Τhe situation in Greece
A report by Stratos Mavrantonis to the Central Committee Executive, Communist Party of Australia, May 2010
To be fully understood, the current situation in Greece must be seen as directly connected with a now unfolding drive by the world’s finance capital, aimed at savagely attacking the peoples’ living standards, taking back all workers’ gains won in the last 50 years and making labour power as cheap as possible for employers all over the world.
This is the underlying fundamental cause of the current crisis in Greece.
The second cause, unfolding simultaneously with the first one, is a concerted effort by US monopoly circles to intensify the war against their European rivals by undermining the Euro, so the US dollar regains its international supremacy it had lost for a while to the European currency.
In the European Union (EU) the drive by monopoly circles against the peoples is manifested at the same time as the US war against the Euro. Many people are so terrified by the intensity of the crisis they are asking: What is going to happen? Is the Euro collapsing? Is the European Union collapsing?
The EU, an artificial economic unity
Neither of those things is going to happen, on this occasion. However, certain facts must be explained to clarify why the Euro is so vulnerable. As we all know, a currency expresses in financial terms the strength or weakness of the economy behind it. Here lie the inherent contradictions of the Euro. The Euro is supposed to express monetarily the economy of the European Union. But there is not one single economy in the EU. The economies of the EU countries are at different levels of development, none on a par with any other. Consequently a single currency cannot express a variety of different economies. The Euro was introduced in the hope of achieving economic unity. This, however, is an artificial unity and is not backed up by real economic facts.
It was obvious that inevitably the Euro’s rivals would attempt in a systematic way to exploit these inherent contradictions. So both the attack against the Euro and the attempt by European monopolies to increase their profitability by undermining workers’ rights is manifested against the smaller and weaker economies first. It is not a crisis confined to one country. It concerns the whole European Union and not only the EU.
Greece was picked by the financial speculators as the first victim, because of the particular circumstances of its economy namely, the high public debt, the recurring budget deficits and its non-productive character. Production of commodities is not the strong point of the Greek economy, being mainly based on services and tourism. Greece could have one of the strongest economies in Europe as the country’s mineral resources are bigger than the resources of all the other EU countries combined. With a different social system Greece could present an entirely different picture today. What has failed there is capitalism itself.
The specific factors that have contributed to the exacerbation of the economic problems of Greece are:
- The subservience of the Greek ruling class to foreign monopoly powers and its dependence on them. Greece never actually gained full independence. The ruling class has failed to invest its own capital and capital received from the European Union in productive projects, infrastructure and programs for developing the economy. Instead, huge sums of money were squandered for private enrichment, for bribes and a luxurious, parasitic life style. Even in today’s crisis with the country’s foreign debt approaching 300 billion Euros, the deposits of Greek businessmen in Swiss banks are a staggering 240 billion Euros. The government’s subservience is demonstrated, among other things, by the fact that instead of officially requesting Germany pays to Greece the 200 billion Euros it owes in war reparations and the loan it extracted from the Greek people during the occupation period (1941–1944), it is appealing to Germany and the other European partners to assist Greece to borrow money from the EU and the International Monetary Fund (IMF).
- The government’s overspending in the period 2002–2004 for the staging of the Olympic Games, catapulted the foreign debt to unprecedented levels. The conservative government that followed increased the debt by another 100 billion.
- The government handout to the banks to “assist then to overcome the financial crisis” and to improve their liquidity. The previous conservative government handed the banks 28 billion Euros, while the present “socialist” government of Mr Papandreou has made it known that out of the 110 billion Euros the country is going to receive in loans from the European Union countries and the IMF in the next three years, it will immediately hand 10 billion to the banks with the possibility of a further 20 billion made available at a later stage. The banks, which are primarily responsible for the financial mess, are being bailed out while the people are called on to pay the bill. Another thing about the banks we should keep in mind is the fact that according to the European Union Charter, banks of member states can borrow from the European Central Bank (ECB) at an interest rate of 1%. The governments of the member states however, cannot borrow from the ECB. Consequently the Greek banks borrowed huge sums of cheap money and lent this to the Greek Government at a rate of 6%, thus making huge profits without having to lift a finger. The end result of this highway robbery was that the Greek banks recorded profits of 300 billion Euros in the last three years!
Part of the plan of international finance was to put such pressure on the Greek economy, through the big game speculators, so as to make it impossible for the country to borrow on the international market with affordable interest rates. The country needed to borrow at least 20 billion Euros by the 19th May 2010 to pay off previous loans payable on that day. In fact, on the 18th May it received 5.5 billion from the IMF and 14.5 billion from the EU mechanism, set up for this particular purpose. The idea was to force Greece to default on its payments and thus be dropped out of the Euro Zone (the group of 16 EU countries having the Euro as their currency). The expectation was that as soon as that happened the Euro could take a dive. Then they would turn their attention to other weak economies, such as Portugal, Spain, Ireland, and even Italy.
