Two years ago the Greek government drafted a memorandum of co-operation (henceforth Memorandum) with the EU, the IMF and the ECB as a precondition to receive financial assistance and to avoid an immediate default. At the outset, the Memorandum was presented as a solution to the developmental impasse of the Greek economy, however it soon became apparent that it is only leading to the latter’s destruction. Hence the result of the 6 May elections reflected well the political verdict of the Memorandum and put on the table its very nature and aims. What is then the Memorandum’s true content and why Greece has to cancel it?
When speaking of the Memorandum one has to begin with an initial claim: There is an explicit dialectical tension between form and content that bears clear political implications. There is, in other words, a stark difference between what the Memorandum appears to be and what it really is.
Appearances come first. The Memorandum is a loan agreement signed by the partners involved in the financial assistance to Greece, and sets the conditions under which the latter will be carried out. Behind this approach lies a set of political presuppositions: The problem of debt is isolated at the country level and is not pertinent to the Euro-zone as a whole, therefore specific Memoranda are to be drafted in order to put the deficit countries in order. The responsibility of crisis management rests solely with the country in question, and in case of failure the blame is put on the failure of government reform attempts. In this respect, if a government opts out of the Memorandum’s iron clad is deemed as a rogue state that breaks its commitments and prefers to plunge into a deeper recession turning its ungrateful back on its self-proclaimed saviours. This is more or less the political narrative accompanying the Greek imbroglio in the European and Global governance fora as well as in international media.
However, a closer look would reveal the essence behind the appearance and then a radically different story emerges. The Memorandum is nothing more than a neoliberal response to the incumbent fiscal crisis. It is a recipe prescribing that the crisis can be dealt with solely by rolling back the welfare state, deregulating labour markets and transfer violently a large segment of wealth from work to capital so as to make out for the latter’s losses. In this context, the Memorandum is not country specific; rather it is the last card of neoliberalism ready to be played at every corner of the European continent. Hence cancelling the Memorandum is not an act of defiance, but a decisive step towards the survival of the entire European edifice.
A careful inspection fully corroborates the essence of Memorandum as a neoliberal response to the crisis, applied in Greece by token of a test case. Austerity measures introduced by its clauses precipitate its subsequent application to all European countries, irrespective of their exposure width to the current crisis. Three mechanisms are deployed to consolidate capital. The first is taxation. Corporate tax has been reduced the last five years from 40% to 20% and now is scheduled to be reduced further to 15%. The burden shifts to indirect taxation. VAT was increased last year from 21% to 23% while the taxation on basic-need goods rose from 10% to 13%. At the same time high incomes are to a large extent rest intact. The second is the deregulation of the labour market. Collective agreements have been abolished; lay-off regulations are now lifted, while the wages in the private sector have been scaled down by 32%. The same holds for public sector employees who in some cases suffered up to 60% cuts. The third mechanism is privatizations, which open wide the field for the valorisation of capital. A massive programme of privatizations is scheduled amounting to 56 billion Euros. Along with this comes a deregulation of the social insurance system and the dismantlement of public health and education.
A clear indication that the set of policies described above is an utter failure and that the Memorandum is nothing more than a dead letter, is well illustrated in the timeline of its application. The first Memorandum was introduced in spring 2010. Along with its trimester monitoring came four major amendments, only to result in the creation of a second Memorandum in early 2012. Apart from this, there is an outspoken break with the initial claims of the whole project. The Memorandum was introduced on the grounds that will bring the economy back on track by 2012, while from 2013 onwards an annual rise in GDP was to take place at the rate of 3.5-4%. Two years after the painstaking implementation of the austerity measures the result was: a decline of the GDP approximating 20%, a rise in unemployment from 11.1% in 2010 to 21.7% in 2012, private consumption fallen by 15% and total investment ratio by 32% and last but not least public debt rose from 115% in 2009 to 165% in 2012. Numbers speak volumes and the voice indicates that the Memorandum is certainly not the road to salvation.