By Mahir Ali, Dawn
Notwithstanding the demonstrations of popular displeasure — which, despite being generally peaceful, were tear-gassed to such an extent that the police response has been described as chemical warfare — the Greek parliament last week passed the `austerity measures` prescribed as a precondition for obtaining the billions of euros necessary to avoid defaulting on its debts.
Greece cannot afford to pay back what it has borrowed, so further loans must be thrown its way — provided it drastically reduces public spending, including through sharp cuts in the salaries of state employees (an unusually high proportion of the population, by European standards, falls in that category) and includes prized state assets in the inventory for an everything-must-go sale that is expected to eventually yield 50bn euros.
The EU agreed last year to a 110bn euro bailout — terminology that suggests philanthropic financial assistance but in fact refers to high-interest loans — under stringent conditions, which helps to explain why release of the final tranche entailed a spot of drama. Another 120bn euros is to follow.
There is talk of restructuring Greece`s debt, which is effectively tantamount to postponing its tryst with destiny by permitting the loans to be paid back later.
Leading ratings agency Standard & Poor`s (S&P) has warned, however, that such moves would effectively be considered a default. Back in April, the Greek prime minister, George Papandreou, condemned such agencies for “seeking to shape our destiny and determine the future of our children”. Last month, Nobel prize-winning economist Amartya Sen decried the tendency of allowing “international financial institutions and ratings agencies the unilateral power to command democratically elected governments”.
“It is worth remembering,” he went on to say, “that the record of ratings agencies in certifying financial and business institutions preceding the 2008 economic crisis was so abysmal that the US Congress seriously debated whether they should be prosecuted.”
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