‘Fear that Greece will be unable to repay the banks is precipitating a crisis in the eurozone and beyond’
Panos Garganas, Greece
The crisis in the eurozone reached panic levels last week—as financial leaders helter-skeltered across the globe.
US treasury secretary Timothy Geithner flew to Warsaw in Poland to meet European finance ministers. The French and German leaders Nicolas Sarkozy and Angela Merkel held an emergency telephone conference with the Greek prime minister George Papandreou.
The rating agency Moody’s downgraded two leading French banks.
As the markets felt the strain, a study suggested that the sudden fluctuations in the stock markets resemble the pattern of nervousness and panic just before “Black Monday” in 1987. That day shares dropped by 22 percent.
The immediate concern is over the fear of a Greek default—that Greece will be unable to pay back the money it owes to banks. That would precipitate a banking crisis in the eurozone and beyond.
But Greece is only one aspect of a broader picture. European banks hold just 81 billion euros worth of Greek bonds—an amount dwarfed by the 325 billion euros of Italian bonds they hold.
So the extent of the panic has a lot to do with fears of an Italian default. Silvio Berlusconi’s government is pushing through a massive package of cuts.
This provoked a general strike and clashes outside parliament in Rome. When the government was seen to hesitate in the face of workers’ resistance, the European Central Bank (ECB) put the pressure on Berlusconi to step up the cuts and calm the markets.
If our rulers can treat an Italian government that way, you can imagine the pressures they put on a small country like Greece. Back in July, European Union (EU) leaders agreed to bail out Greece, but imposed harsh conditions.
Out of an estimated 172 billion euros set aside for refinancing over the next three years, only 38 billion are for Greek budget needs. The rest would go straight back to the banks in one way or another.
Despite the ferocity of this programme, the IMF, EU and the ECB now demand an extra 4.5 billion of cuts and taxes within the next 15 months.
After a half-hearted attempt to renegotiate, the Greek government capitulated and announced a new tax on households.
So for example, a young couple that has taken a mortgage to buy a flat in Athens will have to pay an extra 500 euros straight away and the same again next year. This comes on top of higher mortgage payments and wage cuts that average 150 euros per person per month in the civil service.
The new tax is payable with the electricity bills, so that if people don’t pay they are cut off.
The power workers’ union GENOP-DEH has taken a principled stand and is refusing to cut off the supply of people who are unable to pay.
But the government also wants to sack civil service workers. It thinks the threat of sacking will put fear into the workforce.
Primary school teachers are set to strike on Thursday and they will be joined by secondary school teachers in escalating to a 48-hour strike in the first week of October because the new term started in many schools without books.
All public transport in Athens is also set to come to a halt on Thursday as metro workers and bus workers strike. This can be a springboard for wider action.
Contract workers in Athens occupied the central depot and stopped rubbish collection to prevent mass redundancies. Journalists and staff in ERT (the equivalent of the BBC) clashed with police outside parliament to prevent the closure of a state TV station.
Students have occupied over 300 university and technical education departments since the end of August and they plan to continue along with the teachers’ strikes.
The mood was shown in the streets of Salonica on 10 September. As Papandreou was setting out the new round of cuts, thousands of students joined thousands of trade unionists in a brilliant display of unity in action. Strikers in Greece will be cheering as news of further resistance comes in from across Europe.
Panos Garganas is the editor of the newspaper Workers Solidarity in Athens
Freeze loans, not wages
If the European Union decides that it won’t give any more loans to Greece, it will be a catastrophe.
The banks will close. People will not be able to get their wages.
We say that we have to act before such a default is imposed on us.
Instead of freezing wages, our solution will be to freeze repayments of loans and the interest on loans.
The debt repayments amount to 50 billion euros—the equivalent of the whole Greek budget. Freezing repayments of the debts would free up enough funds to reverse all the cuts.
‘Neighbourhood assemblies have taken direct action to prevent evictions’
Albert Garcia, Spain
The crisis in the eurozone has been hitting Spain for months. The country’s public debt levels are lower than Britain, Germany and France—but it has some of the biggest private debt in the world as a result of a burst real-estate bubble and related speculative frenzy.
Some 21 percent of the population who are fit and available for work are now unemployed—almost the worst figure in the country’s history.
These factors have weakened trust of international bodies in Spain’s ability to repay its debts and made Spanish bonds a target of financial attacks.
The Spanish ruling class has responded to this situation by showing its commitment to austerity.
The government of the PSOE—which is like Britain’s Labour Party—has joined with the Conservative PP to impose a limit on future public spending.
These measures, pushed for by Germany and France, have not calmed investors. The interest and cost of Spanish government bonds has soared because of the risk of default.
