There are moments when the fundamental conflict defining capitalist society becomes visible for all to see. Athens on Wednesday of last week was one of them.
Against the background of a general strike, the crowd that had been occupying Syntagma Square in the centre of the city for the previous three weeks laid siege to the political elite.
Confronted with the stark reality of popular resistance, the financial markets, which have dictated the imposition of successive—and increasingly brutal—packages of austerity measures, panicked.
Although the fundamental class antagonism was revealed in this lightning flash, the relentless efforts of the world’s ruling classes to make the Greek people pay for a crisis they had nothing to do with creating continues.
Greece’s foreign debt is too great to pay. And austerity, by causing the economy to shrink, make the debt burden when compared to national income even greater.
No serious faction of the main capitalist classes wants to reverse this irrational policy. On the contrary, they want even more blood.
The Financial Times reported last Saturday that the price of Greece getting an additional loan would be to cede control over tax collection and a 50 billion euro programme of privatisation to the “troika” of the European Central Bank (ECB), European Commission, and the International Monetary Fund (IMF).
This is reminiscent of the semi-colonial regimes that were imposed on states such as China, Egypt and the Ottoman Empire in the late 19th and early 20th centuries. They had to hand over control of their financial systems to their Western debtors.
But the leading ruling classes have been divided over how to prevent Greece defaulting on its debt. A default would be a disaster for them, for two reasons. Since French and German banks were the main lenders to Greece, it could shatter the already shaky European banking system.
Secondly, there is the danger of contagion. The financial markets have already forced Ireland and Portugal to follow Greece into the arms of the troika.
In the wake of a Greek default, they could start targeting other members of the eurozone. If Greece, Portugal and Spain all defaulted this would wipe out half the capital of the ECB, which has been buying their bonds. So there is agreement that, to prevent financial catastrophe, Greece should get another loan.
The disagreement has come over the terms. German right wing tabloids and politicians have been making a huge fuss over their hard-working citizens subsidising lazy Greeks (even though Greeks work longer hours than the European average).
So the German chancellor Angela Merkel and her finance minister Wolfgang Schäuble have been campaigning for the new loan to include a “haircut” for Greek bondholders.
In other words, the banks that lent to Greece in the first place would have to share the burden by getting less than 100 percent of their money back.
This has been furiously resisted, particularly by ECB president Jean-Claude Trichet. He argues that any move like this would provoke the financial markets to declare Greece in default, precipitating the catastrophe outlined above.
He’s probably right. When Merkel first raised the idea back in November it spooked the markets, helping to force Ireland to call in the troika.
Last week, having wanted to string out a decision until September, Merkel was forced to capitulate. Private bondholders will simply be encouraged to roll over their loans to Greece, but it will be up to them whether they do this.
The outcome is interesting because during the eurozone crisis Germany has been aggressively imposing its will on the other member states. But Merkel seems to have succumbed to the combined pressure of the US, the IMF, the ECB and France.
This deal may buy a little time, but the crisis is far from over. It has exposed deep and potentially paralysing divisions at the top of society. But it has also revealed new forces of resistance down below. This is where our hopes must lie.