The potential to shut Greece down

by Alex Callinicos

The price of the so-called “rescue” of Greece is massive austerity for working people. This is coming up against resistance from the most militant working class in Europe.

The general strike on 5 May was very significant. Greece is a country where general strikes happen quite a lot—but this wasn’t just a good general strike. It had qualities of a real workers’ insurgency.

In Constitution Square in the centre of Athens, massive crowds confronted riot police as they tried to get into the parliament.

The struggle is moving beyond the stage where a one-day general strike, or a succession of one-day general strikes, is sufficient to express workers’ anger.

The scale of the attacks—cuts in public services, jobs and pensions, and raising the retirement age—is such that the level of struggle has to rise in order to stop it.

More one-day general strikes are not enough. The struggle needs to move towards indefinite strikes by those groups of workers who are most under threat.

Power workers may be coming out on strike soon. If that became an all-out strike, it has the potential to shut Greece down.

But there is a big problem with the struggle. Though Greece has the biggest radical left in Europe, the dominant forces on the left aren’t really rising to the challenge.

The Greek Communist Party is massive, but its highly sectarian. Its strategy is to say, vote for us because we have the answers to the crisis.

The coalition of the radical left, Syriza, has always lived off the ambiguity of combining opportunistic politics with revolutionary rhetoric. That ambiguity can’t hold.

SEK, the Socialist Workers Party’s sister organisation, is involved in an anti-capitalist coalition, Antarsya, which is attracting more powerful forces and having some effect on the struggle. A very exciting situation is unfolding.

Vulnerable

If we step back from Greece, we see how the crisis there has caused austerity programmes to ricochet across Europe. Vulnerable governments have adopted increasingly severe austerity programmes to appease the markets.

It’s happened in Spain and Portugal, and it’s clearly happening here as well.

The illusions that the crisis is essentially over and that the key economic question for our leaders is how to handle the recovery have been destroyed.

The markets have woken up to how fragile the situation is and the rich are worried about the possibility of a double dip recession.

That is the nightmare scenario for the capitalist class. The protracted recession in the 1930s lasted for ten years and went through a succession of different phases. The present crisis is comparable to that.

Its present phase is dominated by the so-called problem of sovereign debt.

That’s the debt that governments have accumulated—and it is leading to a crisis in the eurozone in particular.

Governments have borrowed and spent on a massive scale to try and stave off the crisis. This has increased government debt.

In the eurozone, this general crisis of public debt combines with the structural flaws of the eurozone. There are two main flaws.

Firstly, the euro is based purely on a monetary union, not a fiscal one. The European Union does not have the authority to implement European-wide tax and spending policies—and so it falls to nation-states to deal with the crisis.

Secondly, the euro brings together Germany, a huge exporting machine, with a lot of much weaker economies. These states import a lot of German goods and have borrowed heavily to pay for them—in particular from German and French banks.

The so-called rescue of Greece is essentially an effort to rescue the French and German banks. If Greece defaulted, that would deal a further blow to the banks that are already weakened by the broader crisis.

The flaws in the eurozone make a toxic combination.

This column is transcribed from a speech given last weekend to SWP Party Council

Alex has recently returned from Greece. While there he was interviewed by tvxs. The interview (in Greek), can be read at » bit.ly/dgzeol

Greek crisis: Time to junk the EU-IMF?

Who should we believe as the Greek and the wider European sovereign debt crisis spirals further out of control?

Should it be the financial markets and the media or the political institutions of state and the hard working officials of the EU and IMF?

In Brussels we trust?

The European Commission and many EU governments, especially in southern Europe, are getting increasingly rattled by their failure to convince financial investors, or speculators, that everything is going to be ok.

On Wednesday, commission officials were angrily threatening credit rating agencies after Standard & Poor had the nerve to give the thumbs down to the EU-IMF by downgrading Greek bonds to junk status.

The downgrade, the first time a euro area member state’s bonds have been junked, came as Standard & Poor also questioned Portugal’s sovereign debt status sending financial markets into a tailspin.

Furious officials have accused the credit rating agencies and markets of being out of step with reality. Be warned, they said, Brussels is ready to use new regulations to stop credit agencies from being the bearers of bad news that undoes all the hard work of officials.

“We have seen developments in the markets that raise some doubts about behaviours of some of the players,” said a Commission spokesman.

New regulations enter into force in December this year allowing the powers that be to make sure “the quality of the rating methodology and the ratings is watched over”.

“We would expect that when credit rating agencies assess the Greek risk, they take due account of the fundamentals of the Greek economy and the support package prepared by the ECB, IMF and Commission,” said the spokesman.

There is a palpable sense of official outrage that markets have not been convinced by the “carefully calculated” aid package for Greece backed by a “concrete”  offer of €45 billion in IMF and euro zone loans.

“Isn’t that far more reflective of reality than some of the other hypotheses being put forward as absolute reality?,” said the spokesman.

Others are less convinced that perversly evil markets are undoing all the noble and good work of the officials.

Hugo Brady, a senior research fellow at the Centre for European Reform, told Reuters: “The markets aren’t stupid. They aren’t going to be fooled by elaborate peacocking displays. They can see when reactions are credible and when they are not.”

While not at all convinced that markets should dispose of the fates of nations, I am utterly unconvinced that the world would be ok if only we all trusted the officials.

Governments that raise investment to cover their debts by issuing bonds to be bought, sold and traded in the market have to live with the fact that investors are likely to assess the product before buying it.

There is no reason why – during a crisis or at any other time – a credit agency, or anyone else, should not critically assess Greek, Portuguese or other government bond even if their conclusions are deeply inconvenient for EU-IMF officialdom.

Financial markets, and state dependence on them, have played a major role in the banking fiasco, the resulting recession and the sovereign debt crisis that necessarily followed it.

If politicians, and the EU, were serious about taking on the financial sector, then they should have allowed banks to fail, without allowing the moral hazard of their dodgy dealing to be transferred to public authorities, making sovereign debt an issue.

Limiting the ability of financial players to issue damaging ratings would not make markets more rational. It might make life easier for officials but it would be bad for the public, in the marketplace of ideas, because it would further shroud the workings of finance and sovereign funds in obscurity and mystery.

Credit rating agencies (even if they made a hash of assessing toxic sub-prime assets held by banks before the crisis) have the same right to pronounce on sovereign debt as anyone else.

What’s next? Should the regulators start looking at the “methodology” of newspaper articles slating the EU’s cack-handed attempts to solve the Greek crisis?

Europe’s crisis will not get better or go away if people stop or are stopped from scrutinising or rating government bonds or EU-IMF packages.

European countries are deep trouble, problems that have been compounded by the junk policies, let alone bonds, of Europe’s governments and their Union. Let’s start a run on their authority.

http://blogs.euobserver.com/waterfield/2010/04/28/greek-crisis-time-to-junk-the-eu-imf/

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