When Greeks think of austerity, they think of the pain they have to endure to make sovereign bond investors happy.
Their pensions and wages are getting crunched, their taxes are going up and 150,000 civil servants are being shown the door. A new property tax is built into electricity bills. Don’t pay it and your lights go off. The result is soaring unemployment, a dying economy and sullen or desperate citizens.
On Sunday, Greece will get a chance to retaliate against the austerity measures in the second general election since the inconclusive vote on May 7. It is being billed as a referendum on Greece’s membership in the euro zone. If the anti-bailout parties win, Greece’s exodus from the common currency region would go from possible to probable.
But the election is much more even than a vote on euro zone membership that stands to reshape the future of Europe and ripple or tear through global financial markets. The result will also help to define the era of austerity ushered in by the financial crisis, and marks a new phase in the European debt crisis that has been galloping forward, relentlessly, since the 2008 subprime disaster almost torpedoed the global economy.
In Greece, France and other countries, voters are pushing for a re-examination of the policies that have failed to improve economies or livelihoods.
The Greek vote is the most significant referendum to date on the economic concept called austerity, which came into vogue as governments around the world sought to pull back after the crisis-induced spending sprees of 2008-09. Sunday’s results in Athens will shake not only Greece, but the entire European Union, each of whose 27 countries have launched austerity programs of varying harshness. The Greek election, much like last month’s French one, will also serve as a reminder to global leaders of the power of voters who are backed into economic corners, with no ready way out.
Sunday’s Greek vote gives that country’s voters the chance to play a historic role in dispelling what is coming to look like the greatest government economic myth since the Great Depression: That severe austerity will produce pleasing results for an economy and its people.
The soaring unemployment rates, busted banks and businesses, and sense of hopelessness in many of the 17 euro zone countries, especially those on the Mediterranean frontier, already point to the opposite being true.
The Greek vote, and the pressure it is putting on the other 27 austerity drives across Europe, is the strongest sign yet that a new way of thinking about the euro is rapidly emerging as harsh austerity faces a backlash. The new way would replace austerity with austerity-lite. It would try to balance austerity with growth policies. It would not demand quick results.
Above all, this new way of thinking would recognize what voters are saying: That the tools used so far to try to end the three-year debt crisis, now morphing into a banking crisis, are failing. The measures may have stalled the deterioration for a while, but they will not work.
The Greek electorate is far from alone in delivering this message. In France, François Hollande was able to send Nicolas Sarkozy, whom he painted as Angela Merkel’s fawning austerity lap dog, packing in the May presidential election.
The austerity-lite approach may yet break the Franco-German alliance. Indeed, Ms. Merkel is sticking to her austerity-for-all message as the prime crisis-fighting tool, in spite of evidence in country after country that saving Europe will require a more subtle and tailored strategy than cut, cut, cut.
On Friday, she dismissed “quick fixes” for the euro zone, lashed out at Mr. Hollande for blocking EU supervision of national spending, and attacked France’s shabby economic performance. “If you look at the development of unit labour costs between Germany and France, differences have now been growing a lot more strongly, a topic that must be discussed,” the Chancellor said.
The tragedy of Greece