Greece - the austerity coalface

There was much surprise at the news the Scottish Government is to see a £177m budget cut in the current financial year.

To be fair, we should have seen it coming. George Osborne announced it as part of departmental budget cuts of £3bn in 2015/16. "We set out two weeks ago that we were going to find further efficiencies and savings in government. That is what we deliver today.”

Labour called it “short-term salami slicing” while Osborne, of course, used the “long-term economic plan” strapline.

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Indeed, his government was elected on a fiscal responsibility ticket, and defied the polls by getting an overall majority. He has every right to feel his tactic of bringing down the budget deficit by spending cuts, as opposed to reduced borrowing, has been endorsed by the electorate.

(Well, just over 36 per cent the vote.)

And although Scotland voted for an anti-austerity party in the General Election, it also endorsed a union last year which meant long term economic strategy was reserved at a UK level. And the UK voted for austerity.

I was on the island of Kos at Easter, and as businesses were beginning to open up for the tourist season there was a sense the income from those businesses would be more important than ever. Cleaning swimming pools and hotels, whitewashing buildings, furnishing bars, the Greeks were hard at work. Well, some of them.

Although unemployment has stabilised in recent months, it still remains at a whopping 25.6 per cent. Around half of Greeks between 15 and 24 are jobless.

The majority of the homeless I saw who congregated every day at the town police station were of young working age. After six years of austerity that would make even George Osborne blush, there is nowhere else for these people to fall.

After all, it was now three years ago that a 77-year old man shot himself in front of the Greek parliament saying “I don’t want to pass on my debts.” In those three years the situation has not improved.

It’s important to recognise this context before embarking on a narrative which says the Greeks should shut up and take their medicine for self-inflicted injuries. Sky’s economics editor Ed Conway says the country is “next-to-clueless” about how to deal with its problems.

This surely is another disservice onto an already embattled people. Were Syriza, the left wing alliance who govern Greece, really ‘next-to clueless’ when they told the International Monetary Fund Greece will delay a debt repayment of €305m (£223m), due on Friday?

A more realistic assessment is they are playing hardball with their creditors, just as they were elected to do.

The action is a big deal, because it makes the prospect of a Greek default or exit from the EU one step closer to reality. It “raises the stakes”, as one risk economist said on Friday morning.

But for the firemen begging for donations to run their services, for the hospitals who have seen unsustainable cuts in funding, and for the pensioners who have worked their whole life but can now be seen raking in bins, the stakes are high enough.

For the EU the discussion is one rooted on financial responsibility, but the arguments are intensely political. To continue to receive EU bailout loans, Greece must agree to punitive conditions - create a surplus (which would shrink its economy even further), cut pensions, slash jobs, reduce welfare payments and privatise whatever assets it has left.

Even if Prime Minister Alex Tsipras capitulates on those conditions, they have already been rejected - at the ballot box. He is already in hot water from his MPs for not being hard enough.

Syriza was elected on a democratic mandate. Tsipras is popular.

(Well, just over 36 per cent of the vote.)

But the £130bn EU bailout was pushed through the Greek parliament by an unelected technocrat - former Vice President of the European Central Bank Lucas Papademos. He was appointed after a proposed referendum on the subject was scrapped in 2012 because it looked like they might reject the Euro entirely. Not only have the Greeks rejected austerity, they didn’t vote for it in the first place.

And the bailout loans aren’t to provide security for ordinary Greeks, they are to service the debts to the IMF and the European Central Bank.

Greece’s creditors need to wake up and smell the coffee. Greece is not a sound debtor, and ‘loans to pay off loans’ is not a responsible way to deal with the vulnerable.

For all the deals with the Troika, Greece has seen its GDP fall year on year, while its debt to GDP ratio has risen sharply. It’s now 180 per cent. If austerity is about fiscal responsibility, it isn’t working.

Like Osborne, Tsipras has a mandate. But his mandate is to fight austerity. On that point alone, writing off some debt must be an option now.

In Scotland we were told a union is about spreading risks and resources. Wasn’t the European Union supposed to be about the same thing?