President Obama and House Speaker John A. Boehner are continuing their talks, but key officials in both parties now believe that Washington will be unable to avoid some mix of the tax increases and automatic spending cuts mandated next month by the austerity measures known as the “fiscal cliff.”
Senior Democratic and Republican officials say the best-case scenario will be for a less ambitious deal to extend middle-class tax cuts and forestall tax hikes on most Americans.
But such a deal would still set in motion a series of steep spending cuts at some federal agencies and allow key tax provisions to expire, raising taxes for many. “I don’t know if we fall off the cliff, but I think we’re at least going to jump out of a tree,” said Sen. Lindsey O. Graham (R-S.C.).
That assessment hasn’t stopped Obama and Boehner (R-Ohio) from trying to reach a broader pact before year’s end. The two spoke by phone Friday afternoon, after news broke of the massacre at an elementary school in Connecticut, and officials in both parties confirmed that Boehner was considering allowing tax rates to rise for those earning more than $1 million annually, in exchange for cuts in entitlement programs.
A GENERAL strike; protesters on the streets; parliamentary battles over austerity measures needed to unlock rescue funds; and a sinking economy with an ever bigger debt burden. The situation in Athens this week is grimly familiar—and not just because Greece has had so many similar weeks over the past couple of years. There are also eerie echoes of the developing-country debt crises of the 1980s and 1990s.
The experience of dozens of debt-ridden countries in Latin America and Africa holds lessons that Greece’s rescuers ought to heed. For years, the IMF and rich-world governments tried to help them with short-term rescue loans. But the most indebted started to recover only when their debts, including those owed to official creditors, were slashed. In Europe, Poland also provides a precedent: its economy took off in the 1990s after it too was given a break by its creditors.
Greece is in the same boat. Provided that the country’s parliament passes the 2013 budget on November 11th, a fresh infusion of rescue funds will stave off imminent catastrophe (see article). Yet Greece’s economy won’t recover until it has more debt relief. That should involve, broadly, a two-part process: first, agree on a plan to reduce debt if certain targets are met; then cut the debt in stages over the next decade.
Strikes Cripple Greece Ahead of Austerity Vote in Parliament
Thousands of Greeks took to the streets of Athens on Tuesday on the first of two days of strikes to protest yet more biting austerity measures. Their anger is palpable, but if parliament fails to pass the cuts on Wednesday, the consequences could be dire.
Hundreds of thousands of Greeks began a 48-hour nationwide strike on Tuesday, shutting down schools, banks, local government offices and ports to protest the government’s latest round of austerity measures.
Transportation in Athens became difficult as subway and taxi services were halted and flights in and out of the country were stopped for three hours early in the day. State hospitals were running on emergency staff.
About 16,000 people gathered at a union-organized protest outside parliament in Athens, where lawmakers on Wednesday will vote on the law, chanting slogans like, “People, don’t bow your heads!” and “This strike is only the beginning!” Several thousand more marched in a separate demonstration in Athens, and about 20,000 protested in Greece’s second-largest city, Thessaloniki.
In addition to further tax hikes and cuts to pensions, the expected measures will raise the retirement age from 65 to 67 and make it easier to fire or transfer civil servants. Altogether they are aimed at saving the state €13.5 billion ($17.3 billion) and are a key condition of Greece’s international creditors to continue to receive emergency bailout funds.
Average Greeks are reeling under the strict austerity measures passed in order to balance the country’s budget. Top earners, on the other hand, continue to evade the tax man. Most of the self-employed in Greece significantly underreport their earnings, whereas shipping magnates enjoy generous exemptions.
The principle of tax justice may be enshrined into the Greek constitution, but it has become increasingly obvious that not all Greek taxpayers are created equal. Currently, the government in Athens is preparing yet another round of harsh austerity measures, severely testing the cohesion of both the coalition and society. Already, such measures in combination with tax hikes have slashed average household income in Greece by half since the beginning of the crisis. Measures now planned will see pensions sink by 25 percent.
