Greece on the rack

The Troika (the IMF, the ECB and the European Council) knocked back the Syriza leadership's proposal and are ramping up the price for the release of the 7 billion euros which is the last bit of the bailout funds that the EU had already agreed before Syriza won the Greek election last January.

92% of the 252 billion euro bail out launched in 2010 has so far gone in debt payments to European banks and other original lenders (59%), to Greek banks (19%) and in incentives to private Greek bond holders (14%.) Only 8% of the bailout has so far gone into the Greek Government's budget. The remaining 7 billion euros of the original bailout will go almost entirely into debt repayments to the IMF at the end of June and to the ECB later in the summer.

The Troika allows European political leaders and their paymasters to play good cop / bad cop. This is useful for example for Merkel as she faces powerful pressure from the US to settle with Greece for geo-political reasons. Nevertheless, what is playing out now is a thoroughly co-ordinated political strategy. Already Syriza leader Tsipras faces objections from the left in Greece for his original compromise - particularly on pension age. It is clear that while fomenting the colonels and getting Golden Dawn once again on the streets would require serious unrest against the Syriza government to work - and that is not available (Syriza's popularity remains high) regrouping the Greek parliament over the head of Syriza, through provoking a split in the governing party, that seems more than possible.

Of course it would be better for Greece and Syriza if the European leadership gave way to a policy of growth in Greece. But even if they have no such intention they still underrate the political maturity and culture of the Greek people and of Syriza's leaders and its organisers. Certainly any harsh compromise with the Troika would lead to a battle inside the Greek Parliament and outside it for sure. But then the argument about Greece's relationship with the Euro would really open out in society - as it has to anyway - even if there is no compromise agreed by the Syriza leaders in Brussels and they default on the IMF loan. And it is not at all beyond the realms of possibility that democratic ways would be found of discussing the question and of resolving it. The results of the clash with the Troika can be managed. Of course, either way, if a poor deal is closed by Syriza's leaders, or if there is no deal, retreats, even defeats are sometimes unavoidable and must be faced. And it starts with the Euro. Stepping away from the Euro and repudiating the 317 billion euro debt would, however necessary, create Greece's greatest emergency since the military coup in 1967 and would need to be thoroughly and democratically prepared. Initially there would be big sacrifices. But Greeks have already put up with great sacrifices for the best part of a decade - and that was for nothing. Worse, it was for ending up in a poorer position today with no possibility of of altering the direction of travel in the foreseeable future.

Whatever the political questions that emerge in Greece about the latest talks in Brussels, possibly including an answer to a new question of who will now constitute the anti-austerity political leadership in the Greek parliament in the eyes of the Greek people, the essence of the Greek crisis remains the debt. That is the political and economic question of questions facing Greece. The debt is the instrument that European capital has decided to use to create the politics it would favour across the whole of Europe, whether countries are loaners or debtors. Greece is currently leading a European wide movement against those politics and economics. The rest of us need to put our shoulders to the wheel.

A good starting place is the Jubilee Debt Campaign's international on-line petition for a European debt conference, starting with Geece. Yesterday, a meeting of MPs in Parliament agreed to launch an Early Day Motion based on the Jubilee Debt Campaign's petition. Get hold of 'Drop It' from the same source. It explains everything people need to know about the debt.

Greece on the brink

We are told by the international media that the Greek government have till Thursday 18 June to concede to German terms (the real force behind the showboat antics of the IMF.) It has come down to ultimata. Greece will cut its pensions and dismantle its labour rights or face withdrawal of EU and IMF funding. Without the funding Greek banks will collapse as Euros are withdrawn and there will be no Euros to pay for any government expenditure. Greece will 'fall out' of the Euro and its government will have to pay its debts in a newly created currency without international backing and without reserves available to prevent rapid, even hyper inflation. 

From any moral or even humanitarian point of view such action by Greece's European masters would be a deliberate act of destruction of millions of people's lives; an act taken in full understanding that it weighed human futures against what they claim to be the logic of the ledger book. And it is only a claim because the people threatening this action know fine well that Greece cannot pay its debts, that only growth and debt reduction that will ever give Greece the chance to get out of mass unemployment, the breakdown of services and the years of recession. So their action is taken for the purpose of a message, a warning, for the benefit of the rest of us. We will bow to the will of international finance (behind which stands the mighty German economic hinterland) or we will starve. They shake their heads, these new masters of the universe. They shake their heads at the folly of the Greeks who choose not to bend their knee. But what is the threat that international finance and the German rulers face that they are apparently prepared to destroy a European country?

German rulers and their narrow band of allies are nervous. Geopolitically Russian power is on the rise in the Balkans. Both China and Russia are more than prepared to invest in Greek infrastructure and loans can come from other sources than the IMF. At the same time the clamour for debt reduction is growing. The case, now made by thousands of the world's economists, that the permanent debt economy simply crushes growth, has overwhelmingly won the argument. And not just in Greece. Its contagion is spreading. In the Eurozone four countries face early elections and the overturn of their pro austerity governments. And finally the lodestone of the EU's economic (if not quite yet it's political) future, Germany, is in a growing mess. 

