The Devil made me do it! Deficits, cutbacks and the economy

There is already significant concern about the impact on the economy of the $20 billion in annual cuts proposed by the Harper government. These may well be compounded by the cuts that Tim Hudak and the Ontario Progressive Conservatives are proposing. 

The Deficit is making them do it, or so their story goes.  (More careful observers might note that this policy prescription echoes the program demanded by big business around the world for years.)

So it's interesting to see what is happening in Europe, where dramatic public sector cuts have been ongoing for several years --also as a response to government deficits. 

Greece has been at the forefront (so to speak) of this policy and the results ain't pretty. Far from reviving the economy, these cuts have led Greece to three years of recession and successive rounds of new cuts.  Yet another round of cuts was approved by the Greek cabinet yesterday.

Almost every economic indicator is going in the wrong direction, unemployment is now 16.2%, industrial production has sunk 11% over the last year,  disposable income is in rapid decline, the economy is likely to shrink another 2.9% this year, and the country's debt will reach 150 per cent of gross domestic product this year. 

The country, teetering on the brink of bankruptcy, got €110-billion ($156-billion) for bailout loans a year ago and is now preparing for a second bailout package, worth about €60-billion  ($85 billion).

Worse, yesterday the Greek cabinet approved  (at the urging of international bankers) a €50-billion ($70 billion) privatization program -- a huge transfer of wealth from working people to the wealthy, who will purchase these services at fire sale prices.  

So the deficit made them do it?  More like the Devil. 

That sounds like the view of the 80,000 protesters who took over central Athens on Sunday-- just the latest of 900 protests this past year in Athens. 

 The government still has to get its latest program of cuts and privatization through the Greek parliament, which it may achieve, protests be damned.    

But there are doubts in ruling circles that their policy of cuts is politically sustainable in the long term.  And, what's more, even they have doubts that the current policy will end the economic crisis.  

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