It is hard to calculate the impact of a Greek default on the eurozone but it is likely that it would push Spain into needing a rescue.
That could have a global impact, as the Spanish economy is Europe’s fifth largest and four times the size of Greece. This makes it too large for the EU to rescue—but too big to be allowed to fall.
Because of this we are likely to see increased attacks on workers and the poor.
The PP are likely to enter office after the November elections. The Spanish conservatives held up David Cameron’s austerity policies as a model.
But any further neoliberal offensive will not go unpunished. It will have to face a level of social unease and conflict in Spain unseen for two decades.
Over the summer, the “indignados” movement, which began by holding mass occupations of public squares, has fought alongside health workers and local residents to defend hospitals threatened with closure.
Its neighbourhood assemblies have held direct action, sometimes successfully, to prevent evictions of people from their homes.
Teachers in the Madrid region have called a three-day strike followed by three days of occupation against cuts and sackings.
They did this through holding a rank-and-file meeting of 800 teachers on the model of the camp protests and overturning more timid action by the union bureaucracy.
On 19 October we will hold more mass street protests across the country. We are hoping for a hot autumn.
Albert Garcia is a member of the socialist group En Lucha in Spain
‘Pay has been cut by 15 percent. Welfare has been cut by 10 percent’
Sinead Kennedy, Ireland
Over the last three years Ireland has moved from being the best-performing economy in the European Union (EU) to enduring the deepest, swiftest contraction suffered by a Western economy since the Great Depression.
Last November the EU and the International Monetary Fund (IMF) forced the Irish government to accept an 85 billion euro bailout package amid fears that the Irish debt contagion would engulf the entire eurozone.
In return Irish workers are expected to accept an eye-wateringly painful 15 billion euro budget “adjustment”.
This includes tax increases, pay cuts, significant losses to employment protection in both the public and private sectors and a series of devastating cuts to social welfare, health and education.
When the first wave of the global financial crisis hit in autumn 2008, the Irish government put in place a banking guarantee that covered all the major financial institutions in the state. This ensured that no bank, however toxic, would go the way of Lehman Brothers.
It guaranteed a total of 485 billion euros worth of banking debt—and embarked on the now notorious bailout of Anglo-Irish bank, the world’s most expensive banking rescue.
Now public sector workers have seen their pay cut by up to 15 percent, social welfare has been cut by 10 percent and already chronically under-funded public services like health and education have had their budgets slashed.
Yet, contrary to what governments and bosses claimed, after package after package of cuts and tax increases for workers, Ireland’s economy has continued to stagnate and its debt levels have increased.
The EU-IMF deal commits the government to a further 12 billion euros of cutbacks and tax increases by 2012—3.6 billion of which must be delivered by December.
But even this devastating level of cuts is proving to be inadequate for the EU’s austerity hawks.
Outgoing European Central Bank chief economist Jurgen Stark told the Irish Times this week that Ireland needs to cut much further and deeper.
The problem, as finance minister Michael Noonan recently said, is that “A lot of the low-hanging fruit has been picked.” The “low-hanging fruit” that Noonan is referring to are social welfare recipients, elderly people in care homes and children with disabilities.
While Ireland has not yet seen the levels of protest that other European countries have, it is becoming clear that people here have had enough.
The Irish parliament re-opened after the summer and hundreds of parents of children with special needs protested outside against the cuts.
After announcing plans to introduce a household tax, more than 200 representatives went to a planning meeting to campaign against the tax.
Last week, after the government announced its intention to privatise and sell off part of the ESB electric company, workers announced plans to ballot for strikes.
Sinead Kennedy is a lecturer at Maynooth University and a member of the Socialist Workers Party in Ireland
Italy is the next major faultline
Turmoil on the European financial markets has now engulfed Italy.
Global financiers worry the country will soon be unable to make repayments on its 1.9 trillion euro debt.
The credit agency, Standard and Poor, has downgraded Italy’s credit rating from A+ to A. This will further increase the cost of borrowing.
Market meltdown means that many of the country’s stocks are in freefall. Meanwhile, workers are on the streets demanding that bankers, not ordinary people, pay for the crisis.
In response, the government and the bosses have launched a vicious war on workers.
They are increasing taxes while slashing wages, pensions and public spending.
Outside parliament on Wednesday of last week, riot police came under a barrage of fire, paint bombs and even a pig’s heart, hurled by angry protesters.
Nevertheless, prime minister Silvio Berlusconi’s centre-right government survived a key vote on his emergency budget that evening.
His coalition aims to eliminate the budget deficit by 2013.
But with millions of Italian workers now preparing for action, it remains to be seen if he will survive that long.