Greek election and the IMF

Greece is still reeling from the recent interview of Christine Lagarde, head of the IMF, published in the Guardian on Friday.  In the interview, Lagarde is asked if she’s telling Greece that it’s “payback time,” to which she replies “that’s right.”  She now famously compares crisis-stricken Greece to villages in Niger where children only get two hours of school per day and share “one chair for the three of them.”  In her comparison, she says she has more sympathy for Niger because “I think they need even more help than the people in Athens.”

Fair enough.  It would be hard to argue that point – after all, who can forget the food crisis in Niger a few years ago which killed thousands, and again in 2010?  But Lagarde’s statement about Niger, “I have them in my mind all the time,” begs the question:  what does Lagarde’s organization, the International Monetary Fund, have to do with Niger anyway?

Although it can be hard to find good information about the food crises in Niger, the BBC reported (and it is generally agreed) that the main cause of the 2005 food crisis (I think we’re not supposed to use the loaded word “famine”) was not crop failure, locusts, or drought, but rather the high cost of food.  Niger is the poorest country in the world, so when neighboring Nigeria pays higher prices for food, Niger exports its food, reducing local food supply and driving up prices.  If it didn’t export food, Niger – even at the worst of the crisis – would have been able to feed its people without international aid.

But why would Nigeria pay higher prices for food?  Nigeria itself was also under the IMF and due to IMF imposed structural reforms, their food prices had skyrocketed.  Although this affected Niger the most, other countries, including Cameroon and the Ivory Coast exported more food than usual to Nigeria.

Niger, like Greece, had a corrupt public health care system which provided doctors, nurses, and hospital care for children and adults.  The IMF required Niger to change to a privatized health care system under the austerity measures program.  Now, according to the BBC:

It has a policy, encouraged by the Western world, of privatised health care so that it costs $14 (£8) for a mother to get a baby a medical consultation. That means almost no-one in the country can afford to see a nurse or a doctor.

It’s hard to think of a more effective way of reducing health care costs for the country – with international aid organizations picking up the tab for what health care there is, the government would no longer have direct health costs to pay for.  This is one of the policies that the IMF uses in Niger that it has been trying to get in place in Greece.  This week, one of the biggest news stories in Greece is the flow of Greek doctors – trained at Greek taxpayer expense at Greek universities where they didn’t pay tuition – to work in Germany, where there aren’t enough doctors.

Since the start of the crisis in Greece, the sales tax (VAT) has been increased several times, with goods such as milk and flour being taxed higher than ever before.  The price of electricity has gone up sharply, and I’m not even talking about the new taxes added to the electricity bill.

Johanne Sekkenes… believes that the IMF and EU pressed too hard to implement a structural adjustment programme. … Under the letter of intent signed between the IMF and the government, [they] agreed to extend VAT to milk, sugar and wheat flour, and reduce VAT exemptions on water and electricity consumption.

The quote above isn’t about Greece – it’s about Niger.  Niger – despite having reserves of uranium and gold – owed a lot of money, so they called in the IMF, which, in exchange for agreeing to lend them money, forced them to sign on to a raft of austerity measures.  Included in these was a measure against allowing the distribution of free food aid to starving people, in order to keep food prices high and not “flood the market” so to speak, which would cause food prices to come down.  The same logic was applied to sell off the government’s food reserves.  (At the time, the IMF claimed that these reports are overstated and/or misleading.)

The strongly anti-IMF WSWS says:

After he was elected to a second term last December [2004], President Mamadou Tandja imposed a 19 percent VAT on basic foodstuffs at the behest of the IMF. Part of the same economic package involved the abolition of emergency grain reserves. The tax was imposed despite the fact that the price of basic foods has risen between 75 and 89 percent over the last five years. At the same time, the sale price of livestock—the main income of the country’s nomadic herders—has fallen by 25 percent.

Traditionally, the IMF has pushed governments to privatize – i.e., to sell things owned by the people as a whole, and force the government to give the money from the sale to the IMF to pay down loans.  That’s because the IMF works in countries that are cash-strapped, and their austerity philosophy leads to the destitution of the people.  Once the people are destitute, there is not much tax revenue, so the best way for the government to pay back IMF loans is to sell off public services, land, and resources.  This month, Greek tax revenues are 30% below what they’re “supposed to be.”  While it’s easy for Lagarde to say

“Do you know what? As far as Athens is concerned, I also think about all those people who are trying to escape tax all the time. All these people in Greece who are trying to escape tax.”

