U.S. SENATOR STANDS, ACTS IN SOLIDARITY WITH GREECE
U.S. Senator Bernie Sanders, Ranking Member on the Budget Committee, is taking a stand in support of the people of Greece, demanding an end to the economic austerity measures being forced upon them by the so-called Troika (comprised of the European Commission, European Central Bank, and International Monetary Fund). These measures have led to an economic and indeed humanitarian crisis of historic proportions, with unemployment up to 25% and wage cuts approaching 40% since the recession began; while sharp increases in HIV and malaria contraction, as well as a suicide epidemic, ravage a country that has been made to cut its health services by 40%. Now, the left-wing party SYRIZA has won a democratic mandate to reverse austerity measures and restore dignity to the Greek people, setting them on a collision course with the Troika, which keeps asking for more and more.
Senator Sanders, in separate letters to IMF Director Christine Lagarde and Federal Reserve Board Chair Janet Yellen, is making it clear that enough is enough. He points to the more than $8 trillion provided to the European Central Bank by the Federal Reserve to help Europe overcome the worst of its recent financial crisis, counterposing this with the Troika’s unwillingness to provide necessary debt relief to one of its own, which is suffering a far graver crisis. The Senator makes it clear that the Troika’s inflexible position could induce dangerous deflation and financial instability that may ultimately prove contagious. He also reminds both Lagarde and Yellen of the ghosts as well as the current rise of anti-democratic right-wing parties across Europe, warning them not to further undermine Greek democracy, which has its own neo-Nazi influences lurking in the shadows should the current government be forced to fall.
Senator Bernie Sanders, a self-described democratic socialist, makes it clear that neither the IMF, nor the European Central Bank, nor the U.S. Federal Reserve should support the anti-democratic austerity measures currently being forced upon Greece. He implores both Christine Lagarde and Janet Yellen to reconsider their positions, and explicitly states that as Budget Committee Ranking Member he intends to follow up on his request. Read his letters here, and join the growing international solidarity movement to support the Greek people, its democratically elected government, and those everywhere who are suffering and struggling against the unjust, undemocratic, and increasingly inhumane politics of austerity!
(Rosa Luxemburg Stiftung―New York Office)
Letter to Christine Lagarde, Managing Director of the International Monetary Fund
Dear Ms. Lagarde,
This week, the Greek people elected a new government and invested that government with a mandate to reverse the failed austerity policies of the last six years. It is an important election, not just for people in Greece but for people all over the world struggling with declining spending on their own human needs even as they see rising profits for the financial sector.
Nowhere is this contrast more clear than in Greece. The costs of austerity in humanitarian terms are clear. One in four workers is unemployed, and the health system has been cut by 40%. Homelessness has spiked by a quarter, and HIV cases have increased by 200%. Hospitals are missing basic equipment such as surgical gloves, and pharmacies are running out of medicines. Malaria, once under control, is returning because Greek cities cannot pay for mosquito spray.
The humanitarian cost is severe, but it is important to note that these cuts have failed to address Greece’s debt problems. Despite these cuts, or rather because of them, the Greek economy is smaller than it was just a few years ago, and the debt to GDP ratio is higher than it was when austerity measures were first implemented. As a result, failed austerity policies are leading to a heightened risk of financial contagion, which should be a key concern of the Fund. Should failed austerity policies continue in Greece, Spain, and Italy, the international banking system will have its resilience severely tested.
