Daily Austerity Watch: Greek Prime Minister Is At The End Of His Rope

Greek Prime Minister George Papandreou is mad as hell and can’t take it anymore.  Though there is no sign that Papandreou is about to lose his mind like the character Howard Beale did in network, he clearly is losing his patience with his countrymen.

According to Bloomberg, Papandreou, who continues to face negative polls and throngs of protestors,  did not mince words about Greece’s financial predicament in an interview with the Sunday newspaper To Vima.   These remarks are sure to inflame his critics further.

Here are the highlights:

“We have taken a decision, that no Greeks should live through the consequences of a default and to change the country radically so that it is no longer under anyone’s supervision and can stand on its own feet.”

“Never in my life did I imagine that we would need to slash pensions in order for the state to continue to pay any pensions at all. We chose the least painful of two options: one (is) difficult, the other — defaulting — is catastrophic.”

Of course, Papandreou wants to avoid a default, as any sane person would.  His government announced an austerity program Friday that would save around $41 billion through 2015.   There are two big caveats here.  One is that angry voters may dump Papandreou and install a government less amenable to austerity, which has already happened in other countries.  The second is that the Greek economy is so screwed up that it’s impossible to know whether the second bailout would be enough.   Think of it like celebrities going to rehab to quit their addictions to illegal drugs or alcohol.  Oftentimes, they need to go through treatment several times to get sober.

Popandreaou can take solace in knowing that he is far from alone . The worst economic slowdown since the Great Depression is forcing legislators from Athens to Washington, D.C., to Charlotte, N.C., to answer the age-old fiscal question: To spend or not to spend.   Economist Larry Summers, a former adviser to both Presidents Obama and Clinton, today argued in the Washington Post that the government needs to spend more money in order to avoid “a lost decade” similar to the one that brought Japan’s economy to its knees throughout the 1990s.

“There is no time for fatalism or for traditional political agendas,” he writes “The central irony of financial crisis is that while it is caused by too much confidence, borrowing and lending, and spending, it is resolved only by increases in confidence, borrowing and lending, and spending.”

Another spending backer is North Carolina Gov. Bev Perdue.  Last week, she became the first governor in the history of the Tar Heel state to veto a budget.   According to the Charlotte Observer, Perdue,  a Democrat, said the Republican-authored $19.7 billion spending plan “blatantly ignores the values of North Carolina’s people” by gutting education, public safety and the environment.       Republican Senate President Pro Tempore Phil Berger shot back at Perdue, accusing her of “placing politics ahead of the public interest.”

Meanwhile, the budget impasse in Minnesota shows no signs of easing.   Like in North Carolina, it pits a Democratic governor (Mark Dayton) against a GOP-controlled state Legislature.   Dayton vetoed two budget bills passed last month because they didn’t include increased taxes on the wealthy which he says is needed to close a $5 billion deficit.    Republicans want spending cuts instead and wouldn’t accommodate Dayton even after he trimmed his proposed tax increase.  Layoff notices were sent out last week to state workers who would be affected in the event of a government shutdown.

Unfortunately for elected officials  around the world both proponents and opponents of austerity are “mad as hell” and are unwilling to give one iota of ideological ground to jumpstart the economy.   With a U.S. presidential election around the corner,  the amount of political gridlock will rise exponentially while the chances for meaningful economic reform withers away.

–Jonathan Berr