Vol. 79/No. 24 July 13, 2015
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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