Greece: Is It Becoming the First EU Client State

Monday morning, Athens looked like a city that had been the target of a guerrilla warfare attack…and one could almost say that it had been sacked.

The attackers were Greek, mostly young people who have no jobs and no prospect of finding one, and others who are rapidly slipping into a level of poverty that we would associate with undeveloped countries far from the European Union. The protestors, led by two large Greek unions as well as radical leftists, were estimated at between 80,000 and 100,000. They set fire to buildings (I’ve read that as many as 15 buildings in downtown Athens went up in flames), threw stones torn up from pavements, and tossed Molotov cocktails at security forces. Police responded with tear gas.

Massing in front of the parliament building, protestors shouted that it was the “death of Greece” but that they were not ready to give up.

Amidst this violent protest action, on Sunday night the Greek parliament, protected by 3,000 police, passed (199 to 79 votes) yet another austerity package, demanded by the EU as the price of being “saved” from national bankruptcy and staying in the Eurozone.

Six coalition ministers have resigned in protest at the passing of the new austerity package.

The new austerity package almost surely consigns Greece to years of poverty, high unemployment and a shrinking economy. Most experts say that the package imposed by the EU mandates that Greece remain a sort of slave to the whims of the EU, and that its economy has no chance of producing the money needed to really pay its way out of its financial and fiscal crises any time in the foreseeable future.

The vote was taken after the governing coalition pleaded that without the EU bailout, Greece would need to immediately declare bankruptcy (because of bonds coming due in March) and would begin to unravel itself from the Euro as its currency.

Another argument for fast action was the promise of a European financial group meeting that was to be held today to agree on the 130 Million Euro bailout, which would accompany the 100 Million Euro forgiveness of Greek bond debt by the banks holding it. The Greek coalition has also promised an additional 325 Million Euro cut in government spending, coming from public safety salary reductions of another 10% ands a deep cut in the defense budget. The coalition’s total commitment is a 3.3 Billion Euro reduction in expenditures - which is more than the total annual GDP of Greece. Under the already-existing strains, the Greek GDP fell 6.8% in 2011. The future is looking much worse.

But, wait a minute. The Greek leadership didn’t send a letter to the EU’s finance group promising that even if the Greek government changes, the package will continue in place.

The EU response?  It has postponed the February 15 meeting to February 20, next Monday, waiting for the letter to arrive.

Would you like to promise to the people who hold your purse strings in prison that even if, say, President Obama is defeated in November, the Republican winner will keep his programs intact?  Not a chance. But, that is what the EU is asking Greece to do…and the Greeks will do it, because they believe that they have no choice.

The European Union countries are as afraid of Greece as Greece is afraid of them, to be honest.  Their fear is that if Greece defaults, then other countries will, and this will cause major EU banks to become insolvent, and that from there, an EU-wide recession, spreading to the rest of the world will follow.

Despite their fears, the EU financial group continues to pressure Greece to cut its budget back to the bones. Absent from their conversation is how this could possibly help Greece in the future.

For, if Greece cannot generate the funds needed to survive even under its draconian austerity program, who will cover its debt? The EU, of course. So, we are now watching the creation of the first EU client state, much as eastern European nations became client states of the Soviet Union after the Second World War.

"There are obvious powers within Europe who are playing with fire...and they want Greece out of the Eurozone," Greek finance minister Venizelos said, noting that Greece will do what it takes to show that its place remains with Eurozone. "We have to choose between unpleasant and even more unpleasant solutions," he added.

Waiting in the wing - Spain? Portugal ? Ireland ?

Serious, respected voices are calling the Greek affair madness. The solution, they say, is to cut these countries free of the Euro so that they can use their own currencies to support their own economies.