On the Lack of Democratic Consent of Greeks to Austerity Programs

Michael Hudson, in the Real News Network segment, stresses that the bailouts (with tons of hairshirt measures) being imposed on Greece do not have the consent of the population. Hudson exaggerates a bit on how the debt was entered into. However, a critical aspect is that, as Floyd Norris pointed out, the overwhelming majority of the borrowings are subject to Greek law. That means Greece could repudiate that with no legal consequence. And collecting on the portion under English law would not be a party.

But a far more serious issue is the Greek banking system would collapse unless there was an immediate (or done over the course of a one week banking holiday) switch back to the drachma. Even then, the planning would need to be done in absolute secrecy, since if the public were to get a clue that this sort of move were in store, you’d see immediate capital flight. This is, to put it mildly, daunting.

Martin Wolf has argued in conversation that the ferocity of Greek protests (as opposed to, say, in Ireland) is due to the fact that it is the continuation of an unresolved civil war. Even so, civil disobedience has a way of being contagious, and if the Greeks are perceived to accomplish something, it may change attitudes in formerly complacent but unhappy groups in other countries.

This post originally appeared on Naked Capitalism and is reproduced here with permission.