Austerity and Financial Panic? Why the Whole World is Watching Greece

It may seem surprising that an election in a small country of less than 12 million people could create high anxiety in government ministries in Berlin and Paris and at the European Union (EU) headquarters in Brussels. But as the Russian revolutionary Lenin once wrote, the chain of imperialism is only as strong as its weakest link, and Greece certainly fits that description.

The crisis in Greece emerged in the aftermath of the financial panic of October 2008, when the government was no longer able to make payments on its outstanding debts. The European Commission – the executive arm of the EU – stepped in, along with the European Central Bank (ECB) and the International Monetary Fund (IMF). Known collectively as the “Troika,” they agreed to bail out the Greek financial system, but only if the country slashed government employment and salaries, made deep cuts in social spending, and privatized government services.

At the same time, regressive taxes that hit workers hardest were actually increased. The revenues going to the government immediately flowed out of the country to repay foreign debt.

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