Spain & The Madness of Europe

There's a saying that defines madness as doing the same thing over and over while expecting different results. By that criteria, it's clear that the European Union's response to the long and painful crisis unfolding on that continent is utterly and completely mad.

With the appearance a few years ago of a Greek sovereign crisis - it must be said for debt levels that weren't much higher than those of the USA - the alpha and omega of the EU's response has been to demand austerity. There's two things to be said for Greek austerity. The first is that Greece's difficulties - condemned by German politicians and capitalists as being the result of greedy workers living the high life - is actually the result of the fact that the Euro is too high given the level of development of the Greek economy. On the other hand, the downward pressure that Greek underdevelopment exerted on the EU had the effect of boosting German exports. Not only did German capitalism sell abroad, it also colonized the European economy, competing on an equal footing with unequally developed economies, like those of Portugal and Greece. So, German finger-wagging is utter hypocrisy. The greasy Euro notes that line the pockets of German capitalists were squeezed out of the pockets of Greek and Portuguese workers.

But the second thing that must be said about austerity is this: it doesn't work. As Larry Elliott notes in today's Guardian:

"The lesson from Greece is absolutely clear: slashing spending and increasing taxes when an economy is in free fall leads to higher, not lower, levels of debt. Spain is following Greece down the vicious spiral that starts with weak growth and rising unemployment and ends with expensive bail outs that do more harm than good."

And therein also lies the madness. Having haughtily and with much chest-thumping bravado, utterly destroyed the Greek economy, these idiots are now proceeding to perform the same savage surgery on the Spanish economy. But if the Greek economy represents merely cutting off an EU earlobe, the Spanish economy - the fourth largest in the EU - is like losing an arm or a leg. Such a large wound won't cauterize itself and Europe could easily bleed out with Italy following Spain down the path to ruin. European capitalists, again, led by the Germans, remind me nothing so much as a medieval leech, who cures the patient by killing them. The only hope for both Greece & Spain is that the revolt of the masses, still on a simmer in Greece and heading for a boil in Spain with demonstrations last week involving millions, forces the ruling class of Europe to give up on austerity as a strategy. The long term hope is that the masses kick out the ruling class of Europe and run the continent in the interests of the people who do the work, not the parasitic bankers and bond traders who brought the continent to this pass in the first place.

Greece: You Say You Want A Revolution?

It's hard to make sense of the hubris and cruelty of European Union leaders towards Greece, unless their goal is to goad the Greek population into overthrowing their government. Why else would they demand from the Greeks ever greater levels of austerity, poverty and unemployment and then, when the government turtles and capitulates to their demands, tell them it isn't enough?

Just look at the most recent round of austerity - a 22% cut in the minimum wage, 150,000 public sector jobs to be cut out of 750,000, further attacks on Greek pensions, weakening labour rights and so on and so forth. They also demanded that the Greek government sign an agreement that no matter who is elected they will implement the austerity. So much for democracy and self-determination.

Of course, from the point of view of the Greek ruling class this is pain that they can accept - since it won't be them who suffers it but, rather, the working class. And, from the opposite end of the spectrum, if there is a "disorderly default" it will be the ruling class who suffers - the banks that won't have access to capital markets, the losses incurred by Greek bond holders, etc.

Of course, there's a certain irony in the militant prickishness of the German ruling class and their toadying, bigoted newspapers with their talk of lazy, overpaid Greeks. The existence of weaker economies inside of the EU keeps the Euro from rising. A lower Euro benefits the German export machine and has allowed the German economy to boom. If Germany were to return to the mark some estimate that it would immediately appreciate by 40%.  Germany thrives on Greece's misery. On the other hand, for the weaker economies, being in the same currency with an advanced economic powerhouse like Germany means that they are stuck with a higher valued Euro, which hobbles their ability to compete. So it is rich for the Germans to gripe about the Greeks. If it weren't for the poverty of the Greeks the German economy wouldn't be chugging along as it is.

Frankly, the Greeks would be better off defaulting and getting the hell out of the Euro, then devaluing their currency so that their goods can sell cheaply abroad(or more deliciously, to Germany herself). The alternative is clear - an endless cycle of austerity generated recession that leads to a contraction in tax income for the state, which leads to a deteriorating debt situation followed by demands for more austerity to receive another bailout. Lather. Rinse. Repeat. You don't have to be a Marxist to make this point, it has been argued cogently by Nouriel Roubini for months.