Finally, the most significant cost is political. The severity of these austerity measures has created a dangerous political vacuum. The neo-Nazi party Golden Dawn has gained seats in the Greek Parliament, and is waiting in the wings should the current government fail. The resurgence of the anti-democractic right is not isolated to Greece. Extremist parties all over Europe are gaining as austerity measures are imposed on nation after nation. With a new Greek government in place, we have an opportunity to stop the slide of Greece, the Eurozone, and the global financial system into chaos. The people of Spain, Italy, and Portugal are watching to see if this situation can be addressed in a manner that can point toward a pathway
to broad based economic recovery in their countries. The International Monetary Fund, as a multi-lateral institution and one member of the “Troika” negotiating with this Greek government, has an important role to play. As ranking member of the Budget Committee, I am concerned about the IMF using United States government resources to impose austerity on a people that cannot take any more of it and risking severe financial contagion and political instability in doing so. I also believe that with the right leadership and choices, the IMF can help resolve this painful situation in a way that recognizes reasonable losses to creditors while aiding the Greek government in reducing tax evasion and corruption. There is substantial debate over whether the American government should increase the amount of U.S. resources available to the IMF for lending to foreign countries. Without wading into this
debate for the moment, I would like to understand how our commitments are being used in this case, and whether those commitments are being used to induce financial contagion and rightwing political extremism through excessive austerity or to aid in helping Greece and the rest of Europe achieve a manageable debt load and a sustainable economy.
With this in mind, I would appreciate a meeting with you and a briefing by the team at the Fund that is handling the Greek situation. My senior policy advisor, Matt Stoller, will be in contact with your office to follow up and arrange a briefing.
United States Senator
You can download the letter here.
Letter to Janet Yellen, Chair of the Board of Governors of the Federal Reserve System – February 8, 2015
Dear Chair Yellen,
As you know, the Greek people are suffering from a severe economic depression. Due to deflationary-inducing austerity policies, the Greek economy is 25% smaller than it was just a few years ago. Unemployment, youth unemployment, homelessness, HIV, suicides, and even cases of malaria have increased. While the humanitarian cost is severe, budget cuts have failed to address Greece’s debt problems. The country’s debt to GDP ratio is higher than it was when austerity measures were first implemented. This situation threatens to create a Eurozone-wide deflationary spiral, it elevates the risk of financial contagion, and it undermines vital U.S. interests.
Several weeks ago the Greek people voted for a new government. This government canceled the privatization of key public assets, raised the minimum wage, and restored electricity to the needy. This government is seeking to restructure its relationship with the European Union to encourage economic growth in Greece and to escape from a deflationary cycle.
Recently, the European Central Bank (ECB) announced that it will no longer accept Greek official debt as collateral for loans to financial institutions in that country on the grounds that the new government is not following the dictates of the previous, failed policies. This move had an immediate destabilizing effect on the U.S. and world markets, and further moves could provoke a run on the Greek banking system in the days or weeks ahead.
The United States cannot stand idly by while the European Central Bank undermines the new democratically elected government of Greece, induces deflation and risks financial instability. President Barack Obama was right when he recently noted, with regard to Greece: “You cannot keep on squeezing countries that are in the midst of a depression. At some point, there has to be a growth strategy in order for them to pay off their debts to eliminate some of their deficits.”
It would be a terrible mistake for the world to forget what happens when a democratically elected government, as was the case in Germany in the 1920s, is unable to relieve the severe economic suffering of its people. We must remember that waiting in the wings should this recently elected Greek government fail is the neo-Nazi Golden Dawn party. We cannot allow fascism to come to power in a European country due to our unwillingness to reverse harmful austerity policies.
As you know, the Federal Reserve has in the past provided substantial sums of dollars to the European Central Bank through what is known as ‘a swap line’. During the financial crisis, the Federal Reserve engaged in 271 transactions with the ECB, with an aggregate amount of dollars extended totaling more than $8 trillion. Currently, the Federal Reserve has a standing credit arrangement with the ECB on which the ECB can draw at any time. These swap lines, as they stand, tend to make the United States implicitly supportive of the policies that have so destabilized and damaged Greece. But they also give us a reason, indeed an obligation, to object when a partner Central Bank departs from its commitment to financial stability.
Therefore, I am writing to ask you to make it clear to the leadership of the European Central Bank that the United States and the Federal Reserve object to actions that affect our national interest and risk U.S. and global financial stability through the unnecessary and counterproductive implementation of deflationary policies. Our staffs are already working to set up a conversation on this vital question, and I look forward to speaking with you soon.
United States Senator
You can download the letter here.
Watch an interview with Bernie Sanders about Greek democracy.
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