Politicians and the media use jargon to talk about the crisis that is engulfing the eurozone. This can make it hard to understand what’s really happening.
Here, Socialist Worker answers some basic questions about the crisis.
How do debt markets work, and what are bonds?
Bond markets control much government debt. Bonds work like IOUs.
Governments sell them to raise money, pay interest on them, then buy them back at a later date.
Government bonds can be traded on financial markets.
If the markets lose confidence in a government’s ability to buy back its debts, the bond’s price goes down.
This pushes up the interest rate for new bonds, known as the bond yield.
Who bails out who?
Bailouts have been presented as “rescue packages”—but the reality is quite different.
The money doesn’t go to the people of the country being bailed out. It goes to the banks that own the debt of the country’s government.
And bailouts come with strings that drive down workers’ living standards.
The International Monetary Fund has done this for decades. Eurozone countries can also get bailouts from the European Central Bank (ECB) and the European Union.
What’s going on in the eurozone?
The eurozone economies are in a debt crisis partly because they spent hundreds of billions bailing out the banks in 2007–8.
The eurozone is divided into 17 different countries.
Each has different levels of debt and different growth rates. They are under pressure from different capitalists.
Many politicians would like to integrate the eurozone into a fiscal union, with one powerful central government to try and overcome this. Others call for breaking it up.
Neither would solve the economic problems that underlie the crisis.
Could workers stop the attacks?
Greece could refuse to pay its debts. In 2002, Argentina defaulted on debts of $81 billion after mass protests forced a series of governments to resign.
When bosses tried to close factories in Argentina, workers occupied and kept them open. Greek workers could do this too.