Socialist Worker

Cuts and bailouts are are no solution for European crisis

Talk of a second financial bailout in Greece shows that austerity isn’t working

Issue No. 2255

‘On a magic night, just like in Argentina, we will see which one of the politicians will make it first to the helicopter.”

That was the slogan on the banner carried by the federation of local government workers’ unions protesting in Athens, Greece, last Saturday.

The banner now stands alongside many others in Syntagma Square, in front of the parliament building.

Thousands gather there every night to protest against the new package of cuts and privatisation agreed between the Greek government and the International Monetary Fund (IMF) and European Union (EU).

Dubbed the “second Greek bailout” by the press, it is an open admission that the first one has failed, and that the crisis continues.

It is now a year since the first Greek bailout package—a 110 billion euro loan.

The loan was supposed to help Greece return to the international financial markets by 2012. It was also meant to prevent the debt crisis from spreading to other countries of the European periphery—the PIGS (Portugal, Ireland, Greece and Spain).

But within 12 months both Ireland and Portugal have gone the way of Greece, and Greece is in more trouble. Why is there such failure?

In a nutshell, the IMF, the European Central Bank and the governments working with them have the wrong diagnosis for the crisis, and are imposing the wrong cure.

One popular tabloid explanation blamed the crisis on the “laziness” of Mediterranean people.

Quite apart from the obvious sleight of hand of grouping the Irish with the rest, history contradicts such ideas.

For centuries the Mediterranean was the most advanced area in the world. It took many wars, a change in the mode of production and a lot of racist slander before the people living around the Mediterranean were relegated to a “periphery”.

One study published in the French newspaper Le Monde last week shows that the average working year is 1,390 hours in Germany, 1,654 in Spain, 1,719 in Portugal and 2,119 in Greece. If imposing longer hours on working people was a cure for the crisis, the Greeks would be champions by now.

In reality, the cuts imposed by last year’s bailout have meant rising unemployment.

Figures have leapt by 180,000 to 800,000 and are heading fast towards 22 percent, according to the INE-GSEE trade union institute.

The average pay across the public and private sectors, before tax, has been cut by 15 percent.

Yet, after all this, the economy is deeper in recession and public finances less able to shoulder the burden of debt interest payments—hence the need for a new bailout.

But the second round of European “rescue operations” is going to be harder than the first.

One reason for this is that failure to stop the crisis spreading is causing divisions at the top.

There are powerful voices in the EU saying that more loans to Greece will not work.

They argue that it is better for governments and banks to rethink how much of the debt is repayable, or, failing that, to let Greece go bankrupt.

This is easier said than done.

A Greek default would probably make the Lehman Brothers bankruptcy and its fallout look like a minor episode in the history of capitalism.

That is why most analysts predict that the EU summit at the end of June will give the green light for the new bailout.

The main problem from the point of view of the ruling classes, however, is the rising level of working class resistance to the austerity measures being imposed.

Last year Greece was virtually alone in having a near-insurrectionary response during a general strike when parliament was voting on the IMF-EU package.

Since then not only have general strikes continued—we are heading for our 12th on Wednesday of next week—but we have seen the Arab revolutions providing new inspiration to people fighting back in Lisbon, Madrid and Athens.

The recent Marxism event organised by SEK, the Socialist Workers Party’s sister organisation in Greece, saw speakers from Portugal and Ireland share the platform to stress that the time is rapidly approaching for the left to offer alternatives.

We have to make sure that anti-capitalist ideas fuse with the anger coming out on the streets.

Panos Garganas is the editor of the Workers Solidarity newspaper in Greece

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Tue 7 Jun 2011, 18:23 BST
Issue No. 2255
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