At the same time, though, a small elite of wealthy Greek ship owners is fighting to defend its tax-free status — also, ironically enough, enshrined in the constitution. Meanwhile, other moneyed Greeks, including doctors, lawyers and engineers, continue to systematically avoid taxes. According to a recent study, seven out of 10 self employed Greeks significantly underreport their earnings. Indeed, though the crisis has been raging for five years now, many wealthy Greeks are under no more pressure to pay taxes than they were before.
The study’s authors use data from a large Greek bank which uses several factors in addition to income reports to measure a client’s creditworthiness. The result: Undeclared income from self-employed Greeks amounted to €28 billion in 2009, more than 10 percent of the country’s gross domestic product that year. The state lost €11.2 billion euros in tax revenues as a result.
The European debt crisis and related austerity measures continue to drive up unemployment across the euro zone. In September, according to statistics released on Wednesday, fully 18.5 million people were without work in the common currency area, more than ever before.
Global financial markets have, for the moment, been calmed. The European Central Bank has embarked on its program to buy unlimited sovereign bonds as needed from euro-zone countries suffering from high borrowing costs and all of those countries have adopted strict austerity programs to get their budgets in order.
That, though, has not been good for economic growth — and now the European Union has released new figures highlighting a struggling euro-zone economy. According to a report released on Wednesday by Eurostat, the European Union’s statistical office, unemployment in the 17-nation common-currency area stood at 11.6 percent in September, the highest it has ever been.
The numbers represent an up-tick against the 11.5 percent rate reported for August. In total, Eurostat estimates that 18.49 million people were out of work in the euro zone, up 146,000 over August. The rate indicates a significant rise against the euro-zone unemployment rate in September 2011, which was 10.3 percent.
Tens of thousands of people from all over Spain rallied in the capital on Saturday against punishing austerity measures enacted by the government, which is trying to save the country from financial collapse.
Large protests against austerity measures also took place in neighboring Portugal. Demonstrators in Lisbon threw tomatoes and fireworks at the Portuguese headquarters of the International Monetary Fund. Two protesters were arrested, but otherwise the rally was peaceful.
Spain is stuck in a double-dip recession with unemployment close to 25 percent. The conservative government of the Spanish prime minister, Mariano Rajoy, has introduced sharp cuts and raised taxes in a move to reduce the deficit and to reassure investors and officials from the 17-nation euro zone.
The marchers in Madrid unfurled banners with slogans like “Let’s go! They are ruining the country and we have to stop them.”
“This government’s policies are causing too much pain,” said a union leader, Ignacio Fernández Toxo. “It’s a lie that there isn’t another way to restore the economy.”
On a sweltering Saturday evening, a small crowd gathered in Madrid’s La Latina neighborhood to kick off a festival dedicated to one of the city’s patrons, the Virgin of the Paloma. In the nights to come, there would be paso doble contests, heaps of fried sheep intestine to consume at outdoor stalls and plenty of drunken dancing to Shakira at 2 a.m. But now, at this more politically inspired celebration, the biggest attraction was a carnival booth, called the Pim Pam Pum Indignado, where people paid 50 cents for the chance to throw a ball at a target adorned with the cartoon faces of Prime Minister Mariano Rajoy, Rodrigo Rato (the recently resigned head of Bankia, which had to be nationalized earlier this year to the tune of 21 billion euros) and other protagonists of Spain’s economic crisis. As one bearded young man aimed carefully and toppled Angela Merkel with missile-like accuracy, the crowd erupted in a gleeful “Olé!”
Protests are everywhere and in almost every form these days in Spain. Ever since the Spanish government requested a bailout from the E.U. for its troubled banks in June, the growing list of austerity measures (a 7% reduction in civil servants’ pay; an increase in the value-added tax on goods and services; the abolition of subsidies for most medicines; rising power rates) has pushed a steady tide of demonstrators into the streets. Most of these protests are of the chanting and placard-waving variety; hardly a day goes by in Madrid without some kind of angry march in front of a government building or down a central artery. But as the crisis wears on and Spain appears to approach a second bailout — this one of its rapidly growing sovereign debt — new varieties of protest are emerging. Like the Pim Pam Pum Indignado, the criticism and outrage are becoming downright creative.
