European capitalism’s weak link?

February 10, 2010

Sweeping budget cuts by the Greek government have provoked a fightback by labor unions and students. Tax collectors have already called a 48-hour strike, to be followed by a strike by all public sector workers set for February 10, even as the government demands a 5.5 percent wage cut for public employees. The national trade union federation has called a general strike for February 24.

But the far right is mobilizing, too. Hundreds of neo-Nazis, who have escalated physical assaults on immigrants in recent months, rallied in Athens February 6 to protest a proposed law that would grant citizenship to Greek-born children of immigrants.

Antonis Davanellos, a member of Internationalist Workers Left (DEA) in Athens, looks at the background to Greece's economic and political crisis.

THE GREEK economy is the "weak link" in the capitalist chain of the European Union (EU). The term--used by the revolutionary Lenin to describe Russia in 1917--was initially used in Greece by the radical left. But now, it's in broad use, even by Prime Minister Georgios Papandreou Jr., who, as head of the social democratic party PASOK, took office after the collapse of the right-wing New Democracy party in elections held in October 2009.

Greece isn't the only weak link, however. Other EU countries are under enormous pressure from the economic crisis. The European press not so affectionately refers to them as the PIIGS (Portugal, Italy, Ireland, Greece and Spain).

The crisis is particularly sharp in Greece, which has an annual budget deficit equal to 12.5 percent of gross domestic product (GDP)--which is four times the 3 percent limit mandated under the EU's Maastricht Treaty. Greek public debt stands at 130 percent of GDP, which is double the EU limit. Thus, articles in the European press point to the likelihood of national bankruptcy in Greece.

Greek Prime Minister Georgios Papandreou
Greek Prime Minister Georgios Papandreou (philippe grangeaud)

Politicians and the media blame the crisis on the supposedly generous Greek welfare state, which, they claim, must be slashed to bring the budget under control. In fact, the situation is the direct result of the neoliberal policies that were followed by the social democratic governments of the 1990s, and even more so by the right-wing government of Prime Minister Kostas Karamanlis, as the leader of the New Democracy (ND) party between 2004 and 2009.

For many years, Greek public finances were based exclusively on the taxation of the wage-earning population and the lower middle class. Greece has one of the lowest corporate taxes among EU countries, but even these low taxes aren't collected properly--corporate tax evasion is at record highs. Even the sales tax isn't fully collected by the government, but is left in business hands to further raise their profits.

At the same time, Greece has one of the highest taxes on wages among the EU countries. What's more, employers and even the state--the biggest employer--have stopped paying their contributions to pension funds, creating a shortfall of more than 10 billion euros annually.

These factors are sufficient to explain the bad situation of public finances up until now. Today, of course, conditions have been made even worse with the outbreak of the economic crisis that hit Greek capitalism in its most crucial sectors. For example, the bursting of the real estate bubble brought construction--a sector considered the locomotive of the economy--to a complete standstill.

The crisis hit particularly hard in the tourism and shipping industries. And the supposedly strong Greek banks--used to acting as the dominant players in the greater Balkans region--were forced to admit not only that there is no more gold in the Balkan "El Dorado," but that many of their old speculative enterprises have also turned toxic.

The government budget problems were made even worse last year by the decision of the former Greek government to follow its European counterparts in carrying out a colossal bailout for corporations at the onset of the crisis.

To understand why, consider the numbers. The Papandreou government today wants to extract 25 billion euros from the people over the next three years in order to reduce the budget deficit from 12.5 percent of GDP to 3 percent. Yet in one night only last year, former Prime Minister Karamanlis made available for the support of Greek banks a colossal total of 28 billion euros! Similar support programs were speedily put together for the tourist interests and other capitalist groups.

TO PAY for these bailouts, the Greek government has been forced to turn to massive borrowing. To meet its financing needs for 2010 alone, the government has to sell bonds--that is, borrow--some 55 billion euros.

Investors are skeptical that the government can repay those loans. Thus, at the beginning of January, a report by Germany's Deutsche Bank on the potential risks of government bonds sent interest rates on loans to the Greek government through the roof. On January 25, with the first issue of Greek bonds for a loan of 5 billion euros, there was surprising interest, with offers for almost five times the asking amount. However, the bonds carry a stiff interest rate of 6.2 percent, which, together with the bankers' commission, raised the cost of the loan to 8 percent.

The head of the bank consortium that organized this robbery was none other than Deutsche Bank, the same outfit that warned the world about the riskiness of the investment.

All this highlights the fact that "servicing the public debt" in Greece is nothing than a way to rob the people, depriving them of badly needed resources in order to serve the interests of the banks and all the other loan sharks of the " international market."

This giveaway to the banks is being organized by the PASOK government that came to power in October 2009. PASOK was elected as a result of a campaign that promised resistance to a wage freeze proposed by then-Prime Minister Karamanlis.

