Reports from the Economic Front

a blog by Marty Hart-Landsberg

The Greek Crisis and Militarization

Greece has been in recession for close to four years and its economy continues its downward slide.  Its unemployment stands at 20.9%, youth unemployment at 48%.  In the words of the Guardian’s economic editor:  

Greece is broke and close to being broken. It is a country where children are fainting in school because they are hungry, where 20,000 Athenians are scavenging through waste tips for food, and where the lifeblood of a modern economy – credit – is fast drying up.

According to the conventional wisdom, Greece’s current economic problems are the result of years of too much public spending on social programs and too little tax collection.  Foreign borrowing enabled the Greek state to finance its ever larger budget deficits and sustain growth.  However, this strategy reached its limits in 2008.  The global crisis dramatically increased the country’s deficits and foreign lenders grew worried about Greece’s ability to pay its debts.  Unable to tap credit markets, the Greek state and economy entered into crisis.  

In response to the crisis, European institutions and the IMF have offered the Greek state special loans (so they can pay their debts to foreign banks—mostly German and French).  In exchange, the Greek government has agreed to slash its spending.  This has meant massive cuts in state employment and social programs and, of course, a worsening of the country’s economic downturn.

Interestingly, while the media has demonized Greek workers for creating the deficits and moralized about their need to readjust to the realities of Greek economic capacities, little attention has been paid to military spending as a cause of the deficits and the unwillingness of European leaders to demand a significant change in Greek defense spending.

 Here is what a Guardian reporter has to say  

The current EU-IMF bailout remains conditional on further austerity measures, including reducing pensions, the minimum-wage and civil service jobs. However, one area of the Greek budget doesn’t seem to have received much scrutiny: its huge military spending. . . .

In 2006, as the financial crisis was looming, Greece was the third biggest arms importer after China and India. And over the past 10 years its military budget has stood at an average of 4% of GDP, more than £900 per person. If Greece is in need of structural reform, then its oversized military would seem the most logical place to start. In fact, if it had only spent the EU average of 1.7% over the last 20 years, it would have saved a total of 52% of its GDP – meaning instead of being completely bankrupt it would be among the more typical countries struggling with the recession. 

So, what is driving this military spending—well just as German and French banks have been among the biggest lenders to the Greek state, German and French arms producers have been among the biggest arms sellers to the Greek state.  As the Guardian article explains:

In the five years up to 2010, Greece purchased more of Germany’s arms exports than any other country, buying 15% of its weapons. Over the same period, Greece was the third-largest customer for France’s military exports and its top buyer in Europe. Significantly, when the first bail-out package was being negotiated in 2010, Greece spent 7.1bn euros (£5.9bn) on its military, up from 6.24bn euros in 2007. A total of £1bn was spent on French and German weapons, plunging the country even further into debt in the same year that social spending was cut by 1.8bn euros. It has claimed by some that this was no coincidence, and that the EU bail-out was explicitly tied to burgeoning arms deals.

Greece has finally begun to reduce its military spending, but the cuts in the military budget have been far smaller than those in social programs.  In fact, Greece remains in the top spot in the EU for spending on the military as a percentage of GDP and is still one of the world’s biggest weapons importers.

An article in the German press offers the following picture of how military spending is being handled relative to social programs:

In 2010 the military spending budget should have been cut by only 0.2 percent of economic output, or by €457 million. That sounds like a lot, but the same document proposed to cut back on social spending by €1.8 billion. In 2011, according to the EU Commission, Greece was to strive for “cutbacks in defense spending”. The Commission, though, didn’t make it explicit.

The Greek Parliament was quick to exploit this freedom. The 2012 budget proposes cuts to the social budget of another nine percent, or about €2 billion. The contributions to NATO, on the other hand, are expected to rise by 50 percent, to €60 million, and current defense spending by up to €200 million, to €1.3 billion – an increase of 18.2 percent.

And the German Federal Government’s stance? According to a spokesman, responding to an enquiry, the German government supports “the policy of consolidation of the Greek Prime Minister Papademos. The government’s guiding assumption is that the Greek government will, on its own responsibility, contemplate meaningful cuts in military spending.”

On June 17, Greece will hold national parliament elections.  As the Washington Post explains: 

Let’s recall the background. Greece owes a whole bunch of money it can’t repay. In February, the country received a $140 billion bailout from the IMF, the European Central Bank, and the European Commission. In exchange, Greece is supposed to make a bunch of sharp spending cuts. Greek voters don’t like this, given that their country’s economy is already in tatters. But if they don’t accept further austerity, they might not get the bailout. . . . So that’s the context for the upcoming Greek parliamentary elections.

The two parties leading in the opinion polls are Syriza (Coalition of the Radical Left), which rejects the austerity agreement and is promoting a restructuring of the Greek economy (of course, more is at issue than just military spending), and Nea Dimokatia (New Democracy), which has basically endorsed the status quo.  Here is an article that provides some background on the main parties contesting the upcoming election and here is a statement of Syriza’s program for economic transformation.  The statement is well worth reading; it includes policies that would be helpful for people in many countries.

One response to “The Greek Crisis and Militarization

  1. Dylan June 13, 2012 at 1:30 am

    Very disheartening to see Fascism reemerge in Greece and Europe more broadly. Not to stretch the analogy, but the situation in Greece seems eerily reminiscent of Weimar-era politics. What do you think the prospects of Syriza actually assuming power are, and if they do end up representing the majority, do you think they will make good on their program as outlined above?


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