Two thirds of Germany's exports go to its European neighbours. A third go to (the now rapidly declining import markets of what we used to call the BRIC economies - before they started to decline.) The European two thirds, it turns out, have been bought only through the systematic waiving of the Maastricht regulation on debt to GDP ratio in most European countries that are the main importers of German goods. Systemic low growth in the Eurozone is now coiling back and beginning to choke the arteries of the German powerhouse. Low and still shrinking investment bedevils German manufacture and productivity. In the 1990s investment represented 23% of German economic output. By 2000 it was 20%. And by 2013 it was 17%. This is not just the impact of 2008. The consequences are profound. Germany is now a country with an outdated infrastructure, whose productivity has halved since the end of the 1990's. Germany desperately needs its Euro. Germany needs a shared, overpriced currency to maintain its inflow of capital from the sale of its exports. Germany needs to make an example of what happens to a small European country that begs to differ from the permanent economic cycle that keeps Germany, and the structure of international and European finance, intact.  So; the Greeks have touched a nerve. They could bring the house down! And that is why they are threatened with utter destruction.

This blog has argued before (see 22 Feb; 25 Feb; 10 March etc) that it would be unlikely that the Syriza government would meet its pledges to the Greek people without breaking the current form of the Euro. (Which was never an argument to stop supporting Syriza, or for a particular timing.) At the moment the key question is not how Europeans and socialists world wide should begin a discussion with Syriza about their view on a possible exit from the Euro. That discussion happens daily among the Greek people and the members of Syriza - in a much more sophisticated and practical way than any outside observer might suggest. Our duty is crystal clear. We must help Syriza and the Greek people drive back, in any way possible, it's diehard enemies in the battle that it is now waging. 

A first priority for us all is to attack and denounce and repudiate the financiers' debt, the poisoned well and mainspring of the economic gangrene spreading across our Continent. 

Debt bombing Greece, part 2

At 8.30 pm on February 4, the European Central Bank decided to block funding for Greece despite the previously agreed basis (across all other EU countries) that accepted that outstanding loans could be used as collateral for the ECB's money. It is hard not to see Merkel's intervention here as the Bank chief talked things over with his boss, after meeting with Syriza's Finance Minister earlier that day. Merkel and Mario Draghi then provoked the bank run in Greece on 5 February that they had decided was needed to educate the Greeks that their democratic decisions were subject to European ruling class veto. Billions more Euros were exported out of the country. The ten-day-old Syriza government faced their first Troika initiated emergency.

Greece then is still an experiment. Up to now, this experiment seemed more a matter of Greek politician's rhetoric and hyperbole - that is to most of the media in Western Europe, outside Greece. But Greek people always understood the idea. The Greeks understood why it is that they still 'owe' £340 billion, more than they 'owed' in 2008, even after a £40 billion debt reduction in 2012, and after 6 years of drastic, life-threatening austerity. They lived the 'austerity' and still have the debt; except it has gotten bigger. The Greeks understand that their lives and resources have been stolen from them.

The capitalist world's increasing debt has been discussed before, including by this blog. Now McKinsey Global Institute have been analysing world debt for a decade and have produced a new report. Their latest study shows that, despite austerity policies in the west - presented as the solution to the indebtedness, which nearly blew the world apart in 2008, world debt has increased by $57 trillion since. It now stands at 286% of the world's GDP. China makes a significant contribution to this with an increase from $7 trillion of debt in 2007 to $28 trillion now - 282% of its GDP (see 'China fever ... ' blog 6/11/2014.) All of the major western countries, including the UK, have also increased their indebtedness since 2008. So whatever else is true, this colossal trend in modern capitalism, with debt now at its highest levels for 200 years, including during periods of world wars, cannot be reversed, or even substantially effected, by 'austerity.'

Interestingly among McKinsey's answers to the debt problem are the proposals that inflation is encouraged so as to reduce the value of the world's debt. (This is a call for flooring the gas pedal for growth!) Debt 'restructuring' is called for. (That is annulling what debt you can get rid of.) McKinsey also calls for higher wealth taxes. And it is at this point that they get closest to the heart of the problem and its real solution. How has the capitalist system built its astronomical debt?

The debt is a product of a global capital strike that started in the late 1970s. Since that point big capitalist companies across the globe stopped serious investing and stopped paying part or all of their taxes. And that process sped up after the collapse of the USSR and sped up again when the brakes were taken off financial institutions and the trade in money itself became the world's biggest economic activity. Instead of investing (and despite a real exaggeration, this one built up around the new 'digital revolution' - a source of investment that was miniscule in comparison to the creation of the world's railways and air travel, health systems and universal education) companies instead paid out to their shareholders. Instead of receiving taxes from the companies and the wealthy, it was governments, in cahoots with financial institutions, that were used and continue to be used to 'keep up' the costs of the welfare states that had been won by the working classes in the west. (It is worth comparing the tax income from companies and the wealthy gathered by the 1945 / 48 Labour government with governments today.) Indeed western governments accounted for $25 trillion of the increase of $57 trillion of debt since 2008 - despite their almost universal austerity policies.

That is why we have got the most wealthy ruling class in today's world since any sort of figures were ever collected. That is the true achievement of modern capitalism. The Greeks are right. Austerity cannot deal with the economic problem they face. They will never pay down their debt. What has happened is that their money and their resources have been stolen from them. And now a new experiment in the west is underway. The new experiment that Merkel and others want to try out in Greece (and Osborne in Britain etc) is the withdrawal of government from any substantial aspect of care - in favour of philanthropy and 'citizen based' commissioning. Trying to escape from its historical debts to the working class, forced on them by the huge working class struggles of the 20th century, our new ruling class seeks a new-model, lean and mean state, with as little power over economics as possible. Then the debt can play its real role to the full. It can then be the sword of Damocles permanently hanging over the majority who seek to defend the social rights that previous generations have won.

Next: what are the Greek peoples' options?