Greece stands up
- By Heiko Khoo & Michael Roberts
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E-mail China.org.cn, July 9, 2015
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People talk in Athens, Greece, July 8, 2015. Greece's government pledged on Wednesday the immediate implementation of reforms as soon as next week in exchange for further support via the European Stability Mechanism (ESM) to avoid default and Grexit, according to the formal request tabled, a Finance Ministry statement said. [Xinhua/Marios Lolos] |
On Sunday, more than 61 percent of Greek voters said no to the demands of Greece's external creditors, the "troika" of the International Monetary Fund, the European Union and the European Central Bank. This is an important victory for the Greek people and the European labor movement. The people rejected the conditions demanded by the troika and stood up against a systematic campaign of fear mongering by the EU Commission, German politicians and the media of the Greek ruling class. The no vote constitutes a huge defeat for the troika and for big capital in Europe.
Greek Prime Minister Alexis Tsipras hopes to negotiate a better deal with the troika for a new bailout package that includes some "debt relief," but the result of the Greek referendum actually makes little difference in dealing with the problems ahead. German officials and mainstream politicians are speaking in intransigent tones, and they are loath to make any deal with a Greek government backed by such a popular mandate. Indeed, the German media are firmly against a deal and coldly encourage the idea that the misery inflicted on the Greek people is of their own making. They propose that further poverty and misery form the only way to revive the Greek economy.
Greece's public and private debt burden is too large for its economy to service, despite severe cuts in wages and living standards for Greek workers. The Greek public debt burden arose mainly because capitalist investment was so weak in the 1990s and the profitability of productive investment was so low that Greek capitalists needed the state to subsidize them through low taxes, exemptions and handouts to favored Greek oligarchs. In return, Greek politicians got wealthy too.
This weak and corrupt Greek economy then joined the euro. The gravy train of EU funding was thus made available, and German and French capitalists bought up Greek companies and allowed the Greek government to borrow and spend. Annual budget deficits and public debt skyrocketed under both conservative and social democratic governments. Bond markets financed this because German and French capital invested in Greek businesses and bought Greek government bonds, which delivered a much better interest rate than government bonds in other eurozone countries. Greek capitalism lived off the credit-fuelled boom of the 2000s, which concealed its real weakness.
Then came the global financial crash as eurozone banks and companies got into deep trouble. Suddenly, a government with a debt amounting to 120 percent of GDP and running an annual deficit of 15 percent of GDP was no longer able to finance itself via the market and needed a "bailout" from the rest of Europe. Living standards and public services were slashed to ensure that German and French banks got their bond money back and foreign investment in Greek industry was protected.
Through all the bailout programs, foreign capital was more or less repaid in full while the debt burden shifted onto the books of the Greek government, EU institutions and the IMF.
The troika's plan was to make the Greeks pay at the expense of a 25-percent drop in GDP, a 40-percent drop in real incomes and pensions and a 27-percent unemployment rate. The government deficit was turned into a "primary surplus" within the shortest period of time seen by any modern government. Greece reduced its fiscal deficit from 15.6 percent of GDP in 2009 to 2.5 percent in 2014, a scale of deficit reduction not seen anywhere else in the world. Total public sector employment declined from 907,351 in 2009 to 651,717 in 2014, a decrease of over 25 percent. Greece has gone from having one of the lowest average retirement ages to having one of the highest. As a result, the Greek economy went into a deep depression exacerbated by austerity, and the predicted export-led economic recovery failed to materialize.
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