No one knows the value of a little dramatic action better than Juan Manuel Sánchez Gordillo. A member of Andalucia’s regional parliament and mayor of Marinaleda, 115 km outside Seville, he is also one of the leaders of the Andalucian Workers’ Syndicate (SAT), a union composed primarily of agricultural day laborers. Reviving a tradition that dates to the 19th century, about 1,000 SAT members occupied an estate owned by the Spanish military on July 24 and demanded that the land be redistributed to the area’s workers. When that action failed to garner much attention, the SAT resorted to another tactic: members entered two supermarkets, loaded carts with staples like milk, pasta and olive oil, and walked out without paying (though with a bit of scuffling from management). They later turned over the stolen goods to charity.
“We robbed to give to the poor because the rich are already robbing,” says Sánchez Gordillo. “This crisis is a great robbery.”
“Adolf is coming,” warned Liana Kanelli, Greek communist and Member of Parliament, during our July interview in her office in the parliament building in central Athens.
Were there no video of her being assaulted by a member of the Greek neo-fascist party Golden Dawn on a TV news program in June, Kanelli would have remained unknown in the United States. But the feisty lawmaker’s tussle showed the world how the Greek economic crisis—exacerbated by Northern European demands for more unpopular austerity measures—is opening a Pandora’s box of extremism.
Kanelli, a former journalist, is the contradictory face of the Greek Communist Party (KKE), a staunchly Stalinist group that is Greece’s oldest active party and survived underground for decades after World War II. She speaks for the party, notorious for its top-down structure and doctrinal obedience, yet is not herself a member. Though an atheist, she wears the symbol of Greek Orthodoxy on her neck.
But her political message is clear: the austerity measures imposed by the Troika (the European Union, the European Central Bank, and the International Monetary Fund) and German Chancellor Angela Merkel amount to colonization. The forced wage and pension cuts, the privatization of public services, and the sale of public assets are letting foreign profiteers gobble up the nation’s resources at the people’s expense.
And now Kannelli sees the disturbing rise of fascism as furthering the goals of the EU’s conquest of Greece. “Golden Dawn is a very useful tool for the capitalist crisis,” she said. “They can be used for the dark part of the job.”
As the euro zone debt crisis deepens and austerity measures take their toll across Europe, the number of young children and babies abandoned across the region has increased, according to local charities.
The rise in the abandonment of infants across Europe is most visible in the spread of “baby hatches” or “boxes” across Europe, where unwanted infants are left anonymously.
The phenomenon was previously more prevalent among immigrants, but it is becoming more widespread among financially desperate members of the local population.
The hatches are sensor-activated so when a baby is placed, an alarm is activated and a carer comes to collect the child. Despite the practice being widely viewed as contravening the 1953 European Convention on Human Rights, of the 27 EU member countries, 11 countries still have “baby hatches” in operation, including Germany, Italy and Portugal.
In those countries where hatches are illegal, the number of infants abandoned in hospitals, clinics and churches has also risen, raising concerns among European charities, the UN and the European Commission that austerity measures and increasing social deprivation are the catalyst for the rise in child abandonment.
Greece is broke, and it agreed to big cuts in government spending in return for a bailout by other European countries. However, because that austerity deal was so hated by Greeks, the government fell. The country will vote for a new parliament Sunday.
The question is: Will a new government abandon the bailout agreement, undermining the euro currency and the European Union? Why would Greeks risk that?
Dr. Chris Rokkas is a top cardiologist at Attikon hospital, but these days the U.S.-trained surgeon rarely sets foot in an operating room, which is bad news for Georgia Scambi, who needs surgery urgently.
“She is in serious risk for developing a fatal heart attack at this point,” Dr. Rokkas said.
If he were in a hospital in America, Dr. Rokkas would have operated within 24 hours. One week later, however, he’s still waiting for the right equipment.
Greece’s bureaucratic healthcare system has always been inefficient, but austerity measures introduced in the wake of the financial crisis have cut public health spending by 25 percent — $12 billion — bringing the system to its knees.