The crisis is therefore a crisis for the whole European Union. If then, the crisis concerns the whole of the EU, why didn’t the EU act earlier to avoid this? Why did Germany hold out for so long and demonstrate she was unwilling to come to the Euro’s rescue. Here the contradictions and the different interests of the European Union members come into play.
Germany is an exporting economy. Until recently it was the country with the highest value of exports in the world, a position it has lost to China. Thus for Germany a devalued Euro would be beneficial making German exports cheaper and so more competitive. Therefore Germany wouldn’t mind a Euro devalued by 20% or so, but would not want to see a Euro in a free fall. That’s why it originally rejected the pleas of the Greek Government for loans to be made available to Greece at reasonable interest rates and pointed to the IMF as the solution to Greece’s problems. She only changed her mind when she realised that it was time to do something to prevent a real Euro dive.
Another reason for Germany’s stand was the fact that the German ruling class was strongly in favour of the involvement of the IMF, for reasons that will be explained further on.
Finally the EU decided to involve the IMF in the rescue package and lend Greece, from both sources, 110 billion Euros in the next three years (80 billion from the EU and 30 billion from the IMF), but on what conditions and at what price? Representatives of the IMF, the EU and the ECB have already visited Greece, have carefully checked the facts and figures presented to them by a number of key ministries and have laid down the rules.
According to these rules, the most savage austerity measures must be enforced upon the Greek people. They include wage cuts of all public servants by 20%-30%, a reduction of all pensions in both the public and private sector, immediately raising the pension age to 65 years for both men and women and to 67 years after 2015, lowering the minimum wage to 540 Euros a month, doing way with all collective bargaining, institutionalising so-called “flexible” forms of employment, repealing the existing law which prohibits enterprises employing more than 100 people from dismissing more than 2% of their workforce, to name some of the proposed attacks on people’s rights and conditions. These measures amount to a complete dismantling of the industrial relations system and will have a disastrous effect upon the people’s living standards and trade union and democratic rights.
It must be noted that the Treaty of Rome, which set up the European Union, stipulates that as far as the social security systems of the member states are involved, the EU had no right to intervene in the member states or put any demands on them for changes or conditions to social security matters. That’s why it was necessary for the IMF to come into the picture. Its involvement was the result of an agreement between the US, the EU and Greece. The deal was agreed with the collusion of the Greek Government, which needed to justify those unpopular measures to the Greek people, especially the changes to the social security system, as measures being demanded by the IMF.
The Prime Minister, Mr Papandreou, himself admitted publicly that the country is not just under observation but under guardianship. This means the “guardians” are the ones who enforce these unpopular measures upon us and we have no alternative but to accept them to save the country from bankruptcy. The truth of the matter however, is that some of these measures were introduced by the government even before the intervention by the IMF. The social democratic government, as part of the capitalist establishment, planned the introduction of these measures all along and now uses the IMF and the EU as excuses to shift the blame and save face with the people.
Massive working-class response
It is extremely difficult though, to save face. The response of the workers, the organised working class to these measures has been decisive. On May 5th the whole country was in the grip of the 24-hour general strike organised by the General Confederation of Labour and PAME (All-Workers’ Militant Front, the trade union body of the Communist Party of Greece (KKE)).
A few days earlier there was a 48-hour strike by teachers and local government employees, a 24-hour strike by public servants and a 24-hour strike by seamen. There are massive public meetings and protest marches on a daily basis in Athens and the other large cities. All indications are that the strike movement and the resistance movement generally, involving large numbers of people will develop further and will intensify as the effect of the measures are felt by the people.
The KKE is at the forefront of this resistance movement. The party’s General Secretary, Comrade Papariga, has officially declared that these measures must be defeated and swept aside and she has called on the people to effectively resist the measures and to overthrow the capitalist government and install a people’s government.
Class struggle to intensify
One thing is certain — the class struggle will intensify in Greece and in some other European countries. The other certainty is that the Greek crisis is directly connected to similar processes in the whole of Europe and all over the world and as soon as the dust settles in Greece, other countries will be targeted by international speculators. This is part and parcel of the drive by monopoly capitalism to attack workers’ rights and the living standards of the peoples of the world.
At this stage we are not witnessing the collapse of the EU or the Euro. What we are seeing is perhaps the end of the long period of more or less peaceful development of capitalism and the commencement of a period of aggressive actions by monopoly capitalism. This period will have two main features: a) a declaration of war by capital on the forces of labour on a global scale and b) the intensification of the contradictions within monopoly capitalism itself which will be manifested through currency wars, trade wars and other conflicts among the various imperialist centres.
The real test for the world capitalist economy will come if a deep recession occurs in the Chinese economy. China now holds US bonds of 2.3 trillion dollars. It also holds 1 trillion dollars of European bonds. What is going to happen in the case of a recession in China when the Chinese authorities try to sell these bonds? Unimaginable situations for the world economies could arise then. The US dollar could collapse and so could the Euro, with staggering effects on the economies of all countries.