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Election Watch

Towards fiscal responsibility and away from democracy

The Malaysian Insider
15th July 2015

By Christopher Carson

In the last week, the country accredited with founding the world’s first democracy has moved away from a democratic system.

In the creation of economic policies, Greece has failed to listen to the will of its own people.

After a vote to not accept terms of their loan, rejecting austerity measures demanded by the country’s creditors, leading many to believe that the country would default on its loans, negotiators came to a new agreement involving a new set of austerity measures.

This agreement allows Greece to borrow €86 billion from the European Stability Mechanism with assistance from the International Monetary Fund. In exchange for this, Greece will privatise around €50 billion (RM210 billion) worth of assets, creating a trust fund to reduce its debt to GDP ratio and begin the repayment of its loans.

While such an agreement is great news for supporters of European financial integration and the recipients of the new bailout funds, the agreement is a major loss for those who embrace democratic values and voters who participated in the recent referendum.

The creation of a new set of austerity measures is the exact opposite of what 61% of Greeks voted for on July 5th. In Europe’s oldest democracy, it makes no sense for a referendum to be followed by a policy of the opposite nature.

The new agreement presents the image that Greeks are not responsible enough to make decisions for their own country, and must have a third party choose fiscal policies for Greeks have voiced their opinion that they would prefer default and insolvency over austerity, bailouts, and further economic integration with Europe.

However, many European leaders are not willing to let this happen for purely ideological reasons. Sovereign default within the common currency union of the eurozone would be a massive barrier to the project of European integration and an option that many western European ideologues will not accept.

However, for an individual country, sovereign default would not be the end of the world. Many other nations have defaulted on their loan obligations, and last week, American rapper 50 Cent declared bankruptcy, describing it as a fiscally responsible decision.

While each of these cases is incredibly different from the events unfolding in Greece, the option of sovereign default is a valid choice which should not be left off the table.

In his first interview since his resignation, former Finance Minister Yanis Varoufakis explained that taking out additional loans was not a sustainable option. The policy would only continue the process of excessive borrowing without stimulating economic growth.

He urged Greeks to “stop taking on new loans pretending that we’ve solved the problem, when we haven’t." Varoufakis resigned his post as finance minister after it was clear that the Greek government would not listen to the voice of the people in the July 5th referendum, and would continue negotiating a bailout package with the country’s creditors.

Proponents of the current agreement argue that the current actions are necessary in order to keep Greece within the eurozone and advance the project of European integration.

However, fighting to keep Greece within the eurozone might divide the continent more than unite it. In the last week, the level of tension has dramatically risen, primarily fueled by Germany’s insistence on keeping Greece within the eurozone, despite the vast domestic opposition within Greece.

The animosity has made way for allusions to World War II, comparing Germany’s current policies to the country’s role in the war.

Slogans like “World War II was fought with tanks, World War III is fought with banks” exhibit the extent of the grievances between the nations in Europe.

The hashtag #thisisacoup has emerged on Twitter, further demonstrating the divide within Europe that integration is creating.

Forcing Greece to borrow even more money, as an alternative to bankruptcy, has created harsh feelings among all parties involved, further obstructing the goal of European integration.

The question remains which strategy is best for Greece, and what Germany believes is best for Greece may not be what Greeks believe is best for their own country.

While a reformed financial system and sweeping austerity measures may be the fiscally responsible option, enacting policies created outside of Greece, policies which were rejected in a vote by the Greek people, will only make citizens feel disenfranchised by their own system.

As with any democratic system, it is important to let voters decide what is best for their own country.

While the ECB and other creditors may be starkly opposed to Greece’s choices, they must accept the decisions of Greece’s democratically elected government and the opinions voiced in the recent referendum.

Greek leaders are faced with an incredibly challenging situation, where no option is a good option.

On one hand, Greek leaders can refuse to take the additional loans, leading the country to default and eventually abandon the use of the euro.

While this will have terrible economic impacts in the short run, such a policy could benefit Greece in the long run, allowing Greece to take advantage of inflation to stimulate exports.

Regardless of whether this policy succeeds or fails, it would allow Greeks to be in control of their own destiny.

On the other hand, Greece can continue down the path it has been on for the last six years.

The country can take out one more loan, implement policies of austerity, and hope for economic gains.

Should this policy fail, as it has before, it will be looked back at as a destructive policy forced onto Greece by an authoritative German state, further raising the tensions within Europe and creating pressure against European integration.

The issue at hand is not an issue of left versus right politics or of socialism and capitalism. The issue is about the role of democracy, and whether a country should be able to determine its own policies through democratic means.

Greek citizens have voted against austerity measures and a continuation of the path that has lead Greece to where it is today.

The people have voiced the need for change. While the policies demanded by Greeks will have consequences, possibly leading to the country’s default and expulsion from the eurozone, the particular course was decided through a democratic process and not forced on the nation by a foreign entity.

The current agreement, on the other hand, while also having potential negative consequences, is seen a burden pushed onto Greece by an outside actor, which could lead to further deterioration of the relationship between Greece and the rest of Europe.

While not a panacea to Greece’s woes, allowing citizens to choose their own fate, and suffer the consequences of a self-imposed potential default, is the most optimal solution to the crisis. – July 15, 2015.

View original article on The Malaysian Insider

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