But the only way that any default will occur that can be worked to the advantage of Greek workers will be if it is one forced upon the Greek state by the Greek working class itself. And this isn't a pipe dream. In the last week there have been back-to-back general strikes - a 24 hour at the beginning of the week, followed by another 48 hour strike on Friday and Saturday. By all accounts both were solid. There is a deepening radicalization amongst Greek workers that has seen support for parties to the left of the Greek Labour Party PASOK growing rapidly so that their combined vote is now the highest for all parties. And the movement is deepening its roots amongst ordinary people, with workers beginning to create alternative sources of power and control where the state and employers have withdrawn.

“We have now been on strike since 22 December because our wages have been left unpaid for seven months,” says Moises [who works for Eleftherotypia, the second largest newspaper in Greece].
“But now we’re launching our own newspaper, The Workers in Eleftherotypia, on Wednesday. This is part of a new wave of radicalism in the workers movement in Greece.”
 And Costas Katarachias, a doctor and union general secretary at Agios Savvas cancer hospital in Athens, tells us about the move towards health workers seizing control of their workplaces.
 “At Kilkis hospital they have already started taking the hospital under workers’ control,” he says. “The procedure is under way, but there are steps to taking full control.”

Of course, the truth is not that the European ruling class wants a revolution in Greece. What they want is to punish and humiliate one of the most militant working classes in Europe as a lesson to every other working class movement. And they want to scare every government on the continent that tries to cut some kind of moderate path. They want absolute subordination to the dictates of the banks - who caused the crisis, after all - and to the market. And they are so contemptuous of ordinary people that they don't believe a revolution will be the result. Let's hope that they have a rude awakening because the alternative is a decade or more of misery for Greek workers. And that painful and destructive experiment won't end in Greece.

BBC News - Greece bailout: PM Lucas Papademos gives final warning:

'via Blog this'

Greece: Bigger Than Lehman Brothers

What a frigging disaster. Back in 2008, the US Federal Reserve let the Lehman Brothers investment bank - which held more than a bellyful of toxic debt, go to the wall. It was meant to bring "calm" to increasingly panicked financial markets. That will probably go down in the books as one of the more stupid decisions of the first decade of the new millenium. Rather than calming anyone, it caused the global financial system to lock up as banks lost trust in each other and in the solvency of large borrowers more generally. Everyone was potentially tainted and unstable. Business literally couldn't run because there was a money strike. It was a concrete example of how much the global system had come to depend upon credit for its basic functioning.

Global capitalism seemed to hang in the balance for days and weeks. Ben Bernanke went to the US Congress and told them they had two days to sign off on a $700 billion bailout package or it was game over. Then AIG went to wall - it provided insurance for the toxic debt that turned out to have no value - and the government had to bail them out, to the tune of close to $100 billion. By the time the panic was over, the US debt had doubled.

The extent of the Lehman Brothers bad debt is unclear - in fact, part of the problem that led to the lockdown of the credit system was that the whole derivative structure of the shadow banking system was completely opaque, mixing good and bad debts together in "collateralized debt obligation" packages. However, prior to the bankruptcy declaration, Lehman's had about $65 billion in commercial and residential real estate debt, much of it toxic. They'd also recently borrowed $138 billion from JP Morgan - a debt that the US government dutifully covered for them.

The Greek government has significantly more debt than that, about $470 billion. And if Greece goes, it raises questions about Italy, Spain, Ireland, and Portugal, which involves trillions of dollars. This is mammoth and unprecedented. In Italy, the newest country to be put under severe borrowing pressure, the immediate response of the right wing government of Silvio Berlusconi is to propose an austerity package to slash the budget deficit.

But the rush to austerity is to throw gas on a fire - as Greece has discovered. Massive cuts to government expenditure have an impact upon the real economy, depressing consumption as workers are laid off and business contracts. And when the economy contracts, fewer tax dollars make their way into government coffers, which increases the debt, leading to further pressures for austerity.

It is also to blame the wrong people for the crisis. Workers haven't created this debt load, it has been the greed of the wealthy who have benefited from deregulation and tax cuts over the past three decades, leading to greater debt and greater instability. It has also been a product of the imbalances built into the European Union, which tries to mimic a unified state but is still riven by rival nation-states that compete with each other. It also suffers from imbalances in levels of development. Germany is a manufacturing powerhouse with significant trade surpluses to its European neighbours. Greece, Spain, Ireland buy German goods but could only pay for them as a result of the asset bubbles that saw property prices go through the roof for the better part of a decade. But when those bubbles burst back in 2008, governments were saddled with debt.