Even more than she thinks about all those now struggling to survive without jobs or public services?

“I think of them equally. And I think they should also help themselves collectively.” How? “By all paying their tax. Yeah.”

it sounds as if she doesn’t see the connection between massive salary cuts, five years of recession, and high inflation on food on the one side, and lower tax revenue on the other side.  When 60% of the shops have gone out of business in a town, business tax revenue will go down.  When a person who used to have a job now is unemployed, income tax revenue will go down.  When 90% of a person’s income goes to pay rent, electricity, and heat, sales tax revenue on food and goods will go down.

(I also wonder if she knows that Greeks’ taxes are withheld from their salaries, just like everywhere else.  S and I filed our obscene 2011 taxes yesterday.  On the news they’ve said that anyone who is owed a tax refund will be unlikely to receive it.  Does she really want to talk about the Greek tax payer right now?)

When the IMF told the government of Malawi to sell part of its grain reserve in 2002, and then thousands of Malawians died of starvation, the IMF’s response was that the Malawi government didn’t give the IMF an accurate report of how much grain they really needed.

According to the Guardian, the same media outlet that interviewed Lagarde on Friday, Malawi spent 20% of its GDP in 2002 servicing its debt – “more than it will spend on health, education and agriculture combined.”

The new agreement that Greece signed with the IMF and the EU this spring guarantees that service on its debt is Greece’s first priority – before spending money on public health, education, defense, or anything else.  It’s been reported that Greece has already used all the money they had put aside for natural disasters – we were shaken awake at 3am a few nights ago to be reminded that Greece is a very seismically active place; and who can forget the forest fires in Greece in 2007?  Not to mention the several very active volcanoes.

Anyway, I’m not here to criticize the IMF’s policies in Africa – and I’m not accusing Lagarde of lying when she claims to lose sleep over Nigerien children.  I’m just mystified that she would say those things just three weeks before the Greek election.

In the last Greek election, on May 6, the major issues were “more of the same vs. change” and “illegal immigration.”  The party in power received 13% of the vote, answering the first question, and the ultra-nationalist Golden Dawn party got into Parliament for the first time ever with 21 seats, answering the second.

In the new election, coming up on June 17, the major issues are shaping up to be “austerity vs. growth” and “toeing the EU/IMF line vs. national sovereignty.”  The two old parties, PASOK and New Democracy, represent the austerity and EU/IMF side, and the Syriza and Independent Greeks parties, represent growth and national sovereignty.

Recent polls are all over the place.  Some put ND ahead of Syriza, others put Syriza in front of ND.  The only thing they all have in common is that it will be a very close race.  The IMF and the EU have gone way out of their way over the past week to send the message to Greek voters that New Democracy, Syriza, and PASOK are all lying when they all say that Greece can renegotiate its terms with the EU and the IMF.  PASOK claims it can get the IMF/EU to agree to extend the terms of the pay-back by a year.  New Democracy claims it can get the IMF/EU to agree to “renegotiation of terms.”  Syriza claims it will simply trash the entire agreement.

The question for Greek voters obviously isn’t which of those three they want.  The question is which party they trust to do what the voters want.  Clearly PASOK and New Democracy know that they can’t win by saying “we want to stick to the terms of the agreement,” because that was roundly rejected in the May 6 election.  However, voters should pay attention to the voices coming from the EU and IMF.  They are claiming that they will not allow any renegotiation of any terms.  That means that PASOK and New Democracy won’t be able to do what they claim they will do.  Syriza may well do what it says – who knows.  But New Democracy, if it wins, will have to follow the terms of the agreement – that’s what Lagarde is saying.

And that’s why, I think, New Democracy and PASOK protested so loudly when Lagarde said those things.  They need for the EU/IMF to shut up for three more weeks so they can get elected and continue the austerity path.   With interviews like that, not only does she undermine the parties she wants us to vote for, but she pushes voters toward Syriza.

What on earth was Lagarde thinking?

PASOK president Evangelos Venizelos:  “Nobody should humiliate a people during a crisis and I call on Mrs Lagarde, who insulted the Greek people with her attitude, to rethink what she wanted to say.”

Lagarde’s response was heartwarming:  she clarified that when she said “all these people in Greece who are trying to escape tax” when asked about how she “demands measures she knows may mean women won’t have access to a midwife when they give birth, and patients won’t get life-saving drugs, and the elderly will die alone for lack of care,” what she really meant were rich people.

All those rich people who don’t have access to a midwife when they give birth.