Yet in the few months that PASOK's Papandreou has been in office, he has made clear that he is committed to pushing through an austerity program even harsher than that of his right-wing predecessor--which means an all-out attack on labor rights and social gains. This government aims not only to freeze wages, but to actually cut pay in the public sector, thereby opening the way for bosses to do the same thing in the private sector.

A key aim of the Papandreou government is to significantly reduce employment in the public sector by laying off big proportions of temporary workers (who are employed in place of badly needed permanent workers) and hiring just one new employee for every five (!) who retire. This program completely ignores the dramatic jump in unemployment, which is already estimated at 16 percent.

Overall, Papandreou is implementing a program of drastic cuts in social spending that threaten an already resource-starved public health care and education system with total collapse. At the same time, the government wants to turn public pensions and the social security system into a private and semi-private system. It also plans a broad program of privatization of parts of the public sector, including ports, energy, water, etc.

That's not all. Papandreou aims to substantially raise taxes for working people and the lower middle classes, without touching the profits of the rich--especially big businesses and the banks.

ONCE AGAIN, we have before us a social democratic government with a program of harsh neoliberal policies. Papandreou aims to reduce the deficit over the next three years in order to, he says, "rehabilitate the confidence of the international market in the country."

The government's main asset in enforcing these policies is PASOK's strength in the trade unions. This explains the turn in ruling class political support toward PASOK. The industrialists and the bankers realized that the right had exhausted its credibility with the people. Thus, they looked to social democracy, providing unprecedented support to the PASOK via the corporate mass media.

Another element in PASOK's favor is the paralysis of the opposition New Democracy party, which has been pressured into providing unconditional support to PASOK's economic and social economic program. In order to rally any popular support at all, New Democracy has taken racist and nationalist positions to appeal to its hard core--a traditional conservative audience. (It should be added here that the recently elected leader of New Democracy attempted 15 years ago to found an extreme right nationalist party.)

With the right incapable of effective opposition, Papandreou has a free hand to sell his austerity program. In his speeches, he often uses the punch line: "change or sink." By that, he means that the country must turn in a neoliberal direction--that the balance of forces between capital and labor must be tipped towards the benefit of the rich "so that the country can avoid bankruptcy."

Under this banner, the PASOK government used its first 100 days in office to reverse Papandreou's election program. People were stunned--and public discontent is already being expressed in many ways.

As this article is being written, protesting farmers, using tractors and heavy equipment, have set up blockades in 30 different places along the main freeways, demanding fair prices for their products. Public-sector temporary employees, under the imminent threat of losing their jobs, are organizing strikes in many services.

That's only the beginning. Despite the betrayal by the social democratic leadership of the unions, it's certain that there will be mass resistance to Papandreou's program. That's exactly why "international investors" are expressing strong doubts about the government's ability to impose its "reforms." In recalling Greece's youth uprising of 2008, a major European paper wrote: "In this country, there exists a very low tolerance to modernizing reforms and very high tolerance towards radical protest."

But the struggle is not going to be easy. This time, the ruling elites know very well that the defeat of their austerity policies will have immense consequences. It's no accident that there are a growing number of establishment voices demanding a "national salvation" government run by both PASOK and New Democracy.

TO OVERTURN Papandreou's program, we will need a serious escalation of these struggles.

The ex-chairman of the parliamentary group of SYRIZA (Coalition of Radical Left), Alekos Alavanos, spoke of the need for a new "worker's December." He was referring to a broad uprising like the youth revolt of December 2008--only this time, the struggle must be centered in the labor movement. That could provide the continuity, demands and politics necessary to bring victory for the resistance movement. This slogan--for a "worker's December"--has become increasingly popular, reaching even the pages of the mainstream press.

The fightback must also have a European dimension. The case of Greece is proof that it is impossible to defend workers' rights and social gains without confronting the European Union's policies that prioritize cutting deficits and debts, no matter how severe the impact on the people.

In that sense, Greece could indeed prove to be "the weak link" of European capitalism--not only financially, but also politically. Resistance in Greece could be the signal for a new round of major labor struggles and strikes in Europe.

It should be clear that our goal can't be achieved by mass social resistance alone. The situation also demands a political struggle, in which the forces of the radical left will have to play a crucial role. An important factor is SYRIZA, a coalition in which our organization DEA (Internationalist Workers' Left) has participated from the beginning.

Currently, SYRIZA has electoral support of about 5 percent of voters. A crucial and rich debate is taking place inside SYRIZA about: (a) for the need of radical left-wing policy to meet the challenges of this critical period, and (b) the need for SYRIZA to become a democratic and fighting organization that's capable of supporting the coming struggles. DEA, together with other forces of the revolutionary left that participate in SYRIZA, has focused our attention on this debate.

Whether in Greece, Spain, Portugal, Italy, Ireland or elsewhere, one of these "weak links" has to get broken. The task now is to open the way for mass demands for changes that meet the needs of working people and youth, rather than satisfying the corporate greed of bankers and industrialists.

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