...budget deficits were the result of the policies implemented by states with the aim of preventing the economic crisis from morphing into a depression as well as the result of the reduced fiscal revenues and increased social spending provoked by the 2008-9 recession. The overall result has been to transfer the bulk of the bad debts that were threatening the banks onto the states that bailed them out, thus simply displacing the problem. The euro crisis of spring 2010 was the practical demonstration of this. Speculation over whether the banks were insolvent was transformed into speculation about the solvency of sovereign entities. And while every state is subject to pressures coming from the financial markets rapidly to reduce its exposure to debt, this pressure is much stronger on small and weak states, like Greece for example. What is more, the fact that the huge deficits brought to the centre of attention the capacity of each state to pay back its debts exposed the flawed nature of EMU.

What will happen now? It is likely that panic will continue to spread as European leaders remain deadlocked about what to do about the spreading default hysteria. Germany may well use its clout to attempt to force through a solution more aggressively than it has up till now. Certainly, any solution from the political and business leadership of Europe will involve pain for the working class. What is also certain is that combined with some serious inflation problems in China and a moribund US economy, we are headed back into recession.

The real question is whether workers, so soon after accepting a kick in the teeth to "do their part" in the "last" recession in 2008 (did it really end?), will accept for austerity and rollbacks. We've some magnificent fightbacks in the past year - from Greece to Madison, Wisconsin and even to Hamilton, Ontario, where Steelworkers have been fighting against attacks on pensions. But none have broken through. Sooner or later, workers struggle will have to break through or political leaders in Europe and North America will austerity us into the ground and the economy will continue to fail. The real problem is not that workers earn too much or work too little or have pensions that are too fat. The real problem is a system based upon insane and uncontrolled greed, where the priorities are increasingly based upon financial gambling of the most craven sort. 

Greece set to default on massive debt burden, European leaders concede | Business | The Guardian

Greek Austerity Vote Is Just The Beginning

There was a certain amount of hand-wringing by the business press and politicians internationally that the PASOK government of Greece might not be able to pass the second austerity package in a year. However, it seemed unlikely that more than a handful would revolt against the party when it came down to it. The party that once resisted the Greek military junta had already sold their souls to austerity and neo-liberalism some time ago. As it turned out, just one PASOK MP voted against his party and, in reward, was immediately expelled.

Government agreement to drive down living standards and sell the store for a pack of magic beans - and magic beans would be more effective at reviving the Greek economy than growth destroying austerity and privatizations - is barely the beginning. With around 80 percent of the Greek population opposed to the second austerity package and there having been a year of significant mobilizations, strikes, general strikes and riots, the working class is more radicalized and angry than ever. Indeed, as the votes took place inside the austere parliament, outside tens of thousands of people were battling with cops who attacked them indiscriminately. This is what it looks like to save Europe - tear gas, burning vehicles and hand-to-hand (or baton-to-stave) combat.

Greece is now divided into two clearly defined camps: the minority who favour and want to impose austerity - and who thus represent only the wealthiest Greeks, the banks, the international lending agencies, speculators, corporations, etc. And the people. It is the people vs the machine. The battle would be a quick and decisive one based upon democratic choice or sheer numbers, except that the Greek parliament is not in the service of democracy. And now that the facade of democracy has been lifted, the real source of legitimacy for the Greek state - and by extension the European Union - is made clear - it is armed bodies of men with their sticks and guns and tear gas and shields.

That lesson will not have been missed by the Greek people. The only thing in question is whether there is sufficient confidence and organization to move beyond the symbolic actions of 24 and 48-hour general strikes to action that is powerful enough to counter the threats of international capital and the ratings agencies. The rulers of Greece and Europe must be made afraid - afraid that if they try to impose austerity on Greeks their reward will be the same that Mubarak in Egypt and Ben Ali in Tunisia received: revolution. Things are moving fast in Greece and, in the coming days, the balance of forces in this battle will become clearer. An interview earlier this week with a Greek socialist gives a flavour of where the struggle may go.

Panos [Garganas] said, “There is now a movement in the unions to extend the strikes beyond Wednesday.
“The power workers are determined to continue until the government backs down. That message is spreading.
“Hellenic post bank workers, who face privatisation, are set to hold a general assembly on Thursday to prolong the strike, as do water workers in Salonica, Greece’s second city."

The irony is that PASOK has more power to negotiate terms than it seems to realize. The global banking sector is on the edge of their seats that a Greek default will lead to a "Lehman moment" - a knock-on effect that will tear through first the European banking system and then world credit markets like a tsunami. When push came to shove, neither the IMF nor the European Central Bank was likely to permit such a massive potential meltdown. Even the Greek Tories, New Democracy, seemed to realize this and have called for a re-negotiation of the terms of this tranche of aid. Why PASOK has completely rolled over and thus likely ensured their defeat for a generation, while creating a dangerous level of social conflict, is unclear. What is clear is that, to paraphrase Orwell, the future lies with the proles.

Greece passes key austerity plan - The Globe and Mail