http://themilitant.com/2015/7924/792404.html
The Militant (logo)
Vol. 79/No. 24 July 13, 2015
(front page)
No end to crisis for working class
as Athens, EU face off over debt
BY SETH GALINSKY
No matter what the outcome of a July 5 referendum in Greece on demands
by the European Union and the International Monetary Fund for even
steeper “austerity” measures than those proposed by the Greek
government, working people there will go to the wall.
And whatever the result, it will strike another blow to the illusion
that the euro common currency is a road to capitalist stability and
prosperity, as opposed to a way for the strongest imperialist powers to
squeeze the weaker ones, especially in face of declining production and
trade.
Greek Prime Minister Alexis Tsipras’ Syriza party, the Coalition of the
Radical Left, won elections in January by promising to reject demands by
the German government and other bondholders for harsher measures to make
working people in Greece bear the brunt of paying the burgeoning debt.
But Tsipras caved in to many of the demands of the so-called troika —
the German-dominated European Central Bank and European Commission and
the U.S.-backed IMF. He agreed to raise sales taxes to as high as 23
percent and to speed up raising the retirement age to 67. He agreed to
end a supplementary pension for the poorest retirees by December 2018.
The troika insisted that Tsipras implement many of those changes even
faster, as well as end fuel subsidies to farmers.
And they refused to consider Athens’ request for a write-off of some of
the debt as they did in 2012 when the troika negotiated a deal where
private bondholders agreed to a “haircut” of 50 percent of what Greece
owed. The European Central Bank, the IMF and other government-run
financial institutions bought the remaining debt, which today stands at
$360 billion.
German Chancellor Angela Merkel called the EU-IMF offer “extraordinarily
generous.”
Without new loans, Athens defaulted on $1.8 billion owed to the IMF on
June 30. Another $3.9 billion is due to the European Central Bank July 20.
Eurozone: bourgeois utopia
The European Union, which now includes 28 nations, was formed as a
customs union to allow capital, commodities and labor to flow more
freely across its borders. Introduced in 2002, the euro is now the
single currency of 19 of those nations. The hope of European capitalists
was that a common market and a single currency would allow them to
compete more effectively against their U.S. rivals. But this was always
a bourgeois utopia.
In practice the strongest imperialist powers, Berlin and to a lesser
extent Paris, dominate the rest. And weaker capitalist regimes that have
been pushed deeper into debt no longer have the option of devaluing
their currency to attempt to reduce their debts.
No one believes that the Greek government can pay off the debts.
The biggest concern of Berlin, Paris and Washington is not Greece, but
the Greek example for other deeply indebted capitalist nations,
especially Portugal, Spain, Italy, Ireland and Latvia.
“Appeasing Syriza’s demands could spread political contagion to Spain,
Portugal and other countries that might think they too can avoid reform
and still be rescued,” said a June 28 Wall Street Journal editorial.
‘Ticking time bomb’
Portugal’s debt is $508 billion, 130 percent of its gross domestic
product, with 70 percent owed to foreign bondholders. This is a “ticking
time-bomb waiting to explode,” MarketWatch reported June 24.
Spain has a debt of $795 billion, approaching 100 percent of its GDP,
nearly half to foreign capitalists.
In exchange for loans to avoid default, Greek governments since 2010
have intensified attacks on the wages and living conditions of working
people. This includes laying off nearly 30 percent of government
workers, cutting the wages of those remaining, reducing government
health care spending and pensions by 40 percent, and slashing the
minimum wage.
Official unemployment stands at 26.5 percent, the highest in the EU;
one-fifth of the population does not have enough money for food. Before
2010, the Los Angeles Times reports, homelessness was rare in Greece.
Today an estimated 20,000 have no place to live.
Those measures succeeded in creating a small government budget surplus —
which goes to pay interest on the debt — but gross domestic product has
declined 25 percent. The national debt has soared from 130 percent to
180 percent of the country’s GDP.
With just $2.2 billion on hand to cover $161 billion in deposits, Greek
banks have been relying on daily loans from the European Central Bank to
cover withdrawals. In retaliation for holding the referendum, the bank
has now set a cap of $100 billion on how much it will back. Athens
ordered banks closed until after the vote and imposed a maximum daily
withdrawal from ATM machines of $66.
While calling for voters to reject the troika’s demands, Syriza is also
leaving the door open to further negotiations. “If the people give us a
clear instruction to sign up on the institutions’ proposals,” Greek
Finance Minister Yanis Varoufakis told EU representatives June 27, “we
shall do whatever it takes to do so — even if it means a reconfigured
government.”
Neither Berlin nor Paris nor the capitalist government in Athens want to
see a “Grexit”: Greece leaving the eurozone and EU and replacing the
euro with its old currency, the drachma. But neither side has any
solution. And conditions for working people will deteriorate rapidly
either way.
As the worldwide contraction in production and trade continues, more
capitalist nations will face insurmountable debts. Alejandro García
Padilla, governor of the U.S. colony of Puerto Rico, announced June 28
that the island was in a “death spiral” and its $72 billion debt is not
payable.
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