highs.

The Greek jobless rate went to 16.2% in March from 15.9% in February. Among workers under 30, the unemployment rate is more than 36%.

The social safety net is also on the chopping block, starting with pensions and benefits for retirees, and COLAs will be eliminated.

While these so-called “reforms” are still being implemented, Greece’s GDP declined by more than 4% in 2010. It will certainly decline even further this year.

While we can feel sorry for Greek workers and their families, the thing to take away from the Greek case is that the EU’s austerity program is not much different from the one proposed by fiscal conservatives in the US.

Do they want this be the future of the US?

(Mike Andrew is the Associate Editor of The Retiree Advocate)