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Citizens Electoral Council of Australia

Media Release  Friday, 1 March 2013

Craig Isherwood‚ National Secretary
PO Box 376‚ COBURG‚ VIC 3058
Phone: 1800 636 432
Email: cec@cecaust.com.au
Website: http://cec.cecaust.com.au
 

Build out of the depression! Greece-style austerity leads only to death

Reviewing the human toll from the bone-crushing austerity that has failed to fix the basket-case economies of Europe, Citizens Electoral Council Leader Craig Isherwood today asserted that now is the time for nations to launch massive emergency economic reconstruction projects, in order to build out of the depression.

“In recent months some leading figures have finally begun to admit that the so-called solution applied to the economic crises of European nations such as Greece, Portugal, Spain and Italy, among others, has failed,” observed Isherwood.

“Unfortunately this is too little too late, for the many who have died or suicided in countries such as Greece because austerity robbed them of a real economic recovery.”

In the 24 February New York Times Paul Krugman described how Italy, “for all its dysfunction has in fact dutifully imposed substantial austerity, and seen its economy shrink rapidly as a result.”

“[W]illingness to pursue austerity without limit is what defines respectability in European policy circles. This would be fine if austerity policies actually worked—but they don’t.” The advocates of austerity are sounding increasingly “delusional”, he said.

What is the result of following such deluded advice?

“Nations imposing harsh austerity suffered deep economic downturns; the harsher the austerity, the deeper the downturn. …” Krugman continued. “Meanwhile, austerity hasn’t even achieved the minimal goal of reducing debt burdens. Instead, countries pursuing harsh austerity have seen the ratio of debt to G.D.P. rise, because the shrinkage in their economies has outpaced any reduction in the rate of borrowing.”

Trying to weasel out of responsibility by claiming the impact of the IMF’s policy was a miscalculation, rather than intentional, IMF chief economist Olivier Blanchard, along with IMF economist Daniel Leigh, issued a working paper in January, Growth Forecast Errors and Fiscal Multipliers [1Mb PDF], which claimed that the Fund formulated, demanded, and imposed deadly austerity in error, without understanding what its results would be.

“Forecasters significantly underestimated the increase in unemployment and the decline in domestic demand associated with fiscal consolidation,” wrote Blanchard and Leigh. In detail, they say that the IMF’s forecasters incorporated in their forecasts that every 1 per cent of GDP imposed on a country in cuts would produce a 0.5 per cent GDP contraction in the economy. Instead, “the circumstances of the European economy” made this contraction at least 1.5 per cent in GDP for 1 per cent in cuts, producing the deadly “debt spiral” racking these countries since 2010.

“These cuts have created a humanitarian catastrophe in Greece, as intended,” Isherwood said, “The fact remains that not only have the technocrats at the IMF not changed their approach, they have demanded more of the same austerity!”

A subsequent 18 January IMF “progress report” demanded new austerity measures against Greece, including much faster layoffs of 150,000 public employees, extension of a 100 per cent income tax surcharge past 2015 and faster privatisations of state entities and properties. Further the Troika (IMF, European Commission and the European Central Bank) demanded reducing the existing 2,500 hospital departments and clinics to 661, and cutting the existing 46,000 beds by 11,000.

This is on top of: the 27 per cent general unemployment (and near 60 per cent youth unemployment); 60 per cent cuts to minimum wage and public sector salaries; 25-50 per cent cuts in pensions; massive regressive tax increases with no exemptions for the poor; the obliteration of much of the public health care capacity which has seen medicines for heart disease, cancer, etc. disappear off the shelves; a 50 per cent increase in suicides; an 80 per cent drop in heating oil consumption, which has caused a 400 per cent increase in air pollution in large cities such as Athens as wood is burnt instead; nearly one-third of Greeks existing below the poverty line and one in three families considering leaving the country.

Blanchard and Leigh acknowledged in their report that the IMF forecasters said in 2010 that Greece could “cut deeply into government spending and quickly bounce back to economic growth and rising employment”. Instead the economy is contracting at an 8 per cent annual rate 30 months later, and government debt has ballooned to 175 per cent of GDP.

It is estimated that for every 1 per cent increase in unemployment (or 50,000 lost jobs), the National Insurance Fund, which pays out social security, suffers a loss of EU250 million due to salary withholdings. Not surprisingly therefore, the entire social security system is about to cave in.

Isherwood continued, “This disaster in Greece is a warning to Australians, because remember, both Julia Gillard and Wayne Swan on trips to Europe in 2011 parroted the IMF’s demand that Greece accept austerity, even though it was none of their business. They and their Liberal counterparts are already gradually imposing the same austerity on Australia, which is taking a horrendous toll on the health system, the education system, and productive jobs here. In a full-blown collapse, both major parties are so brainwashed in free market economics they will resort to the same brutal measures that have proved so disastrous in Europe.

“It is obvious that the only pathway to recovery is putting people back to work, in real jobs that meet the daily needs of society. The international Schiller Institute headed by Helga Zepp-LaRouche, the wife of U.S. statesman Lyndon LaRouche, has long promoted grand development schemes to lift Europe out of this depression, just as the CEC has for Australia.

“If you don’t want to see Australia go the way of Greece, join the CEC today!

Click here for a free copy of the CEC’s New Citizen Special Report, The Infrastructure Road to Recovery.

If you have already received a free offer from the CEC, click here to purchase a copy of the CEC’s New Citizen Special Report, The Infrastructure Road to Recovery ($10).

Click here to purchase a copy of the CEC’s book What Australia Must Do to Survive the Depression ($20).

Click here to join the CEC as a member.

Click here to refer others to receive regular email updates from the Citizens Electoral Council of Australia.



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